Henry George on trade:

Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.

Sadly, this insight keeps being relevant.

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A short deductive inference

P1. Bumper stickers for political campaigns that have ended are evidence for the public choice idea that political participation is expressive rather than instrumental. What could be more about you and less about concrete objectives than a call to action for an event that’s already happened?

P2. Bernie Sanders bumper stickers survive all out of proportion to how much support he had.


C1. Supporting Sanders is expressive at an above-average level.
OR
C2. Sanders supporters are lazy and haven’t gotten around to taking off the stickers. (heh)

The social problem of low conscientiousness

Let me preface this with an example I’ve given in classes. When we talk about social problems, we have to be careful what we mean. We don’t simply mean something a lot of people don’t like. In terms of public health, for example, one person’s case of heart disease is not a public health issue in the way one person’s case of ebola is a public health issue. Heart disease becomes a public health issue when it’s a widespread issue with systemic causes that can be fruitfully addressed in a systemic way.

This weekend, as I sat waiting to be called to renew my vehicle registration, I overheard the following exchange (this is inexact, but roughly corresponds):

Receptionist: Can I have your name, sir?

Guy: [J]

Receptionist: And what can we do for you today, J?

Guy: I need to update my registration.

Receptionist: Do you have all the forms? ID, title, emissions inspection, two proofs of address?

Guy: Does a W-2 count as proof of address?

Receptionist: Unfortunately it doesn’t. It can count for proof of your Social Security number. We need two other proofs of address.

Guy: (Loudly) Man, I ain’t got two proofs of shit! Fuck! (storms out)

Now, I agree with J, the rules of motor vehicle registration can be a hassle to comply with, even before you come in and wait. And with only a little bit of imagination we could probably come up with a better system. Most of us have probably thought of tweaks while we waited. But come on, J, them’s the breaks. Yelling at the receptionist won’t change anything. A little self-control goes a long way in life. By itself the interaction wasn’t really a big deal, but people who yell at receptionists tend to express their low conscientiousness in other ways that can be. (I’m sure the receptionist wasn’t happy, but she didn’t seem overly fazed.)

In what follows I may be unfair to J, but from my limited sample of his behavior I am going to generalize him into an archetype we’re all familiar with, and hey, I doubt he will read this anyway. (Plus, is it more likely that the moment you encounter somebody is when they’re acting consistently with their long-term personality or when they’re acting inconsistently with it?)

I think about people like J a lot, people who get low scores in the five factor model’s conscientiousness category. The general population is full of them, and they’re greatly overrepresented in sub-populations of interest to policy makers and people who study rules: the unemployed, welfare recipients, jail and prison inmates, etc. All evidence suggests that major personality traits are partly heritable, i.e. there’s little we can do about them, but there is plenty of room for environment to influence them as well, and of course we know people respond to incentives.

We have a lot of money in formal social institutions that deal with low-conscientiousness people. I recently saw a news story about two men arrested for auto theft while on a roundabout drive to the local courthouse, where one of the men was to pick up an ankle monitor for a previous auto theft arrest. It’s hard to imagine what could be done to deter this kind of bad apple but more of the criminal justice system. People like J, however, aren’t beyond the pale.

I give the Left credit for thinking about systemic influences on behavior, but I often think its prescriptions are lacking. For example, people like J may benefit in the short term from having a social safety net to fall back on when their lack of self-control makes maintaining gainful employment difficult, but in the long term this weakens the incentive to develop self-control. I know the counterargument: the social safety net helps poor children and other deserving poor, and it’s better to cushion too many rather than too few. Creating institutions that penalize low-conscientiousness behavior without unduly impacting others, and that aren’t retroactive criminal justice institutions, is a very difficult task. I readily acknowledge this, but the goal should still be one of the guiding lights of policy. At the very least, failure to acknowledge the tradeoff should be viewed as highly suspicious.

Minimum wage increases vs. alternative uses

One of the common, if often unstated assumptions behind support for higher minimum wages is that businesses can absorb the extra costs just fine. They are making $X/hr off employees currently, and they will simply chug along making $X-increase after the new policy goes into effect.

In general, businesses operate on thinner profit margins than most people realize, but assume this argument is correct. My first bosses, the owners of the Dairy Queen franchise where I worked when I was fifteen, made a pretty decent living. If that was, say, $100,000/year, dropping it down to $90,000/year or even $75,000/year wasn’t going to kill them. (I don’t really have a clue what they took home, but nice round numbers make better examples.) It might have meant something substantial to them, but it wasn’t the difference between the high life and the bread line.

What this common take ignores is that my bosses didn’t have to operate a Dairy Queen franchise to make money. Lionel Robbins defined economics as “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”, perhaps not a perfect definition but one that’s good enough for present purposes. My bosses’ time and energy were scarce means which had alternative uses. They could have operated a Dairy Queen, or they could have done something else. Artifically raising the costs to employ us would have made other uses of their time relatively more attractive. I suppose some owners and stockholders are committed to doing the specific thing their businesses do, but more often than not they want to make money, especially in the case of stockholders who buy and sell shares all the time. My bosses certainly didn’t have any special love for producing delicious ice cream treats.

The fact that my bosses probably could have absorbed some extra costs does not mean they would have absorbed extra costs, not when they had other ways to make money. I can already hear the internal dialogue: “It’s said that people are only motivated by greed.” I don’t agree with that statement, but it’s beside the point. Responsible policy is made for the people you have, not the people you wish you had.

This line of reasoning is completely natural to economists, but not to everybody else, and I wish the public dialogue on this topic pointed it out better.

Political and economic freedom, NK edition

A North Korean defector discusses the link between economic and political freedom:

Another sign of Mr. Kim’s weakening control, Mr. Thae said, is evident at the unofficial markets in North Korea where women trade goods, mostly smuggled from China. The vendors used to be called “grasshoppers” because they would pack and flee whenever they saw the police approaching. Now, they are called “ticks” because they refuse to budge, demanding a right to make a living, Mr. Thae said.

Such resistance, even if small in scale, is unprecedented, he added.

The spread of outside news and market activities could eventually doom Mr. Kim because his government “can be held in place and maintained only by idolizing Kim Jong-un like a god,” Mr. Thae said. “If he tries to introduce a market-oriented economy to North Korean society, then there will be no place for Kim Jong-un in North Korea, and he knows that.”

The reports of the NFL’s death are greatly exaggerated

I keep seeing the meme all over sports media that NFL television ratings are down, as if this is a big deal, tied to scandals and hypermasculinity. I have little use for that line of thought, and there’s a better one.

In a recent interview with Peter King, Brian Rolapp, Executive VP of Media for the NFL, offered a few reasons for the ratings drop. First, presidential election years always have a dip in ratings. This is fascinating! Maybe the explanation is people getting serious once every four years, but I doubt it. The explanation that fits with my priors (and thus the clear frontrunner, right?) is that politics and sports are substitutes. Politics deals with serious issues, but many people consume it as entertainment. They pick teams and get invested in them in the way they do with football. This election was pretty unusual, too, which almost guarantees getting more eyeballs, even for neutrals, which means less attention left over for football.

Another point I thought was interesting was that the number of viewers hasn’t declined, they’re just sticking around less. This makes sense too. If the games are not fun to watch—neither is your team, the outcome is not in doubt—there are a practically unlimited number of alternative things to watch without moving out of your spot. The random variation in game quality week-to-week and year-to-year isn’t under the NFL’s control anyway. This is a big challenge for the NFL, and indeed for any media enterprise. By the way, college football ratings are not down. I think the identification people have with college teams is a lot stronger than with NFL teams, and the markets are not the same. There is a lot less parity in college football anyway, and there always has been, so bad games don’t turn people off as much.

The London games don’t help with domestic viewership either. Obviously they help with European exposure, but there’s only so much football a viewer can watch in a day. If your team plays in London (at 9:30am Eastern time/6:30 am Pacific time) you’re not likely to watch the rest of the games, and if your team doesn’t play in London you’re not likely to watch that game.

One year does not make a trend. I know media people have to talk about something, but we don’t have to take everything at the same level of seriousness.

Incentives matter, college football edition

NFL.com has a great article about the difficult art of quarterbacking in the modern game that includes a gem from Buffalo Bills offensive coordinator Greg Roman:

Of course, handling NFL offensive concepts tends to be especially hard for quarterbacks who’ve spent their college years in systems that don’t require a ton of processing. ESPN analyst Trent Dilfer, an NFL quarterback from 1994 to 2007, puts it bluntly: “The majority of quarterbacks coming out of college these days are as football remedial as you could possibly be.”

Schneider sees the same issue from a scouting perspective: “When you look at college football now, it’s harder to evaluate these guys, because the position is so much easier to play. In so many systems, guys are just looking at the sidelines, waiting for the coach to give them a play with minimal options.”

Adds Roman: “Nobody can really figure out [if they can thrive in an NFL offense] until you get your hands on them, ’cause they’re not being trained to do that. They’re being trained to win the next game in college so the college coach can keep his job.”

The Efficient Fantasy Football Draft Hypothesis

Like millions of other people, I play fantasy football. My league has some of the same people each year, but a handful rotate through. We always end up with some people who aren’t very confident in their fantasy skills so I’ve had plenty of opportunities to explain drafting.

What I end up saying is: don’t overthink it. Draft rankings are done by teams of people who understand more about football than you and I ever will, and it’s unlikely we’ll outguess them. Stick with the consensus rankings that already incorporate the relevant information about players instead of trying to find it all out for yourself.

I suppose it’s possible to consistently beat the experts, but I doubt it. Every year the leader boards have some teams with absurd amounts of points, but that’s only one side of the distribution. There are plenty of teams that fare poorly, and most of us are somewhere in the middle. Moreover, consistently beating the experts year after year is a feat rare enough that I’m not familiar with it. (Even if it were possible, most of us don’t have the time or energy to become the Warren Buffett of fantasy football.)

Externalizing security costs when the price is zero

Here’s a fact that likely won’t surprise you: Walmart is a heavy user of police resources. Some police departments aren’t happy about it:

…Robert Rohloff, a 34-year police veteran who has to worry about staffing, budgets, and patrolling the busiest commercial district in Tulsa, says there’s nothing funny about Walmart’s impact on public safety. He can’t believe, he says, that a multibillion-dollar corporation isn’t doing more to stop crime. Instead, he says, it offloads the job to the police at taxpayers’ expense. “It’s ridiculous—we are talking about the biggest retailer in the world,” says Rohloff. “I may have half my squad there for hours.”

The unintentional twist is that with regard to crime, most firms and most people “offload the job to the police at taxpayers’ expense” to some degree or another. The problem the article identifies is the very great degree to which Walmart does it. Around 15 years ago Walmart scaled back on staff, intentionally saving money and unintentionally creating an environment more conducive to misdemeanor.

This is a classic problem with zero-price public services: there’s no built-in incentive not to overuse them. Until now retailers have found it most profitable to internalize some of the costs of their own security, estimating the amount they pay deters a greater amount of loss. Walmart has a different calculation, is willing to go minimal on security knowing it can externalize the costs, and is therefore guilty of responding to incentives and taking the policy toward its logical conclusion.

Perhaps, in an abstract way, they should shoulder more of the burden. But existing policy allows for this, so they’re well within their legal rights, and just try to come up with another policy that would pass court challenges that wouldn’t lead to other undesirable consequences, like mom-and-pop stores who don’t have deep pockets having to pay extra. What’s the cut-off?

(There is one possible out, as the article mentions the town of Beech Grove, Indiana, declaring Walmart a public nuisance. This would mean a $2500 fine for every police call. This forced the local Walmart to internalize some of its security costs, but the fact that this is the only instance leads me to believe it wouldn’t be employed on a large scale. I lack the legal background to say more about it; all I can see is the rarity of the measure.)

The takeaway points, none of which are surprising:

  • People (and firms) respond to incentives.
  • Firms face different cost structures.
  • Zero-price resources can be overused.

Koyama on Roman Empire economics

Mark Koyama has just written a great piece about Roman Empire historiography. Specifically, about how historians misunderstand the economic aspects of the Roman Empire, leading them to make erroneous conclusions about the cause of its decline. You can find his piece here.

One of Bryan Caplan’s points in The Myth of the Rational Voter is that what voters think about economics is important because so many questions in politics are or affect economic issues. A similar theme holds here, mutatis mutandis. I also see it in anthropology/archaeology. There are a great many fields of study where economics has explanatory power, but more often than not the people in these fields simply aren’t prepared to use it properly. For example I enjoyed Georges Lefebvre’s French Revolution books for the wealth of historical information, but his Marxist interpretation seemed close, but no cigar.

This is important because our framework for understanding the past reflects our framework for understanding the present. The worse we do with one, the worse we’ll do with the other.