Marginal Revolution

Blogging for profit?

Companies used to fire their employee bloggers. Now some of them are discovering that blogging is the "ultimate customer intimacy tool." Imagine chatting with your customers on a regular basis, telling them what the product means for their lives, informing them of new developments, and having them visit you [your site] every day. Who knows, it might even supplant some telemarketing. Here is the link. And see this recent discussion of how blog names matter and signal the nature of content.

Induced innovation in prisons

This fascinating article from Wired illustrates how prisoners make the best of their environments by inventing new contraptions.

"Locked in a California prison, Angelo needs a cup of coffee. Bad. But electric heaters used to make instant joe are contraband in jail. So his cellmate combines the metal tabs from a notebook binder with a couple of melted toothbrushes and some rubber bands.

Soon, Angelo is sipping Folgers.

The jury-rigged heater is one of nearly 80 improvised items Angelo meticulously diagrams in a new book, Prisoners' Inventions [check out this fascinating link, which offers diagrams of the inventions and further description]. Working with the Chicago-based art group Temporary Services, Angelo (not his real name) shows how inmates fashion dice from sugar water and toilet paper, dry bologna jerky on jail-house light fixtures, turn hot sauce bottles into shower heads and make grilled cheese sandwiches on prison desks."

One individual from Temporary Services notes that in the movies, "prisoners only create things to escape, get high or kill each other."

The whole thing reminds me of Soviet engineers.

Will Vouchers Split the Democratic Party?

The House has now passed a school voucher plan for the District. A similar plan was approved by the Senate Appropriations Committee but still must be brought to a full vote. Notable Democractic Senators Dianne Feinstein and Robert Byrd crossed party lines to vote for the proposal. Louisana Senator Mary Landrieu abstained but still faced the wrath of the Black Alliance for Educational Options who took out a full page ad in a New Orleans newspaper pointedly noting that she sends her kids to a Georgetown private school and accusing her of turning her back on African Americans. Other DC voucher groups have taken on Ted Kennedy for his opposition to vouchers likening him to Bull Connor. Strong material coming from anyone, let alone a traditional Democrat base.

I can't let this opportunity pass to reply to some of Tyler's further comments but I'll put those in the extension.

The debate so far Tyler 1, Alex 1, Tyler 2.

Let me take Tyler's weakest point first. He writes, "Imagine politicians upping the voucher amount and coverage to win votes each election cycle..." What like education spending is not a political issue today? In fact, over the past several decades we have doubled real per-capita spending on schooling with zero increase in productivity. It's possible that government would set an education voucher at too high an amount (but let's get it above zero before we worry about this!) but at least we will get something for our money.

Defining an acceptable school is a legitimate issue but one that we already face today with private schools, charter schools, and home schooling. I see no reason why private schools under a voucher system could not be regulated as private schools are today. Private schools do face some minimal regulations including hours and some content requirements but I don't think these have been a significant constraint. Some private schools will undoubtedly teach nonsense but Tyler seems to forget that Ebonics, to give just one example, was a creature of the public schools not the private schools.

I will agree, however, that current voucher plans are typically terrible. Existing vouchers are often limited to poor students and sometimes just to poor students in "failing" schools, the voucher amounts are typically low and to add insult to injury it is often illegal to add-on to the voucher amount (a type of price control). Finally, nowhere near enough students are suported. The DC plan, for example, is aimed at some 2,000 students in a school system of 66,000.

I recommend John Merrifield's School Choices: True and False as an antidote to this kind of limited thinking. Merrifield's bottom line is that we need a system under which the government in no way discriminate against parents who send their children to private schools.

Long Live the Marginal Revolution!

It looks like our short-lived technical difficulties are over (cross fingers!). If all continues to be well we should now be available at our permanent address, www.MarginalRevolution.com which is easier to remember than http://MarginalRevolution.blogs.com (the old address will continue to work just fine of course as they map to the same place). I have a question for the techies. Do different browsers use different DNS servers? I was very puzzled to find that the new address worked from IE at least several minutes earlier (and perhaps longer) than from Mozilla. Email me if you know the answer.

Can you find a Republican on the MIT faculty?

I am not a Republican, but the results from articles of this kind, from David Horowitz's Center for the Study of Popular Culture, disturb me. In America the number of registered Democrats and Republicans, over time, is roughly equal. The same cannot be said for university faculty. The most Republican school these researchers had in their sample was Northwestern, which still had a 4-1 ratio in favor of Democrats. The aggregate ratio was about 10-1, with the school sample included the entire Ivy League and Berkeley. Brown had a 30-1 ratio in favor of the Democrats. They couldn't find a registered Republican at MIT, Williams, Oberlin, or Haverford. They found 3 registered Republicans among the administrators of the Ivy League.

Being a collector is cheaper than you think

"...80 percent of the lots Christie's sell go for under $8,000." From the Thursday New York Times (registration required), and why couldn't an editor improve the grammar in that sentence? The median lot at Sotheby's sells for $4,177, at Christie's South Kensington, a branch, the median lot sells for $2,259. More than ever before, collecting is no longer the exclusive province of the wealthy.

Why I worry about vouchers

Alex (my co-blogger) and I have been arguing for years, it is perhaps no surprise that now we do it in the blogosphere. He is more optimistic about the performance of school vouchers than I am. He notes that housing vouchers have worked well, better than government housing, I think that school vouchers are more problematic than housing vouchers for several reasons:

First, government must define which schools are acceptable recipient of vouchers. In the short run it is fairly clear, it is far less so if we have vouchers in place for twenty years and schooling evolves. What about schools that teach black supremacy? Radical Islam? Creationism? Remember how controversial a few supposedly obscene NEA grants were? Not all those grants went directly to the artists either. What if an educational program involves home schooling plus ten hours of class time a week? Would that qualify for a voucher? Defining "suitable housing" does not involve a problem of nearly this magnitude.

Second, school vouchers could become the new middle class entitlement, as I mentioned in my New Zealand post earlier today. Imagine politicians upping the voucher amount and coverage to win votes each election cycle, just as they are now extending senior health coverage to prescription drugs. Again, we have not seen this with housing vouchers but "parents" are a much bigger and stronger constituency.

If I had my finger on the vouchers button, I would press it and allow experimentation at the state and local levels. So many American urban public schools are a disgrace. But few partial deregulations have worked better than promised. Most have created perverse incentives and occasioned considerable backlash, we all know that electricity "deregulation" has been a mixed bag at best, although the idea in principle makes sense.

If we are going to move forward with vouchers, I would like to know what the plan will look like, once it gets through the political meatgrinder. I don't know any voucher proponent who has done this.

How rich are you, globally?

If you earn $36,000 per year, you are in the top one percent of our planet, for a more comprehensive look at your relative status, check out the Global Rich List, don't use commas when you type in your yearly income. Their stated goal is to encourage charity and make us feel happy about how rich we are, in reality I think they are trying to make us feel guilty about how rich we are. They don't mention the policies and cultural attitudes that created this wealth.

The reference is from the blog of John M Scalzi.

Addendum: Donald Sensing tells us much more about the genesis and meaning of the list.

Kiwi watch: Can New Zealand fly again?

Read this interview with Roger Douglass, former New Zealand finance minister and the initiator of New Zealand's market reforms, which now have stalled for a decade.

Douglass tells us: "Government spending on welfare, retirement income, health and education has now reached $8,000 per New Zealander and $24,000 per household per year [that is Kiwi dollars, take 55 American cents as a ballpark figure for the time period in question]". At the same time the quality of these services has not been rising. Douglass proposes tax credits for these services instead, combined with market provision on the supply side.

Unlike with vouchers (see Alex's previous post on vouchers), the state would not have to define what constitutes an acceptable education or social service. This is a significant advantage of Douglass's notion of tax credit. On the other hand, the reform institutes the equivalent of a negative income tax or guaranteed annual income. A welfare payment that is automatic and easy to collect has bad incentive effects and runs the risk of becoming a new middle class entitlement, increased before every election.

Douglass describes "believability" as the biggest obstacle to reform. Given that a large change would be in the offing, most New Zealanders simply would not believe that they would receive equal or greater quality services for the same or lower net price.

"Blame Sarbanes-Oxley"

Peter Wallison, in today's Wall Street Journal (registration required, and yes you have to pay), serves up a biting critique of Sarbanes-Oxley, the recent legislation aimed at limiting conflicts of interest within corporations.

Here is a key passage:

...this was a wholesale change in the governance of American corporations, putting significantly more authority into the hands of independent directors and correspondingly reducing the power of corporate managements...it may have had unintended consequences - a reluctance of managements to take the risks and make the investments that had previously brought the economy roaring back from periods of stagnation or recession...The independent directors of a company are part-timers...Unfamiliarity in turn breeds caution and conservatism...They [directors] have little incentive to take risk and multiple reasons to avoid it.

There is not much more to the Op-Ed than that, no real facts, but this is an important point. Passing Sarbanes-Oxley was a kneejerk reaction from a Congress that felt the need to do something, anything, about corporate scandals. The Senate voted for it 99-0 (only a few negative votes in the House), never a good sign, unanimous votes often mean that an angry and uninformed public opinion rules the day. Time will tell what costs we will pay for this mistake.

Here is a small bit on implementation costs, but keep in mind they are secondary to the question of how investment gets distorted. I realize that corporate insiders are not the ones to trust here, but they don't like the law either.

Let's accept the fact that corporate governance isn't always fair, and opt for the system that does the best job of delivering the goods.

Addendum: Here is a direct link.