I Heart Economists
Economists Say Movie Violence Might Temper the Real Thing
A paper presented by two researchers over the weekend to the annual meeting of the American Economic Association here challenges the conventional wisdom, concluding that violent films prevent violent crime by attracting would-be assailants and keeping them cloistered in darkened, alcohol-free environs.
“Economics is about choice,” Professor Dahl said. “What would these people have done if they had not chosen to go and see a movie? Whatever they would have done would have had a greater tendency to involve alcohol. If you can incapacitate a large group of potentially violent people, that’s a good thing.”
Professor DellaVigna added, “It’s not as if these people watching violent movies would otherwise be home reading a book.”
Well, in my case….
It’s an interesting argument and a reflection of the fact that sometimes reality can be counter-intuitive.
Unintended Realization
Over the weekend I was out in some wooded country, where I’ve noticed there’s been a lot of development and road construction. Later that night, I contemplated the silliness of the government trying to protect the environment by opening an HOV lane — which required cutting down hundreds of trees to widen the road. Subsequently, I woke up, realizing I had dreamed the whole thing about an HOV lane. I guess you know you’re a libertarian when you dream about unintended consequences.
Technorati Tags: libertarianism, economics
Government as Your Financial Planner
Liberal as Massachusetts is, sometimes I think my home state is not as bad as others when it comes to nannyism — the trend for government officials to infantilize citizens by treating them as incapable of making their own decisions.
But our attorney general Martha Coakley does have a taste for nannyism, seen in her belief that appropriate prescription drug treatment is a matter for prosecutors, not simply doctors and patients. She scratches that itch again today in her assertion that government is a better financial planner than the citizen (insert your favorite Big Dig joke here…). Her office has decided to ban “foreclosure rescues:”
Coakley said she would seek comments from the public over the next 28 days for proposals to make it illegal for lenders to inflate a borrower’s income on their mortgage application, to make mortgages that borrowers clearly cannot pay; and to provide credit when it is not in the interest of the homebuyer or an existing homeowner who is refinancing a property.
The government, or any impartial arbiter, I would argue, does have a legitimate role in defining what constitutes a legitimate contract. In addition, there’s not always a clear line between outright fraud and a fair contract that just isn’t the best deal for someone. So perhaps Coakley is doing the right thing; I haven’t researched “foreclosure rescues” and can’t say I know anything about them other than what I read in this article.
Yet it really sounds as though she is overreaching, telling citizens they are too stupid to avoid making a bad decision and can’t be held responsible if they do.
I am, however, somewhat sympathetic to her wish to ban lenders from “inflating” a borrower’s income; it’s plausible that some shady lenders would use misleading, ambiguous or obscure fine print to substantively alter the terms of a contract, for which borrowers should not be held responsible. But of course it depends on what “inflating” actually means.
Worse still is the idea of forbidding mortgages that the borrower “clearly” cannot pay. If it is “clear” to the lender that the borrower will default on the loan, the lender would not make the offer; if it is “clear” to the borrower that he or she can’t make the payments, then the borrower would not accept the loan. The strong presumption is that the government is a better judge of what someone can pay than both the lender and the borrower, each of whom knows their financial situation far more intimately than the state.
One can, of course, sympathize with someone who gets in more debt than he can handle; it happens to many well-meaning people. But that is what bankruptcy is for. We’re going down a dangerous road if we allow the government to protect us from our own decisions. It is one thing to have welfare and bankruptcy law in situations where a person is in a hopeless situation. It is another for the government to interfere in decisions that might possibly result in a hopeless situation — but might not.
Of course, the two are connected: once you decide to protect people from the consequences of their choices, you realize that paying for it (health care, welfare benefits, bankruptcy courts, etc.) can be expensive. It’s the next logical step for the government to directly interfere in people’s choices. But, of course, it’s in making bad choices, or seeing others do so, that we gain the wisdom to make better choices — including, of course, whom to elect to office.
The trend toward protecting people from bad choices will result in the population getting dumber, leading to even dumber politicians getting elected, leading to progressively dumber laws getting enacted: it’s the death spiral of the nanny state.
Technorati Tags: law, libertarianism, nannyism, welfare
Less than Amazing…
Virginia Postrel is surprised at the proposed incandescent light bulb ban in California:
Grace Peng, who is probably the greenest person I know in her personal behavior, explains why even she is against the light bulb ban. It’s amazing how legislators and regulators are determined to reward and punish particular technologies rather than letting price signals work.
Here are a couple things we know: voters tend to remain rationally ignorant and won’t study economic theory (which would lead them to support market pricing over political control) because the benefits economic literacy confers don’t justify the cost (except for a few weirdos who are excessively interested in such topics). Thus we can expect elect officials to reflect that economic illiteracy.
Another thing we know is that power is a corrupting influence; it is hard for those in power to restrain themselves, and consider how their behavior may be harming others or corrosive to our liberty, because they are just doing so much good for us.
Now, I think Virginia Postrel is a lot smarter than me. But come on: wouldn’t it be vastly more surprising if politicians actually adhered to sound economic theory, and restrained their impulse the ban and control everything in deference to citizens’ free choices?
Socialist Fade-out
Interesting article from the Boston Globe (possible free registration demanded) on the growing influence of capitalism on the Israeli kibbutzim.
As of December 2006, 61 percent of kibbutzim were paying differential salaries to their members and more than 20 percent had decided to transfer ownership of kibbutz houses from the collective to the members who live in them. At Gan Shmuel, north of Tel Aviv, the kibbutz leased large tracts of agricultural land to developers for a shopping mall and McDonald’s. At Ein Gedi on the Dead Sea, the kibbutz guest house is now managed by an outside company that employs kibbutz members.
Voluntary socialism is tricky. To remain voluntary, it needs continuing ideological conformity. The more differences between people, the harder it is to cooperate, and the more the minority feels tyrannized by the majority.
Voluntary socialism may exist when conditions are ripe for it, but as new opportunities present themselves, and new challenges develop, people will find themselves not always thinking in step. Some will choose to start owning property and trading in the marketplace. Socialists then faces the choice whether to fight the tide and repress capitalism, losing the voluntaryst element of their society, or embrace the inevitable pull of the market.
Branson’s Prize
John Tierney reports on Richard’s Branson’s $25 million prize offered for removing 1 billion tons of carbon dioxide from the atmosphere.
The article doesn’t contain any viable-sounding suggestions for accomplishing that (though presumably if Tierney had some ideas, he would have quit the Times already). Much of the article is in fact criticism of Al Gore’s An Inconvenient Truth.
Private initiatives such as Branson’s prize are a welcome development. In order to change behavior, you need to change incentives. The environmentalist side of the argument is to offer severe negative incentives — extensive government restriction of the economy — in the hope of preventing a worse environmental outcome. Nobody wants to go that route, and in particular nobody wants to commit to such restrictions while other nations have not. If we can find a way to make the environment greener by making it profitable for someone to make it greener, we’re going to be much better off.
Smart(er) dust
Engadget reports on RFID “dust,” 0.0025 square millimeter 128 bit tags. Imagine how ubiquitous they will be in 20 years.
While there are legitmate privacy concerns, I wonder if they could be used to help eliminate some of the externalities commonly believed to require government intervention. For example, factory pollution is often adduced to show how a system based on Coase bargaining could not work in large part because you can’t tie particular particles to a particular factory, so can’t argue the factory owner is “trespassing” in your lungs. But suppose so many ppm of the factory’s pollutants are required to have microscopic RFID tags. Air sampling downwind of the factory would test for compliance. You or your doctor would detect the tag, passing the information on to your insurer or other surety organization, which would negotiate with the factory for an acceptable price of polluting your lungs.
The “Big Brother” concerns about RFID seem to have more to do with the possibility of the government spying on and tracking citizens. These fears have less to do with the technology than with the concentrations of power already inherent in our society.
Wind Farms
The New York Times reports on a wind farm controversy in rural Virginia (the Times requires free registration).
Returning for a moment to my earlier post, I mentioned Coase bargaining without explaining it. It refers to the Coase Theorem, which (roughly) says that, were it not for transaction costs, any definition of property rights would be efficient because people would negotiate until externalities are eliminated. One can view externalities simply as a consequence of high transaction costs. These costs prevent the full extent of negotiation that would be needed to reach an efficient outcome.
In the New York Times story, a wind farm, while environmentally attractive, has raised concerns about aesthetics, noise and light pollution (the turbine towers are tall enough that they require beacons to warn aircraft). The solution, per Coase, would be for the wind farm owner to bargain with affected parties to reach a solution that compensates for the nuisance of the turbines. Assuming the wind farm can still be profitable, it can then be constructed. But there may be a lot of people to bargain with; there may be holdouts. It is hard to identify who is really affected, and who is merely claiming to be affected in the hope of a payout.
In my example of factory pollution, the RFID-tagged dust particles emitted by the factory could be traced to a particular factory, and people afflicted by the factory’s pollution would be distinguishable from people with unrelated afflictions. This would greatly aid in reducing transaction costs — all victims do not have to negotiate with all polluters and vice versa.
Noise and light pollution and aesthetics may be trickier because they are more subjective. And there is still the problem of too many parties at the bargaining table.
A class action suit is one possibility, but this seems less than ideal. A tort system is needed when breaches of rights occur, yet the ideal is to have an efficient system of rights in the first place, where lawsuits are the exception, not the norm. It’s better for two farmers to have two clearly defined plots of land where each can grow his preferred crop, rather than share one plot and constantly sue each other when they get in each other’s way.
A better solution is for an intermediary to negotiate with the factory to a mutually acceptable compromise. Government is often proposed as such an intermediary. Government is a monolithic enterprise, not terribly responsive to the varying preferences of different people within its territory. For instance, people will have different tolerances for risk, and different interpretations of harm, as seen in the New York Times article. Perhaps, with the aid of technology, smaller, more responsive organizations could fill the gap between government defining rights for everyone, and individuals having to negotiate all of their rights.
