Wednesday, January 31, 2007

Externalities, Part 2-- my new nemesis


Pictured above is a product that, when consumed, creates a negative externality for third parties within listening range. Loud bass, rattling walls, rattling brains.

We live in an apartment complex where several residents and visitors have such a stereo system. It doesn't matter if it's 1am or 5am or 6pm you can often hear (feel!) basses loud enough to
rattle everything in our apartment. The price paid by the consumer for the stereo did not properly reflect the cost that their stereo consumption has on third parties like myself. Lack of sleep, annoyance, headache, etc.

Every city has a noise ordinance. A law that makes it illegal to create noise that can be heard X feet away or above X decibels, usually at certain times of day (after 10pm, for example). There is a sort of tax on the consumption of the noise, a fine by the city. This attempts to make the consumer pay the true price of his/her consumption, and not just the $200-1000 they spent on the stereo system.

Most cities, however, don't enforce this law on automobile systems. If your neighbors are partying in front of your house the cops will come and take care of it. But, if a car is driving down the road with a loud bass the cops are unlikely to do anything.
This, however, is not the case in nearby Killeen, TX. Last August, from the city's website:


"The Killeen Police Department has adopted a
strict adherence enforcement policy in regards to violations of the loud music or noise ordinance. The excessive number of citizen complaints in regards to this problem, citywide, prompted this change. This change is specifically directed toward motor vehicles."

The penalty is heavy. I don't remember what it is, but it's something like $300-600 for a violation, much more than the average young person driving the vehicle would have handy.

The results:
A huge spike of arrests in August and September, but then a steady decline thereafter. Principle #4: People respond to incentives. The fine created a huge disincentive to consume loud bass music. I'm sure the fine also gave the government some added revenue, a useful bonus of a Pigovian tax.

I'm sure if you track car stereo sales after August you'll also find a steady decline in the number of "loud" systems sold.
If you're looking to use one of these in Killeen, then you'd better be prepared to pay extra for it.

So, here's my proposal:
I'm going to petition my City of Waco councilperson and propose a similar standard of enforcement for Waco. I will argue the following:

1.) It will increase the standard of living in Waco. Less noise pollution = less pollution and annoyance.

2.) It will make the citizens more productive. More sleep = more productive employees.


3.) It will encourage young people to spend money on more constructive uses. If they face a steep fine for their stereo usage, they will be less-likely to buy the stereo in the first place. That may make them more likely to buy books or education materials.


4.) It will create revenue for the city. Rather than raising property taxes, or issuing bonds, this tax will only affect those who are consuming socially unoptimal amount of something
. The city can use this to fund much-needed projects it doesn't currently have the money for.

I'm all for limited government, but this is a perfect example of government performing its proper function: correcting a proven negative externality. If it were just 1 person, then I'd be best to handle it privately. But, when it's hundreds of people, only the government has the real power to correct the externality. Enforcement of a fine (tax) is the perfect solution.

Who's with me?

Tuesday, January 30, 2007

On Externalities, Part 1

Have you ever been taking an exam when someone behind you was eating a snack or chewing on ice and it really bothered you? Have you ever been annoyed with or allergic to someone else's smoking?
Have you ever had a neighbor who had a really nice garden that you liked to look at? They worked hard on it, but you enjoyed it too?

Sure, we all relate to at least one of these examples. In economics we call these "externalities." Wikipedia defines an externality as "a cost or benefit from an economic transaction that parties "external" to the transaction receive. Externalities can be either positive, when an external benefit is generated, or negative, when an external cost is imposed upon others." We study examples of these often in class.

Secondhand smoke is a classic example: Your neighbor has payed $2.00 for a pack of cigarettes that they're enjoying. However, the smoke also affects you and is making you sick. The effect it has on third parties (ie: yourself and others) wasn't accounted for in the $2.00 that the guy paid for the pack of cigs. There's a higher cost that he's not paying.

This is what economists mean by the phrase "market failure." Too much of the good (smoke) is being consumed than is socially optimal. The smoker isn't paying a price that reflects the true cost of the effects of his smoking.

In my Economics of Government class we look at several examples and study how the government can try to correct these failures. Last week I posted about a Pigovian gasoline tax as a corrective action for an externality.

In a perfect world, the government would have the ability to measure the exact cost (in dollar terms) that the smoke has on others. It would then add that cost in the form of a tax to the price of the pack of cigarettes. The smoker would have to pay a higher price and (as long as the demand curve is downward sloping) would therefore consume less. We call this making the consumer "internalize the externality."

In my example, the government would likely tax sellers of cigarettes. This would shift the supply curve leftward the amount of the tax and produce a new quantity of cigarettes consumed. The amount of private consumption (w/out the tax) is Qp and the socially optimal amount of consumption is denoted Qs.

Do you see the triangle in the middle of the graph? The area of that triangle represents the entire social cost to society. The larger the triangle, the more society (secondhand smokers) suffers.

Society is better off because less smoke is being produced, and the government has more revenue to use for benevolent purposes.

So, if you've read this far into my post you're probably saying "Justin, what the heck is this? So what?" (Well, hopefully you're saying "Geez, every sophomore in micro principles knows this. This is really easy!")

I'm introducing this discussion because I'm a third party suffering from a negative externality that I would like to see my local city government correct. I'm going to talk about it and propose my solution in Part 2.

Links of the Day

3 links worth checking out today:

A five-minute video story from a battle in Baghdad by the NY Times. Shows the difficulties of working with the Iraqi army and the insanity of the capture, abandon, re-occupy, then abandon again strategy that Bush wants to end with the troop buildup. Warning: some graphic footage.
Scroll down to the video section below today's headlines.

A very interesting profile of Harvard trade economist Dani Rodrik, and the quest of newly empowered moderate economists to promote trade while promoting social safety nets at the same time. The message from Democrat economists to the Democratic Party should be "Don't throw the baby out with the bath water." I cringe every time I hear John Edwards bash Wal Mart and Hillary Clinton talk of American firms needing "protection from foreign competition."
This article will be required reading for my students.

Milton Friedman had some good quotes about the nonsense of protectionism. After broadcasting the new documentary on Milton and Rose Friedman last night, PBS looks to have another must-see tonight on Frontline. It's a documentary about an Al Qaeda cell that existed in Canada plotting to bomb Toronto. "An examination of a radical-Islamist terror plot to attack Toronto, featuring insights from police informant Mubin Shaikh, who spent two years in the cell that was planning the attacks." Frontline is probably the best show on television.

Monday, January 29, 2007

Tapp Ratings

Here are the Tapp Ratings for 1/29/2006. Reminder, this is a composite rating taken from 7 different rating and projection systems. Also, 2 teams can be equally ranked. I consider that to mean that they're "equal" and only a neutral-court game could decide who is better. They are essentially "tied" for 2nd place or whatever, and the next team is in third place. (First place votes in parentheses)

#1 UNC (4)
#2 Florida (2)
#2 Wisconsin (1)
#3 UCLA
#4 Duke
#5 Ohio St.
#6 Pittsburgh
#7 Texas A&M
#8 Kansas
#9 Oregon
#10 Arizona
#11 Kentucky
#12 Air Force
#12 Memphis

Good news for Cat fans: improvement.
I've been recording UK's Pomeroy efficiency rank before and after every game. Before the Houston game, UK's offensive efficiency was ranked #38 while the defensive efficiency was #23.
After the UT game, offensive efficiency is still at #38 (after falling to a low of #48 after Ole Miss) but defensive efficiency is up to #13. Tempo has fallen from 115 to 152.

We've also played the #14 hardest schedule as far as offensive teams, and the #1 toughest defensive schedule in the nation.

The Answer is C

The answer to my quiz is C. Sok's logic was on the mark. When 2 cars arrive at a 4-way at the same time, the car on the right has the right-of-way. I think everyone knows this rule. In the diagram, car A has to yield to car B, who has to yield to car C who has no one to yield to. I'm trying to talk other professors into giving the same quiz to their students to see what %'s they get. Hopefully it's better than 38% wrong.

I....

had a good time in Lexington. Brent saw the castle, tried an Ale 8-One and sat in the Rupp nosebleed. He liked it.

got to see Scott and Alisa for the first time in about 2 years. Got to see Lucas for the first time ever.

got to see snow for the first time this winter.

learned how to play Farkle. Didn't care much for it.

learned that video I-Pods are cool. Watched clips of 3 classic UK games and 2 episodes of SVU on the airplane courtesy of Brent's I-Pod.

was reminded that SVU really warps people's brains.

about lost my voice screaming at the officials for some of the dumbest calls I've ever seen.

wrote this post very quickly. Sorry.


Friday, January 26, 2007

The Ruthless Professor

As I leave Baylor every evening, I immediately come to a 4-way stop sign. The majority of cars arriving at this stop sign are driven by students. I've noticed that most students either:
a) Don't seem to know who has the right of way when 2 or 3 cars arrive at the stop sign at the same time.
b) Don't care and just go.

c) Are too busy talking on their cellphones or text messaging to brake.
d) Never come to a complete stop no matter what.

This has angered me and almost led to many an accident for myself and others.


So, as part of my quiz on Friday I included the following bonus question for my students. Observe the following diagram. All 3 cars arrived at the stop sign at the same time. Assume that car A is turning left (has his turn signal on). Which car has the right-of-way (ie: can move first)? Can you answer the question properly? Please comment with your answer (without looking it up first!)

34% of my students got it wrong. Guys and girls both did equally bad.
This confirms my fears that a substantial number of students don't know basic traffic laws and are therefore hazardous to our health.

Top Grossing Movies of All Time

One of my pet peeves is to hear on the news or Entertainment Tonight that "such-and-such movie is now one of the top grossing films of all time!" The problem with that is that 99% of the time the person is talking about NOMINAL dollars instead of REAL dollars, adjusted for inflation.

So, this was my lecture in class today. I get to show kids ways to talk to their grandfather when he says "I remember when I could buy a burger, fries, and a coke for 25 cents, those were the good old days!" "Sorry grandpa, you're wrong! That 25 cents would be worth $6.00 today. You can get a McDonalds value deal for cheaper than that, and unlimited refills!"

Here's one of my favorite websites, The Movie Times, and their list of the top-grossing films of all time in America in terms of box-office receipts. You can look at both nominal and adjusted gross on the page.

Nominal:
#1 Titanic ($600.8 mil)
#2 Star Wars (460.9 mil)
#3 Shrek 2 (436.5 mil)
#4 E.T. ($434.9)
#5 Star Wars- Episode I ($431.1)
#6 Pirates of the Carribean: Dead Man's Chest ($423.3)
#7 Spider Man ($403.7)
#8 Star Wars- Episode III ($380.2)
#9 LOTR: Return of the King ($377)
#10 Spider Man 2 ($373.4)


Now, here's the REAL list. Adjusted for inflation, the top 10 grossing movies of all time are:

#1 Gone With the Wind ($1.33 billion!)
#2 Star Wars ($1.1 billion!)
#3 The Sound of Music ($925 mil)
#4 E.T. ($914 mil)
#5 The Ten Commandments ($851 mil)
#6 Titanic ($839 mil)
#7 Jaws ($832 mil)
#8 Doctor Zhivago ($786.6 mil)
#9 The Jungle Book ($703.7 mil)
#10 Snow White ($690.6 mil)

There you go, kids. Adjusted for inflation, Episode I drops to #20 all-time, Shrek 2 drops to #29, and Spider Man drops to #32.

Older movies are ranked much higher because a much larger percentage of our population went to movies back then than do now. There was much less to do back then.

BLS.gov has a handy inflation calculator that will do the math for you. You enter in a dollar amount and the years you want to compare and it'll give how much a dollar in one year was worth in another.

Thursday, January 25, 2007

Bad Mascot, Funny Story

From ESPN.com

"Mascot's antics nearly cost D-League team a victory"

The Austin Toros of the NBA Development League put up with some unneeded Bull-loney when their now-suspended mascot lost his head -- figuratively and literally -- and nearly cost the team its game against the Colorado 14ers on Wednesday night.

The mascot, known as Da Bull, prematurely ran onto the court and hung from the rim with .4 seconds remaining, apparently to punctuate center Loren Woods' breakaway dunk that gave the Toros a four-point lead over Colorado.

While hanging from the rim, the Toros detailed in a news release Thursday, Da Bull collided with a Colorado player. At the point of contact, the mascot's head, to his horror, fell to the floor.

The Toros were assessed a technical foul. The 14ers' Von Wafer made the free throw, but Rick Rickert missed a 3-pointer that would have tied the score as time expired.

Da Bull was suspended for two games and assigned by the team to 50 hours of community service. A replacement mascot will perform in his absence; Da Bull is expected to return to duty Feb. 2 when the Toros play the Bakersfield Jam.

Austin's 101-98 victory came before a sold-out kids matinee at the Austin (Texas) Convention Center.

"I've never seen that in all my years of basketball," Toros coach Dennis Johnson said in a statement, "and I hope I never do again."

What economists are really thinking about

Economics is great because it basically is the study of everything. Several times a semester, a potential professor candidate will come and present his/her research in an open forum. These sessions are usually quite boring, but cover a wide range of topics. Last semester someone came who had shown that MLB Hall of Famers live statistically significantly longer than non-HOFers, and that people who wait several rounds to be voted in usually have health problems and shorter life spans (maybe because of the stress).

Today’s candidate (A. Scott Cunningham) has the most interesting topic: “Sex Ratios and Risky Behavior.”
Here’s the abstract from his paper. I boldface the main points.

An estimated 38.6 million people worldwide were living with HIV in 2005 and an esti-
mated 2.8 million died in that year alone. Behind these aggregate figures are remarkable
racial disparities. Black Americans make up 12.3 percent of the US population, but accounted for 50 percent of new HIV/AIDS diagnoses. In 2002, HIV/AIDS was among the top 3 cause of death for Black men aged 25-54 years and among the top 4 cause of death for Black women aged 25-54. It was the number 1 cause of death for Black women aged 25-34. Epidemiologists have suggested that racial disparities exist because of a greater degree
of concurrency in those sexual networks, but this invites a question: why is the degree of
concurrency (ie: multiple sexual partners) higher in Black sexual networks? In this paper, I emphasize the relative shortage of men in Black communities, created largely by the high rates of Black male incarceration. I hypothesize that these low “sex ratios” allow for men with tastes for sexual diversity to form concurrent (multiple) partnerships, as well as affects their condom use. I exploit the fact that the overwhelming majority of sexual relationships occur between women and men of similar age, race/ethnicity and geographic location to estimate the effect of changing sex ratios on male sexual behavior and condom use.
Using data from the 2000 Census and the National Longitudinal Survey of Youth (1997)....

I find that a 1-point increase in the ratio of women to men (×100) causes Black males at the .90 quantile to have between .096 and .166 more partners a year. Given a 28 point change in the sex ratio, back-of-the-envelope calculations put this at between 2.7-4.6 additional partners a year. Furthermore, I find that men at the .10 quantile of the condom use distribution reduced condom use 1.5 points for every 1 point change in the ratio of women to men, while men at the median increased their condom use 1 point.

Conclusion:
His conclusion is that the average black man has 1 additional sexual partner per year because the ratio of women to men is so high. Black men who don't like to use condoms use this ratio to their advantage by negotiating sex w/out a condom, and those who don't mind using a condom increase their condom usage because they realize that with all the promiscuity the chance of getting infected is high.
So, incarceration of so many black men causes promiscuity, and promiscuity causes HIV/AIDS infection.

I'll probably skip the seminar because I think hearing all of my old, white professors discussing sex and condoms will cause me to be like a 5th grader who will not be able to stop laughing. Hopefully the presenter is more mature than that. All of his research papers seem to look at sex and STDs. Major in Econ, you'll learn something!

Heartbroken

I got to watch the first half of the UK game last night and thought it was sheer bliss. Only 3 turnovers! 12 assists! Crawford with 17! Walk-ons playing!! Blowout city!
I then had to leave because I had "more important" things to do. That didn't take long, and I seized the opportunity to go watch Kansas play Baylor (ESPN has UK matched up against Kansas in this week's tourny projections).

I went home to see how bad we had blown out Georgia and instead discovered the complete COLLAPSE of the Kentucky basketball team, a 17-point lead BLOWN, and a group of guys in disarray. I listened to Tubby's postgame and was VERY UNSATISFIED with them. Nothing is ever his fault.

For a contrast in how the first half and second half was, read John Clay's liveblog posts separately:
1st half

2nd half


Losing stinks. Losing like this stinks worse. We've been picked to lose that game by Pomeroy since Maui. Vegas and most of the computer predictors also predicted Georgia to win. I hate being projected to lose, and I hate not winning those games. I am angry with what this basketball program has become! I'm even angrier with the complacency of fans, particularly the young ones who think none of this matters.

Wednesday, January 24, 2007

The State of the Union and Healthcare

So, maybe the only really meaningful thing that Bush talked about last night was his new healthcare tax-credit plan. Each family could get a tax deduction of up to $15,000 for buying health insurance. "All Americans with employer-sponsored insurance would have to report the value of their health benefit as income, but they could deduct the full $15,000 no matter how much their insurance cost." Sounds good to me.

I just bought health insurance yesterday because I've had a headache for the past several days that won't go away. 6 months on the Baylor plan is about $844. I guess that's relatively cheap, "the average employer-sponsored family plan runs about $11,500 annually."

The Wall Street Journal has a good free editorial explaining and endorsing the plan today. Economists from both the left and right seem to be endorsing the plan. (Maybe Dr. Blake wants to chime in with his thoughts?)

The WSJ says:
"the biggest problem with Mr. Bush's plan is that it wasn't offered two years ago, when it had a better chance to pass."

Apparently some Dems are already blasting it, mainly because they want to be the saviors of healthcare.
"the (2008) political race is going to be between those who want to move to a more genuine market and consumer-based health care, and those who want to move toward Canada, Europe and more government control. The Bush plan ought to jump start that debate."

I saw John Kerry give the Prez a standing O when he talked about "letting patients choose their doctors." I didn't see a lot of other Democrats joining him.

Outside of that, we had the annual charge to balance the budget just before Bush proposed billions more in Federal spending and the creation of at least one new federal agency (the Civilian Reserve Corps) "without raising taxes." Yeah, pretty much business as usual.

Tuesday, January 23, 2007

How to Reduce Fuel Consumption

Early word is that President Bush will ask Congress to set a goal of reducing Americans' gasoline consumption by 20% over 10 years. He's also likely to talk about raising MPG standards on vehicles. He's also going to talk about subsidizing alternative fuels.

The problem is that new fuel efficiency standards on cars and subsidizing alternative fuels is not the 1st best, most efficient policy.

The number of economists in Mankiw's Pigou Club (see the link for a Wikipedia article) grows every day. The point: A gasoline tax would be the best way. Mankiw even expressed optimism yesterday that Bush would announce such a plan to tax gasoline in exchange for making his income tax cuts permanent.

It's simple: if you raise the price of gasoline then people will consume less of it and drive less. They will demand more fuel-efficient cars and therefore market forces alone will drive Detroit to produce more fuel-efficient cars. There are then no government mandates or restrictions, or harmful subsidies to corn farmers.

Plus, it provides revenue to the government to offset lost revenue from the Bush tax cuts. If the Democrats in Congress want to pass pay-as-you-go legislation, then this is one source of revenue which will help keep programs from being cut.

The problem with proposing a Pigovian tax on gasoline is simply the word "tax." It's like saying "Abortion," or "Gay Rights," or "Gun control." The word has become anathema to anyone on the Right. Attention all citizens: NOT ALL TAXES ARE BAD! I'd rather our government's revenue come from U.S. citizens than from Chinese and Japanese banks (which is where much of it comes from now).

There's 2 ideologies that seem to go hand-in-hand, but really don't.
#1: "Carbon emission is helping to cause global warming. We need to stop being an emitter."
I'm fine with this statement. It's probably true. A tax on gasoline or carbon emissions would go a long way to solve this problem.

#2: "We need to be energy independent." This statement is ludicrous and needs to be abandoned by every Republican out there. We're dependent on Mexico for cheap labor, China for textiles, India for IT services, Asia for tea, South America for coffee, Jamaica for bananas, etc. etc.
I'd MUCH rather change this statement to "We need to be OIL independent." I don't mind using ethanol if the sugar or corn is imported from a poor African country or Brazil that need the revenue. Otherwise, it comes much more expensively from U.S. farmers who get rich with my tax dollars through government subsidies. No, thank you.

I DO mind importing oil from Saudi Arabia when much of the $ goes to fund Wuhabbist schools who turn out terrorists.

So, let's solve the problem of global warming AND inefficiency by passing a gasoline tax. Let's still be friends with other countries, and keep prices low in America by importing much-needed energy products like corn and sugar to make ethanol or biodiesel or whatever. Let's tax gasoline consumption so that Americans demand less of that foreign oil from its enemies. But, let's not build up a wall of fear and tariffs and create even more waste by subsidizing people who don't need it and creating new government regulations that restrict freedoms.

Monday, January 22, 2007

Tapp Ratings

This week's Tapp ratings (w/first place votes in parenthesis). There's a wide gap between the first 3 and the rest.

1. UNC (3)
2. UCLA (3)
3. Florida (2)
4. Texas A&M
5. Wisconsin
6. Ohio St.
7. Duke
8. Pitt
9. Oregon
10. Kansas
11. Arizona
12. Air Force
13. Memphis

*Sadly enough, Kentucky has been eliminated from the ratings.

Monday facts...

1.) I'm not feeling well this morning.

2.) I'll be in Lexington, KY in 6 days to re-claim Rupp for the Wildcats. Anyone wishing to see me should probably let me know.

3.) I don't know how the Patriots blew an 18 point lead. I'm happy for Manning but still refused to root against Bill Belichick.

4.) I'm going to mention the "never punt on 4th and short" article in chapter 2 of our economics textbook to my class today as recommended reading. Patriots went for it and got it on 4th and 6 in the 1st quarter.

5.) I noticed that during the Bears-Saints game they quit doing camera shots of the crowd after several people were giving the camera the bird (middle finger) during crowd shots.

6.) I'm pulling for Chicago over Indy. Go Bears!

Saturday, January 20, 2007

Happiness is...

Discovering that the UK game's telecast is being broadcast live for free on Yahoo. If I hadn't seen Sheray Thomas score 8 first-half points with my own eyes I never would have believed it.

Sadness is watching UK lose 3 straight to Vandy, 2 in a row at Rupp. I'm almost speechless. I can't believe they forced us into their game. And Vandy is ridiculous with their shooting. 11 threes in 23 attempts for them (48%)... as usual.

Vandy Game

There's not much to post on this week... classes have resumed, and it's still raining. Central Texas went through a 2 year drought before last weekend. We've now seen more precipitation in the last week than we've seen in like a year and a half here.

Ramel Bradley just invited me to join his Facebook group: "It's not a #$%@ triangle sign, IT'S THE ROC *&%$@!" Okay, so I joined. When UK's starting 2-guard asks you to do something, you do it!

I don't want to be accused of counting chickens before they hatch, but yesterday Kentucky was rated #10 in Sagarin's overall ratings, and #9 in his ELO (we're still #9 in ELO today). UK was swept by Vandy last year for the first time ever since Rupp was built, and I refuse to lose to them again. We're favored by at least 10 in all predictors, so I'll go with UK by 15.

Sheray Thomas is now a shot-blocking machine with a block every 32.5 minutes and several in his past 2 games. Thanks for reading my blog, Sheray!

Enjoy your Saturdays.

Wednesday, January 17, 2007

Keeping Waco wacko

Hey, I've got a crazy idea: Let's open Baylor up at 10am today. Teachers and essential employees will have to come in earlier, of course, to get things ready, but I'm sure they won't mind standing out in the freezing rain trying to de-ice their cars. After all, how many of them don't have garages to park in? Probably just the grad students, but they'll be fine. And, let's let them drive down roads that the weathermen are calling "treacherous" and telling everyone to stay off of. It'll build character. After all, the slickest roads are the ones around Baylor anyway. We won't bother salting them, that would be a waste of precious time. We'll just let the teachers slip and slide on them enough to let them thaw out. And people should really come in early since the weather is actually going to get worse by 10am. If they wait until 9:00 or so, they'll have at least an extra quarter inch to scrape off their cars and to deal with on the roads.

And let's let them see that the other schools changed their minds about opening at 10am and instead decided to cancel. Those pansies, they act like they've never seen a winter storm warning and a freezing rain advisory before!

Tuesday, January 16, 2007

Warning: Angry rant about Texas. Reader discretion is advised.

2 beefs I have with Texas today:

1. “Texas-sized” pickup trucks.

As I sat down in my car at the parking garage at the business building this afternoon on my way home from work, I noticed that an oversized extended-cab pickup truck was parked next to it. Actually, its driver’s side door was about 4 inches from my passenger mirror. The truck was also caked in mud, as though it had come from a farm somewhere. I got out, walked to my passenger side and noticed that I had 2 distinct marks on my car, exactly where this truck’s driver’s door and extended cab door would have opened right into it. The guy had probably a foot of wiggle room to get out and, naturally, he dinged my car. As I looked angrily at the scene, I noticed the bumper sticker on the truck “Don’t Mess With Texas.” Yes.

I also noticed the mini American flag hanging from the rearview mirror, and the expired parking permit. It’s as if the kid said: “I’m late to class, my vehicle is bigger than yours, and I’m going to park here whether or not its legal to do so; Don’t Mess With Texas.”

Then, on the back of his cab I saw it: a fraternity sticker.

You see, looking at this truck you might expect some redneck with cowboy boots and a ten-gallon stetson. But the guys who got out of it are more likely wearing Abercrombie polos, khaki shorts, sandals (even though it’s 30 degrees outside), and a baseball cap turned around sideways. Because this is Baylor.

So, I went home, got my camera, came back and took these pictures of the huge truck that probably belongs to a 20-year old frat boy in designer clothes.

Not pictured: All of the BMWs, Mercedes, and Lexus vehicles and SUV’s parked around the truck (all owned by 19-22 year old students). Because this is Baylor.

2. “Ice chad”

This is what I’ve heard them call stuff they lay down on the roads here in the winter. Seeing as how this is Central Texas and they don’t see snow much (but ice is sometimes a problem) I wouldn’t expect them to know what they’re doing in salting roads. Thus, they don’t actually salt the roads, they lay down this mixture of gravel and sand.

There appears to be one overriding strategy in laying down “ice chad:” heavily cover every bridge and overpass. (They seem to forget that the ramps leading to and from the overpasses can often be just as dangerous and also need their fair share of salt, but I digress).

I drive over one “bridge” on my way home. It’s about 2 car-lengths long and goes over a storm sewer canal, not very high at all, and not a major thoroughfare.

A little chad would be fine, but they’ve been adding to it every day, even on a day like today when we’ve gotten almost no precipitation. But, as my car hits the chad, I quickly lose traction. It’s like driving through a cat’s litter box! This stuff goes flying everywhere! I see trucks kicking it up like sand as they plow through it. Was it necessary to put this much down?

Here are some pictures. Notice: the road immediately before the bridge (no chad) and the bridge (virtual litter box).

This is one of those days where I wish I could fly far, far away from this place.

24

So, since I was home a lot the past couple days, I took a chance on the 4-hour season premiere of 24. I had never watched the show before and had previously avoided it either thinking it cheesy or too overhyped. Well, the show is still too overhyped (over-marketed), but I watched last night's 2 episodes on the edge of my seat. This show is awesome. **spoiler warning!**
1.) Jack Bauer is a likable, tortured soul.
2.) The show is the Republican party's greatest propaganda tool ever:
Terrorists succeed in smuggling nuclear weapons into the U.S.. Liberal lawyers are griping about human rights abuses of "enemy combatants" while slowly realizing that these guys are terrorists intent on murder and by protecting them they're helping to kill thousands.
I think Dick Cheney moonlights as a writer for the series.
3.) The bad guys are going to win lots of battles before the war is won by the good guys. Last night's episode ended in a mushroom cloud, which is the kind of thriller I like. There's closure in a mushroom cloud.
***End spoiler warning***

4.) I know that this seasons' plot will conclude at the end of the season. This is not like Lost or Alias where the show gets really ridiculous after 3 seasons because the writers can't figure out when it's best to end it.

So, I hope I get to see the rest of the series. It's cool.

In other news, the new Tapp Ratings are out for college basketball:
1. UCLA
2. UNC
3. Florida
4. Wisconsin
5. Pittsburgh
6. Kansas
6. Texas A&M
7. Arizona
8. Ohio State
9. Duke
10. Oregon
11. Air Force
11. Clemson
12. Kentucky

I like that A&M and Kansas are equal. That'll be a good game. Florida still needs to beat some better-quality opponents.
Kentucky needs to win tonight and Saturday to validate their AP rank and be 5-0 in the SEC with 2 road wins.

Pomeroy says: Kentucky by 11

Sagarin says: Kentucky by about 8
Pure Points says: Kentucky by almost 10.
Vegas says: Kentucky by 7.

Justin says: Kentucky by 6.

Monday, January 15, 2007

MLK Day

It's only been the weekend, but I feel like it's been forever since I've posted. It's only been 2 days since I was in my office, but this also feels like forever.

Baylor is off, but all of my textbooks are here, so in order to do homework I had to come in. It rained for 2 solid days here then froze last night. I had to de-ice my car this morning with a 2 liters of hot water so I could get my doors open. I scraped ice for 20 minutes so I could see out my windshield.

It's worse west of here, and up in Dallas. Texas ice storms.
Worse, my wife calls and says that she was informed she had to go to work today. She had a better attitude about than than I would have. They always follow the local school system, if they're out for a snow day, then the office is closed. Well, not today. She was going to make us a pancake brunch today. :-(

Today's links that I find really interesting:
First of all, if you're not using Google reader then you should be. It lets me know when any of my friends have written new posts to their blogs. It informs me of news events that I want to know about. It's great.

Freakonomics critiques an article in the NY Times about the Dallas Mavericks' free throw coach, and how they're the only team in the NBA to have such a coach.

Russia moves even closer to legalized xenophobia. What if America tried this approach with its illegal immigrants?

The Arkansas football coaching controversy is apparently over. Houston Nutt clearly won (I think). The whole story brings out everything that is wrong about sports, parents, and college football.

The U.S.'s top General in Iraq thinks the troop "surge" might work. Another Iraqi politician says Iraq PM Maliki has "three to four months."

Anyone see 60 Minutes last night? Bush's first interview since his speech? Didn't encourage me much. I don't see how Iraq's government will possibly be functioning in a year when an enemy of the U.S. (and tool of Iran) controls the Iraqi parliament, and the PM can't go after him without fear of being deposed or killed. We might stabilize the violence there but that's about it. Iran will still be Iran, and Shiia will still hate Sunni. I think maybe we're just postponing the inevitable total anarchy there to the tune of $2 billion a week.

Looks like we now have a grudge rivalry in the NFL. LT and the Chargers were mightily hacked off by the Patriots' "classless" celebration and taunting at the end of their game.
LT says: "When you go to the middle of our field and start doing the dance Shawne Merriman is known for, that is disrespectful. They showed no class and maybe that comes from the head coach."
Wow, I've never heard anyone accuse Belichick of a lack of class, except maybe the NY Jets.

The Chargers were faster and better than the Patriots. Why they didn't run the ball more, or run more short outs to Tomlinson and Turner, I'll never know. Why Schottenheimer challenged Marlon McCree's fumble I'll also never know. That was stupid. Truth: Patriots outcoached the Chargers.
To go 14-2 and lose in the playoffs is mind-numbing. I feel bad for them. Fire Marty!

Welp, back to work.

Saturday, January 13, 2007

Weather & Sheray Thomas

Yesterday we had a tornado warning while warm winds blew from the south. The tornado struck the township of Troy. Today we're on the edge of a winter storm warm with ice storms just north of us and wind blowing from the north. Gotta love mid-January weather right now. I blame El Nino.
Hopefully not caught in the storm are the Kentucky Wildcats. Sheray Thomas watch:
After being benched by Tubby for 4 turnovers in a span of 5 minutes earlier this week, Sheray's numbers are now:
2 points every 18.3 minutes
1 rebound every 6 minutes
1 assist every 15.6 minutes
1 turnover every 14.7 minutes
1 blocked shot every 53 minutes
1 steal every 44 minutes
1 foul every 14 minutes.

He's on track to be the most unproductive senior 6th man ever. Maybe he'll step it up against Mississippi State.
Justin's prediction: Kentucky by 11.

Friday, January 12, 2007

Tire Sales, Game Theory, and Nash Equilibrium

Economist Hal Varian has a good article in the NY Times today reviewing a recently published paper entitled "On the Use of Low-Price Guarantees to Discourage Price Cutting."

Why do stores offer to match or beat their competitor's price? Perhaps because they want to discourage that competitor from cutting their prices in the first place.

His example:

"Suppose that two retailers, East Side Tires and West Side Tires, are advertising the same tire for $50.

If East Side Tires cuts its advertised price to $45 while the West Side price stays at $50, we would expect that some of those customers on the west side of town would be willing to travel a few extra minutes to save the $5.

East Side Tires would then sell more tires at a lower price. If the increase in sales was large enough, its profits would rise. That, in a nutshell, is the basic logic of competition: if customers are sufficiently sensitive to price, then a seller that cuts its price enjoys a surge in sales and an increase in profit.

But instead of the situation just described, suppose that West Side Tires continued to charge $50 but added a promise to match any lower price. What happens if East Side cuts its advertised price?

Now, those who find West Side Tires more convenient can just bring in the East Side ad and get the discounted price. Then, East Side Tires attracts no new customers from its price cut. In fact, it loses revenue since it sells essentially the same number of tires at a lower price.

So, a vendor that offers a low-price guarantee takes away much of its competitors’ motivation for cutting prices.

The paper linked above tries to find empirical evidence that would prove or disprove this theory, and has a hard time doing so. Some pricing behavior apparently doesn't make much sense according to economic models.

But, there are obviously players in a game using a particular strategy. This is where Game Theory comes into play. (I'm taking a class in Game Theory this semester so it's on my mind). We can study the choices these competitors make and determine the possible outcomes and best strategies for them to pursue.

But, thinking about this situation, it's clear that
"If guarantees are being used to discourage price cutting, then two sellers with the same price will each want to offer a low-price guarantee."

It becomes what we call a one-shot game. East Side tires has one shot to lower its prices and try to earn profit. West Side tires will then counter with its low-price guarantee. So, in the end, neither store is better off and they're both making less revenue. They might be just as well off as they were before, depending on the elasticity of demand, just at a lower price.

So, it makes sense for either both stores to stick to the same price, or to both offer a low-price guarantee. This is an example of a Nash Equilibrium (from the mathematician John Nash whose life was fictionalized in A Beautiful Mind). From Wikipedia:
"(Nash Equilibrium)
is a kind of solution concept of a game involving two or more players, where no player has anything to gain by changing only his or her own strategy unilaterally. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium."

But, here's an example from my own life that may give another reason why some competitors advertise low-price guarantees but the behavior doesn't necessarily discourage price-cutting:
When I graduated high school in 1998, my parents wanted to buy me a computer. Both CompUSA and Best Buy had the same model computer I wanted, but Best Buy's advertised price was $400 less than CompUSA. The 2 stores are right across the street from each other. Why was Best Buy's price so low? They didn't have any left in stock! They lowered the price listed on their shelves once those shelves went empty! Why? Because CompUSA said they would match any advertised price! So, the CompUSA rep called Best Buy, did a price check, and promptly sold us a computer for $400 less. I'm sure CompUSA lost money on the sale, and that was Best Buy's point. Great strategy for them, right?

But, this behavior might also end up in a Nash Equilibrium. If CompUSA knows what Best Buy is doing, then it is forced to do the same thing, and then profits even out. Everyone would be just as well off to keep their listed prices the same regardless of whether they have inventory or not.

Wow, what a great start to my day! An example of Nash equilibrium and active game theory in the NY Times, and my own possible explanation to a mystery confounding the authors of the paper being reviewed. It's hard to beat that.

Thursday, January 11, 2007

Is Iraq Doomed to Failure?

In the Left Behind series, doesn't the Antichrist relocate his government's headquarters to former Babylon (ie: Iraq)? Do you think that will happen before or after our troops pull out? I finished reading the Iraq Study Group Report (the report itself is only 100 pages. You should download it and read it). It was insightful as I listened to the President's speech. I heard a couple things last night:

1. We should have had a much larger number of troops there from the beginning. Haven't the generals been saying that for the past 3 years?


2. This is a last-ditch effort. When Congressional leaders asked the President why this plan will work when others have failed he reportedly responded: "Because it has to."

The Iraq Study Group Report (ISGR) has this to say about troop level increases: "Sustained increases in U.S. troop levels would not solve the fundamental increase in violence in Iraq, which is the absence of national reconciliation. A senior American general told us that adding troops might temporarily limit the violence in a concentrated area... another American general told us if the Iraqi government does not make political progress, 'all the troops in the world will not provide security.' Meanwhile... we do not have the troops or equipment to make a substantial, sustained increase in our troop presence." (Pgs. 38-39 italics my own)

This echoes what current and former generals have been saying recently: The Army is broken. We're stretched too thin. The equipment is wearing out too quickly in the Middle Eastern climate.

The ISGR taught me a couple of things:
1. The Iraqi government doesn't function. It doesn't have the infrastructure or capability to even spend the money it has been given. Much of it just gets siphoned off to corrupt officials.
The President is right, and the ISGR agrees that clear "benchmarks" are needed for the Iraqi government to comply with. It just doesn't look like they're ever going meet the benchmarks.

Example: They can pass legislation to divide oil revenues evenly, but the ISGR points out that this is
impossible in reality. They have no census bureau! They have no technology or infrastructure to divide the funds up, or for people to collect that revenue. The Iraqi government just doesn't function.

2. The Americans don't have nearly enough Arabic speakers to work effectively in the country. "Our embassy of 1,000 (people) has 33 Arabic speakers, just 6 of whom are at the level of fluency. In a conflict that demands effective and efficient communication with Iraqis, we are at a disadvantage" (92).

3. The U.S. talks of building up the Iraqi army, but doesn't put forward the money for it. We spend a TOTAL of $3 billion a year for the Iraqi army. For training, equipment, salary, weapons, etc. We spend that amount on our OWN military in Iraq in less than 2 weeks! In other words, we're leaving the Iraqi army completely unequipped for the job we want them to perform.

I'd like to believe that this effort isn't doomed to failure. Perhaps, as the President said last night, we could have hastened bringing the troops home if we had sent more initially. I fear that this troop increase and carrier group deployment will be just a military build-up to eventually make a strike at Iran, also doomed to failure.

We've already lost Pakistan, and Afghanistan is far from being free from the Taliban (contrary to what the President said last night). I believe in miracles, and so I'll pray that God will work one in Iraq. It will take God's help, and do you think we've asked Him how he feels about all this?

Tuesday, January 09, 2007

The 10 Principles of Economics...

...according to Mankiw's textbook, which we'll be going over in class tomorrow. I'll go over these in-depth in class, and for the rest of the semester (and for many of my posts I'll refer back to these by number).
These are the things we know for sure:

How People Make Decisions (Micro stuff):
1. People face trade-offs.

2. The cost of something is what you give up to get it.
3. Rational people think at the margin.
4. People respond to incentives.

How People Interact:
5. Trade can make everyone better off.
6. Markets are usually a good way to organize economic activity.
7. Governments can sometimes improve market outcomes.

How the Economy as a Whole Works (Macro stuff):
8. A country's standard of living depends on its ability to produce goods and services.
9. Prices rise when the government prints too much money.
10. Society faces a short-run trade-off between inflation and unemployment.

Okay, I was wrong.

So, maybe I should have figured it out when the Big 10 went 2-4 in bowl games before this one. Maybe I should have figured it out when Michigan looked like wet paper against USC. But, Vegas certainly didn't figure it out either. Even Emmitt Smith in pre-game sounded like he thought the Buckeyes were better.

Problem was, I had watched UK hang with Florida in Gainesville for a half, watched Florida lose to Auburn, and watched them should-have-lost against South Carolina. I also watched them almost blow the SEC championship game against Arkansas.
So, I was thinking "Florida won't handle the pressure."

What pressure? Ohio State didn't bring any, other than their huge number of fans.

Jarvis Moss: "I could name four or five teams in the SEC that could probably compete with them and play the same type of game we did against them."

So, way to go SEC! You really were that good this year! 6-3 in bowls!

Troy Smith looked awful. 4-14 with an INT? That's it? 82 yards of total offense??? (they averaged 410 per game coming in). Their o-line looked awful, their defense looked awful.
If Jim Tressel coached in the SEC, he'd be fired today.

Monday, January 08, 2007

Buckeye Ball

I've decided to put my full support behind The Ohio State University in tonight's game. For the following reasons:

1. Troy Smith- Well-deserving of the Heisman, Smith is one of the most intelligent football players I've ever heard. He probably won't have much of a pro career so this might as well be his Super Bowl. He makes the magic happen.

2. The Buckeye Nation- The only thing that actually exceeds the Big Blue Nation as far as rabid, passionate fans, following their team to the ends of the earth. How can you root against a team that took so many fans to Texas they had to give them the basketball arena to watch their team beat up on the horns?

3. Might makes right in football. Ohio State is mighty. Their defense is nasty. They're undefeated. Their offensive line runs smashmouth. I love it.

4. Florida already won the NCAA basketball championship (and is a front-runner for another) and Emmit Smith won Dancing with the Stars. Why does Florida need yet another title to its name this year? Lets stop Florida sports domination NOW. (No, I don't think Ohio State will even make the Final 4 this year).

5. Chris Leak chokes. See: vs. Auburn. He lost that game pretty much singlehandedly.

I think it'll be a fun game with Urban Meyer's innovations on full display. Costly turnovers make the difference.
*sniff* my last predictions of the season:

Computer Prediction Average: OSU by 7.06
Sagarin: OSU by 8.8 p
Pure Points: OSU by 11.13
Vegas opening: OSU by 8
Vegas current: OSU by 7

Justin's prediction: OSU by 10.

In other news, here are this week's calculatedJustin Ratings for college basketball
(this week I removed Dunkel from the equation and replaced it with Sonny Moore's more accurate ratings):

1. UNC
2. UCLA
3. Florida
4. Texas A&M
5. Wisconsin
5. Arizona
6. Ohio State
7. Kansas
8. Pittsburgh
9. Air Force
10. Butler
11. Duke
12. Clemson
13. Kentucky

A great day for Lexington, a bad day for Louisville

Story 1:
Lexington's own David Akers kicks the game-winning field goal to beat the New York Giants in the playoffs.
Akers' mom was a teacher at my high school. I had her my senior year for EBCE. This was before her son made it into the NFL. We watched the movie Rudy in her class, and she crie
d all day showing it. She was not my favorite teacher. Many people who read this blog had Akers' dad as a principle and either went to school with David Akers himself or had him for a P.E. teacher in high school.
(He went to Louisville, but lets ignore that).


Story 2:
Bobby Petrino jilts Louisville to take the Atlanta Falcons job.
After flirting with several other coaching jobs and using it to leverage a 10-year, $25 million contract from Louisville, Petrino said this in August:
"I can't tell you how happy I am with the commitment and the confidence that Tom Jurich has in me, and the university has in me," Petrino said after signing the contract. "I also wanted to make sure that everyone understood, I know I've said it, that this (Louisville) is where my family wants to be. This (Louisville) is where I want to be. I want everyone to really believe it."

And some people really believed it.
8 months later, he leaves for a 5-year, $24 million deal from the Falcons. Louisville was on track to compete for the BCS national championship again next season.


Prediction 1: Brian Brohm, Michael Bush, and a host of others leave for the NFL, and several recruits who chose UL over UK will now come calling on Rich Brooks and Co.
Prediction 2: UK will soundly beat Louisville at Commonwealth next season. Circle Sept. 15th on your calendars!

Sunday, January 07, 2007

Here's to You, Tony Romo

The last 5 minutes of the Dallas-Seattle game were among the most bizarre moments in football I've ever seen. The safety, the easy Seattle touchdown that followed, then Julius Jones' huge runs to get Dallas to the red zone, and then the first down that was correctly overruled by replay.

Finally, the Romo incident. The snap was good, his catch was good. I've never seen a hold fumbled in quite this same way. It just...slipped!
Then, he gets tackled about 1.5 feet from a 1st down.

Joni felt horrible for him. I just laughed and laughed and laughed. When John Madden says something is "unbelievable," then you know it really is.

Friday, January 05, 2007

Jay Z, Ramel Bradley, Diamond Dallas Page, and ignorant white kids

So, what does Diamond Dallas Page, Jay Z, Larry Johnson (the KC running back) and Ramel "Smooth" Bradley (the UK guard) have in common?

They all make the same diamond hand motion after a big play. The problem is, anyone other than Dallas Page making that symbol may be illegal.

Jay Z is alleged to have stolen the symbol to promote his Roc-A-Fella Records clothing label. He’s made music videos performing the symbol. Here’s a recent article about the suit.

Larry Johnson makes the symbol because he’s an associate of Rocawear. They pay him to endorse their product.

Ramel Bradley makes the motion because…. Well, let’s hope no one is paying him to endorse their product. If they are, then that’s probably an NCAA infraction. Bradley is from Brooklyn, which is where Jay Z and Rocawear originate. Hopefully, that’s his only connection. But, by making the diamond symbol, Ramel Bradley is indeed endorsing a product. Something tells me that’s getting very close to an NCAA violation. UK plays a lot of games on national TV, and Bradley could easily be added to the lawsuit. I’m going to e-mail UK’s compliance office with my concern.

Anyone else have knowledge on this subject? Has anyone in Lexington heard anything related to this?

What really ticks me off are the ignorant kids in the Eruption Zone who are shown making the symbol themselves imitating Bradley. I assume they’re ignorant about it, or think they’re just doing the “Diamond Cutter” or “flashing the Roc,” and think it's really cool. Either way, they all look “sophomoric,” to borrow a previously used adjective for the student section from John Clay.