Increasing Marginal Utility

A blog so good it violates the law of diminishing marginal utility.

Browsing Catharsis – 07.19.15

Immigration and Crime,” by Ilya Somin.

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“Conventional wisdom suggests that energy efficiency (EE) policies are beneficial because they induce investments that pay for themselves and lead to emissions reductions. However, this belief is primarily based on projections from engineering models. This paper reports on the results of an experimental evaluation of the nation’s largest residential EE program conducted on a sample of more than 30,000 households. The findings suggest that the upfront investment costs are about twice the actual energy savings. Further, the model-projected savings are roughly 2.5 times the actual savings. While this might be attributed to the ‘rebound’ effect – when demand for energy end uses increases as a result of greater efficiency – the paper fails to find evidence of significantly higher indoor temperatures at weatherized homes. Even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.”

Meredith Fowlie, Michael Greenstone, and Catherine Wolfram. 2015. “Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program.” NBER Working Paper no. 21331.

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Browsing Catharsis – 07.18.15

Teardown Artist: How general manager A.J. Preller destroyed the San Diego Padres in a matter of months,” by Rany Jazayerli.

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“This paper measures the 2007-13 evolution of employment tax rates in the U.K. and the U.S., especially as they are influenced by changes in tax and safety net benefit rules. The magnitudes of the U.S. changes are greater, in the direction of taxing a greater fraction of the value created by employment, and primarily achieved with changes in implicit tax rates. Even though both countries implemented temporary “fiscal stimulus,” their tax rate dynamics were different: the U.S. stimulus increased rates whereas the U.K. stimulus reduced them. The U.K. later increased the tax on employment during its so-called ‘austerity’ period. Employer-cost dynamics are also different in the two countries. The tax rates calculated in this paper are a first ingredient for cross-country comparisons of labor market and fiscal policy dynamics during and after the financial crisis.”

Casey Mulligan. 2015. “Fiscal Policies and the Prices of Labor: A Comparison of the U.K. and U.S.” NBER Working Paper no. 21358.

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Browsing Catharsis – 07.17.15

A Lifestyle So Good, It’s Mandatory,” by Kevin D. Williamson. I wish weed wasn’t the headline example.

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“From the streets of Hong Kong to Ferguson, Missouri, civil disobedience has again become newsworthy. What explains the prevalence and extremity of acts of civil disobedience?This paper presents a model in which protest planners choose the nature of the disturbance hoping to influence voters (or other decision-makers in less democratic regimes) both through the size of the unrest and by generating a response. The model suggests that protesters will either choose a mild “epsilon” protest, such as a peaceful march, which serves mainly to signal the size of the disgruntled population, or a “sweet spot” protest, which is painful enough to generate a response but not painful enough so that an aggressive response is universally applauded. Since non-epsilon protests serve primarily to signal the leaders’ type, they will occur either when protesters have private information about the leader’s type or when the distribution of voters’ preferences are convex in a way that leads the revelation of uncertainty to increase the probability of regime change. The requirements needed for rational civil disobedience seem not to hold in many world settings, and so we explore ways in which bounded rationality by protesters, voters, and incumbent leaders can also explain civil disobedience.”

Ed Glaeser and Cass Sunstein. 2015. “A Theory of Civil Disobedience.” NBER Working Paper no. 21338.

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Browsing Catharsis – 07.16.15

Unhealthy Fixation: The war against genetically modified organisms is full of fearmongering, errors, and fraud. Labeling them will not make you safer,” by William Saletan.

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“In response to concerns that distracted driving due to cell phone use has become a threat to roadway safety, many states have passed laws that prohibit drivers from texting and talking on handheld cell phones. In light of recent evidence that these bans do not reduce traffic accidents, this article asks whether this is because the laws are ineffective in reducing usage. Using data on observed driver cell phone usage combined with a difference-in-differences approach that exploits the within-state variation in the adoption of bans, I find that prohibiting drivers from texting and talking on handheld cell phones reduces each by 60% and 50%, respectively. This suggests the policy is effective at reducing the targeted behavior, which leads me to discuss other factors and behavioral responses that may counteract the reduction in observed usage.”

Cheng Cheng. 2015. “Do Cell Phone Bans Change Driver Behavior?” Economic Inquiry 53, no. 3: 1420-1436.

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Browsing Catharsis – 07.14.15

Pizza Hut Australia’s New Pizza Basically Has Pot Pies Embedded in the Crust.”

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“The concept of social capital has become more important in understanding contemporary economic development in the era of globalization. This concept, however, requires a theoretical framework that could help to distinguish between forms of social capital with positive effects on local development and other forms that may have negative consequences. This article argues that in order to understand this difference, two conditions are crucial. First, social capital has to be considered in terms of social relations and social networks, rather than in terms of culture and civicness. The second condition is that the interaction between social capital and other institutions, especially political institutions, has to be carefully analysed. Therefore, this article points to the crucial role of political factors – of the `embedded autonomy’ of political action – in favouring a positive role of social capital in local economic development.”

Carlo Trigilia. 2001. “Social Capital and Local Development.” European Journal of Social Theory 4, no. 4: 427-442.

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Browsing Catharsis – 07.13.15

Celebrating What Is, Not What Was,” by Razib Khan.

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“Social trust is frequently claimed to be conducive for economic reforms. Likewise, the scope of policy liberalization is influenced by the political power structure as manifested in institutional and political constraints on the executive (IPCE). However, social trust and IPCE are possibly intertwined in their effects on economic liberalization. This paper empirically explores the relationship between social trust, IPCE and the scope of economic deregulation as measured by the first difference in the regulation subindex of the Economic Freedom of the World index. The results provide evidence in favor of a positive association of social trust with deregulation and of a negative association between institutional or partisan veto-points and deregulation. Yet, according to our analysis IPCE are an obstacle for economic deregulation only in relatively low trusting environments and social trust unfolds a particular strength as driver of deregulation with increasing levels of IPCE.”

Markus Leibrecht and Hans Pitlik. 2015. “Social trust, institutional and political constraints on the executive and deregulation of markets.” European Journal of Political Economy 39: 249-268.

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Browsing Catharsis – 07.12.15

5 Details That Make Famous Conspiracy Theories Seem Legit,” by Adam Tod Brown.

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“Lighthouse and the Trinity House case have triggered extensive debate on the possibility of private production of public goods and, more especially, lighthouse services provision. This contribution sums up current academic debate about lighthouse provision. It shows that the English system of lighthouse services provision cannot be rigorously considered as an example of private provision. Some historical experiences have shown that private provision was possible, although governmental hindrances restrained a full-fledged market process provision. This contribution defends the interest of mobilizing a political economy perspective for an understanding of the different frameworks and institutional designs for providing such services. Some national cases illustrate and sustain the proposed political economy framework.”

Laurent Carnis. 2014. “The Political Economy of Lighthouses: Some Further Considerations.” Journal des Economistes et des Etudes Humaines 20, no. 2: 143-165.

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Browsing Catharsis – 07.11.15

In Praise of Israel Kirzner,” by Davis Glasner.

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“Behavioral economics presents a ‘paternalistic’ rationale for benevolent government intervention. This paper presents a model of public debt where voters have self-control problems and attempt to commit using illiquid assets. In equilibrium, government accumulates debt to respond to individuals’ desire to undo their commitments, which leads individuals to rebalance their portfolio, in turn feeding into a demand for further debt accumulation. As a consequence, (i) large (and distortionary) government debt accumulation occurs, and (ii) banning illiquid assets could improve individuals’ welfare. These results offer a new rationale for balanced budget rules in constitutions to restrain governments’ responses to voters’ self-control problems.”

Alberto Bisin, Alessandro Lizzeri, and Leeat Yariv. 2015. “Government Policy with Time Inconsistent Voters.” American Economic Review, 105, no. 6: 1711-1737.

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Browsing Catharsis – 07.10.15

Neo-Fisherism, Missing Markets, and the Identification Problem,” by Scott Sumner.

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“This paper seeks to reconcile research finding that labor market outcomes are related to economic freedom for entrepreneurs and separate research finding that higher homeownership rates are associated with more unemployment…. The results indicate that economic freedom is associated with favorable labor market conditions but that the relationship between homeownership and poor labor market outcomes is small and insignificant in most specifications once economic freedom is accounted for.”

Lauren Raymer Heller and E. Frank Stephenson. 2015. “Economic freedom, homeownership, and state labor market conditions.” Journal of Entrepreneurship and Public Policy 4, no. 2.

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Browsing Catharsis – 07.09.15

Invasive species are the greatest cause of extinction,” by Matt Ridley.

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“As shown in the 1930s by Hicks and Robinson the elasticity of substitution (σ) is a key parameter that captures whether capital and labor are gross complements or substitutes. Establishing the magnitude of σ is vital, not only for explaining changes in the distribution of income between factors but also for undertaking policy measures to influence it. Several papers have explained the recent decline in labor’s share in income by claiming that σ is greater than one and that there has been capital deepening. This paper presents evidence that refutes these claims. It shows that despite a rise in measured capital-labor ratios, labor-augmenting technical change in the US has been sufficiently rapid that effective capital-labor ratios have actually fallen in the sectors and industries that account for the largest portion of the declining labor share in income since 1980. In combination with estimates that corroborate the consensus in the literature that σ is less than 1, these declines in the effective capital ratio can account for much of the recent fall in labor’s share in US income at both the aggregate and industry level. Paradoxically, these results also suggest that increased capital formation would raise labor’s share in income.”

Robert Z. Lawrence. 2015. “Recent Declines in Labor’s Share in US Income: A Preliminary Neoclassical Account.” NBER Working Paper no. 21296.

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