Marginal Revolution

Lowering the drinking age

Here is another reader request:

There's been recent talk about what would happen if the legal drinking age were lowered to 18. Would there be a net increase or decrease in risky binge drinking, accidents, etc?

New Zealand lowered its drinking age to 18 in 1999 and bad consequences followed, including a higher rate of drinking-related car crashes.  Illegality, even when it can be circumvented, really does raise the price of an activity in many instances. 

Nonetheless I still think that 20-year-olds -- legal adults in just about every other way -- have the right to drink alcohol.  Sometimes I call myself a "two-thirds utilitarian."  I am a pluralist who thinks that utility is often but not always the primary consideration behind policy choice.

There's always another paternalist intervention to save children's lives but no one is for all of them.  We could ban swimming pools and buckets for instance.  We could ban high school football.  We could raise the drinking age to 25.  How about a drinking age of 50?  How about a driving age of 21?

I see at least two major analytical questions.  First, how much normative force should "extra death" have in a policy argument?  Second, what is special about the number 18?  Consistent with the latter question, I think that 15-year-olds should be able to drink in a restaurant when clear parental permission is present.

Designing Monopoly

In Alabama it is illegal to recommend shades of paint without a license.  In Nevada it is illegal to move any large piece of furniture for purposes of design without a license.  In fact, hundreds of people have been prosecuted in Alabama and Nevada for practicing "interior design" without a license.  Getting a license is no easy task, typically requiring at least 4 years of education and 2 years of apprenticeship. Why do we need licenses laws for interior designers?  According to the American Society of Interior Designers (ASID) because,

Every decision an interior designer makes in one way or another affects the health, safety, and welfare of the public.

This hardly passes the laugh test.  Moreover as Carpenter and Ross point out in an excellent article in Regulation from which I have drawn:

In more than 30 years of advocating for regulation, the ASID and its ilk have yet to identify a single documented incident resulting in harm to anyone from the unlicensed practice of interior design...These laws simply have nothing to do with protecting the public.

Most states do not have license laws for interior designers but the unceasing lobbying efforts of the ASID have expanded such licenses.  Fortunately, unlicensed interior designers are fighting back!  I love that unlicensed designers in New Hampshire have formed a anti-license league, Live Free and Design.  Tuttle Lives!

Against Intellectual Monopoly

Against Intellectual Monopoly is a relentless, pounding, take no prisoners attack on patent and copyright law.  It joins Lessig's Free Culture and Heller's The Gridlock Economy as an instant classic and a must-read on these issues. 

Many people argue that the patent system has gone wrong in recent years, Boldrin and Levine argue that the patent system was rotten from the start.  James Watt they say was a "scoundrel" who with his politically-connected partner Matthew Boulton used the patent system to crush their innovative opposition and delay the industrial revolution. 

During the period of Watt's patents, the United Kingdom added about 750 horsepower of steam engines per year.  In the thirty years following Watt's patents, additional horsepower was added at a rate of more than 4,000 per year.  Moreover, the fuel efficiency of steam engines changed little during the period of Watt's patent; however between 1810 and 1835 it is estimated to have increased by a factor of five.

Will books be published without copyright?  Boldrin and Levine point out that the 9-11 Commission Report was profitably published by Norton despite being available free for download. Not to mention the fact that most of the great works of literature were published without copyright.  Boldrin and Levine are top-notch theorists but AIM is widely accessible and it succeeds best with its many historical discussions and contemporary anecdotes.

AIM does suffer in places from a lack of a lack of nuance and a surprising ability to ignore trade-offs.  Boldrin and Levine argue, for example, that among the reasons we don't need patents are a) because ideas aren't copied immediately, they take time to diffuse, b) first movers have significant advantages and c) trade secrecy is often a more effective "means of appropriating returns" than patents.

Quite right on all three counts but each of these reasons also explains why patents are less costly than one might at first imagine.  After all, what Boldrin and Levine are really saying is that intellectual monopoly would exist even without intellectual property law. 

A standard model used to explain why patents might be useful implicitly assumes that ideas are transmitted instantly at zero cost.  Boldrin and Levine smash the premise of this argument but the premise is sufficient for the conclusion not necessary.  Indeed, once you acknowledge that the slow diffusion of ideas helps entrepreneurs to appropriate the returns to their innovations it becomes an open question of how slow is best?   When is the appropriability of returns strong and when is it weak?  Doesn't it differ for different goods?  Shouldn't intellectual property law recognize these differences?  It's clear, for example, that ideas are diffusing more quickly than ever before.  On Boldrin and Levine's argument, faster diffusion of ideas implies lower appropriability and thus a stronger argument for intellectual property law.  Needless to say Boldrin and Levine are too busy using a "mallet to smash shiny myths" to make this argument.  (To be fair, they are more nuanced in the conclusion.).

Similarly, Boldrin and Levine argue that the larger the market the less patent protection is needed, hence globalization implies less patent protection.  Again, quite right (see also my paper, Patent Theory versus Patent Law, on this point).  But you won't see Boldrin and Levine drawing the corollary conclusion that more intellectual property rights are optimal the smaller the market, despite the fact that we have a very successful example where increased patent rights for smaller markets generated considerably more innovation, namely the Orphan Drug Act.

For economists, it's also surprising how little marginal analysis you find in AIM.  For example, Boldrin and Levine ask, Did Rowling really need a billion dollars to write Harry Potter?  Surely, a few million would have been enough.  But that's like saying that taxing lottery winnings won't reduce the number of buyers because the winner will still get a huge return on her dollar of investment.

The bottom line is that that there is a Laffer curve for innovation - more appropriability increases innovation at first but innovation declines when appropriability extends too far. I agree with Boldrin and Levine that rent-seeking has put us on the wrong side of the Laffer curve for innovation.  We need to reduce intellectual monopoly with patent reform, less copyright protection, and a greater use of patent substitutes like prizes.  But unfortunately, when it comes to innovation there is no invisible hand theorem which moves us automatically to the top of the curve. 

Auto buybacks backfire

In my post, Gun Buyback Misfires, I pointed out that a) gun buybacks encourage people to turn in old, low-quality guns that are unlikely to be used in any case and b) gun buybacks can encourage people to buy and hold more guns because the buyback is a form of insurance, if the gun gets old or stops working you can sell it to the police.

In an excellent post Steve Levitt points out that Alan Blinder's proposal for auto buybacks suffers from exactly the same problems.

...the majority of vehicles that are turned in will not have been driven much, if at all. Indeed, I suspect one of the most visible responses to this program will be a new market for mechanics fixing up cars that don’t run at all just enough so that they can be driven to the government’s lot to collect the cash.

The biggest problem with this policy, however, is the way it distorts long run incentives. Let’s say the rules of the program say that a car must be at least fifteen years old to qualify for a big government subsidy to scrap it. This gives powerful incentives to people with twelve-year-old cars they were planning on scrapping to keep driving them for three more years to collect the government bounty. Instead of reducing the number of clunkers on the road, this program could actually lead to an increase!

Trade is good: settle your lawsuit

Note to victims of accidents, medical malpractice, broken contracts and the like: When you sue, make a deal.

That is the clear lesson of a soon-to-be-released study of civil lawsuits that has found that most of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer.

...Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.   

Here is the story.  The good news is that 80 to 92 percent of cases do in fact settle.  The bad news is that, over time, poor decisions to go to trial have become more rather than less frequent.

Getting serious

Saudi Arabia's religious police have announced a ban on selling cats and dogs as pets, or walking them in public in the Saudi capital, because of men using them as a means of making passes at women, an official said on Wednesday.

...Othman said that the commission has instructed its offices in the capital to tell pet shops "to stop selling cats and dogs".

Here is the full story.  This is, of course, a net benefit for the offenders to date.  The newly created artificial scarcity increases the conversation value of the already owned animals and also confers a positive wealth effect on the wrongdoers.  Is it not better to stop xxxx by giving everyone a pet and thus eliminating its conversational value?  By the way, if this edict is enforced, we can expect an increase in the pet birth rate and also a greater number of abandoned pets.

The final question, of course, is how do you use a pet cat to make a pass at a woman?  I've heard of people walking their cats, but I expect it is not an easy experience.  To limit sex, cats should be subsidized, not taxed.  No?

New constitutional amendments?

Travis, a loyal MR reader, writes to me:

Given our culture and the political environment, both now and in the foreseeable future, what do you predict will be the next constitutional amendment and in what year do you think it will be passed (plus or minus five years)?...If forced to make a prediction, I would argue that between the years 2020 to 2025 there is a p=.25 that there will be some sort of constitutional amendment liberalizing same-sex marriage -- at least giving same-sex couples equal rights and benefits that married couples currently receive but not necessarily allowing them to be officially "married". 

I do not expect further amendments anytime soon but please tell me why I am wrong.  Due to greater political competitiveness, it is harder to overcome the relevant hurdles than before, as there is always someone to fight on the other side or ask for a different version of the amendment.  And the so-called "low-hanging fruit," such as repeal of Prohibition, seems to be gone.  If I had to pick, I'll predict some version of a recast Equal Rights Amendment but "nothing anytime soon" still remains a better prediction in my eyes.

Regulatory arbitrage

Most of the town of Baarle-Hertog is in Belgium but some spots are in the Netherlands, sprinkled into the Belgian majority like chocolate chips, not divided neatly by a line.

The border is so complicated that there are some houses that are divided between the two countries. There was a time when according to Dutch laws restaurants had to close earlier. For some restaurants on the border it meant that the clients simply had to change their tables to the Belgian side.

The link is from Jason Kottke.

Should the driving rules favor cars or bikers?

Not everyone likes DC drivers and more here, both from Megan.  I am more sympathetic to the position of cars and their drivers (NB: I don't ride a bike.)  I see two major arguments:

1. Riding a bike is dangerous no matter how considerate the drivers, at least in the car-intensive cities of the United States (maybe not in Amsterdam).  Furthermore accidents and potential accidents impose costs on both parties and more generally Coasian externalities are symmetric.  The first best equilibrium involves less mutual contact and the cheapest way to bring that about is probably to discourage biking.  (After all, they're the ones who can be scared off with risk of death and dismemberment.)  That means road rules which discriminate against the interests of bikers.

2. If a bike has to stop and wait ten seconds for a car, that biker loses ten seconds of travel time.  If a car has to stop and wait ten seconds for a bike, the driver loses ten seconds of travel time.  The expected loss in distance traveled is much greater for the car, especially in areas where cars are going fast (i.e., the disputed areas when safety is a concern).  Furthermore the cars are more likely inhabited by people with a higher value for their time, at least on average if not for every biking blogger. 

The case for favoring the bikes is that taxing the privileges of cars will lead to truly safer behavior through greater driver caution.  Maybe.

Will chimes in, Arnold too.  Arnold is unhappy.

Vroom!!!

The Gridlock Economy

How many popular economics books offer a message which is (mostly) true, non-trivial, and understandable?  Michael Heller's The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives satisfies that troika.  The key message is that the "tragedy of the anti-commons" is often a bigger problem than the better-known tragedy of the commons.  The tragedy of the anti-commons arises when too many veto rights are exercised.  Here is one simple example:

Tarnation, a spunky documentary on growing up with a schizophrenic mother, originally cost $218 to make at home on the director's laptop.  It required an additional $230,000 for music clearances before it could be distributed.

Or try tracking down orphaned copyrights or proceeding without explicit permission.  Furthermore many new drugs are more costly to market, or end up not being marketed, because there are so many possible patent infringement issues.  By the way about half of the patents litigated to judgment are not upheld.  Too many interest groups have veto power over infrastructure development, such as wind power or a new oil refinery (my examples).  The U.S. allocates its spectrum far less efficiently than either Japan or South Korea.  Holdouts lower the rate of property redevelopment; I learned that The New York Times used eminent domain to build its new headquarters because otherwise assembling such a large parcel of land in midtown Manhattan was very difficult.  It all boils down to the story of too many tolls on the medieval Rhine.

Yes, the author does give full credit to Buchanan and Yoon for their work on the anti-commons.

Heller does not cover the deeper question of whether a society can respect minority rights to the desired degree without encountering too strong a problem of the anti-commons.  Most of us are for the right to appeal, for the right to a fair trial, for various courses of redress, for the right to sue, for basic rights of intellectual property, and so on.  Some set of interest groups has to support those regimes.  Can those interest groups be so empowered without the excesses outlined in this book?  Would we still want to abolish the anti-commons problems if it led to a more general weakening of minority rights?

Authoritarian Regimes

There's nothing like visiting a foreign country like China to get an appreciation of what it's like to live under an authoritarian regime.  I was reminded of this when I arrived home and found that the TSA had rifled through my baggage.

"eBay ordered to pay damages in sale of fake goods"

That's the headline, the country is France.  Is there any efficiency rationale for this decision?  The alternative equilibrium involves a fair number of fakes, some good discounts for real items, an overconcentration of trading activity is easily verifiable or not worth faking items, and of course a diminution in the value of brand names.  The latter effect may even be welfare-improving once you consider price discrimination and the association of brand names with monopoly rents.  You can put the penalty on the seller but how is eBay to detect possible fakes?  Buy and inspect the wares?  Shut down trade in any fakeable item?  I would think it is also easy enough to "buy fakes" from your buddy, in essence keep the cash, give him a percentage, and then sue eBay for the "loss."  If the owner of the brand can sue would not the French court consider a suit from the buyer of the fakes as well?

The culture that is Dutch

1. As of July 1, the Netherlands will ban smoking in public places.

2. The smoking of cannabis and hashish, however, will be allowed, at least in licensed cafes.

3. The regulation will be that adding tobacco to the smoke (a popular practice) will be forbidden and that only "pure pot" will be allowed.

4. It is noted that "This year, the Chinese have started to come."

That is from "What are the Dutch Smoking," in the 30 June 2008 issue of Business Week.  Here is one related article.

Life among the liquidity constrained

This paper tests the hypothesis that the timing of welfare payments affects criminal activity. Analysis of daily reported incidents of major crimes in twelve U.S. cities reveals an increase in crime over the course of monthly welfare payment cycles. This increase reflects an increase in crimes that are likely to have a direct financial motivation like burglary, larceny-theft, motor vehicle theft, and robbery, as opposed to other kinds of crime like arson, assault, homicide, and rape. Temporal patterns in crime are observed in jurisdictions in which disbursements are focused at the beginning of monthly welfare payment cycles and not in jurisdictions in which disbursements are relatively more staggered.

Here is the link, here are non-gated versions.

When worlds collide

The very famous and very impressive James Q. Wilson has been blogging over at Volokh.com, here is one of his posts.  Excerpt:

It is not hard to study deterring crime, but I can't imagine trying to teach someone in a blog how to do a regression analysis. I wish I could do that, but it would take time, and blog commenters seem not to have much time.

Now for a few more facts, but I warn you that to believe my assertions you will actually have to go out and read something. Intensive Probation: This is a good idea, but so far the studies of it have not suggested it lowers the crime rate. I wish it did, because it is cheaper than prison. The chief study, done at RAND, compared probationers under intensive supervision with similar ones not under such control. There as no difference in their crime rates while under supervision. There are two possible explanations for this: Either there was no difference in crime rates, or those under intensive supervision had more crimes noticed by their probation officers.

This earlier post was instructive:

Some readers have asked whether the population of American prisons is large because we lock up so many drug users. It is true that the proportion of inmates described as drug offenders has gone up dramatically, but as Jonathan Caulkins and Mark Kleiman point in their essay in Understanding America, very few are in prison because of drug possession. Many are either major dealers or plead down to a drug possession charge in order to avoid being convicted of a more serious offense. There are more than one million arrests every year for drug possession, but very of them result in prison or jail time. Cannabis possession, when it is punished at all, is typically with a fine or probation.

Markets in Everything: Pay to Stay

A small number of California jails have begun to offer pay to stay programs.  These programs allow inmates in for minor crimes to "upgrade" to a private or public jail with better facilities.  Evidently the fees are profitable to the jails.  Take a look at how Santa Ana county advertises it's hotel jail.

The Santa Ana Jail is pleased to host a full range of alternatives to traditional incarceration.  Our offerings include weekends in jail, non-linear jail sentences, and a variety of work release options.  Our philosophy is designed to allow our clients (!, AT) to serve their obligations to the court in a manner that respects them as human beings and permits them to continue to provide for themselves and their families....

• Programs that include 2-day or 3-day weekends with minimal impact on the client’s professional life.  Work on Saturday and Sunday?  No problem...
• Programs that permit jail sentences to be served in multiple parts. Perfect for clients that live out of the area or clients with frequent business travel.
• Programs that permit the client to leave jail for work everyday.  We have helped everyone from 9 to 5 business people to oil-rig workers, so no work schedule is out of the question.

The Santa Ana Jail is the most modern and comfortable facility in the region.  Our housing areas are a world away from cement and steel bars....

Most clients can be approved immediately, over the phone.  We can also provide same-day acceptance letters for the court.

I have mixed feelings about these programs.  On the one hand, someone has to pay for the jails and who better than the inmates?  And note that to make an inmate-pays program effective you have to give them an incentive to pay.

But on the other hand the profit-maximizing strategy for a monopolist with different quality levels of service is pretty scary in this context.  A profit maximizer will reduce the quality level of the lowest class service - perhaps even spending money (!) to make the quality level lower - in order to push people to pay for the higher quality.  (For more on the theory, see Hal Varian's elegant explanation.)

On the other hand (I know, I know, three hands) California's prison system is already so overcrowded, violent and dysfunctional that one federal judge referred to medical care in the CA system as "outright depravity," thus we may already be close to the lowest quality level.  See this classic MR post for an expert's take on the incentives of private and public prisons.

More on pay-to-stay at a Michigan Law Review Symposium.  Hat tip to Timothy Taylor at the Journal of Economic Perspectives.

Allocating the Arctic

Today's declaration said that all five nations would abide by the 1982 Law of the Sea, which determines territorial claims according to coastlines and undersea continental shelves.

Here is the full story.  The good news is that unclaimed territories, historically, have led to violent clashes.  Settling the property rights in advance minimizes the chances of global instability.  The bad news -- if you think the cost of fossil fuels is too low -- is that supply restrictions are far more effective than a Pigouvian tax on carbon.

What should be an allowable non-profit?

In a ruling last December that sent tremors through the not-for-profit world, the Minnesota Supreme Court said a small nonprofit day care agency here had to pay propery taxes because, in essence, it gave nothing away. 

...Almost 88 percent of overall nonprofit revenues in 2005, the most recent year for which figures are available, came from fees for services, sales and sources other than charitable contributions...Nonprofit health care providers, day care centers and retirement homes, among others, are often difficult to distinguish from their tax-paying competitors.

...the Mall of America, a major tourist attraction, was seeking tax exemptions as part of its plans to expand, arguing that it aids the state economy by drawing visitors.

Here is the full story, interesting throughout.  I would say the Mall of America no, hospitals no (any subsidy to care should be more selective), the AAA club no, universities yes (ideas are public goods), and charities yes.  And here are important new developments in the world of Harvard philanthropy.

Electing Judges

The NYTimes has a good piece today on judicial elections, pointing out how odd American practice is compared to the rest of the world. 

Contrast th[e] distinctively American method of selecting judges with the path to the bench of Jean-Marc Baissus, a judge on the Tribunal de Grand Instance, a district court, in Toulouse, France. He still recalls the four-day written test he had to pass in 1984 to enter the 27-month training program at the École Nationale de la Magistrature, the elite academy in Bordeaux that trains judges in France.

“It gives you nightmares for years afterwards,” Judge Baissus said of the test, which is open to people who already have a law degree, and the oral examinations that followed it. In some years, as few as 5 percent of the applicants survive.

My work on judicial elections shows that elected judges serve their constituents (see also Judge and Jury). In particular, when the defendant is an out-of-state corporation awards are much higher in states that use partisan elections to select their judges than in other states.  As one judge put it bluntly:

As long as I am allowed to redistribute wealth from out-of-state companies to injured in-state plaintiffs, I shall continue to do so. Not only is my sleep enhanced when I give someone's else money away, but so is my job security, because the in-state plaintiffs, their families, and their friends will reelect me."

Richard Neely (1988), West Virginia Supreme Court of Appeals.

CSI on Trial

...to judge by the most comprehensive study on the reliability of forensic evidence to date, the error rate is more than 10% in five categories of analysis, including fiber, paint and body fluids. ...DNA and fingerprints are more reliable but still not foolproof....a 2005 study in the  Journal of Criminal Law & Criminology suggests a fingerprint false-positive rate a bit below 1%, a widely read 2006 experiment shows an alarming 4% false-positive rate.

How can we preserve the usefulness of forensic evidence while protecting the public when it breaks down? The core problem with the forensic system is monopoly. Once evidence goes to one lab, it is rarely examined by any other. That needs to change. Each jurisdiction should include several competing labs. ...

This procedure may seem like a waste. But such checks would save taxpayer money. Extra tests are inexpensive compared to the cost of error, including the cost of incarcerating the wrongfully convicted....

Other reforms should include making labs independent of law enforcement and a requirement for blind testing. When crime labs are part of the police department, some forensic experts make mistakes out of an unconscious desire to help their "clients," the police and prosecution. Independence and blind testing prevent that.

That's forensics expert Roger Koppl writing in Forbes.  If anything I think Koppl is being kind to CSI.  Take bullet lead analysis a procedure used by the FBI for decades that turns out to have no scientific validity whatsoever.

Full Disclosure: Koppl's op-ed is based on a paper in a book called Law Without Romance edited by Ed Lopez to be published by Independent Institute where I am director of research.

In case you hadn't heard

Charity workers have gathered at Myanmar's embassy in Bangkok, Thailand, with vehicles, emergency food supplies and medicine, waiting for their visa requests to be approved.

Here is more.  And more here.

Who Owns Antiquity?

If by chance a scholar came across the Rosetta Stone in a private collection, she would be discouraged from publishing it in today's leading English-language, archaeological journals.  Those journals have policies against serving as "the initial place of publication or pronouncement" of any unprovenanced object acquired by an individual or institution after December 30, 1970, unless it was in a collection prior to that date, or there is evidence that it was legally exported from its country of origin...Not being acquired or published, and thus neither studied nor deciphered, the Rosetta Stone would be a mere curiosity, Egyptology as we know it would not exist...

That is from James Cuno's excellent Who Owns Antiquity: Museums and the Battle Over Our Ancient Heritage.  The book criticizes nationalistic identity politics, calls for measures to broaden international access to antiquities, and argues that museums should again be allowed to acquire undocumented antiquities.  In other words he favors a cosmopolitan, property rights approach.  Here is the book's web page.  Here is an interview, with incisive questions.

Eminent Domain and Civil Rights

“[t]he burden of eminent domain has and will continue to fall disproportionately upon racial and ethnic minorities, the elderly, and economically disadvantaged.” Unfettered eminent domain authority, the NAACP concluded, is a “license for government to coerce individuals on behalf of society’s strongest interests.”

That is the NAACP quoted in an op-ed by David Beito and GMU law prof Ilya Somin. 

Hat tip to The Beacon.

Sentences of interest

The libertarian point is that the illegality and attendant marginalization of polygamy pushes it into isolated, authoritarian, quasi-state cult compounds where these kinds of crimes are most likely to take place.

That's Will Wilkinson and the point reminds me of recent party debates on drug legalization.  I don't mind legalizing polygamy (though I disapprove of the practice), but would such legalization prevent an FLDS type of episode?  Maybe the goals of the perpetrators are rape, abuse, and power-mad intimidation, rather than polygamy per se ("polygamy: merely a means to an end.")  In that case polygamy legalization won't limit their ability to set up isolated, authoritarian, quasi-state cult compounds for their nefarious purposes. 

Alternatively, if illicit polygamy is a marketing point that draws people to the compound in the first place, legalization may well help.  Oddly legalization helps most when the religious belief (in polygamy) is relatively sincere and the abuse accumulates through evolutionary processes of increasingly bestial behavior; legalization helps least when the religious belief in polygamy is for cynical reasons of control and could easily be replaced by some other marketing point.

Just how good would drug legalization be?

John Nye, Megan McArdle and I debated this question at a party today (Robin Hanson asked that we not ban robots, some people called for open borders, John and I explained the hierarchy of the economics profession to Will Wilkinson, and Bryan Caplan told me I have the uncanny ability to predict when people will die, among other highlights; sadly Alex had to leave early).  We also asked some questions that are seldom asked.

Under one model, local gangs have a more or less fixed ability to terrorize a neighborhood.  Even if everything is legalized, the gangs will continue local monopolies to maximize tribute, subject of course to constraints from other gangs and the police.  In this model, legalizing drugs doesn't do much good.  The local gang either shifts its monopoly to another area (milk and sugar, if need be), or de facto the gang's local monopoly on the drug trade continues.  The gang busts you if you try to get your supply of crack cocaine from Merck.  I call this the Rio de Janeiro model; no, drugs are not formally legal there but I don't think it would much matter if they were.

Under a second model, the ability of a local gang to monopolize and terrorize depends on the availability of drug trade revenue.  Take away illegal drugs and the gang collapses -- Merck outcompetes them -- and the neighborhood revitalizes.

Libertarian arguments for legalization typically envision the second model rather than the first.  I expect something in between.  So I don't favor the War on Drugs but I believe the benefits from stopping that war are often exaggerated.  Note that whether the first or second scenario holds may depend on just how easy drugs are to get legally.

One claim was that -- a'la Freakonomics -- current drug suppliers don't reap huge rents, so legalizing drugs won't much discourage them.

Another question from the evening is how much the abolition of zoning in New York City would boost gross national product.  I heard some overoptimistic estimates on that one.

On a scale of 1 to 10, I give the party at least a nine. 

Tabarrok on NPR

Here's me talking about bounty hunters and private prisons with Margot Adler.

Million dollar blocks

An innovative analysis by Eric Cadora highlights "million-dollar blocks" -- individual city blocks where more than one million dollars per block per year are spent to incarcerate individuals from that block.  Some blocks cost over five million dollars per year...A million dollars, coincidentally, is roughly what it would cost to pay for one patrol officer, twenty-four hours a day, every day for one year.

That is from Peter Moskos's Cop in the Hood: My Year Spent Policing Baltimore's Eastern District.  In Brooklyn of 2003, there were 35 million dollar blocks.  Here is more information, plus maps and graphs.

"Guns don't kill people, trading guns does"

Well, that is a joke of sorts.  But here is Jim Kessler's piece on deepening gun ownership.  He writes:

There are 280 million firearms in private hands in America, and last year there were about 300,000 gun crimes. That means that at least 279,700,000 guns did nothing wrong. We also know that in 89 percent of crimes, the person using the gun was not the person who originally bought it. In 34 percent of crimes, the firearm was bought in one state and used in a crime in another. And in 32 percent of crimes, the firearm was less than three years old.

This indicates that the root of America’s gun crime problem is not the number of guns in the hands of Americans, but an extensive web of gun trafficking operations that funnel firearms to criminals.

...The first step is to make gun trafficking a federal crime, not a term of art...Trafficking should be redefined as selling multiple guns out of a home, car, street, or park that have two or more of the following characteristics: obliterated serial numbers, are stolen, are new in the box, or are sold to underage buyers or people with felony records. This would still allow individuals to privately sell firearms to people they know or trust, and it would put the onus on sellers to demand a background check for those they don’t.

None of this seems quite right to me.  It seems to confuse "how things are done now" with "how things could be done if people needed substitutes."  For instance if this proposal were adopted, criminals might acquire guns at a young age and simply never give them up.  (Think of the idea as raising the liquidity premium on owning a gun.)  Or criminals might buy more guns from each other.  I can see that it makes sense to shut off some avenues of gun flow, such as gun sale shows with no buyer verification.  But once the stock of guns is high, I don't think trying to control the flow is likely to prove an effective means of gun control.  Forcing the seller to verify the quality of the buyer is one form of a tax, and yes it will raise the price, but it is in turn hard to verify how well the seller performed this responsibility.  It seems less efficient than a simple and direct excise tax, for instance.

Addendum: Alternatively, you might pose a tax incidence question: how does taxing the stock of guns differ from taxing the flow of trade?  Both will raise price but taxing the flow limits "the velocity" of guns.  Taxing the flow should hurt "whim killers" but it won't so much discourage regular killers.  The former get all the publicity but are they really the bigger problem?

Wacky Patents

A satellite missed its orbit.  The problem can be fixed but, believe it or not, Boeing has a patent on using the moon, i.e. gravity, to change a satellite's orbit!  The patent probably wouldn't hold up in court but because of a different lawsuit Boeing is threatening to sue anyway if the firm uses the procedure.  Since the costs of a lawsuit are high and the satellite is insured, down it may come.

More here including interesting material on space salvage.  Hat tip to Boing Boing.  Tabarrok on patent reform here.

Haitian prison

If international minimum standards of about four square metres for every prisoner were met, the National Penitentiary would hold a little more than 400 inmates. On the day Maclean's visits the prison, there are 3,331 men jailed inside. Most, at least 90 per cent, have not had a trial. They are held under the euphemistic term "preventative detention," and because of a lack of judges, proper evidence, and even vehicles to transport them to court, it is unlikely many will be tried any time soon. "People sleep on top of people in here," one prisoner says through the bars of a bathroom-sized cell that holds 43 people. Most are standing. Others have fashioned hammocks out of scraps of cloth and have suspended themselves from the bars of the cell's high window, where they can get more light and air...

Here is more.  And that is not all:

There is a punishment cell, perhaps four feet tall, where no one can stand. The punishment cell is crowded, but less so than other cells, and some inmates prefer it. "You have people who do things wrong just so they have a place to lie down or to be safe from gangs," Cadet says.

Here is a video about recent food riots in Haiti, and no those are not in the prisons.

How free trade affects thievery, part II

Yes commodity prices are high:

A thief sneaked under the sport utility vehicle with a battery-powered saw, slicing from the Toyota’s underbelly what may be one of the most expensive small parts of the auto world: the catalytic converter, an essential emissions-control device made with small amounts of metals more precious than gold. Who knew?

...Theft of scrap metals like copper and aluminum has been common here and across the country for years, fueled by rising construction costs and the building boom in China. But now thieves have found an easy payday from the upper echelon of the periodic table. It seems there may not be an easier place to score some platinum than under the hood of a car...

The catalytic converter is made with trace amounts of platinum, palladium and rhodium, which speed chemical reactions and help clean emissions at very high temperatures. Selling stolen converters to scrap yards or recyclers, a thief can net a couple of hundred dollars apiece.

Here is the story.  Here is part I in the series.  Here is a man who died trying to extract gold from his computer.

Car patrol vs. foot patrol

Car patrol eliminated the neighborhood police officer.  Police were pulled off neighborhood beats to fill cars.  But motorized patrol -- the cornerstone of urban policing -- has no effect on crime rates, victimization, or public satisfaction.  Lawrence Sherman was an early critic of telephone dispatch and motorized patrol, noted, "The rise of telephone dispatch transformed both the method and purpose of patrol.  Instead of watching to prevent crime, motorized police patrol became a process of merely waiting to respond to crime."

That is from Peter Moskos's Cop in the Hood: My Year Policing Baltimore's Eastern District; here is my previous post on the book.

Katrina recommendations

Steven Horwitz, who notes that Wal-Mart did a better job than FEMA, has a study and a plan:

1. For relief and recovery efforts and ensure that its role [the private sector] is officially recognized as part of disaster protocols.

2. Decentralize government relief to local governments and non-governmental organizations and provide that relief in the form of cash or broadly defined vouchers.

3. Move the Coast Guard and Federal Emergency Management Agency (FEMA) out of the Department of Homeland Security (DHS).

4. Reform “Good Samaritan” laws so that private-sector actors are clearly protected when they make good faith efforts to help.

RateMyCop.com

Inspired by the many Web sites that allow users to rate their teachers, their doctors, even their neighbors, a couple from Culver City have created one that allows people to rate police officers and sheriff’s deputies across the country.

Here is the link.  Here is the site.  I don't see any ratings for "hotness"; I guess that is only for the professors.  There do seem to be more positive reviews than negative ones.  I would on net expect this site to make the world a nicer, freer place, given the benefit of the doubt that abusive cops receive from the system.  I also believe this is the beginning of a much wider trend...what will be the next profession to be rated?

Why have burglaries declined?

Eric H. points to the question of why burglaries have declined steadily, when other crime rates have been more volatile.  Here is one bit:

Criminologists have a lot of theories why burglaries are so different..."If you're going to do a burglary, you need to have some buyers," Mathis says. "Everybody has everything now."

Mathis says there's just too much on the street already. Everyone he knows already has a digital camera, iPod knockoffs and pirated DVDs shipped in from China. "And if it's not new, a lot of people don't even want to fool with it," Mathis says. Forget about last year's video games and old laptops, Mathis says. And don't even bring a VCR or boxy TV to the street.

"You can get a TV for nothing almost," he says. "People are giving them away now."

In other words, we have fewer burglaries because of low wages in China.  You'll note that the standard Baumol-Bowen model of the cost-disease predicts an ongoing decline in burglaries.  Goods become cheaper over time, and thus not worth stealing, while services grow more expensive over time.  It is usually harder to steal services so burglary rates should fall.

The article also cites the decline of heavy drug use, better locks and deadbolts, and more widespread use of locks, plus less cash left around the house.  Some experts cite greater neighborhood vigilance.  Note that robberies are not falling in similar fashion, which suggests that criminals prefer to get the victim away from home turf advantage.

Here is further information.  British burglary is falling too.

Liability Law and Firm Size

I would like to tile my front porch steps and have been shopping.  Lowe's and Home Depot have plenty of tile but although they advertise installation they won't install it outdoors.  The salespeople, however, will surreptitiously recommend small family contractors.  Call Jose, they tell me handing me a number.  Why won't the big firms install outdoor tile?

As best as I can figure the answer is liability.  A few slips, falls and an enterprising lawyer or two and Lowe's could be out millions of dollars.  The revenues aren't worth the risk so small firms step into the breach.  The key, of course, is that the small firms won't be sued because they are judgment proof.

Roberta Romano was here yesterday and offered another example.  The big auditing firms won't do SOX audits for small firms because the revenues are low relative to the risks.  The smaller firms must turn to judgment proof auditors of less reliable reputation. 

In one sense, this is a good workaround for a liability system that seeks out deep pockets.  Consumers are better off than they would be if neither Lowe's nor the judgment proof firms offered services and they are also better off than if Lowe's was required to offer services, because the price at which Lowe's would do so voluntarily would be prohibitive (consumers would be forced to buy insurance they didn't want at the price). 

But more deeply the resulting system is inefficient.  Consumers don't get the insurance that the liability law is supposed to provide and they must turn to lower quality, higher cost service providers even when they would prefer larger firms with solid reputations. 

The realignment of the regulatory powers

Two thoughts: First, the very active role of the Fed in the Bear Stearns crisis must, in the long run, give rise to a fundamental revaluation of the role and powers of the SEC, the entity technically responsible for investment banks.  The SEC now appears relatively toothless.

Second, the more commitments made by the Fed, the more we lose the (quasi) independence of our central bank; for a large commitment Treasury sign-off is needed.  The realignment of the regulatory universe will eventually emerge as a big story from the current crisis, though it is hardly commanding much attention right now.

Paul Volcker comments.

Cop in the Hood

Motivated primarily by a desire for court overtime pay, police officers want arrests on their own terms, ideally without victims, complaints, or unnecessary paperwork.  Young officers make more arrests than veteran officers.  These officers believe that making arrests is police work.  In my squad, the top three officers in arrest totals were three officers with the least experience.  An arrest-based culture can exist in a low-drug environment, but without a limitless supply of arrestable criminal offenders, an arrest-based culture cannot make a lot of arrests.  Neighborhoods, without public drug dealings will not produce a high number of arrests.

That is from Peter Moskos's truly excellent Cop in the Hood: My Year Policing Baltimore's Eastern District.  This is one of the two or three best conceptual analyses of "cops and robbers" I have read.  It is mandatory reading for all fans of The Wire and recommended for everyone else.

The prostitution "crackdown" in the Netherlands

Read this for a public choice interpretation, and here are some real Dutch facts.  Here goes:

The real point is real estate. The red light district is in the oldest, most beautiful area of Amsterdam. In the last 20 years, it has changed from a mixed neighborhood to one almost exclusively peopled by the very well to do. They pay a fortune for those apartments and homes. The talk of cleaning up the neighborhood for the sake of the prostitutes and to lessen criminal behavior is simply a smokescreen. What they wish to do is to create a more up-scale neighborhood - it is gentrification pure and simple.

What is offensive in all this is that anyone who bought a home in that area knew what they were getting into - large crowds every night and all night long. It is to lessen this that the district is being “shrunk”. Less windows for the prostitutes - a more compact area for the tourists - less annoyance for the wealthy.

It is not about anything more than that.

Jim is also right on the mark.  Nick talks about Australia.  HP cites Nevada.

The culture that is German, a continuing series

Economic protectionism, linguistic protectionism, status protectionism, or all three?:

Americans with PhDs beware: Telling people in Germany that you're a doctor could land you in jail.  At least seven U.S. citizens working as researchers in Germany have faced criminal probes in recent months for using the title "Dr." on their business cards, Web sites and resumes. They all hold doctoral degrees from elite universities back home...Violators can face a year behind bars.

Here is the full story.  And get this: "A male faculty member with two PhDs can fully expect to be called "Herr Professor Dr. Dr. Schmidt," for example."

Update: They just changed the law.  I guess I should have titled this post "The earthquake that is Germany," etc.  Sadly there is no medium for telling The Washington Post that their front page story this morning is wrong but of course we have a very keen reader willing to leave comments.

Legalization of prostitution

Nicholas Kristof writes:

I changed my mind [on legalization] after looking at the experiences of other countries. The Netherlands formally adopted the legalization model in 2000, and there were modest public health benefits for the licensed prostitutes. But legalization nurtured a large sex industry and criminal gangs that trafficked underage girls, and so trafficking, violence and child prostitution flourished rather than dying out.

As a result, the Netherlands is now backtracking on its legalization model by closing some brothels, and other countries, like Bulgaria, are backing away from that approach.

A few points in response: first, "backtracking" could and should have been written as "still maintained as mostly legal throughout the country."  Second, Germany offers perhaps the best model for legalized prostitution; by the way, here is one odd description of the German practice in Cologne.  It's not so offputting to make me favor a ban.  Third, we should institute drastically higher penalties and enforcement for traffickers in children and their customers.  Don't blame adult transactions for that problem or think that is the best resource investment to stop it.  Fourth, legalized prostitution may not be "popular" because it doesn't appeal to the median voter, least of all to the median female voter.  So the mere popularity of Swedish policy doesn't make it a success; there is less consensual sex going on! 

We all debate the topic without bringing up the delicate question of the benefits (or lack thereof?) to the customers.  No one wants to say "I think guys should be able to [fill in the blank] more often and more easily," but that's what at least half the story boils down to.  (The other half is the possibility of female empowerment, etc.)  Such a framing maybe sounds bad to you, but that's a feeling we need to come to terms with and indeed question. 

I see the costs and benefits of legalization as murky.  Should government attempt to steer women away from the psychological tendencies implanted in them by child abuse?  Indeed, should such steering stop at their choices to become prostitutes?  When doing our cost-benefit analysis, should we count the preferences of the man sitting quietly at home or the preferences of the man as he approaches the end of the act?  How should we count the preferences -- if at all -- of the bluenoses who don't like the whole idea of legalization?  After all, there are lots of them and they just don't want legal prostitution.  These are difficult questions.

When push comes to shove it is fundamentally a moral question and that for me means legalization or at least decriminalization.  Ultimately you are threatening to jail or even shoot someone (should he or she try to leave the jail) because of a particular interpretation you have placed on their consensual sexual acts.  I have to say "no way" to that one.  Is barter a problem too?  Andrew Sullivan pointed out that it is legal to pay two people to have sex and film them and sell the film; it just isn't legal to pay two people to have sex and simply watch them.  That's what I call absurd.

Very good sentences

The integrity of our criminal justice system rests on the notion that we investigate crimes, not people.

Here is more, via MR reader Malcolm.  Was it Beria who said: "You show me the man, I'll find you the crime"?

How honeytrappers work

Here are the rules, at least for the high-class guys:

...Martinez has "rules of engagement": The target must not be drunk, there must be no touching, and the relative attractiveness of the trapper to the target must be equal.

"It's got to be a fair test," he explains. "So we make sure that we don't set a very attractive honey trapper on a not so attractive target, and vice versa."

"The customer needs a fair answer to the question of whether their husband or girlfriend is loyal."

So those who fail an "unfair" test count as loyal?  But since eighty percent of all those approached fail, maybe the point is simply to drive home the decisive nature of the infidelity.  A related question is whether the customer (usually the spouse) wants the target to pass or fail the test.  Furthermore what does the customer want to think about the customer's own motives?  Here is the full story, and thanks to Jeffrey Ely for the pointer.

Getting oneself in hot water

I am surprised by all the opposition to my argument for not burning the unpublished Nabokov manuscript.  I say this: we limit all sorts of destructive transactions for the living, so why not every now and then a limitation upon the wishes of the dead?  I was not staking out the extreme (but possibly true) position that the wishes of the dead should count for nothing.

I might add that the status quo is permitting the Nabokov manuscript to be published and that civil society has not collapsed.  Nor are people panicking that their gravestones will be overturned three years hence and sold to finance the expansion of the EITC.

In any case I propose a thought experiment.  If you disagree with me, you should never have read Kafka or Virgil, nor should you set foot in the British Museum, go to an ancient Egyptian art exhibit, or for that matter visit any ethnographic museum.  Lots of that stuff was taken from graves.  They probably didn't want "the public" to look at it and yes that includes you.  How many of the nay-sayers will pledge they have behaved this way or even that they are much bothered they didn't? 

Nor are you allowed to hear Doors tribute bands, remixed or recombined Beatle vocals (would John have approved?) and who knows about late Schubert or Mahler's 10th?  Better safe than sorry and that goes for unapproved translations and editions as well, or how about any religious compendium that refers to the Hebrew Bible as "The Old Testament"?  Don't even pick it up.  I do in fact regard Sussmayr's completion of Mozart's Requiem as an aesthetic crime but not a moral one; it is better to hear the work unfinished.  The really sad thing is how many people like the revised version.

Valentine's Day in Saudi Arabia

Every year, officials with the conservative Muslim kingdom's Commission for the Promotion of Virtue and Prevention of Vice clamp down on shops a few days before February 14, instructing them to remove red roses, red wrapping paper, gift boxes and teddy bears. On the eve of the holiday, they raid stores and seize symbols of love.

Here is more, with a thanks to BZ for the pointer.  Yes, this morning I was crying at Heathrow, and not just because they didn't have an open gate to receive our flight.

Department of Unintended Consequences, a continuing series

A rigorous statistical examination has found that smoking bans increase drunken-driving fatalities. One might expect that a ban on smoking in bars would deter some people from showing up, thereby reducing the number of people driving home drunk. But jurisdictions with smoking bans often border jurisdictions without bans, and some bars may skirt the ban, so that smokers can bypass the ban with extra driving. There is also a large overlap between the smoker and alcoholic populations, which would exacerbate the danger from extra driving. The authors estimate that smoking bans increase fatal drunken-driving accidents by about 13 percent, or about 2.5 such accidents per year for a typical county.

That's coming out in the Journal of Public Economics, so it might even be true.  Here is the short source article, which surveys other interesting results as well; worth a read. 

Robbery fact of the day

In 2004, the total cost of all robberies in the United States was $525 million...every year, employees' theft and fraud at the workplace are estimated at about $600 billion.

That contrast is from Dan Ariely's Predictably Irrational.  Even if you add in auto theft, burglary, and larceny-theft, the former sum does not exceed $16 billion.

Addendum: Some people are questioning the $600 billion number, see the discussion in the comments.

Why are so many lawyers politicians?

Johan Richter, a loyal MR reader, writes to me:

As the primary elections are coming up is is interesting to note that so many of the contenders are lawyers, something that is also true of the members of Congress, where I believe half are lawyers. Why are so many US politicians lawyers? It seems odd considering that A) Legal training seems unnecessary for performing the main job of a politician, regardless of whether one takes that to be courting public opinion or governing the country. And there is hardly any deficit of lawyers in Washington to ask for advice if legal knowledge turns out to be needed. B) Being a lawyer isn’t very prestigious as far as I know. Being a military, doctor, police officer, businessman or perhaps even a academic would surely be regarded by many voters as more respectable professions than being a lawyer. C) Other countries don’t have nearly the same over-representation of lawyers in their parliaments as the US does.

I thought Google would yield a paper on this question but I can't find it.  My guess is that lawyers are good at fundraising and good at developing personal contacts.  This helps explain why fewer politicians are lawyers in many other countries; money is more important in American politics.  A lawyer also has greater chance to exhibit the qualities that would signal success in politics, such as the ability to persuade and the ability to speak well on one's feet.  Not to mention that many lawyers have ambition.

Natasha, who is a lawyer, adds that law generates an outflux of people to many other fields, not just politics.  There is also a path-dependence effect, by which a previous presence of politicians in law breeds the same for the future.  What else do you all know about this?

Addendum: I've posted a version of this query over at Volokh.com as well; I expect they will have something to say about the question.

Second addendum: Over at VC, Shawn says:

You will also find that Real Estate and Insurance agents are disproportionately represented in politics, at least at the more local levels.

These professions (along with practicing law) provide the career flexibility for would be politicians to put their jobs on hold or scale them down a few degrees while pursuing elected office or serving is such an office.

This flexibility also is what attracts people who wish to be career politicians, so that they have a job to fall back on between election seasons that won't trap them into long term obligations, keeping them from the next election cycle or serving if elected.

These careers also give would be politicians a good place to get recognition and network within their communities.

Third addendum: Bob Tollison writes to me: "McCormick and I devote a chapter 5 to why lawyers dominate legislatures in our book-- Politicians, Legislation and  the Economy, Martinus Nihoff, 1981. Lawyers are better at combining being in the legisture with making outside income. Hence, lawyers dominate low legislative pay states because seats have a higher present value. Women dominate high pay states."

Suing your real estate agent

Ms. Ummel said in her deposition that Mr. Little had told them “many times that it was a very good buy.”

Here is the story, which should have pushed the point that the real estate agent usually works for the seller.  In another context, if an agent of the mortgage lender says: "Just put down an income of $150,000," even most of the so-called "stupid people" know they are engaging in some kind of fraud.  In reality it is complicity with fraud and a violation of federal law, and yes this is a federal law that should be a federal law.

A society that so blurs the ethic of individual responsibility is a society in trouble.  My notion of individual responsibility does not mean: "Sorry, it is just that you die for your mistake," so there is no need to knock down that straw man.  But a good notion of individual responsibility might start with: "We're not going to label every "little guy" a victim, even when it supports our political narrative to do so."

Very good parts of very good sentences

...the high divorce rates among those marrying in the 1970s reflected a transition, as many married the right partner for the old specialization model of marriage, only to find that pairing hopelessly inadequate in the modern hedonic marriage.

That is Betsey Stevenson and Justin Wolfers, here is more.

Markets in everything

A prostitute is more likely to have sex with a police officer than to get officially arrested by one.

That's from the new Levitt-Venkatesh paper, hat tips to Matt Yglesias and Kerry Howley, both of whom add interesting commentary.

Why isn't legalized prostitution more popular?

Some of this was new to me:

An in-depth look at the legal brothel regime reveals that while the system is preferable, it is stunted by unequal bargaining power between the prostitutes and brothel owners owing to collusive arrangements with local sheriffs. But since a regulated brothel system, with all its faults, provides a safer environment for prostitutes and their customers than prohibition while maintaining a sufficient barrier between the prostitution activity and the community to ameliorate citizen complaints, I ask why this system is not in use in other jurisdictions, specifically Las Vegas, Nevada. Using public-choice analysis, the paper concludes that lower employment costs for casino and hotel owners due to kick backs received by hotel employees from prostitutes and their customers, the interests of rural governments to maximize revenues from tourism generated by brothels, and the interest of Las Vegas legislators to portray the town as family-friendly maintains the status quo of illegality.

Here is much more, hat tip to www.bookforum.com.  The author is Ashlie Warnick, to whom I once taught macroeconomics.

Addendum: Here's something else on the same general topic, call it a new installment in Markets for Everything, hat tip to Freakonomics blog.

No Immunity for the Telecoms

The telecoms happily collaborate with the NSA to run roughshod over the constitution with warrantless phone and email taps but of course they cut off covert surveillance immediately when the government forgets to pay the bill.  Bastards.  Not that I am surprised.  Incentives matter; so of course the telecoms need to be prosecuted.

Thanks to Lee Spector for the link.

Markets in everything, lawsuit edition

...some wealthy investors are starting to dabble in lawsuit investment, bankrolling some or all of the heavy upfront costs in return for a share of the damages in the event of a win...

Here is the full story, thanks to John De Palma for the pointer.

Illegality means illiquidity

Guns:

There are few suppliers. While covering a certain neighborhood of Chicago, Sudhir Venkatesh (SV), the group’s undercover man, only found six suppliers or wholesalers at any given time. The gun brokers are almost all over 30, and have lived in the area for their entire lives providing them with solid networks and neighborhood trust, that help keep them in business. Many suppliers are discouraged to enter the market due to the difficulty in finding business and low profit margins. In the neighborhood area, the authors estimated only 1,400 gun sales in a year, compared to the 200,000-500,000 cocaine sales. Guns are a durable good, so customers usually don’t need to return frequently. Additionally, 30%-50% of attempted transactions go unfulfilled due to all sorts of logistic problems like agreement on the transaction location. Of the brokers that do conduct business, most charge between $30-$50 per transaction and charge an extreme markup on guns, possibly between a 3-5 multiple of the legal retail price. To make the transactions monetarily worth it for themselves, suppliers and retailers have to markup their prices in this way.

Here is much more of interest.  Here is The Economist write-up of the story.  One implication is that if a government has limited resources to enforce bans, it will do better by targeting durable goods, with less liquid markets, rather than frequently traded non-durables.

Laissez-Faire Marriage

Should the state be involved in marriage?  Writing in the NYTimes professor of history Stephanie Coontz notes:

The American colonies officially required marriages to be registered, but until the mid-19th century, state supreme courts routinely ruled that public cohabitation was sufficient evidence of a valid marriage. By the later part of that century, however, the United States began to nullify common-law marriages and exert more control over who was allowed to marry.

By the 1920s, 38 states prohibited whites from marrying blacks, “mulattos,” Japanese, Chinese, Indians, “Mongolians,” “Malays” or Filipinos. Twelve states would not issue a marriage license if one partner was a drunk, an addict or a “mental defect.” Eighteen states set barriers to remarriage after divorce.

It's no accident that the state began restricting and intervening in the marriage contract at the same time as it was restricting and intervening in economic contracts.  It was of course the evil Oliver Wendell Holmes Jr. who dissented in Lochner v. New York and who also upheld forced sterilization laws in Buck v. Bell (writing that "three generations of imbeciles in enough.")  Economists don't like to talk about social externalities but the connection between economic and social regulation is very clear in the progressives.

I think it's time to restore freedom of contract to marriage.  Why should two men, for example, be denied the same rights to contract as are allowed to a man and a woman?  Far from ending civilization the extension of the bourgeoisie concept of contract ever further is the epitome of civilization.  Our modern concept of marriage, for example, is simply one instantiation of the idea of contract.

People will claim that this means a chaos of contracts for every form of marriage.  This is wrong factually and also conceptually misguided.  Factually, we already allow men and women to adjust the marriage contract as they see fit with pre-nuptials.  Moreover, different states offer different marriage contracts with some offering more than one type.  Partnerships of other kinds have access to all manner of contractual arrangements without insufferable problems. 

More importantly, the chaos of contracts argument is fundamentally misguided.  The purpose of contract law is to give individual's greater control over their lives.  To make contract law a restraint on how people may govern themselves is a perversion of the social contract.  To restrict people from accessing the tools of civilization on the basis of their sexual preference is baseless discrimination. 

It is time to restore freedom of contract to marriage,  Laissez-faire for all capitalist acts between consenting adults!

Thanks to Daniel Akst for the pointer.

Repugnance is Repugnant

Many people find the idea of selling human organs for transplant to be repugnant which is why Roth argues that we should focus more on improving efficiency through kidney swaps.  I'm all in favor of swaps and have also suggested that one argument in favor of no-give, no-take rules is that they are ethically acceptable to more people than organ sales.

Nevertheless, I think Roth assumes too quickly that repugnance is a constraint to be respected rather than an outrage to be denounced and quashed.  People's repugnance at inter-racial dating or homosexual sex is no reason to prevent free exchange - the same is true for organ donations.  Repugnance itself can be repugnant.

Is it not repugnant that some people are willing to let others die so that their stomachs won't become queasy at the thought that someone, somewhere is selling a kidney?

What people think repugnant can change rather quickly with changes in the status-quo.  Adam Smith said that in his time there were "some very agreeable and beautiful talents of which the possession commands a certain sort of admiration; but of which the exercise for the sake of gain is considered, whether from reason or prejudice, as a sort of public prostitution."  What were these talents that people in Smith's time thought akin to prostitution?  Acting, opera singing and dancing.  How primitive, how peculiar.

In the not to distance future I think people will look back on the present and think us primitive and peculiar.  Letting thousands of people die while organs that could have saved their lives were buried and burned.  So much unnecessary pain; all for fear of a little exchange.  How primitive, how peculiar.  How repugnant.