Thursday, February 26, 2004

Stern to Satellite?

So does this mean that it won't be long before all the good radio is on Satellite?

LOS ANGELES (Reuters) - Radio station giant Clear Channel Communications Inc. said on Wednesday it was dumping nationally syndicated shock jock Howard Stern from its stations under a new "zero tolerance" policy toward indecency.

Much like all the good TV has gone to cable to avoid raising the ire of regulators, we may see the same thing for shock jocks.

Keywords: Regulation

The Economics of Superstition

Cubs fans will be relieved tonight. One fan will be particularly relieved: Steve Bartman. He was that guy who attempted to catch the foul ball that prevented left fielder Moises Alou from making the out in Game 6 of the National League Championship Series against the Marlins. Tonight the Harry Caray's Restaurant Group, who purchased what is now known as the "Bartman ball" for $113,824, will demolish the ball at 8:30 p.m. ET on MSNBC.

Economic theory, that bastion of rational thought, generally shuns superstition. When I looked up the topic on the "Economic Literature Index" I got a paltry five hits. One of which was an article by Brian M. Lucey that explores the effects of the Friday the 13th myth on financial markets around the world. He found that

"...there is some evidence that returns on Friday the 13th are statistically different from, and generally greater than, returns on other Fridays."

In any case, economics is continually recognizing that behavior is linked to expectations. Expectations are certainly linked to beliefs. If someone believes in superstitions, this will clearly affect their behavior--regardless of the factual and empirical bases of superstitions themselves.

Professor Richard Wisemen researches the phenomenon of luck. His project "The Luck Factor" began in 1994 and has involved hundreds of "exceptionally lucky and unlucky people." What the research boils down to is people's beliefs and how they translate into people's responses to good things or bad things happening in their lives. People that consider themselves "lucky" tend to emphasize the good things that happen over the bad things. People that consider themselves "unlucky" tend to emphasize the bad things. [Note this is the same flavor of argument about recent research on divorce and why some marriages make it. Couples that make it tend to downplay the bad times and when their partner gets snippy. Couples that don't take everything too seriously and personalize the snippy remarks.]

Let's hope this symbolic demolition erases the Cubs Curse. In other words, let the demolition unleash a chain of events that alters the fundamental belief structure of all of the players and managers such that their expectations about winning and losing, and their attitudes toward the bad things can (and will) happen in a game allow them to let it all roll off their shoulders.

Tuesday, February 24, 2004

"Same-Sex and The City"

Speaking of a finale. Check out this Slate article on the flood of same-sex marriages being issued in San Francisco.

Long story short: gay and lesban couples have been flocking to SanFran in heards (We're talking THOUSANDS of couples. I am considering quitting this gig to become a florist in the city! Apparently florists are receiving hundreds of orders for flowers from people around the world sending flowers to couples they don't even know!) since just before V-day to get marriage liscences. Mayor Newsom, despite Schwarzenegger's condemnation and outrage (he actually said that same-sex weddings represented "an imminent risk to civil order"!), claims that under the state's constitution, banning same-sex couples from the right to marry is discrimination on the basis of sex and sexual orientation (despite the fact that the state passed a DOMA).

The Slate article gets into the nitty-gritty of whether and when cities can, in fact, defy state law. Ford concludes that although there are some situations in which cities can defy state or federal law, none of them apply in this case.

Ultimately its the state and not the city that has the power to marry--the city performs marriages as an agent of the state. In the legal metaphysics of local power, the city simply doesn't have any authority in this area that the state doesn't give it. A city can't license marriages that the state does not recognize.

He argues instead that the city should have stopped granting marriage licenses to ANYONE.

This may sound spiteful ("If gay couples can't get married, no one can!"), but a moratorium on marriage could be a responsible temporary measure that would avoid the discrimination, while waiting for the courts to settle on the issue.

That way they would have focused the argument on the constitution and on due process rather than violating state law.

Either way, the moves are symbolic. But I disagree with Slate here when they say that

...purporting to license same-sex marriage is an odd form of civil disobedience: It has the look and feel of a lunch counter sit-in, but it replaces the elements of sacrifice and risk with what looks like political patronage.

Sure, he's the mayor of the gayest city in the universe, and so probably not in danger of being ousted from his current office, but let's see him try for any state or federal office. In any case, he's my hero du jour. Symbolic or no, this positive gesture (giving rights as opposed to taking them away) will alter the social lanscape. Bush claims that an "overwhelming" majority of Americans oppose gay marriage. According to recent polls, 60% of Americans oppose gay marriage while a similar overwhelming majority supports civil unions, but who's counting?

Monday, February 23, 2004

Monday Mourning

The end of Sex and the City. I think I can speak for Co-blogger Lisa Giddings when I say we will miss the show. It was a great example of what TV could be without the kind of regulatory oversight we have with regular network television. And it is one of the reasons why HBO routinely sweeps the award shows. There were many times when "Sex" would have made Janet Jackson blush. But the show was way more than that. I think it helped to usher in (or at least it mirrored) the latest wave of feminism, you know, the one where women are actually in control of their own bodies.

What's amazing about this is that cable TV wasn't supposed to be able to compete with the networks. The market was said to be too small and the audience would be too divided. The truth is more choices increased the total demand for television. What can we learn from this? Supply can create demand? Or maybe the demand exists, but remains untapped?

Farewell girls, we'll miss you, and we'll definitely miss the bawdy sex talk.

Saturday, February 21, 2004

Quick Hits

Looking for a distraction? What beats video games from 80's for wasting time? Nothing. Check them out here. My 80's favorite was Galaga, but Asteroids was not far behind. If that doesn't distract you, then you might want to pop some bubble wrap in an environmentally safe manner here. Be sure to give the maniac mode a try. Or maybe you'd like to club a penguin here? If that doesn't fix your boredom, than shooting hoops in the office will, check it out. For a disturbing take on Michael Jackson's problems check this out. Man I just love Flash and all those developers with time to burn...

Update: Here is a fun first person shooter. Cat lovers beware.

Parking Problems Part Deux

So you have a few parking tickets. You want to fight them? Try pointed to by the fine guys at Marginal Revolution

The District of Columbia takes in more than $100 million in parking tickets each year, a major source of city revenue. The head of claims that seventy to eighty percent of those tickets should be dismissed for technical or legal reasons.

How long will it be before an enterprising C-S or I-S student develops something similar for UW-L?

Following up on this previous post I'm left with two observations from the comments.

1. I am amazed at how willing students are to accept class rank as an allocation mechanism. Is it because they will no longer be freshman by the time this policy kicks in? When student government passes policies which affect the incoming unrepresented freshman, it is yet another example of the insider/outsider theory.

2. Most students correctly realize that the parking issue is not totally controlled by the university. While we are currently undercharging for the spaces we have, increasing the price of permits will not solve the whole problem. It will eliminate the waiting lines for permits (if the price is set correctly), but it won't eliminate the problem of parking in nearby neighborhoods. To eliminate that problem the city needs to increase the price of tickets in order to increase the cost of parking illegally in local neighborhoods.

The problem is made difficult because there are basically two groups of students who have cars, (1)those that live on (or very near) campus and keep a car to go out to the mall, and (2) those students who communte from off-campus. There are many regulations that are used to distinguish between these two groups, all of which have ways around them. Two hour parking is a classic way to prevent group(1) people from occupying spots that group (2) would like. That is fine within the university, but tax payers get mad when you tell them they can't park in front of there house for more than 2 hours. So the two hour parking is usually limited to the work day, but we've all learned how to wipe off the chalk marks.

Anyhow, the problem will continue to grow as the number of students who have had there own car for some time increases. As people get used to the freedom a car provides, they are willing to pay progressively higher costs to keep it.

Keywords: Parking

Friday, February 20, 2004

Is Gay Marriage a Pareto Improvement?

The Pareto condition is a nifty acid test to see if a policy change is indeed efficient. Essentially it goes something like this: an allocation of goods and services is Pareto efficient if there is no other allocation in which some other individual is better off and no individual is worse off.

So, my question is, can we observe a Pareto improvement by extending the right to marry to committed gay and lesbian couples?

This is the debate that has been gearing up at both the federal and state levels since Howard Dean, former governor of Vermont who passed a law creating Civil Unions for gay and lesbian couples, tossed his hat into the contest for the Democratic nomination. Since that time everyone's underwear has gotten all bunged up over the issue, essentially falling on one side or the other of this Pareto condition.

The Pro-Gay-Marriage argument wonders how extending the right to marry to committed gay and lesbian couples and all of the rights and privileges associated therein would do anything but improve the welfare (material and otherwise) of gay and lesbian couples. This describes a Pareto improvement: some people are made better off by the policy while others go unharmed.

This argument is largely based on the notions of equity and fairness. What got the ball rolling was last summer's Supreme Court ruling which struck down state sodomy laws as violating the Constitution's liberty guarantee. In his majority opinion, Justice Anthony Kennedy portrayed constitutional history as a forward march in which "persons in every generation can invoke" the Constitution "in their own search for greater freedom."

Mayor Newsom of San Francisco recently justified his decision to defy state law by allowing same-sex couples to marry by asserting that guarantees of equality in the state's Constitution took precedence.

The Anti-Gay Marriage argument claims that extending the right to marriage to homosexuals will erode the sanctity of marriage. They argue that marriage between a man and a woman is already a Pareto efficient outcome. Extending such rights to homosexuals, while good for the homosexuals, would make some worse off. In response to President Bush's resolution to "codify" this definition of marriage, Rev. Louis Sheldon, chairman of the Traditional Values Coalition said: "The president has taken a courageous stand in favor of traditional marriage at a moment in American history when the courts are conspiring with anti-family extremists to undermine our nation's most vital institution."

So it basically boils down to a cost-benefit analysis. Who wins and who loses? Depends on your point of view.

There are, in fact, material costs and benefits to such a policy shift, indicating that some would lose. A study requested when Congress was considering the Defense of Marriage Act (further evidence of Clinton's closet republicanism. See previous Blog by Taggert) found that over 1,000 benefits, protections, rights and privileges were denied to committed gay and lesbian couples who could not legally marry. These include the right to file a joint income tax return for federal and state income tax purposes, the right to joint custody of children, the right to have a regular division of property upon divorce, health benefits, leave benefits, and retirement benefits to name a few.

M.V. Lee Badgett, Professor at the University of Massachusetts, Amherst and founder of the Institute for Gay and Lesbian Strategic Studies, estimated the cost to employers of extending benefits to domestic partners. In her paper "Calculating Costs with Credibility: Health Care Benefits for Domestic Partners," she finds that the "experience of employers who offer domestic partner coverage suggests that employers covering partners are most likely to see an enrollment increase of 1%, even when both same-sex and opposite-sex partners are covered. A smaller number of employers might see a 2% increase."

The non-material costs and benefits are a bit less empirical. On a recent Minnesota Public Radio story on the topic, one rural-Minnesota woman wondered that if we extended marriage to gay couples, "where would it end?" (I'm not sure what she was implying; letting--gasp--priests marry? Or what, bestiality?). Pat Buchanan on the Today Show claimed that marriage between two men was "absurd!" O.K. so maybe some people should be made worse off.

But these arguments and emotions have no rational base--especially with a backdrop of divorce rates approaching the fifty-percent mark, an indication of the precariousness of the institution in its current state. Some commentators have compared this discussion to the way in which society reacted to interracial marriage. Ellen Goodman said of Britney Spears' recent betrothment "Britney's little leap is a reminder that a marriage doesn't have to be sacred to be legal. The law is no holier than a $40 trip at the Tunnel of Vows Drive Through in the Little White Wedding Chapel."

Further evidence of the ever sanctimoniousness of the institution of marriage as we know it is the marriage of marriage itself and consumerism: you can now get married at the Mall of America! Now that, my friend, is absurd.

In a hilarious Slate article, Dahlia Lithwick identifies things that are really destrying the sanctity of marriage. Here's one example: "Phone messages like the ones we'd get at my old divorce firm in Reno, Nev., left on Saturday and picked up on Monday: 'Beeep. Hi? My name is Misty and I think I maybe got married last night. Could someone call me back and tell me if I could get an annulment? I'm at Circus Circus? Room--honey what room is this?--oh yeah. Room 407. Thank you. Beeep.'
It just doesn't get much more sacred than that."

Keywords: Gay Marriage, Pareto Optimality

Wednesday, February 18, 2004


A student left a good comment (read worthy of extra credit) on a previous post on grades. I thought I'd give it a friendly fisking.

All the math that is involved in grades is fine and good. The best way to figure out grades and gpa is a question constantly in debate. Perhaps the reason there is never an agreement is because grades in the first place are arbitrary!

Arbitrary? That implies there is randomness or even capriciousness in assigning grades. I don't think that is true, although I would say they are subjective.

Think about it: what do grades really tell you? That a student was or was not able to regurgitate facts, read the teacher and deliver what he/she wanted, and meet the requirements. That doesn't tell you diddly squat about what they actually know. A student can get the highest marks possible, and take from it nothing but wasted hours of cramming, after which the material promptly left the cranium.

I agree, this is sometimes (maybe even often) the case, but is that an indictment of assigning grades, or is it an indictment of the way some people try to measure understanding?

Conversely, a student can get a C in the class and get much more from it than the previous student. The point is that grades don't mean a whole lot... education should be about learning, not worrying about a mark.

Amen sister...I agree, but why do earning grades and learning have to be inconsistent? Alfie Kohn has written a book entitled Punished by Rewards which makes the argument that the existence of grades destroys intrinsic motivation. I don't buy it...

Without grades, this would be more easily achieved. A few of my teachers have argued for this idea... but the system will not allow it.

Or they are not brave enough to try. Remember that "the system" is just a collection of the faculty. We decide how to evaluate students and report it. We have it within our power to eliminate grades, don't let anyone tell you differently.

Some schools have tried this (I'm looking for links), but many that have subsequently returned to a grading system, why?

Part of the problem is lack of motivation... but I still think that it would be a more well-grounded system if students were truly interested in the material instead of their grade. The no-grade system (pass-fail, and not knowing if you are passing or failing until the end of the class) could possibly work toward that goal.

Which is one of the reasons why I believe in grades, they operate as incentives. Even if I don't believe all of Kohn's book, I do think poorly designed incentives can reduce intrinsic motivation, but what do you do in the case where the student doesn't want to learn? Maybe nothing....

Keywords: Learning, Grades

Tuesday, February 17, 2004

Sweet Tooth

I have a sweet tooth, I love candy and anything with sugar in it. That is why I am particularly annoyed with the Bush administration's latest "Free Trade Agreement". Read this

Washington uses preferential loan agreements and tariff-rate quotas to keep the price Americans pay for sugar artificially high. Although there is fluctuation, U.S. consumers paid roughly twice the world market price for sugar between 1985 and 1998.[1] The gap has been even worse in recent years. Currently, a March 2004 contract on domestic sugar costs 20.35 cents per pound while the same sugar at world prices costs 5.74 cents per pound. [2] In other words, because of the sugar program, a U.S. buyer is forced to pay three and a half times the market rate for sugar.

The U.S. sugar program stands in stark contrast to the Bush administration's avowed goal of igniting "a new era of global economic growth through a world trading system that is dramatically more open and more free." [3] Most recently, the yawning chasm between free-trade rhetoric and the reality of sugar protectionism was highlighted in negotiations for a free-trade agreement (FTA) between the United States and its close ally Australia.

Even though negotiators missed an end-of-year deadline set by President Bush and Australian prime minister John Howard, U.S.-Australian FTA negotiations made significant progress over the course of 2003. For the past two weeks, however, the talks threatened to fall apart, with much of the bitterness centered on the U.S. sugar program. The U.S. position was that increased market access for sugar is not an option, while Australia insisted that its exclusion would be a deal breaker. [4]

Mark Vaile, the Australian trade minister, and Robert Zoellick, the U.S. trade representative, met regularly in Washington during this period in a dogged effort to save the agreement. In the end, they succeeded—sort of. On Sunday, negotiators announced that Australia had capitulated and accepted a deal that excludes sugar. The United States, in turn, had softened demands that Australia open up a number of protected sectors. This fight to "keep sugar off the table"[5] was a disappointing departure from the prior U.S. commitment to negotiate high-quality FTAs that open markets for all products across all sectors.

What else is there to say? Ever wonder why there is so much corn syrup in the food we eat? Well part of the answer lies in the different types of protection the producers of cane sugar receive relative to producers of corn syrup.

It has caused us to battle with Mexico...and remember an eye for an eye leaves you both blind.

Keywords: ECO120, ECO499, Trade, Sugar

Friday, February 13, 2004

Parking or Pricing Problem?

It looks like freshman will be out of luck, no parking passes for them. According to this Trib article:

Chances that a University of Wisconsin-La Crosse freshman will get an on-campus parking pass next year are slim to none.

In the past, freshmen living in dorms competed in a lottery with sophomores for the chance to buy passes left over after juniors and seniors purchased passes, said Luke Naegele, UW-L Student Association president.

In December, the association and the Residents Hall Association Council approved the change, which will give sophomores the chance at all the passes left by juniors and seniors. Chancellor Doug Hastad approved the change Tuesday, which means a two-year trial of the change will go into effect next year, he said.

Why not just raise the price for parking passes? It would allocate spaces much more efficiently.

But students dodged a bullet on parking tickets according to this article:

La Crosse parking tickets won't double on the fifth offense because the La Crosse Common Council failed to override Mayor John Medinger's veto by one vote Thursday.

In January, the La Crosse Common Council voted 11-4 for the proposal introduced by council member Bruce Ranis to help decrease illegal parking downtown and in residential areas. Medinger vetoed it, and the same number of votes — 11 — were required to override. But the vote to override was only 10 to 5.

So do we think our parking "problems" have gone away? No, but that's okay, I have a permit...

Keywords: ECO120, Parking

Thursday, February 12, 2004

Edwards in Town

John Edwards was in town yesterday, unfortunately he makes me long for the days of Clinton.

From the Tribune:

"I picked up my newspaper in Milwaukee this morning and on the front page, 500 jobs leaving Milwaukee and going to Mexico," Edwards said. Democratic presidential candidate John Edwards is welcomed by UW-L students outside of Cartwright Center after arriving Wednesday on a campaign stop. "Here we go again. Part of the same old pattern. It's this administration's trade policy, their tax policy, that are leading to thousands and thousands — actually millions of jobs, particularly manufacturing jobs — leaving this country," Edwards said.

I'd like to think he was referring to this lunacy from Bush's folks, but I'm quite sure this is not the trade policy he is referring to. I imagine John Edwards is no fan of Free Trade agreements and Bush isn't either. Does everyone remember the steel tariffs that were recently lifted? They never should have been put in place. Oh Bill, conservatives want you back, you balanced the budget and you supported free trade.

I want a REAL Republican back in office, Bill won't you please come back?

Keywords: Free Trade, Outsourcing, ECO120

Free Napster with Room Rental at UWL?

When I was in college we didn't even have cable in our dorm rooms, now some schools are getting "free" access to the new incarnation of Napster. From

The University of Rochester has become the second university to enter into a deal with Napster. The deal will allow 3,700 residence hall students to access Napster's Premium service for free. Napster's Premium service allows access to Napster's library of 500,000 songs. Normally consumers would pay US$9.95 a month for the service; students will be able to play the songs online, but must pay 99 cents a song, or $9.95 an album, to download music to transfer to mobile devices or burn to CD. The deal lasts until the spring of 2005.

Besides offering the Premium service, Napster agreed to work with the University of Rochester's Eastman School of Music to distribute original music from its students and faculty on the Napster network.

Thanks to the Door for the link.

Keywords: Napster, File Sharing, P2P

Wednesday, February 11, 2004


Epistemology, the study of knowledge. How do we know what we know?

From Crooked Timber citing Donald Rumsfeld:

Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - the ones we don't know we don't know

Sound confused? Confusing? Read it again. It won the annual "foot in mouth award", but as the Language Log points out it shouldn't have. It is a really important idea for understanding how decision makers might act.

Tuesday, February 10, 2004

Remain Seated Until the Pilot...

When I was an undergrad I was very interested in the deregulation of the airlines. I think it was because I wanted to be a pilot at one point in my life. Which was really a product of how I (mis)-interpreted the seventh grade aptitude test that suggested I would make a good aeronautical engineer.

Anyhow, the problem of airline congestion at airport terminals is really a pricing problem. Most airports are owned and operated by the local municipality, inefficiently of course. Read Lynn's excellent post on some of the issues here.

Keywords: Deregulation, Airlines

Fisking on Free Trade and Comparative Advantage

For the ECO 499 Seminar on Globalization, I thought I would fisk one of the readings. From the CPE their article on trade and comparative advantage can be found here.

They get the basic outline of comparative advantage correct, but they go awry when critiquing it. Let's look at their first critique.

First, consider what happens if the Poors open their borders to free trade - all the bean producers go out of business because of import competition (remember, the Poors are now producing only rice because of their comparative advantage). Instead of resources simply being switched to rice production, workers get laid off and the land goes idle. All of the gains from trade could be outweighed by the costs of unemployment and less domestic production. In order to get around this problem, the theory of comparative advantage assumes full employment -that NO UNEMPLOYMENT EXISTS, hardly a realistic assumption for most economies.

Ricardo's model was one of the first general equilibrium models, used to predict the sectoral distribution of resources when at full employment. He showed that consumption could be increased beyond what is possible from only domestic production. The model does not deal with nor was it intended to deal with the dynamics of the shift, rather it was only meant to analyze the starting and ending equilibrium points. Arnold Kling says it better here.

Second, in the process of specialization, comparative advantage assumes that everything used in one type of production can be automatically re-deployed to another type of production. In other words, the skills of workers are instantly transferable from one type of production to the other, the same machinery and equipment are used, and the same inputs. The theory ignores the fact that, often, when switching from one type of production to another, workers need to be re-trained and new investment in different types of equipment needs to be made. All of this costs resources -costs that can reduce the gains from trade. The theory of comparative advantage assumes that RESOURCES ARE PERFECT SUBSTITUTES.

While the math works out easier if one assumes constant opportunity costs (inputs are perfect substitutes), it is not required to achieve the results of comparative advantage. The fundamental insight of comparative advantage is that shifting production to something you are RELATIVELY better at, and trading away the extra production at a different rate then you previously did domestically, will allow you to consume more of both goods than would be possible without trade. Note that specialization need not be complete, in fact if opportunity costs are increasing then specialization will likely not be complete, but there will still be gains from trade. It is true that there are switching costs, but it is hard to believe that one time switching costs can possibly outweigh the present discounted value of all future gains that would be experienced by all future generations. See Delong here.

Finally, the theory of comparative advantage assumes that producers don't move between countries. Therefore, the beans producers in the country of Richies can't move all their production to the Poors, Meagers, or Brokens. While this might seem reasonable if we're talking only about rice and beans (due to climate variations, etc), it doesn't make as much sense when we are discussing shoes and automobiles. Therefore, the theory assumes FREE MOVEMENT OF GOODS AND SERVICES, but at the same time it assumes NO FREE MOVEMENT OF PRODUCTION. This unrealistic assumption greatly compromises the theory.

Really...How? Notice they just leave that dangling, because in fact they are wrong. This argument has recently been used by people from very different political perspectives. Democratic Senator Chuck Schumer and Conservative pundit Craig Richards have been hammered here and it has been more thoroughly debunked here. Remember that Ricardo's was the Labor theory of Value, the traded goods merely represent the labor units that produced them. Trading the goods is the same as trading the labor which produced them. So we would trade labor until the relative price (terms of trade) in each country were exactly the same, eliminating the need for them to trade the goods that were then produced. That is a bit tedious (moving labor), but fundamentally the same as trading the goods.

All of these factors aren't unique to the United States. Other countries could develop such potential as well. The advantage the United States has in trade might be more accurately described as a constructed advantage -instead of some sort of natural superiority. The export-led development of countries like Taiwan, South Korea, and Singapore have been based on a type of constructed advantage, where government intervention built up and protected industries until they could compete on a world scale. The idea of constructed advantage can be an important part of what's been called 'fair trade,' an alternative to free trade that preserves the advantages of trade while protecting other features and capabilities important to communities, such as labor and the environment.

Suddenly I think they don't understand comparative advantage at all. There is no constructing it. It is simply a mathematical fact. Let me give you a classic example without the math: Lets say that I'm both a better pitcher and a better short stop than you are. However, I'm a LOT better pitcher then you are relative to how much better of a short stop I am than you. So I have a comparative advantage in pitching, which immediate means by definition (think invert the ratio), you are a RELATIVELY better short stop. The only time this is not the case is when there is a tie, that is when I am exactly as much a better pitcher than you as I am a better short stop than you. In which case its a coin toss on which job I do, but whichever job I do it does not make the team better off than if we split time in the different positions. The same goes for trade, only when two countries have the same domestic terms of trade will they not benefit from trade with each other (actually there is an economic argument for gains from trade in this case, it utilizes the notion of economies of scale).

The theory of comparative advantage says nothing about who gets the 'gains from trade.' Even if you accept the assumptions of the principle of comparative advantage and believe that free trade raises total income of a country, there is nothing about the theory that indicates that everyone is automatically better off. These benefits could, instead, accrue only to business owners in the form of increased profits. Although there may be gains to be had, how they get distributed is a part of the political process, and there is the possibility that workers and communities could become worse off as a result.

Well, actually the theory does provide you with a way to think about the distribution of the gains, albeit with a very uninteresting conclusion. Since there is only one factor of production, labor, all the gains go to labor, and since the productivity of labor is the same for all units employed the gains are thus shared equally. If you want a richer model that incorporates more factors of productions and therefore provides a more interesting view of how the gains from trade are shared, I suggest you look at the Heckscher-Ohlin theory.

Why is this important? The inefficiencies that occur when restricting trade are small, so why do we care? For a look at one neoliberal's view of the benefits of trade in goods and financial capital read this. I'll give you a hint...small though the gains may be, compounded over time they have dramatic impacts on future generation's standard of living.

If all of this seems like gobblty gook, just ask yourself: Do I benefit from trade? If the answer is no, I suggest you go home and perform your own oil change, but remember that will involve drilling for the oil, by yourself in your backyard. The fact is that we have understood the beauty of specialization since the dawn of time (or trade as the case is here), why do lines on a map affect that most basic insight? And why would we want to let the *potential* for there to be some temporary losers, permanently impoversh us all?

Keywords: Trade, Comparative Advantage, ECO499

Sunday, February 08, 2004

Organ Donation

First let me clear up a few issues from class:

It looks like women can be compensated for donating eggs, above and beyond compensating them for their time. Details here:

It also looks like organ donation by the dead does not require the donor's family to pay for the donation, the burden falls on the recipient or the recipient's insurer. See myth #5 in this post and part (b) below.

Otherwise the applicable laws can be divided into those that cover donations from dead and those that cover donations from the living. First lets start with the dead. That is covered by The Uniform Anatomical Gift Act (as amended in 1987) which was adopted by most states as we see it here:


(a) A person may not knowingly, for valuable consideration, purchase or sell a part for transplantation or therapy, if removal of the part is intended to occur after the death of the decedent.

(b) Valuable consideration does not include reasonable payment for the removal, processing, disposal, preservation, quality control, storage, transportation, or implantation of a part.

(c) A person who violates this section is guilty of a [felony] and upon conviction is subject to a fine not exceeding [$50,000] or imprisonment not exceeding [five] years, or both.


The report of the Task Force pursuant to the 1984 National Organ Transplant Act recommended that states pass laws prohibiting "the sale of organs from cadavers or living donors within their boundaries."

This section is not limited to donors. It applies to any person and to both purchases and sales for transplantation or therapy. It does not cover the sale by living donors if removal is intended to occur before death.

A major finding of the Hastings Center Report is:

"Altruism and a desire to benefit other members of the community are important moral reasons which motivate many to donate. Any perception on the part of the public that transplantation unfairly benefits those outside the community, those who are wealthy enough to afford transplantation, or that it is undertaken primarily with an eye toward profit rather than therapy will severely imperil the moral foundations, and thus the efficacy of the system."

(7) "Part" means an organ, tissue, eye, bone, artery, blood, fluid, or other portion of a human body.

So it is illegal to sell the eggs from a dead women, but not a living one. Does this make sense to anyone? Anyhow, there is clearly a shortage in useable parts, even if you don't think dead people should be allowed to sell theirs we clearly need to increase the supply somehow. From the The Uniform Anatomical Gift Act (as amended in 1987).

A 1985 Gallup Poll commissioned by the American Council on Transplantation reported that 93 percent of Americans surveyed knew about organ transplantation and, of these, 75 percent approved of the concept of organ donation. Although a large majority approves of organ donation, only 27 percent indicate that they would be very likely to donate their own organs, and only 17 percent have actually completed donor cards. Of those who were very likely to donate, nearly half have not told family members of their wish, even though family permission is usually requested before an organ is removed. (Report of the Task Force on Organ Transplantation pursuant to the 1984 National Organ Transplant Act - P.L. 98-507 - "Organ Transplantation: Issues and Recommendations" (April 1986)).

At the minimum we should all sign our donor cards and support a change in the default to automatically make everyone a donor unless they opt out.

Now turning to donations from the living. That is largely covered by the federal law. Of interest is Title 3 section 301 of the National Organ Transplant Act of 1984

It prohibits the sale of organs for valuable consideration, where "organ" is defined as the kidney, liver, heart, lung pancreas, bone marrow, cornea, eye, bone and skin. Although valuable consideration does not include the expenses of the donor, which can include lost wages.

It clearly does not ban selling sperm, which is why we are a large exporter. See this link from marginal revolution.

Although maybe sales of organs from living individuals could be troublesome, see "organs for sale" here. Finally there is a nice web page maintained by southwestern publishing on the issue here.

Update: It looks like Affirmative Action may strike the lists of eager potential organ recipients.

Keywords: ECO120, Organ Donation

Saturday, February 07, 2004

Local Home Sales

I hope to have the county specific data soon, but until then I'll just point to this article:

Continued low mortgage interest rates were a major reason why 2003 was another record year in home sales in Advertisement

La Crosse County, the president of the La Crosse Area Realtors Association says.

A total of 1,141 new or existing La Crosse County single-family homes listed on the Multiple Listing Service sold in 2003, up 8.8 percent from the previous record of 1,048 homes set in 2002, said Marv Leisso, who also is a Realtor with Hoppens Realty Inc.

Also, the marginal revolution points to some work done on estimating the value of different household amenities.

Keywords: 7 Rivers, Housing

Grades for Loan

The Marginal Revolution provides this entry:

Loan markets in grades
Tyler Cowen

A school in China is allowing students who don't do well in tests to borrow a few extra marks as long as they pay them back with interest.

The scheme was recently introduced by Penglai Road No 2 Primary School in the Huangpu District of Shanghai, reports Xinhua.

Students who do poorly on a test can ask their teachers to lend them a few points to improve their grade, but twice as many points must be paid back on the next test, assuming they achieve a better mark.

If they don't, interest on the loan continues to run at 100% per test until it is paid off.

It is reported that about 40% of students at the school have taken out such loans.

The fact that people are willing to borrow points is entirely an artifact of the grading system. If the system awarded a letter grade based solely upon the total accumulated points at the end of the semester you would never need or want to borrow them, as doing so would only lower your total number of points.

This is different then the incentive to borrow in the real world, because there you can use the funds borrowed to produce something that hopefully provides enough return to cover cost of borrowing plus something for the risk and effort undertaken. In the regime where grades are only assigned at the end of the semester based upon the total points earned there is no incentive to borrow earlier in the semester, since you can not use those points to generate a positive return. It would simply be a matter of shifting the earning of the points from later in the semester to earlier and it would come at a cost.

What makes this possible is the censoring that happens when mapping the points earned on an exam into a less sensitive measurement scale, such as letter grades. Say you receive 88 points out of 100 on an exam which maps to a B, but is only 2 points shy of an A/B. Borrowing those 2 points, which only represents about a 2.3% improvement in the total number of points, but a 16.7% increase in letter grade (assuming a 4.0 scale). On the next test you will be expected to pay back 4 points, which may not even lower the letter grade on that exam.

Anyhow, you could figure out how often, or in which cases you'd want to borrow points. It would depend primarily on the interval between grades, the smaller the interval, the more likely the large interest payments will lower future letter grades. The wider the intervals between grades, the more censoring that goes on and the larger the incentive to borrow points from future tests. However, I'm pretty sure that the intervals at the Chinese schools aren't wide enough to justify 40% of the students borrowing against future grades. It is likely more evidence of students overestimating their abilities.

This is why I do not assign intermediate letter grades, since you could have a student get the same final letter grade as someone who has actually earned more points, or even worse they may get a higher letter grade than someone who has earned more points.

90-100 A
80-89 B
70-79 C
60-69 D
59 and below F

Adam gets the following scores on his 2 exams
90, 80,
Eve gets the following:
99, 89

Averaging the assigned letter grades gives them both something between an A and B, whereas averaging the number of points and then mapping that into the letter grade gives Adam a solid B and Eve a solid A.

What if Adam earned 90 and 20, which would average to a C if censored by exam, or an F if done based upon total points. Whereas if Eve earned 79 and 59 would give her a D if based upon censoring and a D if based upon total points. Of course it would better to never sensor into a letter grade and instead report only the total points earned, the total possible points and maybe the class rank.

The original article is here.

Keywords: Grades

Friday, February 06, 2004

Medical Marijuana

Well it looks like Senator Kerry would get my vote, if I wasn't voting for the libertarian candidate. At least he is willing to end the persecution of people using and supplying marijuana for medicinal purposes. But maybe Sharpton would be a better choice as he favors outright decriminalization.

From the Vice Squad:

Democrats and Medical Marijuana

Thank goodness, I finally have a legitimate reason to dislike John Edwards. I've had a bad feeling about him from Day 1, even though I couldn't really put my finger on anything in particular that offended me about him.

Well, now I've learned that Edwards has stated that it would be "irresponsible" to stop arresting medical marijuana patients. O.k. John, are you prepared to turn yourself in to the Feds if you take another aspirin ever again? What about NyQuil? It's very responsible for our government to waste millions of dollars and incarcerate our citizens for ingesting a substance that helps them feel better - especially when many of them are terminally ill.

Both Senator Kerry and Gen. Wesley Clark have pledged to end the Bush administration's raids on medical marijuana patients and providers. Kucinich and Sharpton both support decriminalization of the plant outright.

Seriously how can you possibly sleep at night knowing your ignorance and fear of a plant is responsible for perpetuating someone else's pain? I think its morally equivalent to poking out someone's eyes.

Keywords: Drugs, ECO120

Thursday, February 05, 2004

The Power of the Fed

The other day in class I was talking about the power of the Fed. Even small word changes can make or break folks on Wall Street. From Brad Delong:

Yes, Virginia, Cheap Talk Can Move Markets
From the Whiskey Bar:

Billmon: You Can't Please Everyone: The Federal Reserve's Federal Open Market Committee changed exactly nine little words... and managed to wipe out about $120 billion in stock market capitalization in the process. Not too bad for government work. The nine words are the bolded ones in the following sentence, which was included in every previous statement issued by the FOMC for the past five months: "With inflation quite low and resource use slack, the Committee believes that policy accommodation can be maintained for a considerable period."

But in yesterday's statement that same sentence was changed to read: "With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation."

That's it -- that was the only change. The Fed didn't raise rates. It didn't even hint that it would raise rates. But it became infinitesimally less willing to guarantee that rates will stay low for the indefinite future. And Wall Street didn't like that one little bit.

Actually, only four words were changed: "policy accommodation," "can," "maintained," and "be" remain the same. The words "for a considerable period" are replaced by "it," "patient," and "in removing its."

Keywords: ECO301, ECO120, Fed

Promotion and your "Teaching Philosophy"

Damn, a day late and dollar short. Newmark's Door points to several links on developing a "Teaching Philosophy". Fortunately I was able to get promoted despite my "Teaching Philosophy".

Keywords: Teaching

Anyone out there?

So through the wonders of the internet I've been caught reading and cribbing stuff from Newmark's Door. It's rapidly becoming one of my favorite economics related blogs, and I'm not just saying that because he links to my department's web page. It's because he is able to capture and filter what is interesting about economics, much like Tyler and Alex over at Marginal Revolution. If students don't find some of these posts interesting then I doubt there is much of substance that will. It is hard to read blogs with as many diverse interests and such profound intellectual curiosity as these and not get excited about economics in particular and learning in general.

That's exactly what first turned me on to Brad Delong's blog, but alas I think he is being sucked into the shrill black hole that is Paul Krugman's life these days.

Keywords: Economics, Blogs

Wednesday, February 04, 2004

Reading as Ideological Affirmation

This link points to a network map by Valdis Krebs.

Divided We Stand... StillLast year I created a network map of political books based on purchase patterns from major web book retailers. The network revealed a divided populace... at least amongst book readers. I was curious to see what, if anything, had changed in the patterns in 2004.

I used the political books on the New York Times Bestseller List as a starting point for 'snowball sampling'. In the network map above, two books are linked if they were bought together. The network is organized and displayed by an algorithm that looks at the pattern of connections and finds the emergent structure. Nodes with only one or two links, and unrelated clusters that had no bridging role, were removed for clarity.

It appears that the many of the books have changed from last year but the pattern is the same. Two distinct clusters, with dense internal ties have emerged. These political books are preaching to the converted! This year we find more bridges between the clusters. Yet, this network of 67 books is dependent on just 2 nodes to remain connected -- Sleeping with the Devil and Bush at War.

So, if you are working a 2004 political campaign what do you do with this information? Obviously you will not be successful in removing a reader from deep in one cluster and transplanting them into the other cluster. All you can do is focus on the edge nodes and the bridges. See someone reading Sleeping with the Devil? That is someone you can talk to about your candidate. If they are reading Bushwacked or Dereliction of Duty -- the most central books in each cluster -- then either give them a high-five or a sneer, you won't change their views.

There are disappointingly few bridges between the red and blue. If readers were truly interested in understanding and learning they would confront a more diverse set of views than this picture suggests. Of course if they were really interested in learning they probably wouldn't have bought any of these books.

Keywords: Politics

Monday, February 02, 2004

Up or Down? Toilet seat etiquette.

I have found another unusual article. In my quest to find articles written by economists applying the tools of the trade unique problems not normally thought of as economic in nature, I found this one, by Jay Choi.

So what is the most efficient rule to follow when leaving the toilet seat? Always up? Always down? The intuition is pretty easy, since lifting the toilet seat is as costly as putting it down, the rule that minimizes the number of times you have to move the seat is optimal. So both the "always up" and "always down" rules fail because they may require one person to move it twice, and there is still a positive probability that the next person would also have to move it twice. So the optimal rule is one that at most requires everyone to move it exactly once. Once up, or once down. So ladies, you are better off training your man to pee sitting down, in which case the always down rule would become the default.

Thanks to the Marginal Revolution for the pointer.

Another wonderful source of articles of this nature is Steven Landsburg's Everyday Economics columns in Slate. Like this one: Should you peel your bananas from the bottom or the top?

Keywords: ECO120