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...

Gas Gouging!

Great video.  There's nothing complicated here.  We prevent markets from working, by restricting price.  And then we blame markets for failing, because at that price there's a shortage.  Amazing.

 

Contagion Meme: Is Mental Health/Disease Communicable?

Social contagion of mental health: Evidence from college roommates

Daniel Eisenberg et al.
Health Economics, forthcoming

Abstract: From a policy standpoint, the spread of health conditions in social networks is important to quantify, because it implies externalities and possible market failures in the consumption of health interventions. Recent studies conclude that happiness and depression may be highly contagious across social ties. The results may be biased, however, because of selection and common shocks. We provide unbiased estimates by using exogenous variation from college roommate assignments. Our findings are consistent with no significant overall contagion of mental health and no more than small contagion effects for specific mental health measures, with no evidence for happiness contagion and modest evidence for anxiety and depression contagion. The weakness of the contagion effects cannot be explained by avoidance of roommates with poor mental health or by generally low social contact among roommates. We also find that similarity of baseline mental health predicts the closeness of roommate relationships, which highlights the potential for selection biases in studies of peer effects that do not have a clearly exogenous source of variation. Overall, our results suggest that mental health contagion is lower, or at least more context specific, than implied by the recent studies in the medical literature.

I don't know about this "contagion" thing.  First murder, now mental health?  Phone call for Jonny Anomaly...

UPDATE:  John Thacker's comment is what I meant.  Jonny Anomaly is working on just that problem.

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.

What Money Can't Buy, Because It's Illegal to Buy

John Goodman has a nice piece on markets and on stuff we don't like, though we can't explain why.

Some people on the left have an aversion to money, as reflected a lengthy list of goods and services they don’t think should be exchanged for money. Some people on the right have an aversion to unconventional sex and recreational drugs.

You might think that these two groups of people are very different. Certainly there is a difference in the activities that they abhor. Beyond that, they have something in common: a visceral desire to outlaw activities that disgust them.

I would only note that the term “moral” is often a thinly disguised attempt to erect a cloak of ethical justification around what people really want to do: outlaw behavior they don’t like.

Nod to Angry Alex

Bad Analogies Cause Even Worse Science

Homicide as Infectious Disease: Using Public Health Methods to Investigate the Diffusion of Homicide

April Zeoli et al.
Justice Quarterly, forthcoming

Abstract: This study examined the spatial and temporal movement of homicide in Newark, New Jersey from January 1982 through September 2008. We hypothesized that homicide would diffuse in a similar process to an infectious disease with firearms and gangs operating as the infectious agents. A total of 2,366 homicide incidents were analyzed using SaTScan v.9.0, a cluster detection software. The results revealed spatio-temporal patterns of expansion diffusion: overall, firearm and gang homicide clusters in Newark evolved from a common area in the center of the city and spread southward and westward over the course of two decades. This pattern of movement has implications in regards to the susceptibility of populations to homicide, particularly because northern and eastern Newark remained largely immune to homicide clusters. The theoretical and practical implications of the findings, as well as recommendations for future research, are discussed.

Suppose murder were like a rutabaga.  Then, it would be mostly dirty and underground, with a green leafy top.  And you could stop murder with herbicide.  If murder were like a rutabaga, that is.  It's not.  But then it's also not an infectious disease.  As Röyksopp  put it, "brave men tell the truth; the wise man's tools are analogies and puzzles."

Nod to Kevin Lewis

Fenton!

It has happened to every dog owner.

It happened to us here in the woods.  Hobo saw a deer and was gone in 30 seconds.  He was gone for almost a day, coming back all bedraggled.

But, could have been worse. He could have done it in a park in London, and I could have been caught on video, yelling at him.

Thanks to Richard S. 

Poor Little Rich Kids

Is Growing Up Affluent Risky for Adolescents or Is the Problem Growing Up inan Affluent Neighborhood?

Terese Lund & Eric Dearing, Journal of Research on Adolescence, forthcoming

Abstract:  Community studies indicating that affluence has social-emotional consequences for youth have conflated family and neighborhood wealth. We examined adolescent boys' delinquency and adolescent girls' anxiety-depression as a function of family, neighborhood, and cumulative affluence in a sample that is primarily of European–American descent, but geographically and economically diverse (N = 1,364). Boys in affluent neighborhoods reported higher levels of delinquency and girls in affluent neighborhoods reported higher levels of anxiety-depression compared with youth in middle-class neighborhoods. Neither family affluence nor cumulative affluence, however, placed boys or girls at risk in these domains. Indeed, boys' delinquency and girls' anxiety-depression levels were lowest for those in affluent families living in middle-class neighborhoods.

After the Zombie Apocalypse: Estate Tax Implications

While members of our do-nothing Congress bicker, we are faced with a real problem:  What are the estate tax implications of the zombie apocalypse?

I mean, are they dead, or undead?  Do lost body parts count as "partially included assets," or something else?  And how do you figure the unified credit if I blow up my zombie uncle's head, and then get the gold teeth?  Are those heritable, or are they gifts?  The IRS has no answers.  And you can't very well ask your accountant, if he looks like this:

But Professor Chodorow has answers.

With thanks to the LMM, who doens't really like zombies very much.

Save the Balls!

The "save our balls" campaign from Bucky Balls.  Those little magnetic balls, you know.

Are we really going to outlaw everything in the world that's poison, or small?  If so, Harry Reid's brain will be outlawed, on both counts.

Nod to Anonyman

 

Lockhart's Lament

Raoul sends this nice bit.  It contains a link to "Lockhart's Lament," which is worth reading at length.  You have likely read it before (I did), but it rewards new study.

Background from Keith Devlin:

Lockhart is a mathematics teacher at Saint Ann's School in Brooklyn, New York. He became interested in mathematics when he was about 14 (outside of the school math class, he points out) and read voraciously, becoming especially interested in analytic number theory. He dropped out of college after one semester to devote himself to math, supporting himself by working as a computer programmer and as an elementary school teacher. Eventually he started working with Ernst Strauss at UCLA, and the two published a few papers together. Strauss introduced him to Paul Erdos, and they somehow arranged it so that he became a graduate student there. He ended up getting a Ph.D. from Columbia in 1990, and went on to be a fellow at MSRI and an assistant professor at Brown. He also taught at UC Santa Cruz. His main research interests were, and are, automorphic forms and Diophantine geometry.

After several years teaching university mathematics, Paul eventually tired of it and decided he wanted to get back to teaching children. He secured a position at Saint Ann's School, where he says "I have happily been subversively teaching mathematics (the real thing) since 2000."

He teaches all grade levels at Saint Ann's (K-12), and says he is especially interested in bringing a mathematician's point of view to very young children. "I want them to understand that there is a playground in their minds and that that is where mathematics happens. So far I have met with tremendous enthusiasm among the parents and kids, less so among the mid-level administrators," he wrote in an email to me. Now where have I heard that kind of thing before? But enough of my words.

Will Sean Penn finally settle the War of the Pacific?

Word is out that, among other things, Evo Morales has asked Sean Penn to reverse the outcome of the War of the Pacific and get Chile to give Bolivia back its coastline!

Is Evo is just enjoying the chance to humiliate Penn?

Is Evo so naive as to think Penn can get national boundaries changed?

Is Penn so arrogant that he led Evo to believe that Penn can get national boundaries changed?

By the way, did you know that the War of the Pacific was fought over poop? It's true!

Zombie Apocalypse

As Angry Alex points out, "Best. Military. Exercise. Ever."

Zombie Apocalypse.

A VIP and his personal detail are trapped in a village, surrounded by zombies when a bomb explodes. The VIP is wounded and his team must move through the town while dodging bullets and shooting back at the invading zombies. At one point, some members of the team are bit by zombies and must be taken to a field medical facility for decontamination and treatment.

"No one knows what the zombies will do in our scenario, but quite frankly no one knows what a terrorist will do," Barker said. "If a law enforcement officer sees a zombie and says, `Freeze, get your hands in the air!' What's the zombie going to do? He's going to moan at you. If someone on PCP or some other psychotic drug is told that, the truth is he's not going to react to you."

The keynote speaker beforehand will be a retired top spook-- former CIA Director Michael Hayden.

"No doubt when a zombie apocalypse occurs, it's going to be a federal incident, so we're making it happen," Barker said. Since word got out about the exercise, they've had calls from "every whack job in the world" about whether the U.S. government is really preparing for a zombie event.

Called "Zombie Apocalypse," the exercise follows the federal Centers for Disease Control and Prevention's campaign launched last year that urged Americans to get ready for a zombie apocalypse, as part of a catchy, public health message about the importance of emergency preparedness.

If you want to stock up on your own...

Happy All Hallows Eve!

Grand Game: Broken Window / Hurricane Edition

I actually put off blogging this.  'Cause I could not believe the author--an "economist," and a "widely published" one at that, was serious.  Had to be hoax.  But then I thought about two words, and realized that it may be absurd, but it is not a hoax.  The words, of course, were "Paul. Krugman."
(And, speaking of cheap copies, check this out.  Amazing.)

So, Grand Game it up, folks.  This is a target rich environment.  If the author were correct, of course, then North Korea and Cuba would be the wealthiest nations on earth.

The article  An excerpt (it was hard to pick just one):

When government authorities facilitate rebuilding quickly and effectively, the process of economic renewal, in many tangible ways, can leave communities better off than before.

Factoring in the multiplier effect of $15-$20 billion spent rebuilding yields an economic benefit from reconstruction of about $27-$36 billion.

Ugly Baby? Perhaps Wife Had Plastic Surgery!

A man from northern China who divorced and sued his wife earlier this year for being ugly has recently won the lawsuit, according to a report from PlanetIvy.com.

Jian Feng said his issues with his wife’s looks only began after the couple’s daughter was born.  Feng was appalled by the child’s appearance, calling her “incredibly ugly” and saying she resembled neither one of her parents.

With that being the case, Feng initially accused his wife of cheating.  It was at that point that his wife, who has not been named, came forward saying she had spent $100,000 on intense plastic surgeries to drastically change her appearance before she met Feng.  She never told Feng about those surgeries.

When Feng found out about the procedures, he filed the lawsuit. He said the woman convinced him to marry her under false pretenses.

A judge agreed, awarding Feng $120,000.

With thanks to the LMM.  And of course all our babies were beautiful.

Monday's Child is full of LINKS!

1.  Is flopping an example of rent-seeking?

2.  The 10 most expensive books by HG Wells

3.  The CATO Governor report.  Mary Fallin got a "B" and Bev Perdue got a "C."

4.  Hitler Finds Out Gangnam Style

5.  Institutionalized cronyism

Caption Contest!

A KPC caption contest.  Saw this at UNC-Charlotte, where I was visiting DoL Co-blogger Craig Depken.

The box has dirt in it.  And a bunch of text about how great plants are, and how this "Green Screen" will help save the environment.  I had to take a picture.  It captures pretty much everything I know about the "green" movement... Solyndra in a flower box!

click for an even more unwatered and pointless image

Her First Obama Ad... A "Girl" Never Forgets

With a nod to Angry Alex

I'll have what he's having

People, did you know that pandas LOVE cinnamon?

Me neither.

But it's true and I've got the proof:




Context here.

Education: News From the Front

"As consumers wise up about education spending, for-profit colleges are getting schooled. Institutions such as Apollo Group Inc.'s University of Phoenix, DeVry Inc. and Washington Post Co.'s Kaplan — who only a few years ago reported double-digit student gains on a regular basis and posted hundreds of millions in profits — now are hemorrhaging students." [WSJ]

----------------------

"'Our classes are basically completely filled, they're 100% full. And it's maddening for us because we pride ourselves on access,' says [Santa Monica College] president Chui Tsang. Desperate to widen access, last spring he came up with a programme he called Advance Your Dreams. Tsang's plan would enable students to pay up to 400% more for a guaranteed seat in a class, and the money generated would have allowed extra classes to be arranged." [BBC]

----------------------

"What is more surprising — because no one else has looked at this question lately anywhere in the country — is that the laid-off people around Janesville who went to Blackhawk [Technical College] are faring worse than their laid-off neighbors who did not. We discovered this striking fact by comparing the dislocated workers who retrained with a larger group of about 28,000 residents, from the two counties where most Blackhawk students live, who had collected unemployment benefits recently and not gone to the college. For one thing, the people who didn’t retrain are working more. About half of them had wages every season of the year, compared with about one in three who went to Blackhawk. An even bigger gap exists in how much those who have jobs are earning. Before the recession, we found, the two groups – the dislocated workers who went to school and the ones who didn’t – were, on average, getting paid about the same. Afterwards, the ones who didn’t retrain are earning more. Their pay has fallen by just 8 percent – about one-fourth the size of the pay drop among the people who went to school." [Amy Goldstein, ProPublica]

How to interpret?  Sounds like the market is working its magic, and fraudulent for-profit schools are getting what they deserve.  It just makes sense to charge more for new access, and people who doubt that care more about fairness than they care about people.  And the only thing that Obama and Romney agree on, is wrong.  Happy Monday!

Nod to Kevin Lewis

Robert knows best

Robert Frank's latest NY Times piece is amazing in its incredibly low ratio of facts to opinion.

When do low tax rates hurt the rich? When Bob Frank says so, buddy.

Let's break down some of the questionable and unsubstantiated claims.

First is the axiom that money buys national political outcomes. That rich donors have bought low tax rates and deregulation. Frank cannot conceive of the idea that low tax rates and deregulation might actually be popular policies with a wide swath of the population! Nor does he present any evidence that money buys outcomes. Perhaps that's because there is little to no evidence that it does.

Next is the bizarre idea that budget deficits reduce the "quantity and quality of public services". Actually, given a level of revenue, budget deficits INCREASE the quantity of public services above what could be purchased without the deficit.  Budget deficits are the buffer that keep government purchases from falling one to one with declines in revenue.

Now consider Frank's notion that taxes on the wealthy are currently so low that we cannot have paved roads and safe bridges. In FY 2012, we spent $287 billion on transportation (Federal State and Local combined). Total government spending is running over $5.6 trillion dollars in 2012.  There is plenty of money for basic public services and infrastructure. At current tax levels, the rich can have their Bentleys and paved roads to drive them on. It's hard to believe that the rich are both so powerful they can dictate their tax rates but so un-powerful that they can't influence where the money is spent.

There's much more, but I'll leave that for you people.

What the fudge?

Mrs. Angus took a picture of me last night after I heard about the Harden trade:

I have since calmed down a bit, and am actually OK with the deal.

Durant, Westbrook, Perkins & Ibaka all left money on the table to sign contract extensions with the Thunder. OKC was offering James $54 million over 4 years and asking him to take about a $4.5 million discount over the life of the contract.

He wouldn't.

The Thunder got a lot in return. A high lottery pick either this year or next, another first round pick, a proven scorer to come off the bench in Kevin Martin, and a potentially solid rookie in Jeremy Lamb.

I would like to think that if I was going to be making $13 million a year, I would give up an extra $1.2 million per year to stay on a championship caliber team instead of being tossed into a bare cupboard and getting "coached" by Kevin McHale.

But James Harden wouldn't and who knows, maybe I wouldn't either.

I know the team could have kept Harden this year and seen what developed, but that is apparently just not the Thunder way (see Jeff Green), and it is not clear how Harden would have reacted to being in limbo for the season.

The funniest reaction I've seen to the trade is this bit of genius from Matt Yglesias. Russell Westbrook  was second team all NBA for the second year in a row, and is just getting better and better overall and at playing the point. James Harden is a shooting guard, the easiest thing to find in the NBA.

Guide to Candy Trading

For you young economists out there (and for the Dub MOE, who takes candy from children)... The Guide to Candy Trading


Thanks to Eddie M.

Links

I'm in Montreal, for an ILS conference.  Pretty cold, but darned pretty.

Some links:

1.  KPC pal Zach Weiner sends this, thinking I might like it.  Zach is, in this as in all things, correct.  Me gusta.  Extrapolation rulz, kids.  For all you people who are guessing when China will overtake the US.... required reading.

2.  If this is the standard, all government economists should just quit, like these folks did.  Thanks to the LMM.

3.  Camille Paglia is great.  Sneering and genius need to be explored.

4.  The sex lives of conjoined twins.  Thanks to Angry Alex.

5.  Ouch.  Even worse than "too shallow" for a pool.  Thanks to Tommy the Tenured Brit.