Tuesday, April 27, 2010

Matthew Yglesias Is Hoarding the Internet

Matthew Yglesias, in a two (or more?) part series (I here; II here) calls high salaries inherently immoral:
It’s greedy, absurd, and morally indefensible for talented people born in favorable circumstances to be dedicating their lives to accumulating huge sums of money in order to engage in lavish consumption....While I was writing this post, I took a break from waxing indignant about multi-millionaires buying their third houses to donate some money to UNICEF.
If, like me, you're a regular reader of Yglesias's blog, you might know he posts more often than the prolific Tyler Cowen, often scooping people who could have posted on items he already posted on. Just as the wealthy hoard money, Yglesias is hoarding blog posts. With so many struggling blogs out there, he should take his own advice e-mail their bloggers with his latest discoveries so they have a chance to be well read as well. To paraphrase Yglesias, becoming obscenely knowledgeable in the Internet world and then hoarding your information is, itself, morally wrong.

Tuesday, April 20, 2010

Show Me the Broccoli (Ads)!

Matthew Yglesias asks, "Where are the Broccoli Ads?"
Why is it that nobody’s marketing broccoli and bananas? This stuff is sold in stores, in exchange for money. Presumably there are for-profit enterprises out there with a vested interest in selling more.
In contrast to candy bars and potato chips, most fruits and vegetables have no packaging and thus no easily identifiable brand name. An ad for Bob's Broccoli will probably help Betty's Broccoli sales since it's not clear which is which. Advertising for healthy foods becomes a public good and, thus, under-provided. Note that some vegetables do advertise--Express Salad Mixes keep popping up--but these vegetables have packaging.

Couldn't all fruits and vegetables have packaging? In theory, sure, but such foods spoil more easily (they are often sprayed with water to keep them crisp, something packaging would prevent). Note that Express salad mix is a mix, not just a head of lettuce in bag so there's good reason to give up a bit of freshness for the convenience (their ads also underline how fresh their mix is). Many customers like to investigate such foods before buying them. If you package your food, that makes it harder to inspect and customers might think you're hiding something.

So why don't we see ads brought to us by broccoli farmers? I've seen ads for why natural gas is so great and high fructose corn syrup isn't as bad as we think it is. Surely there's a national association of broccoli growers out there to wanting to get people off the sugar stuff.

And there is (unfortunately I couldn't embed the video).

Sunday, April 18, 2010

Drug Legalization and the Urban Poor

Gary Becker calls for better schools and better teachers, writing
The best longer-term solution to the [income] inequality problem is to reduce the fraction of Americans who dropout of high school...This drop out fraction has been stagnant for the past several decades at about 30% for males, and a somewhat lower but still high percent for females. This is almost surely the highest fraction of high school dropouts among rich countries, and is heavily concentrated among children from African-Americans and Hispanic families. In large cities, often less than half of all the children enrolled in public schools end up graduating.
No doubt better teachers (and better incentives for teachers) would reduce drop-out rates. But let's not ignore a much simpler and (economically) cheaper way to reduce the number of drop-outs: legalize narcotics. This isn't merely about the money saved from enforcement, imprisonment, and judiciary costs. It's primarily about the choices kids face.

Kids drop out for lots of different reasons. But since the problem is so common in poor neighborhoods, where jobs and education are scarce, of course the few financially successful people in those neighborhoods are going to have a big impact. And those individuals are drug lords, people who have made a handsome profit off the black market. It's easy to look up to them and admire them. And it's easy to learn the trade since all drug lords need a large company--er, gang--to support the enterprise so they have a financial incentive to teach them well (or by fear or force). And I guarantee you, they don't require a high school education. One should not be surprised that, in a world where the choice is between learning from a poorly trained teacher with no obvious financial rewards and learning from a gangster who's involved in your daily life and will pay you for "on-the-job" training, more than a few students take the latter. Yeah, there's danger of getting arrested (though from what I gather that's more of a badge of honor) and being killed, but the payoffs are some of the best the kids can choose from and that means a lot when money is so scarce.

Thursday, April 15, 2010

Following the Money

Mark Thoma has a cool chart about where your tax dollars go. When people want to fix the federal budget, they generally cite foreign aid or pork barrel spending or government wages or corporate welfare to cut. But these are all very small parts of the budget (they are in the "other" part of the graph...a total of 4%).

Suppose you're a congressman. You want to cut the budget? You might want to start with Medicare, Medicaid, or CHIPS which are health insurance for the elderly, poor, and children respectively. That will upset a lot of your constituents and I'm sure you're hear about it in the next election when your opponent tells the district you hate some of America's most vulnerable citizens. OK so you can cut Social Security instead, but that will only upset a smaller group of people with even greater fervor. Maybe you could cut the safety net expenses, but that won't be politically smart during a recession. Military's high, but a lot of this is concentrated in major contracts and military bases: a mighty large group of people to upset and has the public sympathy of defending the nation.

In other words, there's no easy way to cut the budget. The reason why these are the big areas of the budget is because they concern people with a lot of public sympathy, sympathy they were able to transform into payments. And it's that sympathy which secure those payments now. If they didn't have that public support (such as from Reagan's famed stories of "welfare queens" which promoted welfare reform), then things would be different. The best way to cut the budget is if hundreds of thousands of elderly people were using their social security checks to fund terrorism.

Tuesday, April 06, 2010

Should We Tax Happiness?

A new study suggests that a good part of income (for cricket players) comes from luck. Home field advantage matters a lot in cricket (apparently), scout show up randomly, and a good debut has a lasting impact on your career. If you happen to be on your home turf when the scout shows up, you're be in a better long-term position than your opponents. (The study was able to separate out performance from the field and performance from skill.) Matthew Yglesias argues that this is evidence for "Progressive taxes and more and better public services."

This leads to an intriguing question: should we tax happiness? The goal of public services (in this context) to the help the worst off and we use progressive taxes to fund those services, ethically justified because the wealthy didn't "earn" 100% of what they made. And because taxing someone because they got something by luck is justified in the area of salary, then taxing someone because got something else by luck must be equally justified.

Before I go further, two points. One is that this is not a serious policy proposal. Measuring happiness is very hard to do, made even more so since you'll be taxing people based on information that's completely subjective. I have no idea how you would do it nor do I care to figure it out. It's just a discussion to check for consistency. Second, yes generic happiness and wealth are functionally the same thing. Yes, the happiness research disagrees with me on this, partly because of issues with happiness research and the difficulty of measurement. All I'm saying is that when you take money away from people, you make them less happy and when you give them money they are more happy. The two are, on the margin, interchangeable (so no comments about how taxing income takes away what people didn't earn but taxing happiness doesn't collect "happiness" for the government to consume).

With that out the way, consider your own happiness. Most notable in my happiness is my relationship with my girlfriend, Tanya. I love her a great deal and she's by far the most serious relationship I've had. We met somewhat by chance, via match.com. (I call this is by chance because I was thinking about leaving the site having gone on so many dead-end dates and she had recently joined it.) According to Yglesias, this is grounds for a tax on my happiness. Most happiness that comes from social interaction is very similar to the cricket story: if you happen on a good opening conversation (performance) with the right person (scout), it can scale into something truly astounding. The question becomes, is this a stupid idea because it's impractical or because the whole notion of taxing happiness inequalities is silly? My vote is the latter as, I wager, it would be for most people.

Sunday, April 04, 2010

The Political Incentives of Being a Jerk

For as long as I can remember, Republicans act like dicks and Democrats act like wusses and for my more partisan friends, those qualities are endemic to their ideological opponents. Republicans are heartless: they hate poor people, gays, atheists, blacks, Jews, Muslims, and the suffering masses. It's no wonder they don't compromise and spread fear and misinformation to the electorate. And Democrats are bleeding hearts: they want subsidies for nice-sounding idea that comes across their desk and throw away the realities of the world for a fantasy worker's paradise. It's no wonder they have no backbone.

But when you add some economics, it's a strange story. Why is there no one willing to break the mold: a Republican who wishes to act even a little dovish to attract some swing support or a Democrat who's just a bit quicker to be hawkish? Such is only the stuff of fiction. The two parties must be locked in this equilibrium for some reason.

Via Matthew Yglesias, I've found strong evidence that the Democrats are a much bigger tent party than Republicans. Because Democrats have to please a larger variety of voters, they have to be more willing to compromise and just don't have that much wiggle room when it comes to policy. Knowing this, Republicans have a strong incentive to be political bullies. This isn't a value judgement; it's a law of nature. If you know your opponents don't have a lot of flexibility, you make demands (especially since there's more than a little overlap between the two parties). Thus even with majorities in both chambers of Congress and a Democratic president, Republicans can hamper or even dislodge major policy changes. It's still a bit of a miracle that health care reformed passed but it's not surprising it took as long as it did.

Saturday, April 03, 2010

The True Cost of the Soda Tax

Monica Potts argues that a soda tax isn't regressive even though lower income families spend more of their money (as a percent) on groceries compared to higher income families:
But that assumes lower-income families won't substitute something else, or just stop buying soda...If lower-income families are drinking a lot of soda, it's only because it's disproportionately cheap compared with healthier foods and drinks.
I really doubt that last statement's true since water's far cheaper and healthier than soda.

People buy soda for the same reason they buy anything else: it's the best value given the price. Yes, I'm sure if you increase the price people will buy less of it but they will shift to options that, when you consider costs and benefits, are less desirable. Even if they end up spending the same amount of money on groceries they are worse off than before the tax, by definition. They can only be made equally happy if they spend more.

This point deserves stress. The standard cannot be "if people are spending the same amount as before, then they are largely unaffected." That's a nonsense comparison. You must weigh the costs (including not just money but time, risk, etc) and the total benefits. Or, if you can, hold everything else equal.