Tyler Cowen's Blog, page 481

Barriers to entry cocoa bean counter edition

Becoming a cocoa beans grader is about four times harder than passing the New York State Bar exam, judging by a comparison of the two tests’ pass rates.

Candidates must correctly identify defects in beans such as mold, infestation from insects and cocoa that is “smoky or hammy”—a sign that the beans have been dried over a fire, not in the sun. Since beans easily absorb odors, the fire can give the beans a smoky flavor. In another section, they must identify the origin of various beans, most of which look identical to the layperson’s eye.

David Morales, one of the three men huddled over the beans in the ICE’s grading room, says he failed twice before he passed the exam two years ago. “I was studying for it, but not enough,” said the 37-year-old Bronx native, who noted the origin section tripped him up.

Is it a public sector monopoly, private sector monopoly, or some combination of both?  Or is it just really hard to do well, requiring individuals of truly specialized abilities and with a lot of value at stake?:

The problem is that there are only 24 certified graders for ICE and the exchange is concerned that retirement and old age will deprive it of a crucial cog in its commodity-trading machine.

In an effort to “keep the talent pure and fresh,” the exchange is offering its licensing exam in October for the first time in two years, said Valerie Colaizzo, managing director of commodities operations for the exchange.

The full article is here, hat tip goes to the excellent Daniel Lippman, note by the way that Daniel’s most recent piece is here.

Assorted links

1. Good essay on *Girls*, hat tip Yana, and David Brooks on why elites stink.

2. The current state of 3-D printing.

3. HP filters and potential output.

4. How novelists think.

5. On the workplace restrictions issue, let’s revisit this old data about OSHA.

6. New results on amnesia?

Police pull over and stop Google driverless car in Washington, D.C.

Spain estimate of the day

Yiagos Alexopoulos at Credit Suisse estimates that Spanish capital outflows are currently running at an annualised rate of 50 per cent of GDP.

Here is more, including a scary picture.

How to improve firms’ treatment of workers

Say a firm screws over a worker on ten dimensions at once, subject to some constraint of the worker leaving.  With those ten depredations, the firm tries to extract from the worker as efficiently as possible, but again so the worker does not leave or leaves only with some lower probability.

Let’s then say the law alters one of those dimensions to favor the worker, for instance the firm cannot force the worker to consent to a body search.  The firm may then increase one of the other depredations. Perhaps not for individual workers on the spot (there is “depredation stickiness”), but over time firms will fill the niches of new depredations to the maximum degree possible.

The new depredations will be less efficient ways of extracting rents than the old, which may hurt the worker.  At the same time, the firm’s rate of return on enforcing depredations may decrease, which may help the worker.

The net effect is indeterminate.  Note also that the lower efficiency may in the longer run limit firm entry and production, which will hurt workers and consumers (and possibly shareholders).  Again, the net effect still is indeterminate but the more you think about this model the less you will see it as an effective way to help workers.  You might try “regulating all ten depredations” but for that to work you also must fix the wage, and so on.

Maybe some of the model variants here will help the workers, but come on, let’s be realistic.  Is it the case that the commentators have firm beliefs about these models for well-argued reasons?  I don’t think so.  It is more likely the case that there is a core belief something should be done, with not too much concern for the systemic effects nor with the “not totally sound but still better than what the critics are serving up literature on compensating differentials.”  I am worried by the common tendency to first cite a lack of perfect competition and then assume the proverbial pony.

Here is Henry Farrell’s response to Matt Yglesias.

Fortunately there is a rather smooth path forward.  Raise the utility of unemployment to workers.  This could be a guaranteed annual income, better unemployment insurance, more food stamps, whatever.  Call it the welfare state.  Improving the welfare state will improve worker bargaining across virtually all workplace dimensions and in the longer run limit the scope of all the employer depredations.

We’re back to the point that what helps is to give people cash, or something cash-like, including when it comes to the dimensions of workplace quality.  It is also a huge help to institute policies which will raise rather than lower worker productivity.

As I said before, the criticisms haven’t even yet dented the traditional economic point of view on this issue.  Those criticisms are operating within the current frontier of analysis, not on it much less beyond it.

Medicaid Wars, Episode IV

While the resistance of Republican governors has dominated the debate over the health-care law in the wake of last month’s Supreme Court decision to uphold it, a number of Democratic governors are also quietly voicing concerns about a key provision to expand coverage.

At least seven Democratic governors have been noncommittal about their willingness to go along with expanding their Medicaid programs, the chief means by which the law would extend coverage to millions of Americans with incomes below or near the poverty line.

Here is more.

I wonder if this is actually true

Researchers who have scanned books published over the past 50 years report an increasing use of words and phrases that reflect an ethos of self-absorption and self-satisfaction.

“Language in American books has become increasingly focused on the self and uniqueness in the decades since 1960,” a research team led by San Diego State University psychologist Jean Twenge writes in the online journal PLoS One. “We believe these data provide further evidence that American culture has become increasingly focused on individualistic concerns.”

Their results are consistent with those of a 2011 study which found that lyrics of best-selling pop songs have grown increasingly narcissistic since 1980. Twenge’s study encompasses a longer period of time—1960 through 2008—and a much larger set of data.

Here is more.

The words English has taken from India

Another author who has drawn inspiration from the dictionary is Tom Stoppard. In his play Indian Ink, two characters compete to use as many Hobson-Jobson words as possible:

Flora: “While having tiffin on the veranda of my bungalow I spilled kedgeree on my dungarees and had to go to the gymkhana in my pyjamas looking like a coolie .”
Nirad: “I was buying chutney in the bazaar when a thug who had escaped from the chokey ran amok and killed a box-wallah for his loot , creating a hullabaloo and landing himself in the mulligatawny .”

Here is more, hat tip goes to The Browser.  They also refer us to this long interview with philosopher Thomas Scanlon, and Ed Glaeser on what American can learn from Australia.

Assorted links

1. The increasing polarization of the eurozone electorate.

2. Will Amazon achieve one-day or same-day delivery?

3. Why does this kitchen sink cost more than many laptops?  That is a question from Amit C.  I say materials, combined with economies of scale on the laptop side.

4. Claims about China and financial repression (“this time it’s different”).

5. Starbucks in a funeral home, and Jeff Sachs is mostly right here.

Optimal policy toward prostitution

An email from Samuel Lee:

…we take the liberty of sending you a link to the working paper:
 NYU Law and Economics Research Paper No. 12-08

In the paper, we build on Edlund and Korn’s model of voluntary prostitution (JPE, 2002) to study the effect of prostitution laws. Our main results are as follows:

- Neither across-the-board legalization nor criminalization unambiguously reduces sex trafficking. The impact of either of these policies crucially depends on the incidence of voluntary prostitution, which in turn depends on other variables, such as the female-male income ratio.

- Even if across-the-board criminalization reduces sex trafficking, it comes at the expense of voluntary prostitutes, who prefer legalization. There is then an inherent conflict between safeguarding (the liberties of) voluntary prostitutes and preventing trafficking. (This conflict is borne out in recent public controversies about prostitution laws in Canada, France, and South Korea.)

- Between different types of criminalization, criminalizing johns is preferable to criminalizing prostitutes. The former is more effective in combating sex trafficking than the latter. The latter is furthermore unjust towards trafficked prostitutes, who’d then be doubly victimized.

Based on our analysis, we propose a different legal approach, which has so far not been tried by any country: criminalization of johns outside of a “safe harbor” for voluntary prostitution. To be more specific:

- Licensed brothels and prostitutes (i.e., regulated brothels) combined with — and this is crucial — criminal penalties for johns who purchase sex outside of these brothels. This (i) discriminates between the two “modes of production” of commercial sex, voluntary sex work and trafficking, and (ii) funnels all demand to the desirable “mode.” Trivial as the idea may sound, this policy has the potential to achieve both objectives, safeguard voluntary sex work and prevent trafficking, and hence to reconcile the two sides of the debate.

- There are implementation issues, but none that couldn’t be addressed. Point (i) requires effective background checks for the licensing procedures. It also requires monitoring of regulated brothels to ensure that only licensed prostitutes are employed there. Point (ii) requires undercover law enforcement (“fake illegal prostitutes”) to deter illegal purchases. And it requires severe penalties for illegal purchases — surveys suggest that the most effective one is public registries (shaming), which in this case is less of a moral statement about prostitution than about trafficking because buyers outside of the “safe harbor” would be aware that they very likely purchase sex from trafficking victims.

- There are clearly costs of licensing and enforcing the laws against illegal purchases. It seems to us, however, that these costs might be lower than for alternative, less effective approaches — which include the costs of enforcing across-the-board criminalization of prostitution and/or law enforcement activities targeted directly at traffickers, who are notoriously hard to catch or convict.

There are other questions regarding prostitution laws that we discuss in the paper, some of them call into question simple interpretations that are often made about empirical associations between domestic prostitution laws and the domestic incidence of trafficked prostitution. We hope that you find the paper interesting.