Monumental Economics: How Many Pennies is the Lincoln Memorial Worth

I once had a conversation with someone where they complained economists can put a price on anything, even a tree (see problem 5.5 in your workbook). This weekend my brother and his foster daughter are visiting and we'll be touring DC monuments, including the Lincoln Memorial. Can we put a value on the Lincoln memorial? Like a tree the value of the Lincoln Memorial includes both the raw materials, land, and the joy it brings to those who visit it and for those who like to know it's there.

First sometimes economists use travel costs as a way to proxy for value. If someone spends $500 to visit the Grand Canyon, then we might say the Grand Canyon is worth $500 to them. One way to figure out the value of a place is to add up the value of all the trips people took to visit it.

If something is free like the Lincoln Memorial you might ask people how much they would pay to visit it. You might also ask how much would you pay to keep the Lincoln Memorial. For example I might never again visit the Wailing Wall in Jerusalem, but I might be willing to donate $5 to save it. Surveying people about their value of how much they would pay to visit or protect something to estimate its value is called contingent valuation. Just this morning NPR did a story on the value of a Pelican.

I could not find a study on the value of the Lincoln Memorial. But I did find this quote from Robert Solow "it makes perfectly good sense to insist that certain unique and irreplaceable assets should be preserved for their own sake; nearly everyone would feel that way about Yosemite or, for that matter, about the Lincoln Memorial, I imagine”

Power and Economic Development

Sunday night along with 300,000 other Montgomery County residents our house lost power. We hope to have power back sometime on Thursday. The power outage has impacted my productivity. I do normally spend a lot of my day at the library or coffee shops, but with my local coffee shop lacking AC right now, Panera lacking outlets, and the library closed for a couple of days due to the power issues, my productivity for the last week has been reduced. It's more the frustration of trying to find a place to plug in and get online that takes up a few hours than anything else. Although perhaps the extra coffee will counter act this.

My power will be back on soon (hopefully). But loss of electricity can have an impact on economic development. Attracting manufacturing is a key part of most countries development strategy, companies are unlikely to want to open up shop in countries with unreliable electricity grids.

The problem is that utilities are large enough that they create a natural monopoly (an industry with high fixed costs that creates a situation where a monopoly will likely form). Natural monopolies are usually taken over by the government or regulated in some fashion. The problem is that many developing countries also lack good governance meaning the countries electric grid gets even less out of their inferior equipment then they could have.

Infrastructure development has long been a part of the World Bank's and other development agencies mission. But it's hard work given the high costs and governance issues. The impacts are also hard to measure, since unlike education or health programs individuals aren't targeted.

At least the store down the block has electricity to fuel their beer cooler!

Public Intellectuals and Tenure

The NY Times had a recent forum on tenure for university for professors. Of the five people who wrote pieces for it, I think all five are tenured. If you look around economic blogs, most of the top academic blogs are written by tenured faculty.

I think it's worth contemplating tenured prof. Tyler Cowen's thought experiment in response to the article.

Take a 53-year-old professor, at a moderate quality university, who goes from publishing three articles a year to one article a year, and in somewhat lesser journals than before. His teaching evaluations slip steadily, though he never becomes a disaster in the classroom. In the no-tenure world, does that person get fired?

Looking at Cowen's CV, that might be close to the truth on the research side for him, although his CV also reveals he's a few years younger. I don't know about the teaching side. What it misses is that Cowen has produced a textbook and I think some decent selling books, plus a really well read blog.

Most of the public intellectuals in economics (Cowen, Mankiw, Krugman, DeLong, Becker, Levitt ect.) have tenure. It could be that tenure professors have more experience so are better writers and have gained a larger audience.

But I think back to the two stars of the year I was on the job market: Emily Oster and Jesse Shapario. When they were on the job market they were in quite a few articles and seemed to try to participate more in the public discourse. But I haven't heard much from either of them lately except press releases of their research. My guess is that they are working as hard as they can to get tenure by publishing articles. In a few years I wouldn't be suprised to see them more in the public discourse.

Without tenure the people I've named would still be at top schools. But professors at smaller schools make contributions at a more local level in OP-EDs and speaking to local groups.

I see the obvious arguments that some professors with tenure will slack off and not be very productive. But I think without tenure many professors would decrease their contribution to the public discourse.

From a personal standpoint, I don't have tenure. I'm not sure how my effort in research, teaching, and blogging will change once I get it. My guess is not very much, but I hope I get to make that choice.

You Have the Right to Remain Silent: Mime Patrol

According to Fisman and Miguel, the mimes had a noticeable impact on compliance with traffic laws. The mayor reported that traffic fatalities fell by more than 50 percent between 1993 and 2003.

From Bogota Colombia. The article on Mayor Mockus and his city policies that include mimes to make fun of jaywalkers and bad drivers, rewarding good cab drivers, and ladies night.

Many times when people act in their own self interest they make things worse for everybody else (bad drivers, litter bugs, and D’Uriner). By encouraging social norms of good behavior people have the incentive to do the right thing.

Now if only we could import some of those mimes to make fun of tourists standing on the left of the escalator of the metro.

Can't Decide There is an App for That

Standard economic models assume that people can make decisions. Sometimes life gives us too many decisions to make and we can't decide what to do.

Behavioral economics tries to take into account that people are irrational and sometimes can't choose what they want to do. Dan Ariely is one of the leading behavioral economists and he is trying to help you make choices. He had one of his students create an Iphone App that will list the choices you are trying to make. It allows you to set a deadline for each choice (see his blog post here). If you don't decide before then, it makes the choice for you at random

Only $1.99, if you are having trouble deciding to buy it as one commenter on his blog did. Ariely provides one free decision suggestion for you, he recommends you the buy it (I'm guessing that recommendation wasn't random.)

Are Randomized Evaluations Out of Control

In the developing world thousands of aid programs have been created with the aim to fight poverty. Do we know if these programs actually work? The most popular way to evaluate these aid programs is through a randomized trial. Take 1,000 people and split them into two: 500 people get help (treatment group) and 500 get nothing (control group). Compare the groups before your program to make sure they are the same. If they are then you can compare the two groups after the program has been running a few years then see the results. If the group that got helped is healthier, goes to school more, or has higher income then it is good evidence the program worked.

Esther Duflo is one of the leading champions of randomized trials. I like this 15 minute TED talk she gave below.



So what about the pitfalls of randomized evaluation. First what works in one country or region may not work in another. Second the evaluations are expensive.

Finally, in a blog post yesterday Alanna Shaikh argues that by focusing too much on randomized trials researchers and development agencies focus too much on immediate results that can be measured.

I think there is validity to all these criticism. However, I still do a lot of work with experiments where treatment is randomized. In part this is because of publication bias, it's much easier to get a randomized experiment published, because you don't have to argue as much what caused the effect you found.

My favorite thing to do is to take experiments and see how different conditions influence how the programs work.

99 is Quite All Right: extending unemployment benefits

The Senate is looking like it will extend unemployment insurance payments to 99 weeks (link). As the chart below from Greg Mankiw's blog shows the median time people have been unemployed is nearly twice as long as anytime since 1965 (link). I do think in some circumstances giving people unemployment insurance payments decreases the chances they will get a new job. In fact just a week ago I had an unemployed person tell me they didn't take a job because it didn't pay enough compared to unemployment insurance.

However, given the high unemployment rate and length of people's job search extending benefits seems to make sense. It also is a reasonably good economic stimulus, since people receiving unemployment checks are unlikely to save much of it.

In terms of the budget, unemployment insurance payments will go down when (if?) the economy recovers. I also think congress has a better record of pulling back long term unemployment benefits, then tax breaks or other spending.

So that's why I think 99 is quite allright.

Should Wine Kiosks Make You Smile?

Want to buy wine in Pennsylvania, there is a new way a wine kiosk. Two Giant supermarkets have added large wine vending machines as part of a trial run to put 100 throughout the state (NPR link). To get the wine purchasers have to swipe their state ID and smile for the camera to be id checked remotely by a state worker. On top of that you have to blow a breathalyzer to show you have no alcohol in your system.

Why can't you just put wine in shopping cart and check out? Because the state has a monopoly on wine sales and hard liquor (it looks like you can buy a six pack in a independent grocery store). Maryland has somewhat similar rules, except you can actually buy wine, but only at independent stores (so no two buck chuck).

So does this kiosk make economic sense. I'm guessing probably not. Although it's interesting the company that makes the kiosk provides them free of charge in exchange for advertising space. The grocery store might attract more people, since it cuts down on a trip to another store to get your bottle of wine or two for dinner.

The only people that are losing are the wine loving citizens of Pennsylvania who still have few options as to where to buy their wine. Ben Franklin would clearly be opposed.

If You Want a Nice Rap It's $7 More

I was listening to the Podcast Too Beautiful to Live and Rap Master Maurice was being interviewed. People hire Maurice to send both revenge raps and non-revenge raps to anyone they have a beef with or want to send a friendly message to.

An interesting thing about the Rap Master's pricing scheme is that friendly raps are $7 more than revenge raps. The Rap Master prefers sending revenge raps, in part because they help keep up his "cred" with his friends, but for a price ($7) more he's willing to send a friendly rap.

Also it seems in the past few years the Rap Master has increased his prices from $7/$14 for revenge/friendly to $12/$19 and the price might even go up $17/$24. Is it from an increase in demand for revenge raps?

Want to see what $12 gets you watch the clip below.

Increasing Returns to Lebron

I'm a little late to the party talking about Lebron "taking his talents to South Beach", but Planet Money recently did a podcast on Lebronomics that I think over simplfied the concept diminishing returns.

So in short Lebron James went to Miami so he could play with Chris Bosh and Dwyane Wade two other super star free agents. Alex Blumberg the show's host said that the impact of Lebron on happiness of local fans was smaller because Miami already had a superstar. He made the analogy to chocolate bars. If you are hungry the first chocolate bar is awesome, the second one is Ok, and the third makes you sick.

This demonstrates the concept of diminishing returns. That is the additional happiness from another player or a chocolate bar decreases which each subsequent one you add. However, diminishing returns don't necessarily start after the first player.

Players have the biggest impact on the probability of winning championships if the team already has some good players. For example teams close to making the playoffs will often trade for more expensive players. The Texas Rangers just added ace pitcher Cliff Lee, because they have a good chance to make the playoffs, they got him from the Seattle Mariners who have almost zero chance of making the playoffs. Cliff Lee provides more value to Texas than Seattle.

At the sports economics conference I went to last week one economist pointed a flaw in one presentation was that it assumed that a players value is constant for all teams. I agree, Lebron's value to the team may be higher in a place with another superstar in place.

Research Has Benefits Even if No One Reads It

Each year academics write thousands of papers, but half of these papers will never be cited and many only read by a handful of people as a recent Chronicle of Higher education article points out. The article goes on to say that the vast amount of "bad" research is taking away valuable time of top researchers who instead of spending all of their time researcher are spending more time reviewing and rejecting bad articles. Chris Blattman points out that it takes him a few hours a month to reject horrendous articles he reviews.

I think my research could still be a net positive even if no one reads it or cites it. I was thinking about something Justin Wolfers said at a session I attended on Economics of Sports Blogging. If you blog and no one reads it, your blog is not a good use of your time if your goal is to have a widely read blog. However, if your goal is to work on your communication skills and critical thinking then it can be a success.

Many academics are more teaching than research focused. By trying to publish and even publishing things that no one reads but the authors, I think they will be better teachers and improve their ability to explain things and keep up to date on their field.

I do hope people actually read my blog and my research.

The Economic Impact of Vampires: True Blood Edition

Suppose that 10% of the world's population turns into vampires in the manner of the HBO series True Blood. I'm less interested in the "blood sucking" and horror part. So ignoring that I wonder what the impact of two changes to a portion of the population would be

1. They cannot go out in light
2. Their "natural" life expectancy is hundreds of years


How would these changes impact the economy? In terms of number 1, you would think this would increase the number of all night businesses. Also property values in areas with less sunlight would increase (winter cabin in Anchorage anyone?).

In terms of number 2. I wonder, would vampires have higher or lower savings rates? On the one hand if vampires saved enough they could quit working after a hundred years of compound interest. On the other hand vampires do not age and could continue working. This aspect may be worth thinking about if science discovers a way to substantially increase our life expectancy.

How to get a Taxi at 2am in DC going to Maryland

It's 2am you are standing on Dupont Circle (DC) trying to hail a cab back to Silver Spring (MD) to go home after a night of utility maximizing. A cab approaches, the cabbie asks where to? You say Silver Spring. The cabbie says no and drives off.

It happen to me last year and it happen recently to the blogger at Sprung on the Spring (a local Silver Spring blogger). As the their post describes even though it is illegal to refuse service, several DC cabs refused to go to Maryland. They don't want to go to Maryland, because DC cabbies legally can't pick up new passengers in Maryland. I think this shows that a law change is unlikely to solve the problem of getting a cab from DC to MD after the bars close.

So I propose two solutions. Granted this will be theoretical, since with a 7 month old I can't do the empirical research necessary to test these theories. If you find yourself in a similar situation please let me know if either of these work.

Solution #1: Instead of saying I'm going to Silver Spring. Start by saying $50 for a trip to Silver Spring (sure it's double the price), but given these two data points $25 is a small price to pay for not trying to hail cabs between 2-3am. I think the cabbie would go for it, since it should compensate them from missing one fair. I also find the negotiations are quick between the cabbie and the person trying to hail the cab. You basically get 1 shot.

Solution #2: Take me to Alaska and Georgia Ave! This is the border of Silver Spring and DC. Once there try to negotiate for the last mile or two if you live in downtown Silver Spring. If the cabbie doesn't go for it, get out hail another cab. A new cab picking you up there is unlikely to refuse service. I'm not sure how many cabs are going by there but I assume it's a decent amount.

Job Advice $2

Students often ask me for advice about getting a job in international development. I sometimes have an idea or two, but I have never had a full time job besides RA or professor so perhaps I'm not the best resource.

Now I have a new place to point my students! Blood and Milk, an excellent development blog, run by a person with lots of non-academic experience working in development is starting a job advice newsletter.

Even better she is charging for it! It's only $2 to subscribe, but my guess is that she'll provide more valuable content at $2 per subscriber than she would for free. She sounds like she is getting tired of answering the same questions for free, so she might not answer any more job seekers questions without pay.

For the time being I'm still willing to answer blog readers questions for free, but you get what you pay for.

I like to watch TV, while I watch TV???

“I think the hope is that a $10 subscription [for Hulu] is a complement to a $50-plus subscription from a cable or satellite company" (NY TIMES)

Hulu a website that let's you watch TV online has just announced they will be offering a new service with access to more shows for 9.99. So how can TV shows complement other TV shows. Usually in economics goods that are complement you enjoy together (eg coffee and cream, cold beer and sandwiches, neck ties and dress shirts). But I would think hulu and cable are substitutes. That is goods you can enjoy instead of the other one (eg coffee or tea, beer or wine, shirts or sweaters)

I think the idea is that Hulu might get you interested in a show so after you watch one season on hulu, you'll want to watch the next on cable.

I'm not really beleiving it. I've used Hulu's free service and Netflix as a substitute for cable. I think the owners of Hulu (NBC/Fox) which also have a major interest in cable and satelitte think Hulu is not too close of a substitute so it lowers their cable earnings less than their Hulu profits.

Finally, let me know by clicking on this link if my blog is a substitute or a complement to vuvuzelas.

NAASE Medal Count

Yesterday I went to a session where two papers tried to predict Olympic medal count and World Cup results.

Two thoughts. First Nate Silver over at 538.com has done a great job of predicting the presidential election, Olympic medals, and is trying to do so on the World Cup.
But Nate's audience is for the masses of sports fans. Which is an important audience, but what do Sports Economists want.

First thought. Both paper discussants urged the authors to think about why these type of predictions might be interesting to Economists. I think it shows an inherent danger in Sports Economics. We can't forget the Economics part if we want to make a contribution.

Second thought. How much should Sports Economists pay attention to the large internet community of people doing similar work. This was apparent in the baseball session I went to that the presenters hadn't paid much attention to the work of baseballprospectus or fan graphs. As Sports Economists we should also make sure we are relevant to the Sports fans.

Now off to discuss a paper on NASCAR!

NAASE Session on Sports Blogging

So I just got back from a a session on Sports Economics blogging with Brad Humphreys, Justin Wolfers, David Berri, Kevin Arnovitz (ESPN)

A couple of quick thoughts, I was going to ask why more blogs don't focus on published works. Then Brad Humphreys said he blogs at the International Journal of Sports Finance about the articles that are published there. Even more exciting is that many Sports Economics classes course websites get students to visit the blog.

Justin Wolfers made a lot of good points about how blogging can help distribute your research. He said for every paper he writes he tries to write an OP-ED, a one page summary, a radio commentary, or a longer blog post. In part Justin does this to help hone his message, but also he does it so he can point media to a more accessible version of his work.

David Berri blog Wages of Wins looks at basketball. He talked about how he promoted some of his better commenters to contributors to the blog. I think this might be a good innovation, economists working with interested non-economists to promote economic ideas in Sport.

Finally Kevin Arnovitz talked about how he tried to take Sports Economics ideas to the masses. I think this type of work could be key if economists want to go from being thought of as people with their head in the spread sheet to someone who has something worth wile to say to the average fan.