I came home from the airport today to discover my car had been broken into again, only this time they decided to enter by shattering my front window, which will now cost me $200 to replace.  I feel bad for the person who is in a situation where he has to break my window to steal what amounted to about $4 and some pens, but I can’t imagine that it was worth the effort.  It also nets a $204 loss to me, while only a $4 gain to him.  The Coase Theorem teaches us that we would both be better off if I just gave $5 to him. He’d have an extra dollar, and I wouldn’t have to replace my window.

Of course, some people call paying someone not to break your stuff extortion.  If only I could pay a group of people to protect me from potential car-robbers.  I could even pool my money with other car-owners and they could protect all cars, not just mine.  And maybe, while they’re at it, they could protect people from murders, or guard public events.  And as long as they’re protecting everyone, maybe we could fund them through some sort of tax scheme - after all, their protection would be a public good.

But what would we call such a group, and who would stop them from beating the crap out of everybody?

Categories: Community, Governance, Incentive Centered Design, Law, Politics
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Edward Luttwak lays the smack down on the Middle East, Middle East Experts, and the rest of us for caring:

That brings us to the mistake that the rest of us make. We devote far too much attention to the middle east, a mostly stagnant region where almost nothing is created in science or the arts—excluding Israel, per capita patent production of countries in the middle east is one fifth that of sub-Saharan Africa. The people of the middle east (only about five per cent of the world’s population) are remarkably unproductive, with a high proportion not in the labour force at all. Not many of us would care to work if we were citizens of Abu Dhabi, with lots of oil money for very few citizens. But Saudi Arabia’s 27m inhabitants also live largely off the oil revenues that trickle down to them, leaving most of the work to foreign technicians and labourers: even with high oil prices, Saudi Arabia’s annual per capita income, at $14,000, is only about half that of oil-free Israel.

Categories: Israel, Politics
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Visualizing economics has a graph of where the top .01% gets their income, excluding capital gains. Looking at the time-series data, there’s a pretty clear story that dividend income has gotten much less important while wage income has grown significantly in importance.

What this means is that the richest of the rich are now earning their money through wages (whether as CEOs, lawyers, or bankers), rather than just collecting bank interest. It says something huge about wealth distribution. There will always be a top .01%, but would we rather the top .01% be filled with those who make their money by working for it and getting paid for it, or by sitting on their couch and letting the bank interest on their billions finance their luxury? I’m especially curious about the left-wing response, as the left is generally more concerned with issues of income equity.

Excluding capital gains does change the data some, as many of the capital-intensive wealthy are seeing income through more active capital (investments) rather than interest.

Categories: America, Business and Economics, Politics
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Slate has announced a guide to political futures markets for the 2008 US Presidential Election. Political futures generally predict outcomes better than polls for a number of reason. Slate is going to track the big prediction markets along the big races and report along.

For a snapshot, the Iowa Electronic Market, the Big Daddy of prediction markets, shows Clinton and Obama neck and neck for the Dems, and the Field Candidate (anyone but McCain, Romney, and Guiliani) taking the republicans. Guiliani leads among those candidates with their own futures. The dems are also predicted to win by a slim margin.

Also, I haven’t investigated the differences between contracts in the markets, but the wide price differences between the Iowa Electronic Market and Intrade seem like an arbitrage opportunity for those who can trade in both.

Categories: America, Information Markets, Politics, Polling, Social Software, Technology
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Another bit of down to earth wisdom for the masses from Tycho at Penny Arcade:

People seem to think that by posting in threads and agreeing with other people they are changing the world. They are not. They are posting in threads online. The universe will not be altered by forum threads, even those which are very wry. Being outraged online is a form of entertainment, and refreshing a thread to receive a hit of consensus packs the thrill of genuine activism without requiring any sweat. I’m afraid this test may require more from the community than a sardonic jpeg.

One day, hopefully before I go back, I’ll get to a write up about my impressions from their PAX convention. The short version: there are real people behind lots of the stuff you see written online, and most of them are exactly like you’d expect, and don’t behave that differently offline.

Categories: Information Economics, Politics, Social Software, Technology
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From the dumbest column I’ve ever read in Slate (which I normally read before anything else):

Suppose the national defense of the United States were relegated to the private sector. Instead of the publicly funded Army, Navy, Air Force, and Marines, the country would be defended by private militias funded mainly by insurance companies. In the event of foreign attack on U.S. soil, the militias would defend those citizens in the affected areas who’d paid defense insurance premiums through their places of work (or, if self-employed, as individuals).

The best-armed troops would defend the wealthiest and most hawkish segments of the population, who would have paid the highest premiums.

The premise of the article is that we should nationalize health care because it’s like the military, and look how good a nationalized military is. Wow, lets go through all the ways this is flawed.

1. National Defense is a public good, health care is not. You may think that health care is a right, or something everyone is entitled to, and those are philosophical positions, but health care doesn’t fit the definition of a public good in the economic sense. First of all, it isn’t non-rival, which means that if I consume some health care, you can’t consume that same amount. If I take a pill, or use a X-Ray machine, you can’t take that same pill or use the machine at the same time. In contrast, an army that protects the United States offers the same amount of protection, whether or not you add more people to it. Second, health care is excludable. I can stop you from taking a pill or getting that X-Ray if you don’t pay for it. But with national defense, if you don’t pay your taxes, the army still protects you. There are fundamental characteristics between them that make them different.
2. In general, everyone in the country shares the same risk if the country is attacked. Granted, people in high-risk areas may suffer a greater risk due to terrorism, and that is actually reflected most of the time in higher local tax rates to support police counter-terrorism, or insurance premiums for potential targets. In general, though, if there is a large scale attack against the United States or its allies, the risk to all of us is the same. When it comes to health care, we all have different amounts of risk, and only minimal information about that risk. Well planned insurance lets us pool this risk to reduce the cost to individuals and overcome some of this information problem. Nationalized health care has nothing to do with risk pooling, and it effectively involves the health and low-risk subsidizing the unhealthy and high-risk.
3. National defense is a pretty bad example. There’s definitely consensus on the left, and I think among some people on the right that we spend way too much on national defense. It costs the Defense Department orders of magnitude more to procure technology that is available cheaply in the private sector. Defense technology research involves massive outlays relative to the returns. The military is a sprawling and inefficient bureaucracy with a sprawling and inefficient supplier network supporting it. Do we really want to take our relatively dynamic biomedical research sector and make it part of a government supplier complex? Is this really a way to reduce costs?

I later found that Arnold Kling took a briefer, though probably more economically informed shot at the column as well.

Categories: America, Business and Economics, Distribution, Governance, Incentive Centered Design, Information Economics, Politics
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Taking a short break from sunny, geriatric Weston Florida (winds around 18 mpg, gusting to 27), I give you a technique for scoring your think tank panelists:

In times dominated by momentous questions of war and foreign policy, a particular kind of Washingtonian is bound to thrive: the think-tank pundit. But competition is relentless. Good judgment and extensive research may help advance a career, but what really matters in Washington is an elusive quality known as “Say-sO Superiority,” or SOS. Staffers at Asia Policy Point, a Washington foreign policy research center, devised the following highly scientific measure to calculate a speaker’s SOS score (and to keep themselves awake during luncheon talks).

Categories: Funny, Politics, The Academy
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But half the 247 pupils at the 40-year-old local authority-supported school are Muslim, and apparently the Muslim parents go through all sorts of hoops, including moving into the school’s catchment area, to get their children into King David to learn Hebrew, wave Israeli flags on independence day and hang out with the people some would have us believe that they hate more than anyone in the world.

The Muslim parents, mostly devout and many of the women wearing the hijab, say they love the ethos of the school, and even the kosher school lunches, which are suitable because halal and kosher dietary rules are virtually identical. The school is also respectful to Islam, setting aside a prayer room for the children and supplying Muslim teachers during Ramadan. At Eid, the Muslim children are wished Eid Mubarak in assembly, and all year round, if they wish, can wear a kufi (hat). Amazingly, dozens of the Muslim children choose instead to wear the Jewish kipah.

About a Jewish school in England with a majority Muslim student body.

Categories: Community, Education, Israel, Jewishness, Politics
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Newly elected New York governor Elliot Spitzer is going to tie school funding to performance metrics:

Schools that do not perform well, he said, would be shut down. Educators who do not meet performance goals would be dismissed. A new accountability system would monitor how schools are performing academically and whether they are making the best use of their money, he said. Also, the schools will be judged on whether their academic programming is helping students perform better.

Categories: Education, Governance, Incentive Centered Design, Metrics, Politics
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It also raises several questions. Has the American reaction to the attacks in fact been a massive overreaction? Is the widespread belief that 9/11 plunged us into one of the deadliest struggles of our time simply wrong? If we did overreact, why did we do so? Does history provide any insight?

Certainly, if we look at nothing but our enemies’ objectives, it is hard to see any indication of an overreaction. The people who attacked us in 2001 are indeed hate-filled fanatics who would like nothing better than to destroy this country. But desire is not the same thing as capacity, and although Islamist extremists can certainly do huge amounts of harm around the world, it is quite different to suggest that they can threaten the existence of the United States.

Historian David Bell asks “Was 9/11 Reall That Bad?“   It’s only Monday, but I’m going to call this as the must-read for the week.

Categories: America, Governance, Politics
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The GapMinder foundation has a cool tool hosted by Google that lets you compare graphs of development variables against each other over time.  It defaults to Life Expectancy vs. Income per capita, but you can chart other variables as well.  You can see some very interesting movements when you play with the time slider.  Genocides show up as major dips in life expectancy - look at Cambodia in the 70s, Rwanda in the 90s.  To see the impact of AIDS, look at Zimbabwe or South Africa more recently.  A fun tool to play with, though it doesn’t have nearly as much data as some other visualization sties out there.

Categories: Business and Economics, Metrics, Philanthropy, Politics, Science, Technology
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Mystery Pollster Mark Blumenthal cites a National Center for Health Statistics study concerning the growth in cell-phone only households, a concern for pollsters who can’t reach them, as well as a Pew Study which finds that this group is distinct from the rest of the population:

A new study of the issue finds that cell-only Americans – an estimated 7%-9% of the general public – are significantly different in many ways from those reachable on a landline. They are younger, less affluent, less likely to be married or to own their home, and more liberal on many political questions.

It doesn’t look like the study controlled for age in the base numbers, and aren’t younger people generally less affluent, less likely to be married or own their own home, and more liberal on many political questions? What the study really says is that young people aren’t reachable by pollsters because they are in cell phone only households. Don’t worry, though, young people don’t vote!  When they did control for age, most of the differences look like they’re for things that correlate strongly with affluence and urbanization, which makes intuitive sense.

Categories: America, Community, Politics, Polling, Technology
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Israeli Knesset Member Yossi Beilin makes the case that Jimmy Carter said nothing Israelis themselves don’t say:

It is not that Israelis are indifferent to what is said about them, but the threshold of what passes as acceptable here is apparently much higher than it is with Israel’s friends in the United States. In the case of this particular book, the harsh words that Carter reserves for Israel are simply not as jarring to Israeli ears, which have grown used to such language, especially with respect to the occupation.

In other words, what Carter says in his book about the Israeli occupation and our treatment of Palestinians in the occupied territories — and perhaps no less important, how he says it — is entirely harmonious with the kind of criticism that Israelis themselves voice about their own country. There is nothing in the criticism that Carter has for Israel that has not been said by Israelis themselves.

I think that the American Jewish Community is grossly mishandling their reaction to Carter’s book, not that I’m surprised that the organized Jewish community is mishandling something. Despite nearly unanimous criticism of Carter’s book from nearly everyone I know, and countless more in the jBlogosphere, I’ve yet to find anyone (Beilin excepted) who has actually read the book.

Categories: America, Books, Israel, Jewishness, Politics
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Which of these two statements, if believed to be true, would make the world a better place?

1. There’s no point in attacking and occupying another country because it never turns out well.
2. Sometimes wars of occupation turn out great!

Scott Adams, of Dilbert fame, says that there is no chance that anyone can win a war of occupation. In my post earlier this week, I questioned why anyone would think that you could. For a number of reasons (future post?) the era of large, conquering armies is over. Believe it or not, Donald Rumsfeld knew this when he tried to retool the army, but then he tried to use tomorrows army to fight yesterday’s war. Changing geopolitical realities don’t mean armies need to go away, but governments need to reassess how they’re deployed.

Categories: America, Politics
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Jane Galt has some interesting posts on the war in Iraq (start here, revisited here, again here), the debate leading up to it, and how everyone has 20/20 hindsight. Before the war, my opinion was that it was a bad idea because we didn’t have a clear goal, and more importantly, I didn’t think we could pull it off. I admit I wasn’t very vocal about it, because it was tough to find a place on the anti-war “fighting is wrong” left, and you couldn’t really get away with saying “the military is great, just not that great.” What I don’t get, though, is why so many otherwise rational people, who are usually so skeptical of government’s ability to solve huge problems, actually thought that the military could accomplish all of its goals in Iraq: find Weapons of Mass Destruction, dismantle the government, create a new one, and keep the peace. That’s still my biggest issue: why did people actually think this would work, given all the prior evidence from American military experience.

Unlike most anti-war activists, I don’t really question the motivations for going to war. I think that most supporters were genuinely afraid or genuinely wanted to overthrow the government. What I don’t get is why they were so cocky they thought they could pull it off without thousands of people dying and things getting worse before they got better. Making democracy is really, really hard. We’ve been at it for over 230 years, and we’re still figuring a lot of things out. And we started from scratch. By the way, that is not an argument for staying the course.

Somewhere in Yithak Rabin’s memoirs, he talked about a meeting with Henry Kissinger where he said that the only way you could win a war was if you had a clear objective and ended it once that was accomplished. The Powell Doctrine was pretty similar - you need to have an exit strategy. We never had a clear objective, a clear measure of when it was accomplished, and we never had an exit strategy, all things that we needed at the beginning. This isn’t hindsight, this is foresight that we should have had from the 70’s, 80’s, and 90’s, but that we keep forgetting.

The lesson everyone learns from prolonged military engagements or occupations is that they don’t work, that you can’t beat an entrenched indigenous insurgency, and that conventional militaries are bad at unconventional warfare. So why, every decade or two, does someone roll around and forget all this?

—Update, like 5 minutes later—

Robin Hanson says it might be due to an overconfidence bias among hawks.

Categories: America, Governance, Politics, Strategy
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