All That We Are

NPR's The Diane Rehm Show today discussed the advantages of having a Hispanic woman (Sonia Sotomayor) on the Supreme Court. Because she'll be able to draw on a "wider palette" of experience, they say, she'll be a valuable asset and necessary resource.

Just because she had different experiences doesn't mean she has more, and certainly not ones more applicable to cases. Just because she'll be more empathic to women's issues or Hispanic culture doesn't mean she'll be more fair or that the court as a whole will be more fair. Yes, she can add something others can't, but in that endeavor aspects of a case can become more important than they should be. No net gain is obvious.

We are all merely the sum of our experiences so any fair judge would recognize that. This is what expert testimony is for. By expecting the justices to capture all that we are by their demographics alone, we hurt ourselves. Prioritizing gender or race (or sexual preference, or religion, or the presence of a disability, etc) requires us to narrow our field of search. It could well deny us someone far more accomplished, and fair, than whoever is left after we apply whatever parameters we happen to be prioritizing at the time.

Waxman-Markey-Dobbs

The DC area gets policy advertisements, ones I never remember getting when I lived in Iowa or Wisconsin. Perhaps that's just because of population density, but I have feeling the "company" of this company town has a lot to do with it. Lately I hear a lot about the Waxman-Markey bill, a bill supporting cap and trade for carbon emissions. If cap and trade is better or worse than a carbon tax is debatable and I'm not sure on my position, but the arguments put forth looks like they were authored by Lou Dobbs.

China's making energy efficient lightbulbs and has other "green" industries, jobs they "took" from Americans. According to the ad, the bill will let us take those jobs back. If this the best argument for the bill (and it might be; Tyler Cowen reveals the benefits are hard to find), then we got a big problem. As Don Boudreaux likes to say, costs are not benefits. By forcing the costs of production higher (reflected by the fact that firms will produce these things in the more expensive US without additional gain), the economy becomes poorer, not wealthier. If jobs were wealth, the best thing the government could do is not eliminate trade, but eliminate technology.

My Students On Opportunity Costs

In the first exam for my international economic policy class, I asked my students the following infamous question:

You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton?

Only a quarter of them answered it correctly (note this is slightly better than the quarter from the survey because my multiple choice had a "none of the above" option). But there were complaints that the question was confusing, particularly on the topic of if you already bought the ticket or not. So for the final, I repeated the question with a few tweaks:

You won a free ticket to Germany (which has no resale value). A plane for France is leaving at the same time and is your next-best alternative activity. You value the ticket to France at $600 and could buy it for $550. Assume there are no other costs of visiting either country. What is the opportunity cost of going to Germany?

I'm pleased to say that the class did much better but given that I repeated the same question, reworded it to make it clearer, and discussed the question in the wake of the first exam, that's expected. That 52% still got it wrong is not. I doubt it's me (though it could be) and recalling that so many economists got the original question incorrect, maybe there's something about opportunity costs that's more counter-intuitive than we give credit.

The Blessed Death of Newspapers

Gideon Yago appeared on MSNBC arguing "there's no question we need the newspapers," going so far to suggest that the government subsidize the failing medium. Commentators joked that the death of the printed word marks a golden age for corrupt politician.

Yago mistakes the death of one medium with the death of all media. The reason newspapers are doing poorly is because other sources, notably the Internet, do the job so much better. New technology changes things, but people still want investigative journalism. The method changes but the content will ultimately be the same, because preferences on content haven't changed. The fourth estate is not limited to the screaming Jamesons and inquisitive Lois Lanes of the comic book world. The legions of writers and bloggers that parade the Internet do it, too, but in a form superior to newspapers in virtually every way. Yago might as well said the end of the horse drawn carriage is the end of travel. Quite the opposite, actually.

Exam Question

I hope my international economics students can answer the following:

Consider the recent movie X-Men Origins: Wolverine and then answer the following:

a. Using the graph illustrating the market for the movie, indicate the areas of rent, consumer surplus, and deadweight loss. (3 points)

b. What characteristic does this product have which explains why the marginal cost is zero? (One word would suffice…provided it’s the right word, of course.) (1 point)

c. If the movie could be illegally downloaded, who along the demand curve should download it to maximize efficiency? (You may indicate your answer on the graph, but make sure you clearly distinguish it from other things you’ve indicated on the graph.) (2 points)

d. Many people who saw this movie were disappointed. What type of asymmetric information problem does this represent? Why do you say so? (Think about when the problem occurred in relation to when the transaction occurred.) (2 points)

e. Suppose people had perfect information about the quality of the movie (assume the demand curve before this point reflected estimated benefit which, as noted in (d), is too high). Recalling your answer in part (c), would the optimal number of illegal downloads increase, decrease, or stay the same? Why? (2 points)