Tuesday, March 31, 2009

Another Win for Singapore

Singapore's parliament has passed a law allowing payments to organ donors (found on William Saletan's blog). But don't get too excited.
The new legislation will bring Singapore in line with similar practices in the United States and Britain where donors are financially compensated, according to Khaw.
Apparently all this law does is make it legal to pay a donor's medical expenses--nothing more. The U.S. and other countries have similar laws. Saletan suggests that what is interesting here is the argument being used to pass the law--that denying payment to donors is unfair to them. He thinks that this argument might be used to persuade people to accept even more substantial payments to donors (which economists usually support on the grounds that it would result in a greater supply of organs, helping more people in need).

I don't think that's necessarily the case. I suspect that most people will say that fairness says donors get compensated for their costs, and nothing more. People are uncomfortable with the idea of profiting from the sale of one's organs.

Monday, March 30, 2009

Earth Hour, Buy Nothing Day, and Gas Boycotts

Last Saturday my wife and I experienced Earth Hour during the intermission of a play (On the Town) at Belmont College in Nashville. It reminds me of Buy Nothing Day, or the occasional gasoline boycotts that occur when gas prices are high.

In general, these sorts of boycotts should not be expected to do much. This is because refraining from buying a good on a particular day, with the intention of buying it on a different day instead, doesn't really change supply and demand for the good. If you decide to buy gasoline on May 16 instead of May 15, it really doesn't matter much. If a really large number of people went along, then prices might fall on the 15th, if prices are flexible enough, but it's not likely--and even if the price did drop, this would just lure more people in to buy on that day, pushing the price back up. That is, the drop in price that one person is trying to create is an opportunity for someone else to buy cheaper gas. The likely result: gas prices don't change at all. The same goes for Black Friday.

Of course, the intended goal of these sorts of events may not be to affect prices. They may be intended to simply get publicity and encourage consumers to behave differently. This is more plausible than changing prices, but I still think it unlikely to have large effects.

Is Earth Hour like this? To some extent, yes. A factory that turns off its lights for an hour is probably just going to make up that hour later. Also, some people will end up driving around in their cars in the hopes of seeing what their city looks like with the lights off, creating more pollution, both in terms of particulates and in terms of light pollution.

Having said that, Earth Hour is also different. If you turn all your lights off and just sit there enjoying the darkness, you don't turn on double your usual lights afterward to make up for lost time. Because that hour in the dark is a sunk cost, it can't be recovered. Some people might stay up later to do things they would otherwise have already finished, using more energy, but some will not. It is therefore possible that Earth hour could, on net, reduce energy consumption. Of course, a more efficient way to do this would be to simply raise the marginal cost of energy using a tax. This way, people could decide for themselves when the best time to save energy was, or whether or not, in their particular case, saving energy was worthwhile.

Wednesday, March 18, 2009

Macro Odds and Ends

From calculatedrisk via Brad Delong, this graph is interesting. Leaving aside the ups and downs of the business cycle, there seems to be a general downward trend in capacity utilization. I wonder what accounts for that. Apparently the capital stock is expanding faster than we can make use of it. This could also be a measurement problem of some kind.

Arnold Kling has a fantastic blog entry on financial regulation. This is something that seems to elude most commentors on economics: regulation is always backward-looking; it is not prepared to deal with new kinds of crises. It is even possible that the old form of regulation is what leads to new forms of crises. Because markets almost always innovate faster than regulators can keep up, financial crises (bubbles, bank runs, etc.) may be inevitable and unavoidable. Sure, they always seem avoidable in hindsight--"if only we had done X, this crisis would not have occurred"--but setting up institutions to stop these problems before they start may be impossible.

Note that I'm not saying (and Kling is not saying) that markets always get things right. What I'm saying is that it may not be possible to create regulation that keeps markets from sometimes going wrong.

Sunday, March 15, 2009

Privacy and Price Discrimination

I'm doing some research on privacy policies and prices charged on webstores. There has been a great deal of work by Taylor, Varian, and others developing models that try to determine whether websites can use data collected on past purchases to change the prices that consumers face for future purchases. That is, if a website notices that you've purchased many action movie DVDs in the past, you might see higher action move DVD prices the next time you visit the site than someone who doesn't buy such movies. The goal would be to increase profit, with possible side effect of making some consumers better off.

As far as I can tell, the only clear example of this being done is Amazon, which tried it for a while in 2000. Customers were outraged, so Amazon stopped. The CNN link just provided says that this Annenburg study says that other sites may do it as well. Reading the actual paper, however, I can't find mention of the photography site example mentioned at the CNN link. It seems to me that this sort of price discrimination would be very hard to carry out, since one could evade it by clearing one's cache. It will naturally tend to anger customers, too. Suppose a friend links you to a good deal, and you click the link only to find that, for you, the price is higher. Wouldn't you find this irritating? The ease with which consumers can search for and compare prices should make price discrimination of this sort difficult.

So I ask you, have you ever seen something like this happen? Are you aware of any examples of hidden price discrimination online?* That is, has anyone else done anything like Amazon, charging different people different prices based on their purchase history, or based on sites recently visited? If there are no such examples, I cannot help but wonder why some economists have devoted so much effort to this issue. Online privacy is an interesting topic, but I don't think it has much to do with price discrimination.

*I am not referring to old-fashioned price discrimination here. For example, airline websites still charge customers more for flights that leave tomorrow than they do for flights that leave in five months. That's merely a continuation of what they used to do offline, and they're not secretive about it.

Monday, March 09, 2009

Are Rape Simulators and Rape Substitutes or Complements?

Now there's a title I never thought I would type. 

Apparently there is a Japanese "rape simulator" game that some are trying to stop from entering the U.S. At the moment no stores want to carry it, but it can be illegally pirated online. Would it be bigoted of me to say that Japanese culture is frequently strange and disturbing? Apparently the game is just part of a genre of similar games. 

Two questions come up. The first question, and the less interesting one, in my opinion, is "Does the First Amendment protect this?" I think the answer should be "yes". Whether the answer actually is "yes" is beyond my knowledge of pornography law. 

The more interesting question is "Should we want to allow this on utilitarian grounds?" I think the First Amendment should be used to protect unpopular speech, because it is the speech most in danger of being suppressed by the government, and because governments cannot be trusted to wisely get rid of dangerous speech. Not all speech is valuable; some of it is trash. If we had a benevolent bureaucrat god, he or she could presumably eliminate speech that does more harm than good. Would this game fit that description?

It's possible that it might. If simulated video game rape encourages rapists to go out and commit more rapes--that is, if rape simulators and rape are complements--then the rape simulator is probably, on net, harmful. On the other hand, what if some would-be rapists stay inside and play rape simulators instead? That is, what if rape simulators and rape are substitutes? Then we might, in the interests of womens' health and safety, and reduced use of the legal system, want to allow rape simulators. There is some evidence that pornography and rape may be substitutes. The same could be true of rape simulators and rape. 
So who wants to go out and join me in a protest in support of rape simulators? Anyone?

Sunday, March 08, 2009

Naomi Klein vs. Rahm Emanuel

Apparently White House Chief of Staff Rahm Emanuel has been quoted as saying "You don’t ever want to let a crisis go to waste: it’s an opportunity to do important things that you would otherwise avoid." I can't find a reference to when or where he said that, but if he did say it, I wonder, will Naomi Klein claim that he, too, is part of the vast neoliberal conspiracy to make everyone miserable?

Klein has argued that Milton Friedman and other free market types espoused using crises as opportunities to advance their radical free market agenda. She hasn't let facts get in her way, as has been thoroughly documented. Apparently the conspiracy extends to slightly left-leaning presidential administrations, too. Perhaps she would argue that the Obama administration isn't really progressive after all. The Rahm Emanuel quote sounds an awful lot like the Milton Friedman quote that Klein willfully misunderstands, except that Emanuel's quote sounds more like the sinister interpretation Klein uses (which is not to say that I think Emanuel is actually being sinister and plotting).*

I would like to give the Obama administration thanks for ending the federal raids on medical marijuana facilities. Hopefully we'll move a few steps closer to legalization.

*For those curious, here is the quote:
Only a crisis--actual or perceived--produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
Klein misinterprets the first part of the quote as prescriptive, rather than descriptive.  She thinks that Friedman wants to manufacture crises to get his ideas implemented. Rather, he is simply saying that when a crisis comes along, it's wise to have good ideas developed and ready to be used. So she thinks that Friedman conspired with Pinochet--which is untrue--and that groups like CATO support the Iraq war in order to get radical free market ideas implemented in Iraq. In fact, CATO opposed the Iraq war, which Klein would know if she bothered to do the slightest bit of research.