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.

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....)

 

 

A Dog Post....For Shirley!

A post for frequent reader Shirley in Westerly, RI.  We figured she would enjoy it for two reasons.


First, some cute and smart dogs. Always a winner.

But second, and much more importantly, note that this "smart" dog NEVER makes....

A left turn!

Just like Shirley...

Stupid Is as Stupid Does

Pick your favorite stupid part of this act....

Several obvious possibilities:

A.  There were skid marks UNDER the ice.  A mystery that would require Sherlock Holmes to figure out....not.

B.  The guy already had his shirt off, in case he was going to be on C*O*P*S.  In spite of the 15 degree F wind chill.  So, the only thing he actually planned was the shirt-off thing.

C.  They kept the buckets in the back seat of the other car.

D.  The friend, who showed up later, was ALSO drunk and was also charged with drunk driving.

E.  The artificial black ice could quite possibly have caused another car to run into the guy who had faked the accident.  Perhaps it wasn't C*O*P*S, but a Darwin Award, that he was going for all along.

F.  For reasons that escape, women seem to LIKE this kind of guy (hey, he was creative, and he had a BMW until he wrecked it, faked an accident, and had to go to jail!).  So maybe it's not even a Darwin Award, but a highly effective redneck mating dance.  Leaving me to draw the conclusion that, once again, women are the very hardest thing to understand or explain.

Glass Test Dummy...

This is pretty rough.

I wonder if

1.  Those are full 7.62 x 39 mm, 123 gr AK shells.  That's a pretty high energy round to "test" with a live human
2.  The fact that the windshield is at quite an angle helps.  I know it helps, but I wonder if those same shells would still bounce off if their direction of travel were 90 degrees compared to the windshield surface.

Freedom of Sale

You can have stickers on your car.  Bumper stickers, etc.

In Alexandria, VA (and elsewhere), you can NOT have a "For Sale" sign sticker, though.

Or, can you?  One case.

Another case.

Cool quote: “I can put a bumper sticker on my vehicle about my religious views and moral views,” said McLean, 35 and a lawyer. “Those pocketbook issues are just as important. For me, free speech doesn’t have any qualifiers.” 

Last week, McLean and the foundation filed a lawsuit against the Alexandria government, calling the city’s decades-old no-sale-sign statute an arbitrary ban on commercial speech that violates the First Amendment. “We need the court to formally recognize the importance of the right to advertise and the ability to earn a living,” attorney Christina Martin said. “Free speech is essential to free enterprise.” 

The foundation made a video about the case and also produced a podcast, noting that the streets of Alexandria — and elsewhere — are full of commercial vehicles that offer goods and services for sale. 

With thanks to Chug.  His own letter of response, to Alan Gura:

Too bad we can't make the City refund all the charges (fines and other costs) paid by all the people who received those unconstitutional tickets over the last half century. 

And I have my doubts that the City would eventually get around to repealing the ordinance unless they had gotten some push back. It's depressing to think how many allegedly educated people, not to mention lawyers, dealt with that ordinance over the last 50-plus years and no one questioned it. 

 It is the multitude of idiotic things like this that gradually turned me in to a libertarian.   

Thunder Roared

To paraphrase the old kids' doggerel:

Thunder roared, lightning flashed.
Tree fell, car got smashed.

They come to take away the Lincoln today.  It was a fine car.  We had just put new tires and suspension on the thing, within the past year.  Which, unfortunately, cost more than the total blue book value of the car.  Still, it only had 120k miles on it, and those Town Cars last double that, at least on the drive train.  So we were in for the long haul.

Now, it's a short haul, to the dump.  The LMM pays her last respects.  Note the murder weapon, sawed up into fireplace-sized bites, in the background.

Headline Meme

Both the meme and the mystery:  Man Crashes into Conn. Gas Station, Steals Banana.

Good example of the meme because once you have read the headline you are pretty much finished with the story.

EXCEPT for the mystery.  If the guy was high...a banana?  If I needed munchies bad enough to crash my car into a gas station, I'd be going for the Ho-Hos, Snickers, and Doritos.  If he was just really drunk...why stick around, rather than panic?  And if he was a marathon runner, lost on his way to the start...Actually, that explains it, never mind.

Nod to the LMM.

Banning Competition

Hayek had this right, and people forget how often the point is illustrated by those we call "conservatives":


There is some justification at least in the taunt that many of the pretending defenders of “free enterprise” are in fact defenders of privileges and advocates of government activity in their favor rather than opponents of all privileges. In principle the industrial protectionism and government-supported cartels and agricultural policies of the conservative groups are not different from the proposals for a more far-reaching direction of economic life sponsored by the socialists. - F.A. Hayek, page 107 , Individualism and Economic Order 

A beautiful example, just beautiful:  good ol' North Carolina may outlaw car companies that try to sell cars directly to customers.  The whole "support your local (car) dealer" thing is interesting.  But this takes it to a whole new level.  Russ and I talked about some of these issues a while back.

Nod to Marc B, who is going to lose his lefty label if he's not careful.
UPDATE:  Marc B., demonstrating he has gone round the bend, sends this photo:

Dr. Evil exists.  In the heart of every Democrat and Republican ever elected anywhere to any legislature.  It just makes so much sense, doesn't it?  Charging all those low prices for high quality stuff?  It's MEAN, that's what it is.  And it must be stopped, before it costs us more jobs.

Headline Meme

Headline that pretty much says it all:

Naked women cause traffic jam in Charlotte.

I bet so.  Nod to the LMM.

Speedometers: Immoral?

It appears that people like to have speedometers that, like the amps for Spinal Tap, go all the way to 11.   The story.

Okay, in this case it's a little different, because Spinal Tap really could turn up the amp all the way.  But there is NO way that a Corolla is going to do 160.

This may be silly.  Fine, in fact it is silly.  But should the government regulate it?  And is this the reason government should regulate it?  It's IMMORAL?

The rising speedometer numbers aren't surprising to Joan Claybrook, the top federal auto safety regulator under President Jimmy Carter. She's been fighting the escalation for years and says it encourages drivers _ especially younger ones _ to drive too fast. During her tenure, she briefly got speedometer numbers lowered.

"They think that speed sells," she said of automakers. "People buy these cars because they want to go fast." ...For years, most speedometers topped out at 120 _ even though that was 50 mph over the limit in most states. Then, in 1980, Claybrook, who ran the National Highway Traffic Safety Administration, limited speedometers to 85 mph, even though cars could go much faster.

The move, designed to end the temptation to push cars to their limits, drew outrage from gearheads nationwide. Some automakers got around the rule by ending the numbers at 85 but leaving lines beyond that to show higher speeds. The government also forced automakers to highlight 55 mph, which at the time was the fuel-saving national speed limit.

The limit was short-lived, overturned two years later by President Ronald Reagan, who campaigned on a pledge to end onerous government regulations. Cars with 85 mph speedometers lingered for several years until they were redesigned and the maximum speeds for most returned to 120.

By the 2000s, however, the speedometer speeds crept higher. Even compact cars showed 130 or 140 mph. The 2014 Chevrolet Corvette speedometer and some Jaguar models now peak at 200.

Claybrook concedes there's no data to show the 85 mph limit saved lives, but she believes it did. She calls the ever-higher speedometer numbers "immoral."

 Lagniappe:  "The fuel-saving national speed limit"?  The fuel-saving limit would be zero.  Further, there is only one resource we can't get more off:  time.  Fuel we can work around, get more of, etc.  The 55 speed limit was a "time-wasting national speed limit."

A New Mandatory "Option": An Interlock System for Alcohol

From Big Brother motors!  You'll like it.  And if you don't like it, you'll have to buy it anyway.  Even though the touchscreen monitor you ALSO have as an option is more of a danger.

Audio Resources on the Econ of Car Dealerships

The economics of car dealerships is interesting.  Some time ago, RR and I did this podcast on the subject, and found a bunch of questions we really couldn't answer.

NPR Planet Money just did a piece, where we hear from the car dealers themselves.  The central question is, "Why do we have a system of pricing and bargaining that consumers hate?  I mean, actually hate?"

Nod to Kyle R.

Shut Up and Deal

Interesting example of transactions costs economics, and the "hold up" problem.  It is a generic problem, but auto dealers are a particularly important bargaining setting, because the stakes are high and both sides have power. 

The recent scoop:

If a manufacturer expects substantial regional sales growth, it can survey its local dealerships and then dictate that they expand their operations—showroom, service facilities, lots, everything—to meet the projected volume. The dealer might be less optimistic and reluctant to fork over the millions required to inflate his business by 50 or 100 percent. If, however, he is unco­operative, the factory might add another franchise nearby that will cut into his existing sales. If state laws prohibit that, the manufacturer can cut a portion of the dealer’s margins, relying on a clause in the franchise agreement that specifies the size of the dealership required by each market area. “Market area” being a somewhat nebulous concept, there is much room for disagreement. Additionally, factories have been known to get twitchy when their dealers own another store peddling a brand deemed undesirable or overly competitive, even if the second franchise is housed in a different building. It’s technically illegal for a manufacturer to do so, but adding a brand that the carmaker doesn’t like might trigger a clause in the franchise agreement that cuts a dealer’s margins. One dealer told us that the clause cost him $25,000 to $40,000 a month—enough to motivate him to sell the offending store.

ATSRTWT

Nod to WH

More Russian Drivers

David Skarbek sends this video, on the "Crazy Russian Drivers" meme.  I started not to put it up, because it's pretty horrible.  But the cows appear to get up in pretty good shape.  The driver.... hard to say.

 

Planning

Got this email from a colleague at another university

I continue to be impressed by the crosswalk situation on University Avenue by A_____ Hall. Top down planning dictated that a crosswalk be emphasized with a prominent sign that cars yield for pedestrians. It is like California in the extreme. A pedestrian steps off the curb and cars screech to a halt as far as the eye can see. It is often difficult for cars to move down University Avenue without many starts and stops. Sometimes a single pedestrian holds up 20 to 50 cars or more.

Prior to the prominent sign and crosswalk we had a bottom-up system of pedestrian crossing and car movement along University.  This was the case for decades. Pedestrians moved in and out among the cars and the cars moved in and out among the pedestrians.  It was seamless as each pedestrian and each driver looked out for the other. Pedestrians did not want to be hit by the cars and the drivers did not want to hit the pedestrians. As far as I know there were almost no accidents, certainly less than what we must have today with all the starting and stopping of automobiles.  Not to mention the environmental costs and car wear and tear.  It was a perfect example of how an emergent system ordered human activity far better than the top-down planner.

Q:  but doesn't someone have to be in CHARGE?

A:  No.

Too Many Deer

Too many deer!  NC allows hunters to take SIX deer, and four have to be non-antlered.  We are trying to hold down the population, here.

Article on the dangers of too little hunting.  If I don't harvest the deer, and respectfully put the results into my freezer, Bambi's momma is going to be coming through your windshield at 45 mph.

I'll be taking the Mauser K-98 out to the property this weekend.  Because I am such a public-spirited fellow. Gamebill went out last weekend, and saw some deer, but couldn't take a clean shot.  I imagine Joel will be out there with me this weekend.

Scarcity is the Problem. Price Rationing is One Answer

So, I've been getting quite a few incredulous, scornful, and even insulting emails from folks who object to the idea that prices should be allowed to rise to "solve" the gas problems in the northeastern U.S.  The majority of my argument has been to claim that price will (1) induce people to buy less, thereby leaving some for everyone else, instead of the first few people in line getting all of it at an artificially low price; and (2) induce other people to find ways to supply more, by  renting generators and rushing gas to the stricken area.

Obviously, I think this argument is persuasive, and even sufficient.

Suppose, though, that you aren't convinced.  And a lot of you aren't convinced (I'm thinking of YOU, Hutter!)  Let's do this your way.

More after the jump...

Price Gouging as a Rationing Device: Sandy Edition

Zoe Chace did a nice job with this, I thought.  I wish she would have given a little more of my explanation, but the stories are good.  She gets it.

Why?

Why is this a car commercial?


Oh, and to Tommy the Tenured Brit:  You're quite welcome.

A nod to Angry Alex, who is Confused Alex for the purposes of the above.