One way to control admission to (some) public schools is by having an entrance exam. That solves a number of problems, including of course the time at which admissions choices are made. In response, families sometimes invest a lot of time in exam preparation. One development that has apparently moved from Asia to NYC is the "cram school". The NY Times reports on The Big Cram for Hunter High School. The story looks in on a group of sixth graders who "had paid up to $3,000 for a few months of English and math classes at Elite, a regimen modeled on the cram schools of South Korea, China and Japan."
"While Elite limits advertising to Asian-language newspapers, about 50 percent of its students are non-Asian. ...Many of the students in the winter break program were children of immigrants — from South Korea, Japan, Poland — and most attend city schools. "
"When prompted, they took a moment to reflect on why they wanted to get into Hunter. Some said it was an urge to become better students and be surrounded by bright peers; others said they had been told Hunter was a vital steppingstone to elite colleges and a successful career... "
"And what if they were not among the fewer than 200 students who gain seats out of a pool of up to 2,000 test-takers?
“I’ll be sad,” said James Lee, a student at Intermediate School 119 in Glendale, Queens, “but there’s still Stuyvesant.”"
Tuesday, January 6, 2009
Monday, January 5, 2009
Markets for Macro Risks: Early Shiller
Whenever I think about designing markets on which individuals can hedge big risks, I think about the remarkable market-design work of Robert Shiller. It's not his recent bestsellers that I'm thinking of as much as his 1993 Clarendon Lectures, Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks. It called for the creation, among other things, of what became the Case-Shiller Home Price Indices, that allow large movements in residential real estate to be hedged.
His web pages on what he calls Financial Democracy, and its associated references and links, are well worth looking at.
His web pages on what he calls Financial Democracy, and its associated references and links, are well worth looking at.
Sunday, January 4, 2009
A word for unraveling in Singapore: "Choping"
"Choping" is Singapore English slang for reserving something well in advance, i.e. a place in school for your child, etc. That is, it is one of the actions involved in the unraveling of markets, the process by which transactions are arranged increasingly far in advance of when they will be carried out. Sometimes this has been a cause of market failures that lead to new market designs, with a prominent example being medical labor markets.
In some cases, the unraveling of a market has caused serious inefficiencies, as when college football bowl games used to be decided before the end of the regular season (which made it harder to arrange the kind of championship games that draw high television viewership), or when gastroenterologists used to be hired long before they finished their internal medicine residencies (which caused the national market to collapse into lots of regional markets). But, in most unraveled markets, data are lacking to directly determine if a particular set of market arrangments and timing are inefficient.
Tyler Cowen at MR has a (characteristically) very interesting post on choping at Singapore food courts, where patrons reserve seats by placing tissue papers on them, and then go to stand in line to get their food. He suggests (maybe just to be contrarian) that this is efficient. As one of the comments to his post points out, this would be the case in a model in which having to look for a seat once you have your food is incomparably more costly than any other outcome. Of course it is easy to see how (with different parameters) reserving seats in advance could be inefficient (although still an equilibrium). E.g. if it takes 15 minutes to get your food, and 15 minutes to eat it, then each chair could serve four people in an hour if people looked for a chair after getting their food, but only two people per hour if people reserve a chair before getting on line.
The discussion of all this in the Singapore press is satisfyingly nuanced. After a demonstration against choping by some students (Wiping out bad habit of 'choping' seats with tissue pack), the Straits Times has a story (Is this rude?) that explains both points of view.
On the one hand:
"But many people reckon there is nothing rude about reserving one's spot with a packet of tissue paper. Indeed, Mr Wong, who arrived in Singapore last month, said: 'It is a practical and creative way to reserve seats instead of standing around with a tray of food turning cold.' "
On the other:
"Tissue 'choping' seems to be uniquely Singaporean. Housewife Ivy Ong-Wood, in her late 30s, a Malaysian now living in Hong Kong, told LifeStyle: 'At the tea cafes or cha chan tengs in Hong Kong, people queue outside and are told where to sit. In Malaysia, there is no problem getting seats at the food centres.' "
Whatever the truth of the matter, this will not be an easy equilibrium to displace. The story notes: "It is so pervasive that companies even have tissue packs specially made with the word 'chope' for marketing purposes. "
In some cases, the unraveling of a market has caused serious inefficiencies, as when college football bowl games used to be decided before the end of the regular season (which made it harder to arrange the kind of championship games that draw high television viewership), or when gastroenterologists used to be hired long before they finished their internal medicine residencies (which caused the national market to collapse into lots of regional markets). But, in most unraveled markets, data are lacking to directly determine if a particular set of market arrangments and timing are inefficient.
Tyler Cowen at MR has a (characteristically) very interesting post on choping at Singapore food courts, where patrons reserve seats by placing tissue papers on them, and then go to stand in line to get their food. He suggests (maybe just to be contrarian) that this is efficient. As one of the comments to his post points out, this would be the case in a model in which having to look for a seat once you have your food is incomparably more costly than any other outcome. Of course it is easy to see how (with different parameters) reserving seats in advance could be inefficient (although still an equilibrium). E.g. if it takes 15 minutes to get your food, and 15 minutes to eat it, then each chair could serve four people in an hour if people looked for a chair after getting their food, but only two people per hour if people reserve a chair before getting on line.
The discussion of all this in the Singapore press is satisfyingly nuanced. After a demonstration against choping by some students (Wiping out bad habit of 'choping' seats with tissue pack), the Straits Times has a story (Is this rude?) that explains both points of view.
On the one hand:
"But many people reckon there is nothing rude about reserving one's spot with a packet of tissue paper. Indeed, Mr Wong, who arrived in Singapore last month, said: 'It is a practical and creative way to reserve seats instead of standing around with a tray of food turning cold.' "
On the other:
"Tissue 'choping' seems to be uniquely Singaporean. Housewife Ivy Ong-Wood, in her late 30s, a Malaysian now living in Hong Kong, told LifeStyle: 'At the tea cafes or cha chan tengs in Hong Kong, people queue outside and are told where to sit. In Malaysia, there is no problem getting seats at the food centres.' "
Whatever the truth of the matter, this will not be an easy equilibrium to displace. The story notes: "It is so pervasive that companies even have tissue packs specially made with the word 'chope' for marketing purposes. "
International market for transplantable organs: "transplant tourism"
Frank Delmonico writes in response to my previous post as follows:
"Re: the Times of London story
"It is well-known that patients from Greece and Israel and the Gulf countries travel to destinations that provide priority organ transplants for those recipients.
"This practice has become termed “ transplant tourism” and the ethical objection arises from two important aspects:
"1. Rich patients with ample resources are prioritized for example in the UK (as evident by this Times of London story) to undergo transplantation which diverts resources and expertise from the native patients living in that destination country;
2. The impetus to develop or expand deceased donation in the client country is diminished. Why develop a program of deceased organ transplantation, if residents of the client country can readily buy an organ in the destination country?
"Transplant tourism ( and organ trafficking) has been condemned by the Istanbul Declaration.
"The Transplantation Society is working diligently country by country to expose these practices and bring them to a halt. Alternatively, each country should develop a national self-sufficiency in organ donation and transplantation to provide a sufficient number of organs for their own native patients. "
Francis L. Delmonico, M.D.
Director of Medical Affairs
The Transplantation Society
World Health Organization
Advisory for Human Transplantation
Professor of Surgery
Harvard Medical School
"Re: the Times of London story
"It is well-known that patients from Greece and Israel and the Gulf countries travel to destinations that provide priority organ transplants for those recipients.
"This practice has become termed “ transplant tourism” and the ethical objection arises from two important aspects:
"1. Rich patients with ample resources are prioritized for example in the UK (as evident by this Times of London story) to undergo transplantation which diverts resources and expertise from the native patients living in that destination country;
2. The impetus to develop or expand deceased donation in the client country is diminished. Why develop a program of deceased organ transplantation, if residents of the client country can readily buy an organ in the destination country?
"Transplant tourism ( and organ trafficking) has been condemned by the Istanbul Declaration.
"The Transplantation Society is working diligently country by country to expose these practices and bring them to a halt. Alternatively, each country should develop a national self-sufficiency in organ donation and transplantation to provide a sufficient number of organs for their own native patients. "
Francis L. Delmonico, M.D.
Director of Medical Affairs
The Transplantation Society
World Health Organization
Advisory for Human Transplantation
Professor of Surgery
Harvard Medical School
Saturday, January 3, 2009
Market for transplantable organs
The Times of London reports on Outrage over organs ‘sold to foreigners’
Much of the discussion of sales of transplantable organs focuses on whether the organ donors may receive compensation. Most countries forbid such sales as repugnant. The issue here is quite different. Britain has both private medicine and a National Health Service, and in transplants performed privately, the transplantable organ is essentially sold in a package with the surgery and hospitalization. That is, even without any payments to donors, hospitals and surgeons sell organs, and when the transplant recipients are not British nationals, questions are being raised, the paper reports:
"THE organs of 50 British National Health Service donors have been given to foreign patients who have paid about £75,000 each for private transplant operations in the past two years, freedom of information documents show.
The liver transplants took place at NHS hospitals, despite severe shortages that mean many British patients die while waiting for an organ that could save their lives.
The documents disclose that 40 patients from Greece and Cyprus received liver transplants in the UK paid for by their governments. Donated livers were also given to people from non-European Union countries including Libya, the United Arab Emirates, China and Israel.
The surgeons who carry out the transplants receive a share of the operation fee — believed to be about £20,000 — as all the work is done privately in NHS hospitals. "
See my recent posts on the ongoing discussion in the U.S. on compensation for donors here and here. In the U.S. too, of course, although no payments to donors or their survivors are permitted, patients receive organs as part of a package that they or their insurers are charged for.
Much of the discussion of sales of transplantable organs focuses on whether the organ donors may receive compensation. Most countries forbid such sales as repugnant. The issue here is quite different. Britain has both private medicine and a National Health Service, and in transplants performed privately, the transplantable organ is essentially sold in a package with the surgery and hospitalization. That is, even without any payments to donors, hospitals and surgeons sell organs, and when the transplant recipients are not British nationals, questions are being raised, the paper reports:
"THE organs of 50 British National Health Service donors have been given to foreign patients who have paid about £75,000 each for private transplant operations in the past two years, freedom of information documents show.
The liver transplants took place at NHS hospitals, despite severe shortages that mean many British patients die while waiting for an organ that could save their lives.
The documents disclose that 40 patients from Greece and Cyprus received liver transplants in the UK paid for by their governments. Donated livers were also given to people from non-European Union countries including Libya, the United Arab Emirates, China and Israel.
The surgeons who carry out the transplants receive a share of the operation fee — believed to be about £20,000 — as all the work is done privately in NHS hospitals. "
See my recent posts on the ongoing discussion in the U.S. on compensation for donors here and here. In the U.S. too, of course, although no payments to donors or their survivors are permitted, patients receive organs as part of a package that they or their insurers are charged for.
The credit crisis and market design
The WSJ, in its Real Time Economics Blog and in a related story in their January 2 issue, raises some questions about how discussion of financial market regulation has turned into a discussion of market design (although that's not exactly the way they put it). They recount the poor reception given to Raghuram G. Rajan's 2005 presentation at the Fed's Jackson Hole conference in honor of Alan Greenspan. Prof. Rajan noted that banks' increased exposure to the securities markets would make them less able to serve as a source of credit in a crisis, and his concerns were, the story reports, met with disdain by those assembled. The blog summarizes the attitude at the time:
"The episode suggests one reason that the crisis went unchecked: A dangerous all-or-nothing orthodoxy had come to dominate the policy debate, where one was either for free markets or against them. "
The point of the market design movement, of course, is that markets aren't either "free" or non-existent. A better description is that markets have rules, and some rules work better than others, and the goal of regulators and others who shape the rules should be to find rules that enable markets to work better.
However the WSJ blog also quotes Professor Rajan on the difficulties facing academics who wish to offer opinions on compex issues of public policy:
"“Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about,” says Mr. Rajan. “They fear talking about things where everything is not neatly nailed in a model. They stay away and let the charlatans occupy the high ground.” "
(The story notes that calls for sensible regulation and market design were met with condescension before the credit crisis, a condescension that is being reevaluated now. So perhaps now is the chance I've been waiting for to note that an anagram for MARKET DESIGN is NEGATED SMIRK :-)
"The episode suggests one reason that the crisis went unchecked: A dangerous all-or-nothing orthodoxy had come to dominate the policy debate, where one was either for free markets or against them. "
The point of the market design movement, of course, is that markets aren't either "free" or non-existent. A better description is that markets have rules, and some rules work better than others, and the goal of regulators and others who shape the rules should be to find rules that enable markets to work better.
However the WSJ blog also quotes Professor Rajan on the difficulties facing academics who wish to offer opinions on compex issues of public policy:
"“Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about,” says Mr. Rajan. “They fear talking about things where everything is not neatly nailed in a model. They stay away and let the charlatans occupy the high ground.” "
(The story notes that calls for sensible regulation and market design were met with condescension before the credit crisis, a condescension that is being reevaluated now. So perhaps now is the chance I've been waiting for to note that an anagram for MARKET DESIGN is NEGATED SMIRK :-)
Thursday, January 1, 2009
Designer dresses: avoiding coordination failure
The Telegraph reports that "The anguish and embarrassment of arriving at an exclusive party only to find another woman wearing the same outfit could be banished forever thanks to a new website that allows partygoers to “register” their dresses before the event."
Apparently this is a serious problem, as the paper reports "The dress duplication problem has long caused anxiety among women. "
Here is the website at which you can register your dress and the event you intend to wear it to, or see if someone else has: http://dressregistry.com/ .
I'm planning to wear jeans to the office today, guys.
Apparently this is a serious problem, as the paper reports "The dress duplication problem has long caused anxiety among women. "
Here is the website at which you can register your dress and the event you intend to wear it to, or see if someone else has: http://dressregistry.com/ .
I'm planning to wear jeans to the office today, guys.
Marriage market for non-resident Indians
Being an overseas businessman is no longer the draw it once was in India's market for arranged marriages: West no longer best for Indian brides seeking suitors. Interestingly, detective agencies seem to play a role in this market.
"Those who work in India’s arranged marriage business say that Mrs Verma is far from alone. “Interest in NRIs has fallen by a quarter in just the past few months,” said Vivek Khare, of Jeevan-saathi.com, a website that helps to arrange up to 6,000 weddings a month.
Last year, an NRI with a decent career in Britain could easily arrange to meet 15 possible brides during one trip to India, according to Mr Khare. Now he would struggle to see five.
The demise of the NRIs’ status owes much to India’s economic renaissance and a new sense of national pride, experts say. “The opportunities to do well in India have increased hugely,” said Vibhas Mehta, of Shaadi.com, another matrimonial website. He added that India’s present brides-to-be are more independent than their predecessors and less taken with the idea of travelling overseas, leaving their own careers and families behind. ...
"It is not only the NRIs who stand to miss out. In India, scores of private detective agencies do little else but check up on prospective brides, to ensure Indians overseas have received accurate pictures. "
"Those who work in India’s arranged marriage business say that Mrs Verma is far from alone. “Interest in NRIs has fallen by a quarter in just the past few months,” said Vivek Khare, of Jeevan-saathi.com, a website that helps to arrange up to 6,000 weddings a month.
Last year, an NRI with a decent career in Britain could easily arrange to meet 15 possible brides during one trip to India, according to Mr Khare. Now he would struggle to see five.
The demise of the NRIs’ status owes much to India’s economic renaissance and a new sense of national pride, experts say. “The opportunities to do well in India have increased hugely,” said Vibhas Mehta, of Shaadi.com, another matrimonial website. He added that India’s present brides-to-be are more independent than their predecessors and less taken with the idea of travelling overseas, leaving their own careers and families behind. ...
"It is not only the NRIs who stand to miss out. In India, scores of private detective agencies do little else but check up on prospective brides, to ensure Indians overseas have received accurate pictures. "
The Economist as Auctioneer
Paul Milgrom has a new company, Auctionomics.
Arguably already the world's leading auction theorist, and a demigod among bidding consultants, this marks Paul's entry into the world of auctioneers (and providers of auction software), with some new ideas for flexible auction formats.
An older, related venture is Market Design Inc., with a number of other colleagues active as auctioneers, including Peter Cramton and Lawrence Ausubel, and the company Power Auctions LLC.
The title of this post is a play on the title of my 2002 article "The Economist as Engineer:... ." The increasing involvement of economists as auctioneers (and not just auction theorists and consultants and advisors) is a sign that market design is thriving.
Arguably already the world's leading auction theorist, and a demigod among bidding consultants, this marks Paul's entry into the world of auctioneers (and providers of auction software), with some new ideas for flexible auction formats.
An older, related venture is Market Design Inc., with a number of other colleagues active as auctioneers, including Peter Cramton and Lawrence Ausubel, and the company Power Auctions LLC.
The title of this post is a play on the title of my 2002 article "The Economist as Engineer:... ." The increasing involvement of economists as auctioneers (and not just auction theorists and consultants and advisors) is a sign that market design is thriving.
Wednesday, December 31, 2008
College admissions: deadlines and congestion
One modern convenience for high school seniors applying to college in 2008 is the Common Application, which lets them cut down on the number of times that they have to type in their social security numbers and middle names. But, as the end-of-2008 application deadline approaches, the fact that many people wait for the deadline combines with the fact that many now use the Common Application to create some congestion, the NY Times reports: Applications for Colleges Clog System
"On Tuesday, from 6:30 to 6:50 p.m., and on Wednesday from 9:45 to 10:45 a.m., there was a slowdown at the Common Application Web site, which handles online applications for some 350 colleges and universities. With the clock ticking toward a Jan. 1 deadline, the briefest delay can feel like a full-blown crisis to panicky high school seniors. ...
"More than a million high school seniors use the Common Application. Last year, the organization said that more than 171,000 applications were filed in the 72 hours from Dec. 30 through Jan. 1., 75,000 of them on Dec. 31.
Seth Allen, dean of admission at Grinnell College and president of the Common Application, said many students worked on their applications for weeks but waited until the deadline to submit them.
“I think having an online application has exacerbated waiting till the last minute,” Mr. Allen said, “and if they’re getting timed out on the site, on New Year’s Eve day, that’s certainly going to make them nervous.” "
"On Tuesday, from 6:30 to 6:50 p.m., and on Wednesday from 9:45 to 10:45 a.m., there was a slowdown at the Common Application Web site, which handles online applications for some 350 colleges and universities. With the clock ticking toward a Jan. 1 deadline, the briefest delay can feel like a full-blown crisis to panicky high school seniors. ...
"More than a million high school seniors use the Common Application. Last year, the organization said that more than 171,000 applications were filed in the 72 hours from Dec. 30 through Jan. 1., 75,000 of them on Dec. 31.
Seth Allen, dean of admission at Grinnell College and president of the Common Application, said many students worked on their applications for weeks but waited until the deadline to submit them.
“I think having an online application has exacerbated waiting till the last minute,” Mr. Allen said, “and if they’re getting timed out on the site, on New Year’s Eve day, that’s certainly going to make them nervous.” "
Marriage Market among a slice of the wealthy
The NY Times reports on the International Debutante Ball at the Waldorf-Astoria: Glamour Still Rules, but With Fewer Debutantes .
"...shortly before midnight, the young debutantes, each flanked by a civilian and military escort, ascended the stage for a deep curtsy."
The "introduction" or "coming out" of young women as debutantes at 18 used to be the announcement in a certain part of high society that they (the young women) were old enough for first marriage.
"...shortly before midnight, the young debutantes, each flanked by a civilian and military escort, ascended the stage for a deep curtsy."
The "introduction" or "coming out" of young women as debutantes at 18 used to be the announcement in a certain part of high society that they (the young women) were old enough for first marriage.
Tuesday, December 30, 2008
Market for honey: "honey laundering"
'Honey laundering' beats US tariffs on Chinese food products (I couldn't resist a new criminal activity with such a great name...)
"As the name suggests, honey laundering involves disguising drums of the sticky stuff from China by selling it to a third party—usually a distributor in another part of the world—then re-packaging it and re-exporting it, so that its source remains unknown. ...
As harmless as honey laundering might sound, health officials say that unless something is done, the problem could result in a repeat of the tainted baby milk and pet food scandals that dominated headlines this year—this time with honey. The reason dates back to 1997 when Chinese bee hives were almost wiped out by a bacterial epidemic. Instead of destroying the hives, beekeepers treated them with chloramphenicol, a toxic antibiotic... The practice has since been outlawed by China’s Ministry of Agriculture, but even today, some Chinese honey remains tainted—hence the fact that random checks on shipments are carried out at US ports. "
"As the name suggests, honey laundering involves disguising drums of the sticky stuff from China by selling it to a third party—usually a distributor in another part of the world—then re-packaging it and re-exporting it, so that its source remains unknown. ...
As harmless as honey laundering might sound, health officials say that unless something is done, the problem could result in a repeat of the tainted baby milk and pet food scandals that dominated headlines this year—this time with honey. The reason dates back to 1997 when Chinese bee hives were almost wiped out by a bacterial epidemic. Instead of destroying the hives, beekeepers treated them with chloramphenicol, a toxic antibiotic... The practice has since been outlawed by China’s Ministry of Agriculture, but even today, some Chinese honey remains tainted—hence the fact that random checks on shipments are carried out at US ports. "
Marriage market in Iran
The marriage market in Iran is not proceeding as planned, the Guardian reports: Premarital sex on rise as Iranians delay marriage, survey finds
"The survey also revealed that the average marrying age had risen to 40 for men and 35 for women, a blow to the government's goal of promoting marriage to shore up society's Islamic foundations."
The rise in age of marriage might be a result of religious barriers being raised to courtship between unmarried men and women. But there are other hypotheses to consider:
"Many blame economic circumstances for their failure to marry, citing high inflation, unemployment and a housing shortage along with cultural traditions that expect brides' families to provide dowries and husbands to commit themselves to mehrieh, an agreed cash gift."
"However, Hojatoleslam Ghasem Ebrahimipour, a sociologist, told Shabestan news agency that the trend was due to the availability of premarital sex, and feminism among educated women. "When a woman is educated and has an income, she does not want to accept masculine domination through marriage," he said."
"The survey also revealed that the average marrying age had risen to 40 for men and 35 for women, a blow to the government's goal of promoting marriage to shore up society's Islamic foundations."
The rise in age of marriage might be a result of religious barriers being raised to courtship between unmarried men and women. But there are other hypotheses to consider:
"Many blame economic circumstances for their failure to marry, citing high inflation, unemployment and a housing shortage along with cultural traditions that expect brides' families to provide dowries and husbands to commit themselves to mehrieh, an agreed cash gift."
"However, Hojatoleslam Ghasem Ebrahimipour, a sociologist, told Shabestan news agency that the trend was due to the availability of premarital sex, and feminism among educated women. "When a woman is educated and has an income, she does not want to accept masculine domination through marriage," he said."
Pawn shops attracting wealthier customers
The WSJ has a story whose title and subtitle sum it up: People Pulling Up to Pawnshops Today Are Driving Cadillacs and BMWs : Well-to-Do Turn to Last-Resort Lenders; Putting Up Diamonds, Dumpsters as Collateral
Not only are the number of customers for loans increasing, so are the number of defaults:
"This year, the number of first-time pawnshop users is up 10%, according to Mr. Adelman of the pawnbroker trade group. Owners say the rate at which people are coming back to retrieve property and pay off loans has fallen about 10%. That leaves the store on the hook to sell the goods."
So pawn shops may be a place where a larger variety of goods than in the past will be recycled in the continuing credit crisis.
Not only are the number of customers for loans increasing, so are the number of defaults:
"This year, the number of first-time pawnshop users is up 10%, according to Mr. Adelman of the pawnbroker trade group. Owners say the rate at which people are coming back to retrieve property and pay off loans has fallen about 10%. That leaves the store on the hook to sell the goods."
So pawn shops may be a place where a larger variety of goods than in the past will be recycled in the continuing credit crisis.
Sunday, December 28, 2008
Eminent domain
A story in the NY Times has a striking photo of a private home in Seattle located in a niche in a large commercial building. The large building had to be built around the small one after developers were unable to convince the owner to sell them the last piece of land they needed to build a conventional, rectangular building.
Governments, unlike private developers, have the right of eminent domain, which allows them to compel landowners to sell their land for public purposes. The idea is that some public projects, like highways, would be difficult or impossible to complete if each plot of land on the proposed route would have to be acquired on the private market before a road could be built. Eminent domain is meant to solve the coordination problem involved in assembling a large landholding (since there are seldom large, road-shaped plots of land vacant where new roads would be useful in populated places). It is also meant in part to solve the "holdup problem" associated with the fact that, once a large tract of property has been assembled, the missing pieces have very high marginal value, so that the last properties needed for a large project would become especially difficult or costly to acquire.
Governments can use eminent domain for private projects that they take to be in the public interest, e.g. not just highways, but privately owned railroads also. Recently the State of New York agreed to use eminent domain to acquire the last plots of land for Columbia University to expand its campus north of its current Manhattan location, on land that Columbia had mostly assembled over years of private acquisition.
Harvard acquired land in the Allston neighborhood of Boston in the 1990's, without eminent domain, by buying lots secretly, through a third party, as they became available. The thought was that the last lots would have become very expensive if it became known that Harvard was purchasing land for a large project.
Update: Steve Leider urges me to include the recent expansion of eminent domain authority to include more strictly private projects. He writes:
"You probably ought to mention the Kelo decision (http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London ) which substantially expanded what counts as "for a public purpose" in terms of using eminent domain for a private project - basically increased tax revenue counts. The decision is very controversial, since it basically allows ED for just about anything, and many are worried that developers will try to wield influence with lawmakers to get ED invoked. There was lots of discussion at the time on law blogs like volokh.com (here are some of their recent posts on the subject http://volokh.com/posts/chain_1201469127.shtml )"
Governments, unlike private developers, have the right of eminent domain, which allows them to compel landowners to sell their land for public purposes. The idea is that some public projects, like highways, would be difficult or impossible to complete if each plot of land on the proposed route would have to be acquired on the private market before a road could be built. Eminent domain is meant to solve the coordination problem involved in assembling a large landholding (since there are seldom large, road-shaped plots of land vacant where new roads would be useful in populated places). It is also meant in part to solve the "holdup problem" associated with the fact that, once a large tract of property has been assembled, the missing pieces have very high marginal value, so that the last properties needed for a large project would become especially difficult or costly to acquire.
Governments can use eminent domain for private projects that they take to be in the public interest, e.g. not just highways, but privately owned railroads also. Recently the State of New York agreed to use eminent domain to acquire the last plots of land for Columbia University to expand its campus north of its current Manhattan location, on land that Columbia had mostly assembled over years of private acquisition.
Harvard acquired land in the Allston neighborhood of Boston in the 1990's, without eminent domain, by buying lots secretly, through a third party, as they became available. The thought was that the last lots would have become very expensive if it became known that Harvard was purchasing land for a large project.
Update: Steve Leider urges me to include the recent expansion of eminent domain authority to include more strictly private projects. He writes:
"You probably ought to mention the Kelo decision (http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London ) which substantially expanded what counts as "for a public purpose" in terms of using eminent domain for a private project - basically increased tax revenue counts. The decision is very controversial, since it basically allows ED for just about anything, and many are worried that developers will try to wield influence with lawmakers to get ED invoked. There was lots of discussion at the time on law blogs like volokh.com (here are some of their recent posts on the subject http://volokh.com/posts/chain_1201469127.shtml )"
Market for used books
The easy availability of internet shopping for used books hasn't just affected used book stores, it is having an effect on the sale of new books as well, much like internet downloading of music affects sales of recorded music. Here's a story from the NY Times: Bargain Hunting for Books, and Feeling Sheepish About It . It makes the point that people can (and do) now sell relatively new books once they have read them, and that this impacts stores that sell new books, and of course authors, since neither get a share of resales. Increasing the thickness of the used book market increases the 'velocity' of a book, i.e. the rate at which new books change hands. Each copy of a book gets more readers, but each title sells fewer new copies.
"A book search engine like ViaLibri.net can knit together 20,000 booksellers around the world offering tens of millions of nearly new, used or rare books."
"Andy Ross, the former owner of Cody’s, told me that buying books online “was not morally dubious, but it is tragic. It has a lot of unintended consequences for communities.”
Mr. Ross said he realized that Cody’s was doomed when he noticed that in the last year he hadn’t sold a single copy of that old-reliable for undergraduates, Kant’s “Critique of Pure Reason.” Students presumably were buying it online. Sales of classics and other backlist titles used to be the financial engine of publishers and bookstores as well, allowing them to take chances on new authors. Clearly that model is breaking. Simon & Schuster, which laid off staffers this month, cited backlist sales as a particularly troubled area. "
"A book search engine like ViaLibri.net can knit together 20,000 booksellers around the world offering tens of millions of nearly new, used or rare books."
"Andy Ross, the former owner of Cody’s, told me that buying books online “was not morally dubious, but it is tragic. It has a lot of unintended consequences for communities.”
Mr. Ross said he realized that Cody’s was doomed when he noticed that in the last year he hadn’t sold a single copy of that old-reliable for undergraduates, Kant’s “Critique of Pure Reason.” Students presumably were buying it online. Sales of classics and other backlist titles used to be the financial engine of publishers and bookstores as well, allowing them to take chances on new authors. Clearly that model is breaking. Simon & Schuster, which laid off staffers this month, cited backlist sales as a particularly troubled area. "
Thursday, December 25, 2008
New York City Middle School Choice
New York City has a centralized school choice process for high schools, but middle schools are another story. The New York Times reports: New York’s New Choices Raise Stakes for Middle School
"Over the past two years, the city has taken steps to standardize middle-school admissions, organizing fairs in each district, printing directories to clarify options and creating a uniform timeline. Applications preprinted with each fifth grader’s test scores and attendance record were distributed this month and are due, with choices ranked, on Jan. 9. For the first time, the applications will be processed using a $9.7 million system being developed by Vanguard Direct for prekindergarten through high school admissions.
But these changes have also highlighted how wildly admissions policies vary between schools and districts.
For example, of the 16 middle schools in District 2, which covers the Upper East Side and much of Lower Manhattan, one, Greenwich Village Middle, considers grades, interviews, writing samples, teacher recommendations and “group problem-solving tasks,” while another, Middle School 131, weighs attendance and punctuality, among other factors.
In District 12 in the Bronx, 14 middle schools select students randomly or with preference for certain addresses, while five others are open only to students in certain neighborhoods. Two Queens districts do not use the city’s applications, simply placing students by geography (though some schools within them have their own applications).
In fact, there remain middle schools scattered throughout the city that have been allowed to keep their own separate processes, including seven in Manhattan that accept children from across the city."
"Over the past two years, the city has taken steps to standardize middle-school admissions, organizing fairs in each district, printing directories to clarify options and creating a uniform timeline. Applications preprinted with each fifth grader’s test scores and attendance record were distributed this month and are due, with choices ranked, on Jan. 9. For the first time, the applications will be processed using a $9.7 million system being developed by Vanguard Direct for prekindergarten through high school admissions.
But these changes have also highlighted how wildly admissions policies vary between schools and districts.
For example, of the 16 middle schools in District 2, which covers the Upper East Side and much of Lower Manhattan, one, Greenwich Village Middle, considers grades, interviews, writing samples, teacher recommendations and “group problem-solving tasks,” while another, Middle School 131, weighs attendance and punctuality, among other factors.
In District 12 in the Bronx, 14 middle schools select students randomly or with preference for certain addresses, while five others are open only to students in certain neighborhoods. Two Queens districts do not use the city’s applications, simply placing students by geography (though some schools within them have their own applications).
In fact, there remain middle schools scattered throughout the city that have been allowed to keep their own separate processes, including seven in Manhattan that accept children from across the city."
Charity at a price
Nicholas Kristof's NY Times column on Christmas day, The Sin In Doing Good Deeds, begins with the question about repugnant transactions:
"If a businessman rakes in a hefty profit while doing good works, is that charity or greed? Do we applaud or hiss? "
He writes, of a book by Dan Palotta on the subject:
"Mr. Pallotta’s frustration is intertwined with his own history as the inventor of fund-raisers like AIDSRides and Breast Cancer 3-Days — events that, he says, netted $305 million over nine years for unrestricted use by charities. In the aid world, that’s a breathtaking sum.
But Mr. Pallotta’s company wasn’t a charity, but rather a for-profit company that created charitable events. Critics railed at his $394,500 salary — low for a corporate chief executive, but stratospheric in the aid world — and at the millions of dollars spent on advertising and marketing and other expenses.
“Shame on Pallotta,” declared one critic at the time, accusing him of “greed and unabashed profiteering.” In the aftermath of a wave of criticism, his company collapsed. "
Kristof later touches tangentially on a lively debate among development economists:
"There are lots of saintly aid workers in Rwanda, including the heroic Dr. Paul Farmer of Partners in Health, and they do extraordinary work. But sometimes, so do the suits. Isaac Durojaiye, a Nigerian businessman, is an example of the way the line is beginning to blur between businesses and charities. He runs a for-profit franchise business that provides fee-for-use public toilets in Nigeria. When he started, there was one public toilet in Nigeria for every 200,000 people, but by charging, he has been able to provide basic sanitation to far more people than any aid group. "
Aside from debating the merits of non-profit versus profit making organizations in fostering development, development economists have become interested in the question of whether it might further the goals of charity to charge a small price for some goods (water purifiers, or mosquito nets), rather than giving them away for free. Aside from the issue of how such supplies are financed, the question has been raised about whether charging for such goods might better put them in the hands of those who would actually use them, or even might make people more likely to use them.
Two randomized trial field experiments have reached different conclusions on this subject, in two countries, for two different goods.
The first of these, by my colleague Nava Ashraf, and James Berry, and Jesse M. Shapiro is "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia."
They find that, for a home water purification product, in Zambia "...higher prices screen out those who use the product less," i.e. that when a price is charged, more of the product ends up being actually used.
The second paper, which uses the Ashraf et al. experimental design to study the distribution of insecticide-treated mosquito nets in Kenya, is
"Free Distribution Or Cost-Sharing? Evidence From A Randomized Malaria Prevention Experiment" by Jessica Cohen and Pascaline Dupas. They conclude
"... our results suggest that in some settings free distribution might be as
cost-effective as cost-sharing, if not more."
"If a businessman rakes in a hefty profit while doing good works, is that charity or greed? Do we applaud or hiss? "
He writes, of a book by Dan Palotta on the subject:
"Mr. Pallotta’s frustration is intertwined with his own history as the inventor of fund-raisers like AIDSRides and Breast Cancer 3-Days — events that, he says, netted $305 million over nine years for unrestricted use by charities. In the aid world, that’s a breathtaking sum.
But Mr. Pallotta’s company wasn’t a charity, but rather a for-profit company that created charitable events. Critics railed at his $394,500 salary — low for a corporate chief executive, but stratospheric in the aid world — and at the millions of dollars spent on advertising and marketing and other expenses.
“Shame on Pallotta,” declared one critic at the time, accusing him of “greed and unabashed profiteering.” In the aftermath of a wave of criticism, his company collapsed. "
Kristof later touches tangentially on a lively debate among development economists:
"There are lots of saintly aid workers in Rwanda, including the heroic Dr. Paul Farmer of Partners in Health, and they do extraordinary work. But sometimes, so do the suits. Isaac Durojaiye, a Nigerian businessman, is an example of the way the line is beginning to blur between businesses and charities. He runs a for-profit franchise business that provides fee-for-use public toilets in Nigeria. When he started, there was one public toilet in Nigeria for every 200,000 people, but by charging, he has been able to provide basic sanitation to far more people than any aid group. "
Aside from debating the merits of non-profit versus profit making organizations in fostering development, development economists have become interested in the question of whether it might further the goals of charity to charge a small price for some goods (water purifiers, or mosquito nets), rather than giving them away for free. Aside from the issue of how such supplies are financed, the question has been raised about whether charging for such goods might better put them in the hands of those who would actually use them, or even might make people more likely to use them.
Two randomized trial field experiments have reached different conclusions on this subject, in two countries, for two different goods.
The first of these, by my colleague Nava Ashraf, and James Berry, and Jesse M. Shapiro is "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia."
They find that, for a home water purification product, in Zambia "...higher prices screen out those who use the product less," i.e. that when a price is charged, more of the product ends up being actually used.
The second paper, which uses the Ashraf et al. experimental design to study the distribution of insecticide-treated mosquito nets in Kenya, is
"Free Distribution Or Cost-Sharing? Evidence From A Randomized Malaria Prevention Experiment" by Jessica Cohen and Pascaline Dupas. They conclude
"... our results suggest that in some settings free distribution might be as
cost-effective as cost-sharing, if not more."
Wednesday, December 24, 2008
Markets and fraud
You can't read the news these days without thinking about fraud, and how market designers should think about it. I don't just mean headline grabbing Ponzi schemes of unprecedented proportions either, but run of the mill misbehavior. Part of the answer involves regulation, legislation, law enforcement, and the profession of accountancy. There's even an Association of Certified Fraud Examiners.
Scott Kominers (an aspiring market designer who is applying to grad schools this year, and looks like a hot prospect) draws my attention to a case that might fall under the heading of environmental activism: Bidder said it was easy to rig government auction.
Scott writes:
"Apparently, "Tim DeChristopher, 27, a University of Utah economics student and environmental activist," infiltrated the government oil and gas parcel auction. 'He snapped up 22,500 acres of parcels between Arches and Canyonlands national parks that he doesn't plan to develop or even pay for. He also drove up prices on other bids by hundreds of thousands of dollars.' Proof that those who do not practice safe market design are doomed to be beaten by economics students."
Scott Kominers (an aspiring market designer who is applying to grad schools this year, and looks like a hot prospect) draws my attention to a case that might fall under the heading of environmental activism: Bidder said it was easy to rig government auction.
Scott writes:
"Apparently, "Tim DeChristopher, 27, a University of Utah economics student and environmental activist," infiltrated the government oil and gas parcel auction. 'He snapped up 22,500 acres of parcels between Arches and Canyonlands national parks that he doesn't plan to develop or even pay for. He also drove up prices on other bids by hundreds of thousands of dollars.' Proof that those who do not practice safe market design are doomed to be beaten by economics students."
Tuesday, December 23, 2008
Lifesharers: organ donation as a club good rather than a public good
My earlier post today drew a comment from the executive director of an organization, LifeSharers, with an interesting approach to promoting deceased organ donation. In economist-speak, they want to increase organ donation by changing it from a public good to a club good.
Deceased organ donation is a public good in the sense that everyone is better off in expectation if everyone else is willing to donate their organs when they die, but no one receives any direct benefit from donating his organs after death (and there must be perceived costs to donation, since not everyone is a donor).
Economists often worry about how to provide public goods (which is one reason for the invention of taxes: the fellow who mows the lawn in a public park is likely a city employee, but there's no problem in getting people to maintain their own, private lawns...)
In between public and private goods are "club goods," like a park or country club that is funded by members, and is only open to members and their guests. The idea of LifeSharers is that organ donation can be a club good: members indicate that they are willing to donate their organs, giving first preference to other members.
The LifeSharers site has references to some of the many articles that discuss this or similar ideas favorably in the context of organ donation. (I can't put my finger offhand on an unfavorable reference, but I recall seeing some arguments in the medical ethics literature that question whether you should always be happy giving preference to a club member in favor of a non club member, when there might also be many other features that distinguish them...)
As a practical matter, there are obviously obstacles to making a voluntary club good out of a public good that only benefits a member with very low probability. The LifeSharers FAQ includes the following:
Q. How many LifeSharers members have died and donated organs?
A. We have not yet had a member die in circumstances that would have permitted recovery of his or her organs.
Whatever your views on the market design issues, the holidays are a good time (when families are gathered) to let yours know that you would like to be an organ donor, so that they will be able to act on your wishes if it comes to that.
Deceased organ donation is a public good in the sense that everyone is better off in expectation if everyone else is willing to donate their organs when they die, but no one receives any direct benefit from donating his organs after death (and there must be perceived costs to donation, since not everyone is a donor).
Economists often worry about how to provide public goods (which is one reason for the invention of taxes: the fellow who mows the lawn in a public park is likely a city employee, but there's no problem in getting people to maintain their own, private lawns...)
In between public and private goods are "club goods," like a park or country club that is funded by members, and is only open to members and their guests. The idea of LifeSharers is that organ donation can be a club good: members indicate that they are willing to donate their organs, giving first preference to other members.
The LifeSharers site has references to some of the many articles that discuss this or similar ideas favorably in the context of organ donation. (I can't put my finger offhand on an unfavorable reference, but I recall seeing some arguments in the medical ethics literature that question whether you should always be happy giving preference to a club member in favor of a non club member, when there might also be many other features that distinguish them...)
As a practical matter, there are obviously obstacles to making a voluntary club good out of a public good that only benefits a member with very low probability. The LifeSharers FAQ includes the following:
Q. How many LifeSharers members have died and donated organs?
A. We have not yet had a member die in circumstances that would have permitted recovery of his or her organs.
Whatever your views on the market design issues, the holidays are a good time (when families are gathered) to let yours know that you would like to be an organ donor, so that they will be able to act on your wishes if it comes to that.
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