Back when blog posts were composed with reed styluses on clay tablets, I put up a couple of posts (here and here) on fuel subsidies in the developing world. These are generally 1) fiscally ruinous; 2) terrible for the environment and traffic congestion; 3) highly regressive with regard to wealth distribution; and 4) market-distorting by artificially promoting fuel-guzzling industries. So I made the case that this is a pretty foolish public policy, in fact one of the worst I can think of. It’s up there with tobacco subsidies, the Concorde, pretty much everything the North Korean government has ever done, and our government’s failure in spending a paltry $615,000 taxpayer dollars for UC Santa Cruz students to digitize priceless Grateful Dead photographs, t-shirts and concert tickets.
Given the problems with fuel subsidies, I promised a third post on what to do to eliminate them. But since I have a day job, and being a professor is much more difficult than it looked when I was undergrad, I’ve procrastinated on putting this last post up. However, engineering student Kishore from India wrote asking where part three is, and customer satisfaction is a goal here at Freakonomics. Besides, no doubt governments around the world have been waiting impatiently for my post before they start dismantling their fuel subsidies, so here it is.
Given the damning case against fuel subsidies, and a rising swell of opinion that they are counterproductive on many levels, why don’t these policies go away? The IMF (see this) and I offer several reasons: Read More »
Between the N.S.A./Merkel mess and the ObamaCare mess, it seems a good time to ask a question we’ve asked in the past: just how much does the President of the United States really matter? Our original podcast on the topic came out in 2010; we overhauled the episode in 2012, adding interviews with Donald Rumsfeld and Austan Goolsbee.
As Jon Stewart puts it so well in the video below, if the President is out of the loop on Merkel eavesdropping and his namesake healthcare law, just what loops is he in? I do not mean to cast aspersions on President Obama himself (although you are free to cast away). I mean to highlight the possibility that we assign way too much weight to the role of the President generally.
What are the odds that you agree with my argument? Who knows. What are the odds that, even if you do agree, you will disagree once it’s time to elect the next President, and we get caught up once again in our Great Man Theory of Voting? Read More »
University of Arizona economist Price Fishback, who has been on this blog before, is one of the leading scholars of the economics of the New Deal. He has a great new set of insights to share on the U.S. mortgage mess. He’s also the co-author of the forthcoming book Well Worth Saving: How the New Deal Safeguarded Home Ownership, with Jonathan Rose and Kenneth Snowden.
The Folly of Eminent Domain Takings of Failing Mortgage Loans
By Price Fishback
Several cities around the country are considering using eminent domain to take control of troubled mortgages in their cities. An Associated Press example of how the proposal will work calls for the city to use eminent domain to force the lender to accept $150,000 for a $300,000 mortgage on a home that has a current market value of $200,000. The city would then refinance the loan while cutting the principal owed by the borrower to $190,000.
Eminent domain requires a public purpose for the taking of an asset. The public purpose claimed here is that property values and property tax revenues can be boosted by preventing a mass of foreclosure sales. Real estate studies do show that increasing numbers of foreclosure sales are associated with lower housing values in nearby neighborhoods. However, the spillover benefits of preventing foreclosures, tend to be focused on houses in nearby neighborhoods. Read More »
At the Queen Victoria Market, an immense city-run collection of stalls and shops in Melbourne, Australia, a fishmonger at a prime corner is paying $5,500 per month to the City to operate there. Since other fishmongers pay less, much of this payment is economic rent — payment for the visibility/access at this corner. But is the City extracting all the rent, or is it giving the fishmonger a good deal?
This fishmonger has been in business at this location for a very long time. That fact suggests that at most the City is not overcharging him, and perhaps it isn’t even extracting all the rent. Whenever many public lessees in competitive businesses stay in business a long time, the public agency is probably granting them excess profits — at the public’s expense.
Ray Fisman and Tim Sullivan use the example of New York City’s surprisingly efficient passport office to explore an interesting question: “Why do some government offices perform well and others poorly, even when they’re providing the same services and working with comparable resources?” Fisman and Sullivan think it’s all about the management:
There’s an emerging body of research that chalks up these productivity gaps to the all-too-human ways that different companies (and divisions within a single organization) are managed. The fact that management matters—a lot—shouldn’t come as a shock to anyone who has ever worked under a good manager and also a bad one: Good managers coach, listen, support, and make their employees feel like they’re making progress. Bad ones don’t—often in uniquely horrible ways. And if this is true at for-profit companies, why wouldn’t it be true for branches of the government?
At the Hudson Street New York Passport Office, the management is Michael Hoffman: Read More »
Our latest podcast is called “Government Employees Gone Wild.” (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post. You can also read the transcript below; it includes credits for the music you’ll hear in the episode.)
It’s about a book that I’ve come to love — a most unusual book. What makes it unusual?
1. It is made available online, as a Word document, but is not actually published.
2. It is free (or, more accurately, it’s already been paid for — by U.S. taxpayers).
3. It is published by the U.S. Department of Defense.
This unusual book is called The Encyclopedia of Ethical Failure, and you can get it here (2013 additions here). What is it? It’s an ethics guide for government employees, full of true stories about epic screw-ups. In the podcast, you’ll hear from the Encyclopedia‘s founding editor (Steve Epstein) and its current editor (Jeff Green). Read More »
1. How well does government work? Economists call for evaluations.
2. UMass Amherst grad student Thomas Herndon finds coding errors in key debt-load paper by Reinhart and Rogoff.
3. Price dives: gold, cupcakes, and chicken wings.
4. Databases that track employee theft. Read More »