Infotopia

A new study reported that Americans are getting just as much news from TV/radio as we did 20 years ago (57 minutes/day) and now also get 13 minutes via the Internet. So in theory we should be more informed.


But when you look at the mix of what we watch/listen to, that explains the amazing truths in books like "The Myth of the Rational Voter" etc. We know what Paris Hilton and Justin Bieber are doing.

It's like what many researchers have predicted about the interaction between confirmation bias and the variety that is available on the Internet. We have the ability to go online and either get high quality news from multiple perspectives so we can evaluate the evidence on various issues and decide for ourselves what is true (e.g. climate change) or what policies are best (e.g. taxes). But we don't. We go where we will get the comforting feeling of someone agreeing with us.


I suspect that few of us understand what the implications of this are on the future of our society. Do any of us know what effects the Turkish approval of their new Constitutional amendments will have on world peace? Or of the possible leadership challenge last week to Japanese Prime Minister Naoto Kan?

fighting society's problems from both directions

Anyone who reads this blog knows that I am a fan of Pigouvian tax policy. In essence, this means using tax policy to balance externalities. If people engage in a behavior that adds cost to society, then taxes can be used both to discourage the behavior and to compensate society for those costs. For example, if speeding costs society in terms of increased health care costs, pollution, and other results from the increase in accident risk, we can fine speeders so that the money raised pays for the costs and drivers are discouraged from speeding. This only works if the money raised is actually spent on the externalities rather than redirected to other things.

Similar approaches can be used for pollution (carbon taxes), gambling or alcohol taxes, etc. Recent proposals for sugary soda taxes could also be Pigouvian, although I am not sure if the money raised would be directed to fighting childhood obesity.

I read an article recently that suggested we would be better off focusing our efforts on reducing the externalities instead. Rather than fining speeders, let’s make roads safer for fast driving so we can drive as fast as we want without creating the externalities in the first place. Of course, this is also a good approach, but I suppose it depends on how feasible the solutions can be. Which is easier, innovating road design to make them safer for speeding or adding more police to the highway patrol? Can we fight childhood obesity in ways that allow kids to drink as much sugary soda as they want? I’m not sure. But the article is correct that these challenges should be approached from both directions.

Pigouvian alcohol taxes

Wow. According to the research cited here, the externalities from alcohol consumption (the cost to society from DUI, health care, etc) should quadruple the alcohol tax (assuming we use the money to compensate for those costs - called Pigouvian taxes for anyone reading my blog). That would make a 6-pack of Bud, currently about $6 int...o $10.

The research also shows that light drinkers (the ones who don't cause the societal costs) would reduce their drinking because of the increased cost but the heavy drinkers wouldn't by very much. So we would still have the drunks driving around and getting liver disease, but the rest of us would lose out on the enjoyment of a good scotch after dinner.

I am a strong proponent of Pigouvian tax strategies, but I am not sure about this tradeoff.

BP spill

I haven't posted a public policy post lately, but the Congressional hearings on the BP skill are driving me a bit crazy.

Yeah, I know I know these things are always about demogogueing and pounding the podium for campaign material, not actual fact finding. But the questions they are asking are just ridiculous.

If you are hiring a CEO for a huge corporation, what would you tell him or her to spend his/her time focused on:

• making large strategic decisions about the company's future
• second guessing the technical experts about technical decisions
• studying the technical decisions so you understand them

I vote for #1. #2 is definitely off the table. And #3 sounds good, but it would take all day so I would rather skip it and stick with #1.

So why ask the BP CEO why they went with this kind of collar and grade of steel v another? What they should be asking him is how the balance between safety, cost, and profit potential was established and how it was communicated and implemented to the technical experts. Were they rewarded for taking short cuts? Were they discouraged from looking into the risks of shortcuts they took? How were risk mgmt procedures selected and managed?

This is what the CEO should either know or be able to find out. If they want to know about the collars, they need to bring in the BP technicians and ask them how and why they chose. Ask them how they justify the reduced safety of their choices. What were the tradeoffs they made at those times?

Allocating health care resources

When deciding if health care resource allocation policies are fair, the average person rates them as more fair when framed positively than when it is framed negatively, even though there is no real difference in the result.

For example, if you describe a policy as the one that will be used to decide who gets a heart transplant, it will seem more fair than if you describe the same policy as the one that will be used to decide who doesn't get one. This is the case even if they know that there are only X number of hearts available (so for each person who gets one, there is by definition a person who doesn't).

What does this show? In addition to showing that the average person's decision making processes are flawed, it also present policy guidance. The way you sell the policy has as much to do with whether it is accepted by the public as the policy itself. Maybe more.

Fashion Copyrights

Great guest post over at Freakonomics on copyright issues in the fashion industry. The blogger, an expert on the fashion business, explains why fashion copyrights are counterproductive. Fashions change very quickly, especially at the high end, that are most dependent on their intellectual property. By the time the pirates come out with volume copying, the high end has already moved on. So it doesn’t really hurt.

And it also helps. The pirating brings attention to the original designer and gives him or her the credibility and authority as a top designer. So by enhancing his/her street cred, it makes his/her new desgns that much more attractive. They call this the piracy paradox, but it makes perfect sense to me.

It is a good example of how copyright law has to be designed in consideration of the economics and dynamics of the industry. Let’s hope that policymakers and activist judges don’t mess it up. And also that they generalize this approach to other areas that probably need copyright protections to be relaxed a bit – think digital music!!