Transaction Costs in Everything: Needs a Lift

 This request appeared on "Next Door," an app for communicating about neighborhood doings and information.

Many "shade tree mechanics" have their own set of ramps, some with hydraulic lifts like this one.

But if I could rent a real lift for (say) $44.95 an hour, and could schedule the time, I could get a lot more done very quickly. Oil change, tires, brakes; could do several things at once. Plus, the rental could come with a standard set of basic tools, which in the case of auto repair is both standard and quite specialized. Would need a way to check all the tools are there at the end, and are unbroken, but that should be possible if we can just use electronics to reduce (say it with me!) transaction costs.

Okay, the $44.95 is NOT HYPOTHETICAL! Anything I can imagine, some entrepreneur has already tried.  That one is in Denver, by the way. A video, if you are interested:

Given the labor shortages plaguing many parts of the country, we might see apps/facilities that rent out auto lifts, commercial kitchens....what else, folks?  The sky is the limit, if the sky were transaction costs.

Transaction Costs in Everything: "MiLaw Who Needs Constant Attention"

CraigsList ad seeks a wedding escort for a future bride's mother-in-law, offering $1,000 for two days work.

The ad, titled "Wedding Date Wanted for Mother-in-Law," was posted on July 11 to the Hudson Valley Craigslist, Times Union reported. The ad said it was looking for someone available for an August wedding in Hudson Valley.

"She needs constant attention and supervision," the ad read. "She will probably wear white and try to escalate small dramas - your job is simply to distract and de-escalate. Flatter her for 2 days and make an easy $1,000."

I dunno. $1,000 is not much, for the set of skills and...well, "attention" that this might require.

Not putting too fine a point on it, but applicants MIGHT want to see a photo of the MiLaw in question, before a final price is negotiated.

Transaction Costs in Everything: The Drill

 Coordinating the sharing economy can be complicated. That's why there are platforms.....

With thanks to the LMM for the find...

Don't Cross the Streams: Economies of Scale in Ignoring Sports Teams

 Three weeks ago today, Sept. 5, I paid close attention to the St. Louis Cardinals baseball game against the Brewers. The Cards lost by giving up 5 runs, in stupid and inept fashion, in the 9th inning, blowing a 5-1 lead.

I announced that baseball season was (for me) OVER, and I would be ignoring the Cardinals and all of baseball from this point until Spring training, when pitchers and catchers report in February.

This promise I have kept, scrupulously. 

My impression (I wouldn't actually KNOW, of course, because I'm ignoring baseball) that soon after I unplugged the Cardinals have won some games, and are playing better. Given that their winning percentage at the time I began to ignore them was 0.51, it is a simple binomial calculation to show that the chances of them winning (say, I don't know) 15 games in a row is less than .000001. 

By any reasonable standard of inference, then, it is MY IGNORING OF THE CARDINALS that has produced any success (of which of course I am unaware, but have heard rumors). 

This is an enormous power; my good friend Christina Wolbrecht has gone so far as to suggest that I seclude myself in a remote Unibomber style cabin, to ensure that I am able to continue to ignore the Cards. I should note that Donna Gingerella has endorsed this proposal, on condition that I write home occasionally. 

So far so good. But I have a friend, a pathetic Reds fan (if that is not redundant, and of course it IS redundant), who has asked that I should ALSO ignore the Reds. He would be willing (I won't give his name, but his initials are Michael Martin) to pay a small amount for this service.

It struck me that this is quite a business opportunity. Rooting FOR a team is time-consuming; that's why I gave up on the Cards: it was taking a lot of time and sadness. But IGNORING a team is easy, and of course it SCALES. I could ignore MANY teams, with no additional cost.

But then I saw the problem in the reasoning: what if two teams I'm ignoring PLAY EACH OTHER. It would be the equivalent of "crossing the streams" in Ghostbusters. And that would be very, very bad. Egon said so.

So, sorry folks: ignoring the Cardinals is going to be my sole project for the rest of this year. I'm happy to accept bids to ignore YOUR team next year, once I have started watching the Cards again.

Transaction Costs in Everything: Thai Taxi Gardens

 For now, at least, Thailand has WAY "too many" taxis.

Parked, they take up a lot of valuable surface area, and create runoff for rain.

But if you put a small plot of "land" atop each taxi...voila! Modular commodification of excess capacity!

As argued in my recent book, these are LITERAL platforms!

 

Is Behavioral Economics Dead? Should It Be?

  Wow....Pretty harsh, from an insider of Behavioral Economics. 

But also this, rather embarrassing and even ironic since the study was "about" honesty... 

To be fair, Nassim Taleb and a few others have been very critical for a long time. But the collapse of house of behavioral cards is still pretty dramatic. 

Taleb's argument is very plausible: If human behaviors are evolved, then the existence of certain patterns cannot actually be "irrational," though it may be atavistic).

 

 

 

Transaction Costs in Everything

 As any reader of KPC knows, we often credit Tyler Cowen ("LeBron") for his occasional, but always insightful, series of posts on "Markets in Everything." 

I have been accused of finding "Transaction Costs in Everything," so I might as well own that. My plan is to post at least weekly on this, and so have a collection of applications.

Prompted in part by this (accurate) comment from the LMM:

An example, then.

We had a piece of furniture, a bed frame actually, that we were going to throw away. But the LMM wondered if someone might want it. So she posted a "free, take it!" listing on NextDoor. 

Within half an hour, two people had said they wanted it. Instead of sending it to the dump, it was now actually going to be used by someone who needed it.

I was very excited by this, and of course launched off into my rambling: "Do you know WHY this happened, why someone will now use something we were going to throw away?"

LMM: "Well, it's not because of you...." (It is barely possible, as all my coauthors know, that I sometimes take credit for things I did not actually do, I'll admit that. So her response was not out of line...) 

MM: "Quite so. No, the answer is...." (LMM is staring at me, already mildly disgusted at the coming lengthy disquisition)

"transaction costs! Or rather the reduction in transaction costs. The small value of the thing we are giving away, an old bed frame, limits the amount of effort justified by finding someone who needs it. YOU would not have gone door to door, knocking and asking 'need a bed frame? need a bed frame?'  But you didn't have to. Because the transaction costs on both sides, announcing the availability of the free thing and finding a willing taker for the free thing, were reduced by a platform, the bed frame went to a higher valued use instead of the dump! The online platform helped us make better use for a bed platform! It's a triumph of cooperation in the new sharing economy!"

She's got that thousand yard stare at this point.

I continue, very excited: "Such an important, general insight! Why, I bet they'll put 'He's Reducing Transaction Costs in Heaven' on my tombstone!"

LMM (sotto voce): "Soon, I hope."

Per Capita

 SO many people just repeat the line about the US having the "most deaths from COVID," as evidence that Trump (but NOT the CDC, FDA, and other bureau-nebishes) "botched" the American "management" of  the pandemic. For example,  NPR's constant "America is the world leader in Coronavirus fatalities..."

I have some sympathy for that (except the absolving of the CDC, which was borderline criminally negligent; to be fair, NPR hammered the CDC) view. But it really does matter that the US is a very large country, with a large population. The more relevant consideration is deaths per 100,000, and by THAT measure the US is not even in the top 10 "most deaths." 

Took the data from the Johns Hopkins database, and then deleted all the tiny countries with fewer than 10,000 total deaths (there were MANY countries that had very high death rates per capita, but only a few hundred deaths total, which seems to put TOO MUCH emphasis on the per capita thing...)

The resulting table, deaths per capita as of June 1, 2021, for countries with at least 10,000 total deaths, is reproduced below.  And the results are interesting.

1. The US is not in the TOP TEN.

2. Countries with national health services, including the UK, Italy, and Belgium, have MORE deaths per capita than the US.

3. Sweden, which of course did the "no lockdowns" thing, has FAR fewer deaths per capita than the US. You can say Sweden had more deaths than Sweden WOULD have had, if they had locked down, but clearly locking down everything by force was not a panacea. 

Anyway, if you want to say that the US health authorities got a lot of things wrong, and never acknowledged that they made this much worse than it should have been, I'm with you. But the US is not even close to the "most deaths" if you use a reasonable measure that controls for total population size. 

 

 

 

 

Sam Peltzman Drops the Mic

 As you may recall from my NY Times a piece a few years ago, one has to recognize that the regulatory problem is not just parametric optimization. In my example, the problem was that football helmets, which are actually quite good at protecting the head, result in MORE head injuries. 

Interestingly, last year--2020--there were far fewer cars on the roads, because of social distancing, the shutdown of bars and restaurants, and the fact that many people did not commute to work at all. 

The result: MORE TRAFFIC DEATHS. People drove much more aggressively on the nearly empty roads. To be fair, the total number of accidents did in fact fall by quite a bit, as you would expect. But the severity of the accidents that did happen? That was up sharply, especially outside of cities. 

The point? Regulations have to take into account the likely response of citizens, based on expectations. You can't just twirl dials and pull levers when it comes to public policy. 

 (If you don't get the Peltzman reference....)

 

 

Conversations with Tyler

 People this is what I have to put up with! What follows below is verbatim.

TC:  Lonzo Ball really good! Pelicans could be decent if they make Zion the #3 option.

Angus: So far this year Lonzo is at 11 ppg, 4.6 assists, 2.3 turnovers. His PER is 10. Zion's is 24. Ingram 20. Lonzo is shooting 38.8 from the field, 30.1 from 3 and  58.3 on free throws. His career shooting numbers are about the same as that.  So, that's the opposite of good.

TC: You are like those people who do not wish to approve the AstraZeneca vaccine!

Angus: If he was 56% effective, I would definitely approve him.

TC: Just don't let anyone over 60 years of age watch him play.

Brown Paper Packages Tied Up in String

 

Most pleasing musical sounds:

1. Electric guitar with Alnico pickups played through a tube amp and a speaker with paper cone and alnico magnet.

2.Hammond B-3 organ

3. Fender Rhodes piano

4. Stradivarius Cello

5. Selmer Paris tenor Sax

I couldn't pick a guitar brand. I play a Reverend guitars East Ender (a tele-strat hybrid). But I have to admit there are a lot of great sounds coming from Gibson too. It's all about the downstream I think. Only 20 Strad cellos ever made, Yo Yo Ma plays one. Here it may be about the compositions for me. Bach's suites for solo cello are some of the very greatest things a human has ever created. Selmer-Paris was Stan Getz's axe.

F**K, Marry, Kill

 I'm really exhausted by this quixotic attempt at the elevation of (price) theory. As Boettke, Coyne and Leeson (2003) themselves point out, theory has evolved to the point where any proposition is provable, making good empirical work more important than ever.

Take the minimum wage for example. There's the basic supply and demand model that says one thing and there are monopsony and other models that say something else. IT'S AN EMPIRICAL QUESTION!

In the absence of experiments, modern methods that try to get at identifying causal effects are super-important.

If your theory is so right, you should be able to find empirical support in models using the best available methods for the problem.

None of this is to say that empirical work doesn't suffer from file drawer bias or p-hacking, or cannot be influenced by the ideology of the researcher. Of course it can. BUT SO CAN THEORY!!

I really feel like to be a scientist, you have to have at least some tiny part of your brain be willing to consider the possibility that your preferred theory may be wrong.

5 years ago I would have said that raising the minimum wage was a laughably horrible way to try and help people, but today I'm not so sure how bad it really is. Thanks to the research of Dube and company.

Smoking Hot Takes on Jan 6, 2021

 Three hot takes:

1.  The lack of security at the Capitol was clearly a tactic. I'm not sure the Capitol Police are really at fault, though of course in retrospect it was a really bad mistake. During the BLM marches on the mall, there were fully fitted out infantry/police, 2 or 3 deep, on the Capitol steps. On Jan 6, very few police, and not wearing riot gear. The thought must have been that it would be better not to have a show of force, to avoid provoking violence. 

The police had no way of knowing in advance that Trump was going to throw them under the bus, actually telling his supporters to go to the Capitol and (implicitly) mob it.

I do have a question about the counterfactual: Suppose there had been a substantial show of force, and the mob had attacked (more than a few of the rioters were armed). There would have been dozens of casualties, on both sides. Would that have been better?

For myself, the answer is yes. The symbol of the relatively easy takeover of the Capitol is very bad. But having 5 police and 20 rioters killed and wounded (say) would have been pretty bad also.

2.  DJT made a speech at the rally yesterday. He said that being "weak" was bad, and now was the time for strength. Having the Capitol stormed by a mob, almost without resistance, and having the cops be sprayed with mace and beaten up, and having people breaking into secure areas and the offices of elected officials, is NOT strength.

The only way to make that strength is if you care only about Trump, and hate the U.S.

3. We are lucky that Trump is lazy, incompetent, and shallow. With a competent leader, capable of planning, yesterday could have been an actual coup. Imagine that instead of firing up the mob and then being surprised (I think) that they did something, Trump had in fact led the March to the Capitol. Imagine that he had quietly coordinated that march with even one dissident tank battalion. With 50 tanks, that march could have actually occupied the Capitol and held the Congress hostage.

Instead, Trump went back to the WH to watch TV, like he always does, unless he's playing golf. That's not what Lenin, Stalin, Mussolini, Hussein, or Putin would have done. 

The best analogy is probably Mussolini's "March on Rome," where King Emmanuel likewise did not offer police or military opposition. It's very fortunate that Trump is not capable of carrying out a detailed plan. It could have been much, much worse, since it turns out that the Capitol was wide open for the taking.