Marginal Revolution

Ron Bailey

Here is the story, via Megan McArdle; an excerpt:

“On global warming, the problem is ideologically I suspect it did cause me to …discount evidence which cut against the way I wanted it to be in that case. My justification to my self would be that I had seen [the environmentalists] be so wrong so many times before, why should I trust them this time?” he says.

But when the science appeared irrefutable, Bailey changed.

It is important to distinguish two claims.  The first is that a revenue-neutral carbon tax is, in expected value terms, a good idea.  If nothing else, we cannot emit accelerating rates of carbon forever. 

The second and more dubious claim is "a carbon tax is likely to solve the problem."  That's not so clear.  China and India may not follow suit, the oil may be pumped and used anyway, and the elasticities may be working against us.  I give the carbon tax about a thirty percent probability of significantly ameliorating global warming and that is assuming that we engage China in a constructive manner.  A pessimistic view, however, does not refute the case for trying.

Addendum: Here is an interesting post on whether more information about global warming causes people to worry about it less.

The real estate bubble, local government style

Over the last year, percentage increase in the tax assessment value of the land beneath our Fairfax house: > 50 pct.  The new valuation arrived yesterday.

If the real estate markets gets any worse, our tax bill may not be able to stand it.  Fortunately reassessments may be in order.  The lesson is that when revenue is at stake, the rule of law is fragile indeed.

Why I am not a Rawlsian

The Difference Principle is not so much excessively risk-averse as excessively jerry-rigged.  OK, we can't aggregate as utilitarians but then we resort to some notion of primary goods with intersubjective validity.  OK, the size of the worst-off group is itself endogenous to the contractarian process.  But just how big is that group supposed to be?  Can it be 99 percent of society?  OK, people behind the veil don't know their particular identities, but just how "thin" is their knowledge supposed to be?  And must their choices be purely self-interested?  All these criticisms are well-known.  You might try to shore up Rawls on any one of these points but the entire apparatus is simply too wobbly. 

The bottom line is that you can't get lexical orderings out of a moral theory unless you build them in upfront.  And without lexical orderings, well, Rawls, like many illustrious minds before him, does not succeed in sidestepping the dirty mess of aggregation.  The critical moral question is how we should compare the interests of some people to others in a real world setting; don't expect to find an easy way out of that one. 

Rawls's Principle of Equal Liberty is if anything on weaker ground than the Difference Principle.  Equal Liberty?  Who says?  At what margin?  At what cost?  Lexicality can't plug all the leaks in this shaky boat, and no it can't save Robert Nozick either.

The biggest problem is simply why the imaginary agreement behind the veil of ignorance should have moral force.  Now I like preferences as much as the next guy, but imaginary preferences take me only so far.  That is just one piece of information in a much broader comparison of plural values.  I'm not even sure that imaginary preferences should override the very real preferences of very real people in very particular situations.  Why should they?  "Fairness" is just one value of many.

I read Rawls as a very very smart and intellectually honest guy, determined to resurrect Kant, avoid the aggregative problems of consequentialism, and move at least one step beyond Sidgwick.  He knew how hard it was to even attempt such a success and he makes all the requisite moves to get us there, albeit without, in the final analysis, squaring the circle. 

Matt Yglesias adds commentary; he notes, correctly, that for the current Left Rawls doesn't offer such an inspiring vision.  I'll put it this way: if you have to work that hard to establish "Sweden is great," you should be spending more money on plane tickets.

Just to clarify, there are at least three Rawls doctrines: "Justice as Fairness," TJ, and Political Liberalism.  I like the first one best, but won't cast my lot with any of the three.  At the end of the day I come away thinking that it is Sidgwick (and maybe Kierkegaard?) who is the central moral theorist of the last two centuries.

Assorted links

1. A new way of learning history of economic thought

2. Tim Harford recommends ten books

3. How to breed callousness: send a doctor to school

4. Via Greg Mankiw, tax rates on the middle class are falling

5. Dan Ariely says we are predictably irrational on Obama

6. Rate busters?

Which work of American liberal political thought has held up best?

Having said A, one must say B.  Ezra Klein poses this question and receives many responses.  I'll nominate William Appleman Williams's The Tragedy of American Foreign Policy, Karl Polanyi's The Great Transformation, Richard Rorty on cruelty, Michael Walzer's Spheres of Justice, and Harold Cruse's Crisis of the Negro Intellectual.  Martin Luther King's Letter from Birmingham Jail deserves consideration although it does not exactly fit the category.  Rachel Carson wrote an important book but not really a good book.  Carol Gilligan is an interesting dark horse selection.

Jane Jacobs, by the way, might win either prize if you are allowed to count her as either a conservative or a liberal.  But which is she?  John Dewey and Walter Lippmann are two other figures who could be nominated for either prize.

If you think this list beats the conservative one, you are right.  Note, however, that the conservative list excluded economics (and libertarians), which is where most of the contributions have come on the Right over the last fifty years.  Plus the all-important Chicago School focused on ideas and articles, not books.  So the comparison is not as lopsided as these posts, taken alone, might indicate.

Just a few weeks ago, Bryan Caplan and I decided that Rawls's Theory of Justice wins the prize for "least Hansonian book ever."  For all the evident philosophic care, in the final analysis Rawls was just making stuff up.

What are your nominations?

Addendum: Thinking back, Wilson's On Human Nature might be a good pick for the conservative prize, even though I do not believe Wilson is himself a conservative.

Who hates inequality?

Chimpanzees are highly sensitive to inequity, and typically refuse to continue in interactions in which they get less than a social partner. However, chimpanzees from stable social groups do not respond negatively in situations in which their partners received better rewards, whereas chimpanzees from less-established groups show rejection rates as high as 60 percent.

Here is the full story, interesting throughout; the hat tip is to Mark Thoma.

Nazi Literature in the Americas

Part of Bolaño’s genius is to ask, via ironies so sharp you can cut your hands on his pages, if we perhaps find a too-easy comfort in art, if we use it as anesthetic, excuse and hide-out in a world that is very busy doing very real things to very real human beings. Is it courageous to read Plato during a military coup or is it something else?

That's from one review of the newly translated Roberto Bolaño book.  (Might it have been titled "Conservative Fascism"?)  This work is not a structured narrative but rather a series of impressionistic portraits of how easy it is for some people to slip into being horrible and stay that way.  Imagine a fictional bestiary of creepy aesthetes who are playing at human relationships, sleepwalking through their dreamlike yet trivial obsessions, and in the meantime pledging allegiance to tyranny.  Literature is a "surreptitious form of violence" throughout.

Here are excerpts from other reviews.  At this point it goes without saying that everything by Bolaño is essential reading; however you may find many parts baffling if you don't have a strong background in things Latin American.

Forward markets in everything, restaurant edition

Jason Kottke relates:

The Riverdale Garden Restaurant in the Bronx is trying out a novel way of staying in business: they're asking for their regulars to pledge $5000 in exchange for a year of free dinners.

The problem of course is obvious.  First, you probably won't get your money back.  Second, if everyone paid up, the restaurant has a weaker incentive to serve good food.  And which customers do you think will receive the best treatment?  The ones who put up nothing per each meal?

Suicide fact of the day

Glen Whitman reports:

I went back to the original data source (imagine that!) and found that the stereotype is dead wrong: suicide rates are notably lower for teenagers than adults...Suicide rates do rise throughout the teen years, but they plateau at about age 20 and remain flat throughout the years 20 to 65. Then they jump again for the 65+ demographic.

In case you're wondering, teen suicide rates have not been rising, either. They've been in decline since the late 1980s.

Yet these teens still take the most risks.

Which 20th century classic of American conservative political thought has held up best?

We discussed this question over a group dinner Tuesday night.  I opined that none have held up particularly well, mostly because they underestimated the robustness of the modern world and regarded depravity as more of a problem than it has turned out to be.

By stipulation, this universe of books does not include Milton Friedman or pure economics.  It does include Russell Kirk, John Flynn, Richard Weaver, Robert Nisbet, and William F. Buckley, among many others.  You can nominate grumpy Brits and Europeans who settled in the United States, so yes Road to Serfdom is a contender, even though its main empirical point (socialism leads to loss of political freedom) would seem to be refuted.  You can try Albert Jay Nock or Eric Voegelin but Rothbard and Rand do not count as conservatives.  Your answer cannot come before the 20th century, so no Federalist Papers and no Tocqueville.

Leave your answer in the comments and also say why.  At some point I'll offer up my pick as well.

Why Plurality Rule is a Bad Voting System

1. “Falling Slowly” from “Once”*
2. “Happy Working Song” from “Enchanted”
3. “Raise It Up” from “August Rush”
4. “So Close” from “Enchanted”
5. “That’s How You Know” from “Enchanted”

Discuss.

New roots for the Irish miracle?

By the turn of the century [2000], according to some reckonings, 70 percent of Irish manufactured exports were by US-owned firms...

This was, of course, encouraged by tax breaks and a form of industrial policy.  But part of this process was a shift away from English investment:

Between 1960 and 1970 British-owned companies represented 22 percent of new industrial enterprises in Ireland.  But by 1980 they accounted for less than 2 percent.  Significantly, the proportion of exports to Britain from Ireland halved between 1956 and 1981.

In other words, Ireland found a more complementary economic partner, namely the United States.  The Irish economic miracle is in part the American economic miracle.

That is from the often interesting Luck & the Irish: A Brief History of Change from 1970, by R.F. Foster.  Here is a previous MR post on the Irish economic miracle.

William F. Buckley has died

Here is one account.  I never considered myself a Buckleyite conservative but as a kid I was much taken by his show Firing Line.  It is the first time I was exposed to Hayek (I recall that Buckley blew apart his critique of social justice with a single question), or for that matter Milton Friedman, or for that matter Johann Sebastian Bach.  Here are many obituaries.  Here is lots of YouTube, recommended.

Addendum: Here is Ilya Somin on Buckley.

Daylight savings time increases energy usage

There is a natural experiment from the recent switch away from DST in Indiana.  Matthew Kotchen and Laura Grant report:

Our main finding is that—contrary to the policy’s intent—DST increases residential electricity demand. Estimates of the overall increase range from 1 to 4 percent, but we find that the effect is not constant throughout the DST period. There is some evidence of electricity savings during the spring, but the effect lessens, changes sign, and appears to cause the greatest increase in consumption near the end of the DST period in the fall. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. Based on the dates of DST practice before the 2007 extensions, we estimate a cost of increased electricity bills to Indiana households of $8.6 million per year. We also estimate social costs of increased pollution emissions that range from $1.6 to $5.3 million per year.

In other words, with DST less is spent on light but more is spent on air conditioning.  Here is a summary article on the work, from today's WSJ.  Do note this:

There may also be social benefits to daylight-saving time that weren't covered in the research. When the extension of daylight-saving time was proposed by Mr. Markey, he cited studies that noted "less crime, fewer traffic fatalities, more recreation time and increased economic activity" with the extra sunlight in the evening.

Tyler and I Have a New Business

Mike Moffatt has signed up with Stickk.com to try to lose some weight and he wrote to Tyler and myself.

I need to find people to give the money to if I fail, so I thought I'd ask the Economics blogging community for help. If you agree then if I fail at my goal, I will pay Marginal Revolution, or the charity of your choice, $100. 

Here is my response to Mike:

Hmmmm....I am not sure whether to be pleased at the prospect of a free $100 or upset that you consider $100 in our hands to be such good motivation!  Speaking personally, however, I understand the difficulty of losing weight thus I want you to know that if we receive the $100 we will not send it to India, we will not give the money to cancer research, we will not give the money to any cute animals instead we will use your money to squash the poor, to fight against universal health care, and to gas up our Hummer.  Moreover, we will do this while drinking fine wine, smoking cigars, eating foie gras and laughing uproariously.

There that ought to help.

If there are other left-wingers out there who would like more motivation to accomplish their life goals then do know that Tyler and I are here to help.

Moral puzzles about collective action

If I don’t fly from London to my sister’s wedding in New Zealand she will be upset, I will cause her pain and so that’s morally bad. If I do fly to my sister’s wedding in New Zealand I will put about four tonnes of carbon dioxide into the atmosphere, which will contribute to climate change, which, according to the World Health Organisation, already causes about 150,000 deaths every year. Clearly that’s also morally bad. Which is the morally correct thing to do?

That question is considered by Will Wilkinson.  Don't argue the facts of carbon emissions (you can choose another scenario if you wish), focus on the moral dilemma.  Will says fly, the plane is going anyway.  That makes my brain hurt with game theory and the probability of threshold effects and triggers.  (Isn't there some chance that your patronage, eventually, sets another flight in motion, if only stochastically?)  Under an alternative approach, say you are allowed some quota of carbon emissions; otherwise suicide or residence in Iceland as a pedestrian would be required.

Your net carbon impact depends far more on the number of children you will have than any other variable; remember good environmentalism uses a zero rate of discount.  So people with no biological children should be allowed to fly a lot and people with lots of biological children should not get to fly so much at all.  Is that so far from the reality we observe?

Here is a good new piece on our carbon footprints.

Article about GMU Economics

The focus of the article is on Robin, Alex, Bryan, myself, Peter Leeson, and also Ilia Rainer, who plays straight man very very well.  I've put the part about myself in the first comment below.  But read the whole story!  It is very insightful.

Barack Obama's economic advisors

Here is the story, by Noam Scheiber of TNR, hat tip to Greg Mankiw.  Excerpt:

Like Bill Clinton in 1992, Obama's campaign boasts a cadre of credentialed achievers. Intellectually, however, the Obamanauts couldn't be more different. Clinton delighted in surrounding himself with big-think public intellectuals--like economics commentator Robert Reich and political philosopher Bill Galston. You'd be hard-pressed to find a political philosopher in Obama's inner wonk-dom. His is dominated by a group of first-rate economists, beginning with Goolsbee, one of the profession's most respected tax experts. A Harvard economist named Jeff Liebman has been influential in helping Obama think through budget and retirement issues; another, David Cutler, helped shape his views on health care. Goolsbee, in particular, is an almost unprecedented figure in Democratic politics: an academic economist with a top campaign position and the candidate's ear.

Why not increase this penalty?

The headline reads: "Health Insurer Must Pay $9 Million for Canceling Sick Woman's Policy." 

The article has gory details about company employees being given cancelation quotas and bonuses, apparently regardless of whether the cancelations were merited under the terms of the initial policy.

If you think that health insurance policies are unjustly canceled fairly frequently (and yes I can believe this), surely this penalty should be much higher.  The cancelers are rarely caught, so a simple application of law and economics suggests severity not leniency.  For a large health insurance company a $9 million fine is peanuts.

As far as I can tell, credibly stiffer fines have not been tried.  In other words, the government does a poor job at enforcing the health insurance contract.

You might hold a theory that the government judiciary will malfunction in such a way but a health care government bureaucracy would not make mistakes of comparable importance.

I do not hold such a theory.  When it comes to health care reform, I would like to start with the enforcement of contracts based on rational and just penalties.

How poor does Cuba look?

The question is why anyone might think Cuba is doing OK, relative to northern Mexico.  Megan McArdle offers (more than) two points:

3) Deep poverty is much more picturesque than moderate poverty. Poor countries have their old colonial buildings still standing, because no one had the money (or the reason) to tear them down and put up something bigger. The countryside is dotted with adorable houses made out of natural materials and natives wearing colorful traditional garb. Animals graze in verdant fields, besides teams of sowers and reapers. Middle income countries are smoggy, and almost everything looks like a cheaper, shabbier version of what you get in the US. Scenic landscapes are despoiled by cinderblock buildings with hideous tin roofs, or trailers; cities are choked with boxy modern buildings that look something like our housing projects. The genteel decay that looks gothic and intriguing on an old Victorian mansion just looks seedy when it's eating away at badly poured concrete. Affluent Americans underestimate the utility value of things like having personal space, or an automobile.

4) Cuba was relatively wealthy in 1959; it therefore has more of the markers, like old majestic buildings, that we associate with wealth.

I found the most evident signs of Cuban poverty to be the unceasing supply of articulate and sometimes weakly sobbing mendicants, none of whom sounded like con men, all of whom needed money to buy food and clothes for their families.  The most shocking part is what small sums of money they would ask for or be made happy by.  Or the numerous women -- and I mean ordinary women in the streets -- who would offer their bodies to a stranger (handsome though I am) for a mere pittance.  Yes in Cuba there is good access to doctors but anesthesia is in short supply and the health care system stopped improving long ago.

If you want to understand northern Mexico, get out of the Tijuana tourist strip and visit Hermosillo.  Count the number of new housing developments, and then count how many of them are inhabited by fairly dark-skinned, previously dirt poor, Mexican mestizos.  Put that number over the number of buildings in Havana that do not have serious maintenance problems and see if you can divide by zero.

It's quite possible that a lower middle class Mexican eats better food than you do, but there is no chance of that for anyone in Cuba except the top elite.  Powdered milk is a luxury there. 

I've long thought that Prague looks much richer than it is, and that the ugly northern Virginia or Houston looks poorer than it is.  Where else looks deceivingly rich or poor?

Shout it from the Streets

This is Fred Krupp president of the Environmental Defense Fund interviewed in Wired who after noting the success of markets in acid rain avoidance says this about approaches to carbon avoidance and global warming:

...I know that capitalism works, that American entrepreneurialism works, and we can damn well expect that private capital — not government money — will actually solve this problem.

Markets in everything

"Express 7-11."

Go there if you find that a standard 7-11 involves too much inconvenience and delay.  There is a new Express 7-11 near campus, right next to an old (non-express) 7-11.

Gun Buyback Misfires

Oakland's recent gun buyback was especially ridiculous.  The police offered up to $250 for a gun "no questions asked, no ID required."  The first people in line?  Two gun dealers from Reno with 60 cheap handguns.  Fortunately the buyback did manage to get some guns off the street, too bad they were turned in by a bunch of senior citizens from an assisted living facility.   Whew, the streets are safe at last.

Even putting aside the obvious nonsense, gun buybacks simply don't work.  In technical terms the supply of guns to Oakland is perfectly elastic so buybacks won't reduce the number of guns in Oakland.  Here is an analogy from my op-ed in the Oakland Tribune.

Imagine that instead of guns, the Oakland police decided, for whatever strange reason, to buy back sneakers. The idea of a gun buyback is to reduce the supply of guns in Oakland. Do you think that a sneaker buyback program would reduce the number of people wearing sneakers in Oakland? Of course not.

All that would happen is that people would reach into the back of their closet and sell the police a bunch of old, tired, stinky sneakers.

Gun buybacks won't reduce the number of guns in Oakland. In fact, buybacks may increase the number of guns in Oakland.

Imagine that gun dealers offered a guarantee with every gun: Whenever this gun gets old and wears down, the dealer will buy back the gun for $250.

The dealer's guarantee makes guns more valuable, so people will buy more guns.

But the story is exactly the same when it's the police offering the guarantee. If buyers know that they can sell their old guns in a buyback, they are more likely to buy new guns. Thus the more common that gun buybacks become, the more likely they are to misfire....

The guns bought in this buyback are destined to be melted down to create a monument.  It's a shame that this monument will be the only lasting effect of the buyback.

Tim Harford's chapter eight, a contribution from Sahar Akhtar

Today's guest blogger is the very impressive Sahar Akhtar, who has a Ph.d. in both economics and philosophy; she is currently at Brown University.  As I read her post on Tim, she is saying that most people really do act -- at least in part -- as if their votes count.  I now turn "the mike" over to Sahar:

In Chapter 8, Harford illuminates a large chunk of life with a single insight. Borrowing from Schelling once more, along with a little Bates and North, he shows us that individually rational behavior doesn’t always add up to collectively rational results. But this time the domain is politics, and it might be a stretch to say people always behave rationally.

The analysis he provides on issues where there are high stakes, like revolutions and trade barriers, is pretty great. So I’m going to instead focus on the issue that’s been so hashed out that the marginal contribution of any additional discussion is almost as low as the marginal impact of my vote. But I’m not fully rational.

The rest of Sahar's contribution comes under the fold...

Harford writes that voters aren’t fooled into thinking their votes affect the outcome and that most people vote because it makes them feel good. These ‘expressive’ explanations help us preserve the idea that people are rational (a great book is by Brennan and Lomasky).  But is this an actual account of why people vote? Until we have better survey data, anecdotal evidence will have to do.

Go to a diner, bus stop, retirement home or even a college campus and almost invariably people will tell you that their vote counts. What does ‘count’ mean here?  It might mean they think their vote is important because it satisfies a civic duty to support democracy (but why would so many think this is the best way to discharge that duty unless they think their vote counts in the more literal sense). Or maybe it means they think their vote somehow encourages more people to vote (but why isn’t lying more efficient? And why would people get influenced into voting, unless they think it matters? ) Isn’t it possible to think that people actually believe their votes count?  But if this were true, how could we best make sense of it? One way is to bite the bullet and accept that (a lot of) people might just be irrational.

Voting does of course increase with education level, but this doesn’t defeat the claim that voters might be irrational. Most of our civic/political education in high school and college centers on the details of how democracy functions and why voting is important, and not on the trivial impact of our votes.

And remember the way that voting works in the U.S. at least—through some freaking inscrutable thing known as the electoral college. On my not so good days, I still have no idea how this works and, like most MR readers, have above average education. Does my vote count more in states with fewer delegates, or not at all in some locations, or because this is a republican state does this mean my vote for a democrat wouldn’t matter or would it matter more, and where is this school? My neuronal synapses die just a little.

Also, without voter irrationality it’s hard to make sense of the success of campaigns such as “a vote for Nader is a vote for Bush” in resonating with potential voters—the aim of these kinds of slogans is to encourage people to vote in a particular way. If people don’t believe their votes count, why would these slogans be effective and why would the slogan designers anticipate they would be effective? Harford seems to hint at this kind of problem when he points out that while voters don’t go to the polls to impact results, they don’t realize that what they do once they get to the booths doesn’t matter—but I wish he gave us his thoughts on this sort of inconsistency.

The fact that people don’t simply vote, but vote for a particular candidate, at best suggests that if people feel duty-bound it’s not to some abstract ideal but to particular parties and groups, which raises another, and not incompatible, potential motivation for voting.

Some might think that their votes count not individually, but as part of a group. Harford and other economists aside (including this one), people don’t always act on their (individual) self-interests.  (for just some examples, see Fehr and Fowler on altruistic punishment)

There are good evolutionary reasons to think that we frequently adopt the perspective of “what is good for us”.  You don’t have to believe in the group-selectionist theories of people like Sober and Wilson.

If that makes you feel dirty—selfish gene will get you there if there are enough genes shared in common among a group. And, a la Robert Frank, what starts out as emotional incentives to act on behalf of a fairly specified, narrowly defined, and kin-based group gets co-opted and extends (irrationally?) to larger, less cohesive groups. The group in this case would simply be the class of people thought to share the same values and beliefs.

Of course, like all evolutionary explanations, this is a just-so story and needs to be tested, but so does the rational voter idea. We still don’t have very good insight into the motives of voters, and until we do we should remain skeptical of any one model.

I’m not a hater--in many (maybe most) areas of life, the rational choice model makes damn good sense. In some areas of politics, however, emotions run high and irrationality can be bliss, and these may be areas where dynamic writers like Harford should resist the model a little.

Back to TC: Readers, do tell us what you think...

The personality traits of liberals and conservatives

This topic does not die easily:

Dr Wilson and Dr Storm restricted their study to white, Protestant teenagers, in order to eliminate confounding variables. However, their volunteers came from two different traditions—Pentecostal, which tends to the conservative, and Episcopalian, which tends to the liberal.

The researchers conducted the study by giving each volunteer a beeper that went off every two hours or so. When it beeped, the volunteer answered a questionnaire about what he was doing at that moment, and how he felt about it.

Dr Wilson and Dr Storm found several unexpected differences between the groups. Liberal teenagers always felt more stress than conservatives, but were particularly stressed if they could not decide for themselves whom they spent time with. Such choice, or the lack of it, did not change conservative stress levels. Liberals were also loners, spending a quarter of their time on their own. Conservatives were alone for a sixth of the time. That may have been related to the fact that liberals were equally bored by their own company and that of others. Conservatives were far less bored when with other people. They also preferred the company of relatives to non-relatives. Liberals were indifferent. Perhaps most intriguingly, the more religious a liberal teenager claimed to be, the more he was willing to confront his parents with dissenting beliefs. The opposite was true for conservatives.

Here is Storm's doctoral thesis, a source for some of the material.  This Wilson blog post is a useful summary; nonetheless it emphasizes the weaker part of the results, namely the claim that conservatives are more conformist.

Surely someday we will make progress on this question; it is unlikely that any two non-random groups will have exactly the same personality traits.  But what is the correct comparison?  By looking only at religious Protestants, we are holding some factors constant, but perhaps choosing atypical members of each political ideology.  For instance maybe all we are doing is comparing Pentecostals to Episcopalians.

Further thoughts on a carbon tax

I haven't figured this out yet, but I'm experiencing ongoing worries.  Let me try to articulate them, maybe one of you can cure me.  One story I hear is that the new, carbon-friendly energy technology will be subject to decreasing costs, or alternatively increasing returns to scale.  In other words, there are high start-up costs, but once it is underway it will be pretty cheap and lots of countries will adopt it.  So: 1) the U.S. levies a carbon tax, 2) the U.S. incurs the start-up costs and invents or improves the decreasing cost technology, and 3) lots of countries make the switch.  Voila!

It was reading about the new $2500 car, from India, that got me worried.  Let's say the new technology is more carbon-friendly than what we do now, but still generates some carbon.  (That sounds reasonable, no?)  The new energy technology is really cheap, so lots more people -- most of all in China and India and Africa -- enter carbon-using sectors of the economy.  Even if the new technology is three times as carbon-efficient, if the world as a whole uses three times more energy, carbon emissions do not go down.  The basic problem is the combination of low costs and many people standing on the verge of the carbon-using sector of the economy. 

Or to put it another way, eventually gasoline costs become a very important part of the total cost of a car.  Then say that cars become much more gasoline efficient.  Lots more people can afford cars.

Of course if the new technology is solar, and hardly generates carbon at all, this problem goes away.  (That said, even cheap solar power might encourage other kinds of carbon-using technologies.  Maybe factories and homes can go solar but cars can't.  The factories make Africa wealthier, and Africans buy more cars, etc.)

Alternatively, maybe the new induced carbon-friendly technology has increasing costs rather than decreasing costs.  It never gets really cheap.  We keep on using it only because the tax is high.  Most importantly, countries without comparable carbon taxes will never switch to the new technology.  I might add that many factories will relocate to those countries, thereby partially thwarting the initial purposes of the tax.

I am not sure if I have spelled out these scenarios correctly.  I am not sure which scenario we are supposed to be rooting for.

Why is popcorn so expensive at the movie theater?

There is now some data for the price discrimination hypothesis:

Looking at detailed revenue data for a chain of movie theaters in Spain, Wesley Hartmann ... and Ricard Gil ... compared concession purchases in weeks with low and high movie attendance.

The fact that concession sales were proportionately higher during low-attendance periods suggested the presence of "die-hard" moviegoers willing to see any kind of film, good or bad--and willing to purchase high-priced popcorn to boot. "The logic is that if they’re willing to pay, say, $10 for a bad movie, they would be willing to pay even more for a good movie," said Hartmann. "This is underscored by the fact that they do pay more, even for a bad movie, as is seen in their concession buying. So for the times they’re in the theater seeing good or popular movies, they’re actually getting more quality than they would have needed to show up. That means that, essentially, you could have charged them a higher price for the ticket."

Should theaters flirt with raising their ticket prices then? No, says Hartmann. The die-hard group does not represent the average movie viewer. While the film-o-philes might be willing to pay, say, $15 for a movie ticket, a theater that tried such a pricing tactic would soon find itself closing its doors.

"The fact that the people who show up only for good or popular movies consume a lot less popcorn means that the total they pay is substantially less than that of people who will come to see anything. If you want to bring more consumers into the market, you need to keep ticket prices lower to attract them." Theaters wisely make up the margin, he says, by transferring it to the person willing to buy the $5 popcorn bucket.

Here is more.  The data are the data, but this doesn't strike me as a very general explanation.  Specifically it requires that the high-value movie demanders are also the high-value popcorn demanders.  If anything I would expect the casual movie fans to be the ones who want to buy the concessions; the seasoned moviegoer will have some other, better plan worked out in advance.  For other explanations for high popcorn prices, you might look at the research on "shrouding," or consider that ticket revenue is shared with the studio but concession revenue usually is not.