Patrons at Cecil’s Jazz Club in West Orange, N.J., savored one of the last nights for smoking in bars and restaurants. (Photo: Marko Georgiev/The New York Times)
A journalist writing for the Financial Times complains that Britain’s indoor smoking ban has resulted in more pubs closing and a decline in beer sales of 10 percent.
I believe that smoking and beer drinking are complements for the average consumer, so he is no doubt correct that the decline in demand for beer has shifted the industry demand curve leftward and forced some pubs out of business. He views the whole effort as disastrous and notes that the absence of pubs, a focus of social life in small towns, will impose a negative externality through reduced feelings of community.
Perhaps, but he ignores the whole point of the laws: to remove the potentially severe negative externality produced by second-hand smoke. The net effect of such laws on economic welfare just isn’t clear, but it is poor analysis to ignore the main effect that has led countries to enact them.
Eric A. Morris is a researcher at U.C.L.A.’s Institute of Transportation Studies, concentrating on a variety of transportation issues including history, economics, and management. He weighed in here earlier on the gas tax. Here is his first of two posts on road tolls.
Why You’re Going to Love Paying to Drive on Roads That Used to Be Free
By Eric A. Morris
A Guest Post
To end the scourge of traffic congestion, Julius Caesar banned most carts from the streets of Rome during daylight hours. It didn’t work — traffic jams just shifted to dusk. Two thousand years later, we have put a man on the moon and developed garments infinitely more practical than the toga, but we seem little nearer to solving the congestion problem.
If you live in a city, particularly a large one, you probably need little convincing that traffic congestion is frustrating and wasteful. According to the Texas Transportation Institute, the average American urban traveler lost 38 hours, nearly one full work week, to congestion in 2005. And congestion is getting worse, not better; urban travelers in 1982 were delayed only 14 hours that year.
Americans want action, but unfortunately there aren’t too many great ideas about what that action might be. As Anthony Downs’s excellent book Still Stuck in Traffic: Coping With Peak-Hour Traffic Congestion chronicles, most of the proposed solutions are too difficult to implement, won’t work, or both. Read more…
The Times (of London) recently reported that “The F.B.I. has been forced to transfer agents from its counter-terrorism divisions to work on Bernard Madoff’s alleged $50 billion fraud scheme.”
This might lead you to ask an obvious counter-question: Has the anti-terror enforcement since 9/11 in the U.S. helped fuel the financial meltdown? That is, has the diversion of resources, personnel, and mindshare toward preventing future terrorist attacks — including, you’d have to say, the wars in Afghanistan and Iraq — contributed to a sloppy stewardship of the financial industry?
The Times (of New York) followed with an article by Eric Lichtblau that at least partially answered the question:
Federal officials are bringing far fewer prosecutions as a result of fraudulent stock schemes than they did eight years ago, according to new data, raising further questions about whether the Bush administration has been too lax in policing Wall Street.
One of the coolest things about posting at Freakonomics is the chance to be educated by your high-quality comments, which add to our posts and sometimes correct our mistakes.
But to be honest, every once in a while I have been depressed by the harsh general tone of criticism. (For example, the comments here got me down. To be specific, it’s not that commenters sometimes disagree with a post; it’s that they claim that the post is insufficiently related to Freakonomics-type thinking.)
Peter Ubel suggested that some of these comments may be the byproduct of Google Alerts and not come from regular readers of this blog. In an earlier post, I made a mistake in describing how often the open-source statistical software, R, is updated, and dozens of knowledgeable R users appropriately corrected me. I’m betting that most of these comments came from Google Alerts (plus indirect links on message boards). The Google Alerts comments are real comments, and as this example shows, they are often helpful comments. Read more…
Some of them, according to this New Yorker piece by Lizzie Widdicombe, are being sent in by Madoff victims to raise cash:
Back in midtown, business was brisk at the Madison Avenue headquarters of CIRCA, a jewelry-buying firm, where Madoff-related jewels had been incoming all month, like expensive shrapnel. “When Madoff hit, then we started to get the calls,” the firm’s C.E.O., Chris Del Gatto, said the other day in his office, which is decorated with polo paraphernalia. An older woman in Beverly Hills had mailed in a nine-carat diamond to sell, so that she could pay her expenses; the company had sent armored cars to retrieve two batches of family jewels from Chicago and Arizona. “If it’s high enough value, one of the services we provide is we’ll send Brinks,” Del Gatto said.
And some of them, according to this Washington Post report by William Branigin, are being sent out by Madoff himself, which is a no-no:
In a separate development in New York, federal prosecutors today charged that Madoff, who is currently under house arrest in his Manhattan apartment, violated conditions of his bail by mailing about $1 million worth of jewelry and other assets to relatives and friends. The prosecutors asked a judge to revoke Madoff’s $10 million bail and send him to jail. An attorney for Madoff argued that the mailings were done “innocently” and said his client is not a flight risk or a threat to the community. The judge said he would rule later on the matter.
Note to self: apply tomorrow for a job with the U.S.P.S. and keep on the lookout for more Madoff jewels.
As I was getting coffee in the faculty lounge, I started talking to a senior colleague who is nearing retirement. He said that he avoided a lot of the market pain of the last year because he had only about 25 percent of his savings in stock. (Now with the market drop, he has an even smaller percentage!) But his current concern is inflation.
As this killer graph from Paul Krugman shows, Ben Bernanke has been incredibly aggressive in expanding the money supply.
It is quite reasonable to be worried that the Fed will not be nimble enough to suck up this cash as the economy recovers. The banks and others are currently hoarding cash. But when they start to spend or invest it, the Fed will need to remove it by buying back assets (such as Treasury bonds), or we will have substantial inflation.
So here’s a puzzle: What should you do if you are retired or close to retirement and you are scared about the risk of inflation?
Holding stocks is often a way to hedge inflation — because dividends and stock prices rise with inflation. But at this stage in your life, you don’t want the risk of holding stock. Where should you invest at least some of your money to hedge the inflation risk?
This is not a hard puzzler; but if you’re having trouble, here’s a hint: Larry Summers. Read more…
Turkey fryers are fixtures at southern holiday parties. As I watched my friend’s husband gleefully fry his turkey in a big vat of boiling oil this Christmas, I became a bit concerned for his and my safety … and rightly so.
But Environmental Capital also notes that small-town mayors, among others, are increasingly grateful for the surplus of grease the fryers create — a valuable source of biofuels now that a regular grease supplier, school cafeterias, are cutting down on fried foods.
The American Economic Association meetings are taking place. There is a young economist whom I have never met, but who is doing some really interesting research. So I wrote him and asked if he wanted to get together over a beer to talk about his work. The first sentence of his response was:
I would really like to be very interested in meeting with you.
You don’t see that kind of honesty every day! Although the economist in question is not actually interested in meeting with me, he wishes he were.
Actually, he wrote back later saying it was a typo.
I would really like to be very believing that is true.
The C.B.O. has released a new report on effective tax rates (total taxes divided by total income). Compared with previous reports, it includes more information about thin slices at the top of the income distribution.
I typed this from 10,000 feet, while on my way to the annual econ gabfest known as the ASSA meetings. I was lucky enough to score an upgrade to first class, and as I settled into my seat I was informed about the most astonishing cost-cutting measure: U.S. Airways has taken the coat hangers out of its planes.
Arriving uncrumpled used to be one of the few perks for those at the front of the plane, but now the racks behind seat 4B sit unemployed. It can’t be that these hangers had much value on the secondary market, and the number of flight attendants hasn’t changed, so I can only guess that the cost reductions come from the fuel savings that come from carrying a few less ounces. (How big could these be?)
Turning from comic strips to a weightier arena, I would welcome suggestions of notable quotations from United States Supreme Court decisions of recent years. Are there any worthy successors to the eloquent justices of the past, such as Oliver Wendell Holmes Jr. and Robert H. Jackson?
In recent years, the federal government has taken various actions to make it harder to bet on sports over the internet.
That’s lucky for me, because when I used to bet on football, one of the key pieces of information I used was whether or not a team was a home underdog. For whatever reason, bettors don’t like to bet on home underdogs.
Recognizing this, bookies shade the point spreads toward the home underdogs. Because of the bettor bias, the bookies can set spreads so that home underdogs cover the spread more than half the time, but attract less than half the betting dollars. According to my estimates, home underdogs covered the spread almost 54 percent of the time over a 20-year period, but they still only attracted about 40 percent of the betting dollars in those games. As a consequence, these games are extremely profitable for the bookies: most of the money goes on the visiting favorite, who manages to cover the spread only 46 percent of the time. (For more on this, see an academic article I wrote on the subject.)
Even after I published that paper, the home-underdog bias remained alive and well. I nearly won an 800-person handicapping contest doing little more than picking home underdogs. Read more…
In a New York Times Op-Ed on Saturday, Sonja Lyubomirsky wrote that subjective well-being has remained high during the recession. But she’s dead wrong.
Research in psychology and economics suggests that when only your salary is cut, or when only you make a foolish investment, or when only you lose your job, you become considerably less satisfied with your life. But when everyone from autoworkers to Wall Street financiers becomes worse off, your life satisfaction remains pretty much the same …
So in a world in which just about all of us have seen our retirement savings and home values plummet, it’s no wonder that we all feel surprisingly O.K.
Unfortunately the claim she’s making — that we’re all O.K., thank you very much — isn’t one for theory, it is a factual claim. Read more…
Sorry, moms: it turns out that reading in low light won’t make you go blind; going hatless in the winter won’t make you freeze to death; and you could eat poinsettias all day and not be poisoned.
All this holiday medical myth-busting and more is courtesy of our somber friends at the British Medical Journal (part one and part two).
Of course, you probably didn’t need the British Medical Journal to tell you that — a quick Google search would have popped the bubble on each of the three myths we mentioned.
The internet may be good at slaying old myths. But if myths can spread like viruses, do they also respond under the pressures of natural selection by evolving?
Patrons at Cecil’s Jazz Club in West Orange, N.J., savored one of the last nights for smoking in bars and restaurants. (Photo: Marko Georgiev/The New York Times)
