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Winners of The Knockoff Economy Photo Contest

We are excited to the announce the winner of The Knockoff Economy contest for best photo of a knockoff. In fact, we are excited to announce that we have two winners (we had a lot of great entries, but these two jumped out). And, since they kind of go together in an odd way, we decided to award them both the prize. Winners receive a signed copy of The Knockoff Economy plus a copy of the new album Just Tell Me That You Want Me, featuring covers (i.e., legal knockoffs) of Fleetwood Mac songs by artists like Karen Elson, Lykke Li, and The New Pornographers.

Our congratulations to Donna Ivanisevic for the Louis Vuitton condom (originally created and sold, ever so briefly, for World AIDS Day) and to Terry Stedman (disclosure: a former student of Kal’s) for the Louis Vuitton Virgin Mary:


A Remarkable New Chapter to a Remarkable Story

Last week I blogged about a grass-roots effort to get a baseball player named Adam Greenberg an at-bat in the majors. Greenberg did make the majors once, back in 2005, but was hit in the head by the very first pitch he faced, never to return.

I wrote a chapter about Greenberg (called “Once-Hit Wonder”) in the forthcoming book Jewish Jocks . I hope the book goes to a second printing, because his story already needs an update. Next week, Greenberg is scheduled to get another chance to hit in the majors. The Miami Marlins — the team Greenberg that faced in his 2005 at-bat, when he was with the Cubs — has signed him to a one-day contract. He is set to play for the Marlins on Tuesday, when they face the Mets and pitcher R.A. Dickey (a knuckleballer!). ESPN has good coverage.

Who knows, maybe Greenberg will hit a rocket in his first at-bat and win his way back into the big leagues. 

 


Makers and Takers

Can’t resist chiming in on Mitt’s “47%” comment, as I was asked to do so by USNews and World Report:

I’m a freeloader/slurper from the public trough. But I’m also producing something—educated citizens and workers, and useful research—that taxpayers’ decisions in political markets have determined to be socially valuable.

Read the rest here.


The Cost of a Happier Chicken: Who Pays?

Animal rights activists often oppose animal welfare reforms on the grounds that they make animal production more efficient. Rutgers professor Gary Francione argues this case convincingly, insisting that some “[w]elfare reforms make animal exploitation more profitable by eliminating practices that are economically vulnerable.” He adds, “For the most part, those changes would happen anyway and in the absence of animal welfare campaigns precisely because they do rectify inefficiencies in the production process.”  The point is compelling and controversial: welfare reforms–which so many consumers support–can make it easier for industrial agriculture to turn animals into food.

Improbably enough, industrial producers of animal products agree. As a justification for what concerned consumers perceive to be inhumane practices, factory farmers routinely insist that if they treated their animals poorly, production would decline. Thus, they conclude that consumers need not worry: the animals are doing just fine. Scott Dewald, Vice-President of the Oklahoma Cattlemen’s Association, explains, “Our producers take care of their animals, and we know that an animal that isn’t treated well doesn’t produce.”  Sherrie Niekamp, head of animal welfare for the National Pork Board, echoes this sentiment when she acknowledges that “Animal welfare is . . . a market driven issue.”


Contraception as a Prisoner's Dilemma

A reader named Dennis Schenkel in Martin, Tenn., writes in with an interesting commentary about an article that intersects with a lot of things we’ve written about:

First, I know I’m partisan. I’m a Catholic priest. I’m a moralist. I’m biased. That having been said, I just read an article [from 2010] … describing how better contraceptives have successfully split the previous (before 1960) “mating market” into two markets consisting of the “sex market” and the “marriage market,” the author goes on to describe how this sets up a classic “prisoner’s dilemma” for women and gives men a huge advantage in both markets. The article appears in First Things, which is a religion/philosophy/culture/arts journal inhabited mostly by orthodox Catholic and Protestant Christians. But the article’s author does his best to speak exclusively in the language of the social sciences, without moralizing.

 


What Is the Relationship Between Income Inequality and Revolution?

A pair of interesting-looking papers, particularly interesting when paired, about income inequality and its relationship (or not?) to revolutions. From “Russian Inequality on the Eve of Revolution,” by Steven Nafziger and Peter H. Lindert:

Just how unequal were the incomes of different classes of Russians on
the eve of Revolution, relative to other countries, to Russia’s earlier history, and to Russia’s income distribution today? Careful weighing of an eclectic data set provides provisional answers.    We provide detailed income estimates for economic and social classes in each of the 50 provinces of European Russia.  In 1904, on the eve of military defeat and the 1905 Revolution, Russian income inequality was middling by the standards of that era, and less severe than inequality has become today in such countries as China, the United States, and Russia itself.  We also note how the interplay of some distinctive fiscal and relative-price features of Imperial Russia might have shaped the now-revealed level of inequality.


A Conservative Wishtory of the United States

My friend Jack Hitt has a funny piece in The New Yorker listing misstatements about American history by conservative politicians, beginning with these doozies: 

1500s: The American Revolutionary War begins: “The reason we fought the revolution in the sixteenth century was to get away from that kind of onerous crown.”—Rick Perry

1607: First welfare state collapses: “Jamestown colony, when it was first founded as a socialist venture, dang near failed with everybody dead and dying in the snow.”—Dick Armey

1619-1808: Africans set sail for America in search of freedom: “Other than Native Americans, who were here, all of us have the same story.”—Michele Bachmann

1775: Paul Revere “warned the British that they weren’t going to be taking away our arms, by ringing those bells and making sure as he was riding his horse through town to send those warning shots and bells that we were going to be secure and we were going to be free.”—Sarah Palin

1775: New Hampshire starts the American Revolution: “What I love about New Hampshire… You’re the state where the shot was heard around the world.”—Michele Bachmann

[Ed. note: One of these claims seems much closer to being true: see page 1336-38 of Property in Land].

Freakonomics Nation: can we produce an analogous list of historical misstatements by liberal pols? We’ll give out some Freakonomics swag to a clear winner or two. 


When a Typo Improves an E-Mail

We received a pretty standard e-mail recently that included the following sentence:

“We will be using experimental economic sand psychology to explore the motivations behind …”

Wow, I thought — that sounds interesting: experimental economic sand psychology. I wonder how that works. Is each subject given a pile of sand and asked to create a sand castle that represents their view of capitalism? Or maybe do different subjects bid on different lots of sand in an auction/game theory setting?

And then I read it again. Oh. It was supposed to read “experimental economics and psychology,” not “economic sand psychology.”

Never mind. Into the trash bin.


Bring Your Questions for FiveThirtyEight Blogger Nate Silver, Author of The Signal and the Noise

Nate Silver first gained prominence for his rigorous analysis of baseball statistics. He became even more prominent for his rigorous analysis of elections, primarily via his FiveThirtyEight blog. (He has also turned up on this blog a few times.)

Now Silver has written his first book, The Signal and the Noise: Why So Many Predictions Fail — But Some Don’t. I have only read chunks so far but can already recommend it. (I would like to think his research included listening to our radio hour “The Folly of Prediction,” but I have no idea.)

A section of Signal about weather prediction was recently excerpted in the Times Magazine. Relatedly, his chapter called “A Climate of Healthy Skepticism” has already been attacked by the climate scientist Michael Mann. Given the stakes, emotions, and general unpredictability that surround climate change, I am guessing Silver will collect a few more such darts. (Yeah, we’ve been there.)


Boycotts and Jerks

A reader named Ert Dredge writes in with the following set of trenchant observations and questions:

Hiya, Dubner ‘n Levitt.

I was just listening to podcast #84 “Legacy of a Jerk,” and it brought to mind a long-standing cocktail party question of mine:  Is it reasonable to boycott what someone does for a living, if you think they’re good at it, because they’re privately a jerk?

Is it reasonable to never watch Braveheart again because of Mel Gibson‘s anti-Semitism or other issues?
…or never watch another Roman Polanski film?
…or to have not listened to Cat Stevens during the whole Salman Rushdie fatwa issue (misunderstanding?)

And, if so, does that mean that boycotting my local shoe repair guy’s business because he doesn’t clean up after his dog is reasonable.


The Cost of Environmental Regulations

The environment has taken a back seat to the economy this election season. But timely new research looks at the intersection of politics, economics and the environment: the actual cost of environmental regulations.  

A new working paper (abstract; PDF) by Michael Greenstone, John List, and Chad Syverson analyzes the economic cost of air-quality regulations. From the abstract:

The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters.


The Risk of Reading This Blog

From a reader named William Haisley:

I’m a weekly columnist for the Daily Collegian, the Penn State newspaper, where I currently attend law school. Today my column about why I don’t vote — an idea I was exposed to and ran with after reading your “Why Vote” article — ran and I have been dealing with the fallout ever since. I think I’ve been insulted more often today than the rest of my 24 years combined.

In some sense, my column is just an amalgamation of your article and various Overcoming Bias articles — which, again, I was introduced to on your blog and can’t thank you enough for — I’ve read over the years, though I guess I could say that about my entire belief system at this point.

Anyways, you should have a warning label at the end of your articles that tells people the potential dangers of publicly stating some of your more controversial findings (though I really didn’t think this was that controversial, but I’ve been proven wrong). You really need the cultural tread to take people somewhere they didn’t know they were going.


The Authors of The Knockoff Economy Answer Your Questions

We want to thank everyone for their questions — it’s great to see people responding to, critiquing and, in some cases, tweaking, the ideas we set out in The Knockoff Economy. We are fascinated by the complex relationship between copying and creativity — and we’re thankful that many of you are as well.  So, to the Q&A . . .

Q. The issue that concerns my industry most is internet sales of prescription skin products such as retin-A and hydroquinone. Some might be counterfeit, but many are probably diverted products. The manufacturer sells them to a physician, the unscrupulous physician sells them on the internet at a deep discount, the patient may be hurt by expired or dangerous medications or may not use them correctly even if they are real. This hurts legitimate physicians by drawing business away from them, but also hurts a manufacturer’s reputation. (Apparently, people who have qualms about buying Viagra online don’t think twice before buying skin medications from those same sources.)

Do you plan to do any research in this area? Will you be looking at diversion in addition to counterfeits?


Peter Cramton: Medicare Auction Gadfly

My friend and co-author Peter Cramton continues his two-year crusade to improve the workings of “Medicare’s Bizarre Auction Program.”  You can watch his YouTube testimony before the United States House Committee on Small Business here.

(See also his Oral Testimony, Transcript of Hearing, Video of Entire Hearing.)

Peter’s supplemental comments are particularly devastating in rebutting two claims of Lawrence Wilson, Centers for Medicare and Medicaid Services (CMS) Director of the Chronic Care Group:

CMS [claim]: “CMS worked closely with stakeholders to design and implement the program.”

Mr. Wilson. “CMS worked closely with stakeholders to design and implement the program in a way that is fair for suppliers and sensitive to the needs of beneficiaries.”


Beware the Weasel Word "Statistical" in Statistical Significance!

As Justin Wolfers pointed out in his post on income inequality last week, the Census Bureau was talking statistical nonsense. I blame the whole idea of statistical significance. For its weasel adjective “statistical” concedes that the significance might not be the kind about which you care. Here, I’ll explain what statistical significance is, and how its use is harmful to society.

To evaluate the statistical significance of an effect, you calculate the so-called p value; if the p value is small enough, the effect is declared statistically significant. For an example to illustrate the calculations, imagine that your two children Alice and Bob play 30 rounds of the card game “War,” and that the results are 20-10 in favor of Bob. Was he cheating?

To calculate the p value, you need an assumption, called the null (or no-effect) hypothesis: here, that the game results are due to chance (i.e. no cheating). The p value is the probability of getting results at least as extreme as the actual results of 20-10. Here, the probability of Bob’s winning at least 20 games is 0.049. (Try it out at Daniel Sloper’s “Cumulative Binomial Probability Calculator.”)


Sex and Chocolate: Complements or Substitutes?

The attached picture is a display at the local CVS in Ann Arbor, Mich. My thought was that this shelf display is a great example of complements: Enjoy a chocolate bar together, and who knows what nice things might follow?  My son thought that it depicted  substitutes — no luck in love, so drown your sorrows by eating chocolate.  I don’t know who is correct, but the example illustrates well the fact the complementarity/substitutability can depend on the specific situation being examined.


Freelance Economist for Rent

From the mail:

Hi there,

I am a recent graduate of an economics Ph.D. program. I had what I thought was a successful trip through the adventure that is the economics job market and chose the risky but exciting option of working for a small start-up. Unfortunately, it turns out that it was more risky than exciting and the company doesn’t have work for me after all. So, I will be going back on the job market next year, but in the meantime I have extra time on my hands and bills to pay. I don’t want a permanent position and I don’t necessarily need much work, just enough to keep the lights on and food on the table.

My brother-in-law is a graphic designer and does some freelance work on the side which made me wonder if there could be such a thing as a freelance economist. There must be many small companies or organizations who cannot afford staff economists or expensive consultants, but have data they don’t know what to do with or questions about how their business runs that they don’t know how to answer. Freakonomics readers know that economics shows up all over the place.


The Status Quo

If you ever travel to Israel (which, BTW, is a phenomenal place to visit regardless of your attitudes toward religion or Middle Eastern politics), you’ll certainly see the Church of the Holy Sepulchre, built on what many believe is the site of Jesus’ crucifixion and burial. But you might come away a bit disappointed; the church has something of a disorganized and ramshackle feel.

The problem is not that the site isn’t considered sacred, but that it’s considered too sacred. Thanks to its obvious import, it is shared—and has been for thousands of years—by multiple religious denominations, including the Greek Orthodox, Roman Catholic, Coptic Orthodox, Armenian Apostolic, Ethiopian Orthodox and Syriac Orthodox sects. (Sorry, Protestants, since Luther’s 95 Theses were not posted until 1517 you are Johnny-come-latelys and don’t get a piece of the action.)


How to Cut Prison Costs Without Driving Up Crime?

Putting people in prison helps drive down crime but it’s not cheap, a fact that is troubling some states. So is there a way to cut  incarceration rates without spiking crime?  Yes, says economist Ben Vollaard in a recent article (long version) arguing in favor of “selective incapacitation”:

The idea of selective incapacitation is to make a distinction between offenders with a high and with a low propensity to commit crime. Those of the high propensity type – the prolific offenders – are responsible for a large share of violent and property crime (Tracy et al. 1990). To them, the default penalties have little deterrent effect. By making the length of a prison sentence conditional upon an offender’s criminal record, enhanced prison sentences can be targeted at this population. After all, by repeatedly breaking the law, these offenders reveal themselves to be of the prolific type (Polinsky and Rubinfeld 1991). Once the harsher sentences apply, the penalties may begin to make a difference, if not through deterrence, then by way of incapacitation in prison. 


Research from My Favorite Economic Gabfest

I’ve just gotten back home after a terrific few days at the Brookings Panel on Economic Activity.  It’s my favorite gabfest of the year, featuring economic analysis that is both serious research, and also connected to ongoing policy debates.  (OK, I’m biased–I’m an editor, and organize the conference along with Berkeley’s David Romer.)  And while I think some of you may enjoy slogging your way through the latest papers, others may prefer your summaries simpler and lighter. So I went ahead and recorded a few short videos summarizing the papers. I hope you enjoy!


Special Parking for Hybrids

My wife took four grandkids to the Adventure Aquarium in Camden, New Jersey.  Looking for a parking space, she noticed the usual handicapped parking spots near the entrance, but also parking spaces reserved for hybrid vehicles.  The Aquarium, though not government-run, appears concerned about environmental issues and apparently tries to encourage energy conservation by making a visit easier for those who have chosen energy-efficient vehicles.  The private sector is implicitly subsidizing the purchase of hybrid cars, not by offering monetary incentives, but by subsidizing the time cost of owning these cars.  I suppose one can object that the subsidy matters more to those whose time is more valuable—presumably higher earners; but it’s still a neat way for the private sector to encourage energy efficiency.  I wonder how many other examples exist of explicit non-monetary subsidies by the private sector? (HT to FWH)


Is Income Inequality Rising, and Are a Lot of Feathers Heavy?

New data on income inequality in the United States were just released.  And they provide a useful teaching moment. The graph below, which comes from the Census Bureau, shows the evolution of the Gini coefficient since 1967.  It’s pretty clear that this measure of inequality has been rising pretty much through this whole period.

p>But here’s how the Census Bureau chose to describe these data:

Based on the Gini index, income inequality increased by 1.6 percent between 2010 and 2011; this represents the first time the Gini index has shown an annual increase since 1993, the earliest year available for comparable measures of income inequality.

Say what?


The Knockoff Economy Is Out! Bring Your Questions for Kal Raustiala and Chris Sprigman

The Knockoff Economy: How Imitation Sparks Innovationis out! The book explores the relationship between copying and creativity. Copying has a well-known destructive side—which is why we have intellectual property rights—but it also has a much less appreciated productive side. We explain how some creative industries not only survive in the face of copying, but thrive due to copying.  These industries offer an important set of lessons about intellectual property law and highlight the often complex balance between innovation and imitation. While many of the cases we explore are unusual—such as fashion and fonts—we close the book with a broader examination of the main themes and lessons and a brief look at the music business, which is perhaps the poster child for the (often exaggerated) perils of copying.

The Knockoff Economy grew out of an earlier paper of ours on innovation in the fashion industry. We realized there were many creative fields that fell outside the scope of intellectual property law in one way or another, and just as importantly, these fields turned out to be really fun to explore. Writing the book allowed us to dig into things like football and fonts, and to do so in a way that, we hope, opens up a broader debate on the law and economics of innovation.


When Is It Inconsiderate to Press A Crosswalk Button?

I have no problem with pedestrians pressing crosswalk buttons when they wait for the crossing light to change before crossing the intersection.  Crossing lights and crosswalk buttons serve important safety function at busy intersections especially for disabled or elderly pedestrians who need a bit more time crossing the street.

But some pedestrians press the button with a conditional intention to cross the street before the crossing light changes if there is a break in the traffic.  One often sees pedestrians approach an intersection, press the button, and then immediately cross the street, before the crossing light changes. 

The pedestrian probably reasons a) “I have a right to press the button”;  and b) having pushed it, I now see I can walk without inconveniencing anyone because there aren’t any cars coming.


To Punt or Not to Punt? The Debate Continues

A reader named David Stokes writes to say:

Last night’s Raiders – Chargers game gave one team a unique opportunity to implement the no-punt strategy.
 
With the Raiders’ long-snapper hurt, the Raiders coach had a much less risk-averse reason to try always going for it on fourth down. Especially after the first punt was blown and the punter tackled with the ball, who could blame the coach for going for it on fourth every time?
 
Alas, he proceeded to attempt more punts, and three in a row were blocked or otherwise blown.

FWIW, I think someone should make a documentary about long snappers. I am not kidding.


Can the SEC Cut Down on Foreign Corruption?

Resource-rich developing countries have long struggled to overcome the “resource curse,” which includes a strong streak of corruption, but now they’re getting a little help from the SEC.  Here‘s Jeff Colgan of Foreign Policy:

[T]he SEC finally enacted long-overdue regulations requiring any oil company that is publicly listed on a U.S. stock exchange to report the tax, royalty, and other payments it shells out to foreign governments where it operates. Previously, companies were able to conceal this information, enabling a culture of corrupt payoffs that kept the petrodollars flowing into authoritarian leaders’ coffers — even where it directly contravened U.S. interests.

Colgan argues that in addition to helping developing countries, the regulation will reduce violence, which is good news for the U.S. as well.  “Research shows that oil-producing states led by revolutionary governments like that of ousted Libyan leader Muammar al-Qaddafi are more than three times as likely to instigate militarized international conflicts as a typical state,” he writes.


Taxi Tipping and the Principal-Agent Problem

A reader named Matt Hasten writes in to say:

While in Las Vegas last week for a convention, I took a taxi between casinos (might as well see a few while making my contribution). When it came time to pay and I pulled out a credit card, the cab driver informed me that using a credit card would mean paying a $3 fee in addition to the fare ($11.50). This struck me as a ridiculously high surcharge and when it came time to tip the cab driver (all of this using the back seat electronic card reader), I did not add anything extra. My logic was that while I usually tip 20% on cab fare, that would have only been $2.30 and I already was paying $3 above the fare.

I explained to the cab driver that the money I would usually spend tipping him was instead paying for the $3 fee the cab company imposed on me. The cab driver, understandably, saw things differently and had some colorful wishes for the remainder of my evening. At the time, I felt justified not tipping because I felt the only way to make my displeasure known about the fee was to stiff the cab driver and hope his (and other cab drivers’) anger of missing out on tips might put pressure on the cab company to change the policy. In hindsight, I do feel bad about stiffing the driver! I’m the kind of guy where you have to really mess up to earn less than a 20% tip at a restaurant.

I know the driver didn’t set the $3 credit card fee, but taking it out on him by not tipping was the only way I saw to make my displeasure known or, better yet, impact a greedy policy.

Was I right to not tip?