Hat tip to Freakonomics, who gives us an article worth reading today. If you're feeling lazy, I'll summarize:
1) Sam needed an apartment in Queens.
2) He came across one and it seemed like a good deal.
3) He signed the lease.
4) He soon discovered why it was a good deal—the basement flooded every time it rained.
5) He lost out: none of his storage space was useful.
6) Worse still, he lost everything he stored down there.
The author describes the situation as textbook information asymmetry. I don't disagree. And information asymmetries can be really really pernicious. One simple example:
Wednesday, September 29, 2010
Tuesday, September 28, 2010
If the Yuan's So Cheap...
...why don't we just buy some? I'm tired of all this whining about currency manipulation. Yes, the Chinese yuan is undervalued. Yes, the Chinese manufacturers get a big leg-up: they're able to practically give away goods to anyone not paying in it. And yes, that places the rest of us at a disadvantage. But think of it this way:
Say you're vacationing in China. Somehow, you managed to smuggle $10,000 through customs. Wheee! Everything's cheap for you, right? That means if you exchanged your $10,000 for, say, ¥80,000 (a totally hypothetical exchange rate), you'd be getting a raw deal. You'd be able to buy far less. But if you planned on leaving tomorrow, then you'd be scoring huge. Why? Well, everyone believes the yuan's dirt cheap; it should be worth more in dollars. (And I tend to agree.) But it can't stay cheap forever. So if you take some home and wait long enough, you'll score big. Just bide your time until it is worth more dollars.
Conventional wisdom says otherwise. Conventional wisdom says we'll never see a stronger yuan because we never have. Conventional wisdom says we've never seen a freely-traded yuan, and so we never will. But I disagree. After long enough, we'll hit a tipping point. It's a rising power we're talking about here, but it's one that ultimately will rise. And when that happens, the yuan is going to follow. Right now, China's a paradise for producers, but only by being a consumer's hell. The people of China aren't paying for groceries in euros or dollars; they're paying for them in yuan. And so whenever they make a purchase, they take a hit. Granted, we haven't seen much resistance yet—but that doesn't mean we won't. The more the Chinese earn, the more they'll notice the difference. And the more they'll demand a change.
Say you're vacationing in China. Somehow, you managed to smuggle $10,000 through customs. Wheee! Everything's cheap for you, right? That means if you exchanged your $10,000 for, say, ¥80,000 (a totally hypothetical exchange rate), you'd be getting a raw deal. You'd be able to buy far less. But if you planned on leaving tomorrow, then you'd be scoring huge. Why? Well, everyone believes the yuan's dirt cheap; it should be worth more in dollars. (And I tend to agree.) But it can't stay cheap forever. So if you take some home and wait long enough, you'll score big. Just bide your time until it is worth more dollars.
Conventional wisdom says otherwise. Conventional wisdom says we'll never see a stronger yuan because we never have. Conventional wisdom says we've never seen a freely-traded yuan, and so we never will. But I disagree. After long enough, we'll hit a tipping point. It's a rising power we're talking about here, but it's one that ultimately will rise. And when that happens, the yuan is going to follow. Right now, China's a paradise for producers, but only by being a consumer's hell. The people of China aren't paying for groceries in euros or dollars; they're paying for them in yuan. And so whenever they make a purchase, they take a hit. Granted, we haven't seen much resistance yet—but that doesn't mean we won't. The more the Chinese earn, the more they'll notice the difference. And the more they'll demand a change.
Monday, September 27, 2010
The Economics of Parking...
...was apparently the only thing economists talked about a month ago. Blunt Object has a run down. Not to suggest it's an unimportant debate or anything—but far less interesting than what started it.
Basically, Tyler Cowen made an obvious point about parking prices. More specifically, the ones set by government fiat: they're almost always too low and they almost invariably cause shortage. In the process, the driving public gets a fat, juicy transfer payment from the carless because they're the only ones not totally screwed by the deadweight loss. And then Arnold Kling shat a brick, arguing that shortage somehow isn't shortage in the magic land of parking; it's actually sort of hard to understand, though, because his writing's not its clearest when it's bullshit.
But really, if you're arguing parking spaces should be 100% occupied 100% of the time, you're arguing demand should outstrip supply. The minute any of those spots opens up, you're needing a driver quick to pounce. But that driver had to have been waiting there a while! You're not getting rapid 1-to-1 turnover of every single fucking spot without some sort of backlog. And how the hell do you describe that except as unsupplied demand?!
Basically, Tyler Cowen made an obvious point about parking prices. More specifically, the ones set by government fiat: they're almost always too low and they almost invariably cause shortage. In the process, the driving public gets a fat, juicy transfer payment from the carless because they're the only ones not totally screwed by the deadweight loss. And then Arnold Kling shat a brick, arguing that shortage somehow isn't shortage in the magic land of parking; it's actually sort of hard to understand, though, because his writing's not its clearest when it's bullshit.
But really, if you're arguing parking spaces should be 100% occupied 100% of the time, you're arguing demand should outstrip supply. The minute any of those spots opens up, you're needing a driver quick to pounce. But that driver had to have been waiting there a while! You're not getting rapid 1-to-1 turnover of every single fucking spot without some sort of backlog. And how the hell do you describe that except as unsupplied demand?!
Sunday, September 26, 2010
On Government as Monopoly
Perhaps Max Weber's most enduring contribution to economics was his definition of the state. It's become so widely referenced these days that it's becoming a cliché: governments divide territories and exert coercive monopolies within their sector. Hell, even anarchists and non-anarchists can agree on that much. The main difference between the former and the latter is that the former believe this monopoly is normatively bad; the latter consider it mainly descriptive.
I say "mainly" because, being a non-anarchist myself, I still feel Weber's monopoly has a certain normative component. We love to hate monopolies because they generally screw consumers. But some monopolies, like those given patent owners, are considered so consumer-benevolent that they're justified. The pivot point is behaviour, I think. Let me elaborate.
Monopolies aren't deterred by competition, so they never fully internalise surplus. They would if their market were open to more sellers, because then they'd forfeit control over supply. That they don't causes a disequilibrium between natural demand and price: demand is artificially inflated due to the supply shortage induced by the seller. So, the seller pays nothing for being inefficient. As the sole source, his surplus goes unchecked. In fact, he profits from inefficiency.
I say "mainly" because, being a non-anarchist myself, I still feel Weber's monopoly has a certain normative component. We love to hate monopolies because they generally screw consumers. But some monopolies, like those given patent owners, are considered so consumer-benevolent that they're justified. The pivot point is behaviour, I think. Let me elaborate.
Monopolies aren't deterred by competition, so they never fully internalise surplus. They would if their market were open to more sellers, because then they'd forfeit control over supply. That they don't causes a disequilibrium between natural demand and price: demand is artificially inflated due to the supply shortage induced by the seller. So, the seller pays nothing for being inefficient. As the sole source, his surplus goes unchecked. In fact, he profits from inefficiency.
Saturday, September 25, 2010
Can You Ever Lower Interest Rates Past Zero? (Redux)
Greg Mankiw at the New York Times gives us another option for reducing interest rates past zero. As I explained before, low interest rates incentivise borrowing; subzero ones would leverage that. We'd be doing it to correct a market distortion, which as I noted here is primarily demand inelasticity to price. Money shouldn't act like that. And when it does, our attempts at aggressive AD are effete. But how do we stimulate demand when consumers aren't keyed into price?! All money buys you is price. It's not like we want it to come with 24-hour customer service and a free latte.
We need this demand. We need it badly, because assuming debt comes with the motivation to seek out returns. If borrowing takes off, so does the drive to grow, expand, hire, and innovate. But we can't force people into borrowing; all we can do is reassure them they won't go bankrupt. That's basically what low interest does: it tells the debtor he's not going to end up underwater.
We need this demand. We need it badly, because assuming debt comes with the motivation to seek out returns. If borrowing takes off, so does the drive to grow, expand, hire, and innovate. But we can't force people into borrowing; all we can do is reassure them they won't go bankrupt. That's basically what low interest does: it tells the debtor he's not going to end up underwater.
Friday, September 24, 2010
I, Toby Flenderson (And Not Bernie Madoff!)
Without going into laborious detail, I work in human resources, which means I disseminate truly devastating information on a semi-regular basis. And as such, I've had ample opportunity to learn how to do it–at least, learn well enough to save my windows from bricks. One of the things I've picked up is the awesome power of Fridays. Seriously: people take character-assasinating threats to their livelihood much better on a Friday.
But I'm neither the first nor last person to figure this out. Governments do it to cover their hides; companies do it to sway their shareholders–why, it's become a downright fixture in our lives. Who hasn't observed the uncanny esteem Fridays curry with earnings reports? With press secretaries? It's a form of opacity, really. But, the nice thing is no one notices. No one's going to defer his or her well-laid plans. No one's going to derail his campout. It's brilliant because it's opaque–but opaquely so.
And who would ever want to be transparently non-transparent? Decide to equivocate, you fool no one. Decide to deceive, you might get caught. And yet, you see these tactics everywhere. (Bernie Madoff, anyone?) But why would they get employed? Why not use Fridays instead? Let's consider the options:
But I'm neither the first nor last person to figure this out. Governments do it to cover their hides; companies do it to sway their shareholders–why, it's become a downright fixture in our lives. Who hasn't observed the uncanny esteem Fridays curry with earnings reports? With press secretaries? It's a form of opacity, really. But, the nice thing is no one notices. No one's going to defer his or her well-laid plans. No one's going to derail his campout. It's brilliant because it's opaque–but opaquely so.
And who would ever want to be transparently non-transparent? Decide to equivocate, you fool no one. Decide to deceive, you might get caught. And yet, you see these tactics everywhere. (Bernie Madoff, anyone?) But why would they get employed? Why not use Fridays instead? Let's consider the options:
Thursday, September 23, 2010
Market, Correct Thy Former Self...
...is pretty much the argument of Rand Paul when he objects to the Civil Rights Act. In theory, his unrestrained marketplace facilitates self-interest, which in turn undermines ages-old biases against historically disfavoured groups. To Rand Paul, the profit motive deinstitutionalises racism (or sexism, homophobia, etc.) because it induces defection by the racists. Yesterday's Woolworth's becomes amenable to integration when it feels the H.L. Green down the street might do the same; all the chains' interests may be promoted by racism, but each one individually senses a windfall by bailing. And the mere threat of that apostasy crumbles the cartel. Each restauranteur ends up fearing another's opportunism so much that the party makes a pre-emptive strike.
But let's think about that more concretely. What we've really got premising the argument is that greater exposure to consumers raises demand. That demand boost, then, raises prices: the more parties bidding for your product, the more you can afford to be selective. The more you can translate that into profit, the more you're poised to drive out competitors. Etc., etc. And if that's not the ultimate argument to break ranks–losing your shirt if you don't–I don't know what is. Who would ever choose cooperation in that world?
But let's think about that more concretely. What we've really got premising the argument is that greater exposure to consumers raises demand. That demand boost, then, raises prices: the more parties bidding for your product, the more you can afford to be selective. The more you can translate that into profit, the more you're poised to drive out competitors. Etc., etc. And if that's not the ultimate argument to break ranks–losing your shirt if you don't–I don't know what is. Who would ever choose cooperation in that world?
Wednesday, September 22, 2010
The Utility of Pride (Redux)
When I blogged on Monday about the value of pride, I also placed a premium on something else–that is, non-guilt. In the example I used, I was wedged between making a buck and losing face. And the determiner that ultimately caused me to relent was the sheer cost of guilt. Whatever gain I would have assumed by feeling self-sufficient, I would have been buying it at the expense of my relatives. And that turned the tables. I didn't want to deprive my relatives of satisfaction. (Who does?) And so I decided to reassess–and voilà! Non-guilt was worth more than pride; and pride, while trumping free money, lost out.
And that's pretty amazing, because I'm as proud as they come.
But that's also pretty important. I'm a regular consumer of non-pride–I expend a lot of resources in tending to my conscience. But I'm not the only one: guilt reduction is universal. And sometimes it's something that pays. Consider the odd example of the penalty for parking a bike illegally in Copenhagen. When bicycles started littering emergency lanes, the city decided to fight. And fight they did–by getting nice. They threw away the tickets, scrapped the hated wheel boots, and replaced them with complimentary tuneups a thank you note.
And that's pretty amazing, because I'm as proud as they come.
But that's also pretty important. I'm a regular consumer of non-pride–I expend a lot of resources in tending to my conscience. But I'm not the only one: guilt reduction is universal. And sometimes it's something that pays. Consider the odd example of the penalty for parking a bike illegally in Copenhagen. When bicycles started littering emergency lanes, the city decided to fight. And fight they did–by getting nice. They threw away the tickets, scrapped the hated wheel boots, and replaced them with complimentary tuneups a thank you note.
Tuesday, September 21, 2010
I'm All Out of Cash... Do You Take Mooncakes?
American Public Radio's "Marketplace" is always an engaging listen. And today's show is no exception. In brief: the odd liquidity of the Chinese mooncake. Well, not the mooncake itself, but the promise to tender one on demand. As it turns out, vouchers for mooncakes have become like currency, with every bearer knowing they're cashable, and every buyer knowing they sell. And this phenomenon, I think, is sort of demonstrative.
I've always been awestruck by network effects. Something gains (or loses) its subjective appeal by virtue of its ubiquity–and by huge margins. It's not everyday you see that. Few of us would opt for Fords because they outsell Hyundais. Yes, we might consider it: maybe it's a proxy for something that does matter, like the availability of service or cost of parts. But the commonality itself is unimportant–and really, really unimportant if Hyundais are massively price competitive or stay on the road forever.
But network effects are basically the only thing mooncake notes have going for them. As the segment notes, few people actually eat mooncakes. They're like the Chinese fruitcake: it's a nice gesture, but an uneconomic one. After all, who wouldn't prefer something not consigned to spoiling in the fridge? The same is true with mooncakes. They aren't valueless, but they aren't hot sellers. They aren't without utility, but it's mainly sentimental, and something most people could do without.
I've always been awestruck by network effects. Something gains (or loses) its subjective appeal by virtue of its ubiquity–and by huge margins. It's not everyday you see that. Few of us would opt for Fords because they outsell Hyundais. Yes, we might consider it: maybe it's a proxy for something that does matter, like the availability of service or cost of parts. But the commonality itself is unimportant–and really, really unimportant if Hyundais are massively price competitive or stay on the road forever.
But network effects are basically the only thing mooncake notes have going for them. As the segment notes, few people actually eat mooncakes. They're like the Chinese fruitcake: it's a nice gesture, but an uneconomic one. After all, who wouldn't prefer something not consigned to spoiling in the fridge? The same is true with mooncakes. They aren't valueless, but they aren't hot sellers. They aren't without utility, but it's mainly sentimental, and something most people could do without.
Sex Club Moving to Town? Blame Craigslist.
Harvey Silverglate over at Forbes shares some interesting thoughts on this week's Craigslist kerfuffle. His piece concerns an unintended consequence of the web service voluntarily removing its adult ads: the risk of making the sex trade even riskier. But his conjecture seemed a bit incomplete to me. After all, if we're going to theorise unintended consequences, why are we taking the relevant market for granted? It seems to me, if consumers are internalising an increased cost to transact–and suppliers are suffering an inhibited demand from the danger–some former johns might look to alternatives. And some former pros might indulge them.
I'm not saying sex clubs or peep shows are perfect alternatives or anything. But they're certainly attractive substitutes: they share many of the benefits of prostitution like human contact and individualised service. And they're a service rather than a good. And if enough of that demand spills over, the relevant market would react: it'd dilate in response to the pattern. Yesterday's pros would end up becoming today's proprietors.
And they might just be opening a store near you!
I'm not saying sex clubs or peep shows are perfect alternatives or anything. But they're certainly attractive substitutes: they share many of the benefits of prostitution like human contact and individualised service. And they're a service rather than a good. And if enough of that demand spills over, the relevant market would react: it'd dilate in response to the pattern. Yesterday's pros would end up becoming today's proprietors.
And they might just be opening a store near you!
Monday, September 20, 2010
Ugliness in a Beauty Contest
Whenever people mention Keynes nowadays–and it's often–it's as a first-string linebacker to bulk up their op-eds. And what invariably happens with linebackers happens to Keynes as well: the true skill disappears behind a truncated rundown of highlights. I've often thought we dismiss (or eulogise) Keynes-as-macroeconomist without circumspection. But, I think the real tragedy is our collective amnesia towards his microeconomics. In one of his more cogent observations, he articulates a common constraint on individuals, the Keynesian Beauty Contest.
The problem is, in sum, being forced to make decisions based on aggregate decisionmaking–with everyone else being forced to too. Think about it in terms of an alternate-world American Idol. There, each judge would be tasked with voting for the contestant most popular with his peers. But let's throw in a wrinkle: the judge most frequently correct in assessing this wins a raise. That means, every evening, the judges would be searching for an average–funnelling down the diversity of opinions into a rough abbreviation. And yet, the judgments that we'd hear would never probe that mean at all! The very fact that each judge knows what his counterparts seek–the aggregate mean–means their voting behaviour would account for that. They'd be voting to ascertain the average prediction of the average. And in fact, it iterates recursively. Knowing that decisions turn on averages of averages, the judges factor that in too.
Which brings me to the ugliness. Every actor here lacks his purported motive: teasing out demand for Idols. And even weirder: the more intense the competition, the farther away it drifts. The more successions we master–the more the forecasts tell–the less the reasons matter why we're locked in the arms race to begin with.
The problem is, in sum, being forced to make decisions based on aggregate decisionmaking–with everyone else being forced to too. Think about it in terms of an alternate-world American Idol. There, each judge would be tasked with voting for the contestant most popular with his peers. But let's throw in a wrinkle: the judge most frequently correct in assessing this wins a raise. That means, every evening, the judges would be searching for an average–funnelling down the diversity of opinions into a rough abbreviation. And yet, the judgments that we'd hear would never probe that mean at all! The very fact that each judge knows what his counterparts seek–the aggregate mean–means their voting behaviour would account for that. They'd be voting to ascertain the average prediction of the average. And in fact, it iterates recursively. Knowing that decisions turn on averages of averages, the judges factor that in too.
Which brings me to the ugliness. Every actor here lacks his purported motive: teasing out demand for Idols. And even weirder: the more intense the competition, the farther away it drifts. The more successions we master–the more the forecasts tell–the less the reasons matter why we're locked in the arms race to begin with.
The Utility of Pride
How many times has this happened to you?
Relative: Honey, you look so thin! And this shirt, you've worn it to threads!
You: Uh, I'm really all right. You don't have to worry–really! When was the last time you saw...
Relative: No, no, no! Here (pulls out cash from billfold). Take this and make me happy.
You: Oh, no, really–that's not necessary. I'm doing just fi...
Relative: Will you please stop being so difficult? Just... (forces bills into hand)
You: (Quiet resignation)
Now, I'm not poor, but I'm by no means rich. I keep a positive balance sheet, but I won't lie–it's often a tightrope walk. Breaking even often turns on an artfully crafted deduction. And inferior goods are a way of life. But, to be honest, I'd derive more utility turning down that money than taking it. At least, that'd be the math in a world free of guilt. My non-acceptance would end up buying me something: pride, a sense of responsibility, my relative's own fixed income not being squeezed another dollar. And how do I know this? I'd pay my relatives not to offer–if they'd throw in saving me guilt.
Relative: Honey, you look so thin! And this shirt, you've worn it to threads!
You: Uh, I'm really all right. You don't have to worry–really! When was the last time you saw...
Relative: No, no, no! Here (pulls out cash from billfold). Take this and make me happy.
You: Oh, no, really–that's not necessary. I'm doing just fi...
Relative: Will you please stop being so difficult? Just... (forces bills into hand)
You: (Quiet resignation)
Now, I'm not poor, but I'm by no means rich. I keep a positive balance sheet, but I won't lie–it's often a tightrope walk. Breaking even often turns on an artfully crafted deduction. And inferior goods are a way of life. But, to be honest, I'd derive more utility turning down that money than taking it. At least, that'd be the math in a world free of guilt. My non-acceptance would end up buying me something: pride, a sense of responsibility, my relative's own fixed income not being squeezed another dollar. And how do I know this? I'd pay my relatives not to offer–if they'd throw in saving me guilt.
Sunday, September 19, 2010
Open Thread: Economies and Constitutions
I thank co-blogger Sonia for her contribution on indecency. I'll keep this brief so we can flesh it out more in the comments, but I'd like to hear some thoughts on economics being cabined by constitutions. James M. Buchanan, the original "constitutional economist," stressed the reinforcing potential afforded by first-order law. That is, its ability set contract-conducive parameters by being permanent and widely regarded. That longevity, the theory goes, fosters confidence and innovation by being a surety against tyranny, destabilisation, etc. It's like an indemnity against catastrophic risk. But, certainly there are counterexamples? Certainly there are some entrenched laws–similar in universal appeal, equivalent in endurance–that could sabotage that very purpose. What can you come up with?
Inflation Targets and Psychology
Tyler Cowen has an excellent write-up over at the New York Times about the Fed's reluctance to announce an explicit inflation target. In sum, it asks why, when our monetary policy is clearly inflationary, our monetary authorities aren't forthcoming in that. I think the question is important, because, as Tyler notes, "if [the Fed] could just convince Americans that it was committed to monetary expansion and economic growth, it would help the economy pick up speed."
The Federal Reserve, even at its most proactive, still needs to be seen as proactive in order to implement effective policy. Let's think about why that is. Say the Fed starts aggressively ratcheting up QE tomorrow. We'd get all this new money flooding our economy and basic Econ 101 tells that our preexisting dollars should lose value. But here's the wrinkle: that inflation isn't a macroeconomic given–we expect it because we acknowledge that inflation, like any aggregate trend, is closely related to certain microeconomic processes. The microeconomic process that does all the legwork here is a demand shift responding to a supply hike. It's weird to think of a world in which, say, an influx of bargain-basement iPods wouldn't discount prices across the board. Retailers selling at the pre-glut prices would be forced to run sales even if it meant taking a loss: anything's better than cannibalising the full purchase price of unsold inventory. Well, QE works on the same principle: the central bank infuses the money supply with bargain-basement dollars, and we expect to see prices react. Money should become cheap, and we should need more of it to buy bread.
The Federal Reserve, even at its most proactive, still needs to be seen as proactive in order to implement effective policy. Let's think about why that is. Say the Fed starts aggressively ratcheting up QE tomorrow. We'd get all this new money flooding our economy and basic Econ 101 tells that our preexisting dollars should lose value. But here's the wrinkle: that inflation isn't a macroeconomic given–we expect it because we acknowledge that inflation, like any aggregate trend, is closely related to certain microeconomic processes. The microeconomic process that does all the legwork here is a demand shift responding to a supply hike. It's weird to think of a world in which, say, an influx of bargain-basement iPods wouldn't discount prices across the board. Retailers selling at the pre-glut prices would be forced to run sales even if it meant taking a loss: anything's better than cannibalising the full purchase price of unsold inventory. Well, QE works on the same principle: the central bank infuses the money supply with bargain-basement dollars, and we expect to see prices react. Money should become cheap, and we should need more of it to buy bread.
A New Canadian Defnition of Indecency....?
Read the court case summary here or the SCC judgment here.
----
It was a decision that made waves around the Canadian legal community. Controversy is the common currency of legal debate, but when the Supreme Court makes a controversial decision about group sex, even the quietest critics come out of the woodwork. On December 21, 2005, the Supreme Court ruled; 7-2, that the conduct occurring in the highly publicized swingers Club L’Orage, was not indecent. Within days of this ruling the rumblings began - not all of it was negative. The Montreal Gazette applauded the decision with an article entitled “Supreme Court Swings the Right Way”.[1] Don Mills of the National Post posted his nod of approval with the lines; “… it is not the role of government to enforce life lessons… [t]hat is why we applaud the Supreme Court of Canada for its judgment ...”.[2]
However, there was opposition as well. The Toronto Star pointed to the sharply worded Supreme Court dissent with the headline; “Majority ruling goes too far”[3] and the editor of the Calgary Herald mourned; “[i]n these cases, the Court has failed … [i]t has said what was once considered disgraceful behaviour is literally a harmless activity”.[4] The media frenzy was sparked by the Supreme Court’s marked departure from previous rulings by declaring that Jean-Paul Labaye [owner of Club L’Orage] was not guilty of operating “a common bawdy house”. What could have prompted such a far-reaching change? One answer is that the judicial definition of “indecency” itself was re-written by the Supreme Court through this significant ruling.
----
It was a decision that made waves around the Canadian legal community. Controversy is the common currency of legal debate, but when the Supreme Court makes a controversial decision about group sex, even the quietest critics come out of the woodwork. On December 21, 2005, the Supreme Court ruled; 7-2, that the conduct occurring in the highly publicized swingers Club L’Orage, was not indecent. Within days of this ruling the rumblings began - not all of it was negative. The Montreal Gazette applauded the decision with an article entitled “Supreme Court Swings the Right Way”.[1] Don Mills of the National Post posted his nod of approval with the lines; “… it is not the role of government to enforce life lessons… [t]hat is why we applaud the Supreme Court of Canada for its judgment ...”.[2]
However, there was opposition as well. The Toronto Star pointed to the sharply worded Supreme Court dissent with the headline; “Majority ruling goes too far”[3] and the editor of the Calgary Herald mourned; “[i]n these cases, the Court has failed … [i]t has said what was once considered disgraceful behaviour is literally a harmless activity”.[4] The media frenzy was sparked by the Supreme Court’s marked departure from previous rulings by declaring that Jean-Paul Labaye [owner of Club L’Orage] was not guilty of operating “a common bawdy house”. What could have prompted such a far-reaching change? One answer is that the judicial definition of “indecency” itself was re-written by the Supreme Court through this significant ruling.
Saturday, September 18, 2010
Thoughts on Money and Politics
I'm canvassing for opinions here. Let's assume the following:
a) the infusion of money into politics shapes the playing field in a fundamental way (e.g., through issue framing, candidate vetting, astroturfing, etc.)
b) said manipulation effects some amount of inculturation at the personal level, and
c) our politics are on solid normative ground if they reflect the "general will," however ill-defined.
In that situation, to what extent is c) in tension with a) and to what extent is c) reliant on a)? That is to say, how much does commodifying politics undermine democratic theory (if any), and how much do our democratic impulses exist primarily because of commodification (if any)?
a) the infusion of money into politics shapes the playing field in a fundamental way (e.g., through issue framing, candidate vetting, astroturfing, etc.)
b) said manipulation effects some amount of inculturation at the personal level, and
c) our politics are on solid normative ground if they reflect the "general will," however ill-defined.
In that situation, to what extent is c) in tension with a) and to what extent is c) reliant on a)? That is to say, how much does commodifying politics undermine democratic theory (if any), and how much do our democratic impulses exist primarily because of commodification (if any)?
The Market for Votes in Afghanistan
Human beings aren't walking statisticians, which is why, all too often, they undervalue their slice of shared assets. The franchise in a body politic is one such asset, and as the New York Times reported yesterday, "[e]ven by the standards of a country rated as one of the poorest in the world, Afghans seem to be selling their votes cheap.”
The article goes on to explain how, with as few as 2500 votes often needed to clinch an election, priced at roughly $5-$10 each, a mere $25k outlay can land you comfortably in the state house. I say mere, because “the lucrative sinecure of a seat in Parliament [...] not only comes with a healthy salary—about $2,200 a month gross—but tremendous opportunities for graft.” Now, given, terms in the Afghan parliament aren't set: they begin and end with votes of confidence. So, it's not like you're buying those perks for the full five-year maximum for a Parliamentary term. It could be five years; it could be one. But even on the conservative assumption that your tenure's going to last, say, two–that's a huge return on $25k! Think about it: $52,800 in guaranteed income, a two-year opportunity to build momentum for future elections, graft. Even assuming that incumbency only predisposes you to a 10% advantage the next time you run, and you only take a couple thousand-dollar kickbacks, that's $25k spent on $60k in earnings. So the question becomes: why the bargain? Couldn't the sellers be demanding more?
Friday, September 17, 2010
Can You Ever Lower Interest Rates Past Zero?
The intuitive answer is no, right? I mean, who would consign himself to an investment that underperforms socking money away in the mattress? And furthermore, what possible incentive could there be to holding such an investment until it matures? Think about it: you cash out the t-bill before it fully vests, and you avoid a blunt-force trauma. Whereas at month 11, you disinvest without realising a negative-interest sting, at month 12, tough luck, hombre.
But that sort of misses the point, I think. The fed's current positive interest rates aren't horribly attractive to consumers either—there are much better deals out there than our 3-year treasuries presently underperforming inflation by half a percent. And they aren't meant to be: they exist to give investors a fail-safe—a fail-safe which, in this economy, is the least stimulative thing an investor can do with his money. So, they're not priced to sell. They're not meant to sell. They're priced to be there for you if, in your starkest throws of desperation, you're absolutely forced to seal your money in a vault. They provide safety, security. They are, essentially, an asset-of-last-resort. If t-bills with negative interest rates would still serve this function, they become at least a theoretical possibility.
Thus, a couple of contexts in which you could see negative interest rates:
But that sort of misses the point, I think. The fed's current positive interest rates aren't horribly attractive to consumers either—there are much better deals out there than our 3-year treasuries presently underperforming inflation by half a percent. And they aren't meant to be: they exist to give investors a fail-safe—a fail-safe which, in this economy, is the least stimulative thing an investor can do with his money. So, they're not priced to sell. They're not meant to sell. They're priced to be there for you if, in your starkest throws of desperation, you're absolutely forced to seal your money in a vault. They provide safety, security. They are, essentially, an asset-of-last-resort. If t-bills with negative interest rates would still serve this function, they become at least a theoretical possibility.
Thus, a couple of contexts in which you could see negative interest rates:
Thursday, September 16, 2010
The Marginal Gain off a Five-Buck Carpool
I end up driving about 100 kilometres each day. The trip to work is 40. The return trip is roughly the same. And when I factor in meandering here and there for routine errands, meals, or meetups, I come out to around 100.
Now, I drive a reliable Honda--but it's getting up there in years. What's more, its odo has passed the 300k mark (180k in miles). And I'm driving it in a region somewhat hostile to small cars with FWD--Wisconsin winters tax even the mightiest 4WDs with their ferocious snows. In the end, I'm driving on borrowed time; and at the rate I drive daily, that time is ticking down quickly.
I highlight this to give my motivation for finding an alternative. It's not the price of fuel: I purchase it at a much-reduced price in ethanol-rich Iowa. And it's not congestion: east of Madison, there's virtually none to speak of. Further, automotive commuting is economically feasible for me--at least in the short-term. So, it boils down to blunting the sting of a sharp economic loss in the somewhat-distant future.
The further I can delay that economic loss, the better equipped I will be to face it. What's more, it's an inevitable aspect of choosing to own a car. So, the less-regular I make the regimen of replacing spent vehicles, the less costly car ownership will be over the course of my life. This all leads me to place a premium on altering my commuting habits.
What is the price of that premium, though? And how does that price affect the selection of an alternative? Some thoughts:
Now, I drive a reliable Honda--but it's getting up there in years. What's more, its odo has passed the 300k mark (180k in miles). And I'm driving it in a region somewhat hostile to small cars with FWD--Wisconsin winters tax even the mightiest 4WDs with their ferocious snows. In the end, I'm driving on borrowed time; and at the rate I drive daily, that time is ticking down quickly.
I highlight this to give my motivation for finding an alternative. It's not the price of fuel: I purchase it at a much-reduced price in ethanol-rich Iowa. And it's not congestion: east of Madison, there's virtually none to speak of. Further, automotive commuting is economically feasible for me--at least in the short-term. So, it boils down to blunting the sting of a sharp economic loss in the somewhat-distant future.
The further I can delay that economic loss, the better equipped I will be to face it. What's more, it's an inevitable aspect of choosing to own a car. So, the less-regular I make the regimen of replacing spent vehicles, the less costly car ownership will be over the course of my life. This all leads me to place a premium on altering my commuting habits.
What is the price of that premium, though? And how does that price affect the selection of an alternative? Some thoughts:
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