If You're Reading This In America, You're Rich

One of my favorite posts in my first year of blogging was titled If You're Reading This, You're Rich. It mostly focused on how much better the world is compared to historical standards. Here's the same message, but with global standards:

You may notice that inequality increases. Nobel laureate Gary Becker has some interesting thoughts on how all inequality isn't bad.

Worst Case Scenario For US Economy

Becoming like Japan:

In 1995, Japan's economy was seven times bigger than China's. Since then, China's economy has grown a lot — it's now bigger than Japan's. And Japan's economy has actually shrunk a bit.

As its economy was shrinking, Japan's government spent like mad. So its debt is now twice as big as its GDP. There is one country in the world in worse debt shape: Zimbabwe. The highly indebted countries you keep hearing about, like Greece and Ireland, have much smaller debt burdens than Japan.

The future does not look bright. Japan's population is tilted towards older people, so they have to think about huge pension payments in the coming decades.

Investors are still lending lots of money to Japan at reasonable rates. The country does not seem on the brink of an acute fiscal emergency. At the same time, it doesn't seem likely to break out of its long term chronic economic illness.

The primary reason for this lack of growth is bad government decisions. The good news is that means this is avoidable. The bad news is we need our politicians to make good decisions. I won't be losing sleep over this, but it is a possible future for America.

Poor Parents Matter More

I've been advocating for an accurate depiction of parenting for quite a while now. I've mostly focused on how parents have less influence than they think and that there are many practical reasons to have kids. However, I certainly admit I see problems caused by bad parenting my classroom all the time. So which is it, does parenting really matter that much or not? Well that depends on how wealthy you are:

For a paper in Psychological Science, researchers at the University of Texas at Austin and the University of Virginia looked at 750 pairs of American twins who were given a test of mental ability at the age of 10 months and then again at the age of 2. By studying the performance of identical versus fraternal twins, the scientists could tease out the relative importance of factors such as genetics and the home environment. Because the infants came from households across the socioeconomic spectrum, it also was possible to see how wealth influenced test scores.

When it came to the mental ability of 10-month-olds, the home environment was the key variable, across every socioeconomic class. But results for the 2-year-olds were dramatically different. In children from poorer households, the choices of parents still mattered. In fact, the researchers estimated that the home environment accounted for approximately 80% of the individual variance in mental ability among poor 2-year-olds. The effect of genetics was negligible.

The opposite pattern appeared in 2-year-olds from wealthy households. For these kids, genetics primarily determined performance, accounting for nearly 50% of all variation in mental ability. (The scientists made this conclusion based on the fact that identical twins performed much more similarly than fraternal twins.) The home environment was a distant second. For parents, the correlation appears to be clear: As wealth increases, the choices of adults play a much smaller role in determining the mental ability of their children.

There are diminishing returns to good parenting. If kids are already playing musical instruments, having intelligent conversations, and taking improv classes, the extra effort has minimal effects. Pretty good argument for some kind of universal early intervention.

Complicated Foreign Policy Gets Complicated

When I called for a less complicated foreign policy, this is why:

That's because, in the final analysis, the US needs a friendly government in Cairo more than it needs a democratic one. Whether the issue is Israel-Palestine, Hamas and Gaza, Lebanon, Iran, security for Gulf oil supplies, Sudan, or the spread of Islamist fundamentalist ideas, Washington wants Egypt, the Arab world's most populous and influential country, in its corner. That's the political and geostrategic bottom line. In this sense, Egypt's demonstrators are not just fighting the regime. They are fighting Washington, too.

For more on the complicated Egypt story, here's a regularly updated article.

Economics of Leno vs. Conan

Or, why Leno's 10 o'clock show didn't stand a chance:

In 2009 key demographic group ratings for network 10 P.M. shows were just half of what they had been five years earlier. And a reason for that was that some 40 percent of households now had the technology of digital video recorders, allowing people to easily program their own TV schedules.

And a habit many people had apparently gotten into was to use the 10 P.M. hour to catch up on programs they had recorded either earlier that night or even earlier in the week. So Leno at 10 wasn’t just up against alternative network programming. Thanks to consumer technology, he was up against millions of people’s personal programming options, too. 

Argument Against Drug Legalization

You know where I stand. But some disagree:

I couldn't have gotten so stinking rich without George Bush, George Bush Jr., Ronald Reagan, even El Presidente Obama, none of them have the cajones to stand up to all the big money that wants to keep this stuff illegal. From the bottom of my heart, I want to say, Gracias amigos, I owe my whole empire to you.

That's apparently from billion drug lord Joaquin "El Chapo" Guzman Loera.

Economics of Bail

We mostly think about prisons and courts as the few things the private sector can't private. But bail bondsman are a unique American solution to a universal problem:

Bounty hunters and bail bondsmen play an important but unsung role in a legal system whose court dockets are too crowded to provide swift justice. When a suspect is arrested, a judge must make a decision: set the suspect free on his own recognizance until the court is ready to proceed, hold the suspect in jail, or release the accused on the condition that he post a bail bond. A bond is a promise backed by incentive. If the suspect shows up on the trial date, he gets his money back; but if he fails to show, the money is forfeited. We don’t want to deprive the innocent of their liberty, but we also don’t want to give the guilty too much of a head start on their escape. Bail bonds don’t solve this problem completely, but they do give judges an additional tool to help them navigate the dilemma.

Bail might be a rich man’s privilege were it not for the bail bondsman. (Many bondsmen are women, but “bondsperson” doesn’t have quite the same ring, so I’ll use the standard terminology.) In return for a non-refundable fee, usually around 10 percent of the bond, a bondsman will put up his own money with the court. A typical bond might run $6,000. If the defendant shows up, the bondsman earns $600. But if the defendant flees, the bondsman potentially can forfeit $6,000. Potentially, because when a fugitive fails to appear, the court gives the bondsman a notice that essentially says, “Bring your charge to justice soon or your money is mine.” A bondsman typically has 90 to 180 days to bring a fugitive back to justice, so when a defendant jumps bail, the bondsman lets the dogs loose.

So what does it take to be a successful bounty hunnter? Not what you'd expect:

What it takes to be a successful bounty hunter is mostly persistence and politeness. On most days your leads don’t pay off, so you need to visit and revisit the fugitive’s home, work, and favorite hangouts. Waiting is a big part of the game. Why politeness? Well, where do the leads come from? From people like Chrissy’s aunt—relatives and friends who might not talk to the police but who will respond to a kind word. Bounty hunters are polite even to the fugitives who, after all, are also their customers, and sadly, bounty hunters rely a lot on repeat business. One customer of a firm owned by the same family that runs the one Dennis works for told him proudly, “My family and I have been coming to Frank’s Bail Bonds for three generations.”

Most fugitives don’t fight, and Dennis is eager to avoid confrontation. Cowboys don’t last long in this business.

What about the skechtiest clients, what are they afraid of?:
If at all possible, bail bondsmen get a friend or family member to cosign the bond. The reason is simple. A defendant whose bond is cosigned is less likely to flee. As Dennis told me, “In my line of work, I deal with some mean people, people who aren’t afraid of me or the police. But even the mean ones are afraid of their mom, so if I can get Mom to list her house as collateral, I know the defendant is much more likely to show up when he is supposed to.” A defendant whose bond is cosigned is also more likely to be caught if he does flee, because the bondsman will remind the cosigner that if the fugitive can’t be found, it’s not just the bondsman who will be left holding the bag.

So what's the difference between a bounty hunter and a police officer?:

Bounty hunters have robust rights to arrest fugitives. They can, for example, lawfully break into a suspect’s home without a warrant, pursue and recover fugitives across state lines without necessity of extradition proceedings, and search and seize without the constraint of the Fourth Amendment’s “reasonableness” requirement. Just like everyone else, however, bounty hunters must obey the criminal statutes. A bounty hunter who uses unreasonable force or mistakenly enters the home of someone who is not a bail jumper is subject to criminal prosecution.

How did we get this uniquely American system?:

The prerogatives of bounty hunters flow from the historical evolution of bail. Bail began in medieval England as a progressive measure to help defendants get out of jail while they waited, sometimes for many months, for a roving judge to show up to conduct a trial. If the local sheriff knew the accused, he might release him on the defendant’s promise to return for the hearing. More often, however, the sheriff would release the accused to the custody of a surety, usually a brother or friend, who guaranteed that the defendant would present himself when the time came. So, in the common law, custody of the accused was never relinquished but instead was transferred to the surety—the brother became the keeper—which explains the origin of the strong rights bail bondsmen have to pursue and capture escaped defendants. Initially, the surety’s guarantee to the sheriff was simple: If the accused failed to show, the surety would take his place and be judged as if he were the offender.

The English system provided lots of incentives for sureties to make certain that the accused showed up for trial, but not a lot of incentive to be a surety. The risk to sureties was lessened when courts began to accept pledges of cash rather than of one’s person, but the system was not perfected until personal surety was slowly replaced by a commercial surety system in the United States. That system put incentives on both sides of the equation. Bondsmen had an incentive both to bail defendants out of jail and to chase them down should they flee. By the end of the 19th century, commercial sureties were the norm in the United States. (The Philippines is the only other country with a similar system.)

So is this private system better than a public bail-bond system? If I'm asking the answer's probably yes:

Our research backs up what I found on the street: Bail bondsmen and bounty hunters get their charges to show up for trial, and they recapture them quickly when they do flee. Nationally, the failure-to-appear rate for defendants released on commercial bail is 28 percent lower than the rate for defendants released on their own recognizance, and 18 percent lower than the rate for those released on government bond.

Even more important, when a defendant does skip town, the bounty hunters are the ones who pursue justice with the greatest determination and energy. Defendants sought by bounty hunters are a whopping 50 percent less likely to be on the loose after one year than other bail jumpers.

In addition to being effective, bail bondsmen and bounty hunters work at no cost to the taxpayers. The public reaps a double benefit, because when a bounty hunter fails to find his man, the bond is forfeit to the government. Because billions of dollars of bail are written every year and not every fugitive is caught, bond forfeits are a small but welcome source of revenue.

Last Names and Academics, Part III

Two years ago I posted an observation I'd had in my classroom; that students with last names near the end of the alphabet tend to do worse in my class. I gave a handful of reasons, not that seemed to really satisfy. Then last year I tried to explain it again, with just as much success. Well, perhaps the third time's a charm:

People waiting in line for days for the latest must-have product are probably a bunch of Zimmermans, Youngs, and, yes, Wilkinses, according to a truly bizarre new study. It's apparently all the fault of elementary school teachers overusing alphabetical order.

This is one of those studies that seems way too ridiculous to be true, but let's at least consider the facts. Researchers tracked consumer patterns in a variety of situations. They consistently found that people whose last names came later in the alphabet tended to buy items far more quickly than those earlier in the alphabet, and the effect got stronger and stronger the later a person's name appeared in the alphabet.

Intriguingly, for married women, the name that mattered was their maiden name, suggesting that the underlying cause for this is created earlier in life. The researchers speculate that the use of alphabetical order during people's childhoods creates a sense in later alphabet kids that, if they want to be first in line for something, they're going to have to make it happen themselves. That explains the later tendency for impulsive consumption, according to the researchers:

The idea holds that children develop time-dependent responses based on the treatment they receive. In an effort to account for these inequities, children late in the alphabet will move quickly when last name isn't a factor; they will 'buy early.' Likewise, those with last names early in the alphabet will be so accustomed to being first that that individual opportunities to make a purchase won't matter very much; they will 'buy late.'"

Now, obviously people's surnames aren't the only determinant of their shopping patterns, and this only speaks to an overall trend in consumption habits. This is the sort of genuinely weird discovery that, while it certainly shouldn't be just dismissed, does need a lot more evidence before it's something we buy into. After all, my last name Wilkins is right at the end of the alphabet, and I remember being at the end of lots of lines back in my school days, and my shopping habits are completely norm...ooh, a sale on backpacks! Gotta go!

If it makes you less patient, and patience is extremely important for life success, perhaps this minor detail can have a big impact.

Charitable Impact of Religion

Recently came across this essay describing the differences in giving between believers and non-believers:

The differences in charity between secular and religious people are dramatic. Religious people are 25 percentage points more likely than secularists to donate money (91 percent to 66 percent) and 23 points more likely to volunteer time (67 percent to 44 percent). And, consistent with the findings of other writers, these data show that practicing a religion is more important than the actual religion itself in predicting charitable behavior. For example, among those who attend worship services regularly, 92 percent of Protestants give charitably, compared with 91 percent of Catholics, 91 percent of Jews, and 89 percent from other religions.

And this has nothing to do with income or political ideology:

Note that neither political ideology nor income is responsible for much of the charitable differences between secular and religious people. For example, religious liberals are 19 points more likely than secular liberals to give to charity, while religious conservatives are 28 points more likely than secular conservatives to do so. In other words, religious conservatives (who give and volunteer at rates of 91 percent and 67 percent) appear to differ from secular liberals (who give and volunteer at rates of 72 percent and 52 percent) more due to religion than to politics. Similarly, giving differences do not disappear when income is neutralized. This should not be particularly surprising, however, because the sccbs data show practically no income differences between the groups.

Not only are they donating more often, the religion are donating more total:

The average annual giving among the religious is $2,210, whereas it is $642 among the secular. Similarly, religious people volunteer an average of 12 times per year, while secular people volunteer an average of 5.8 times. To put this into perspective, religious people are 33 percent of the population but make 52 percent of donations and 45 percent of times volunteered.

And this isn't just a measure of relgious giving to religious charities:

Religious people are more generous than secular people with nonreligious causes as well as with religious ones. While 68 percent of the total population gives (and 51 percent volunteers) to nonreligious causes each year, religious people are 10 points more likely to give to these causes than secularists (71 percent to 61 percent) and 21 points more likely to volunteer (60 percent to 39 percent). For example, religious people are 7 points more likely than secularists to volunteer for neighborhood and civic groups, 20 points more likely to volunteer to help the poor or elderly, and 26 points more likely to volunteer for school or youth programs. It seems fair to say that religion engenders charity in general — including nonreligious charity.

The article closes with this:

Houses of worship might teach their congregants the religious duty to give, and about both the physical and spiritual needs of the poor. Simply put, people may be more likely to learn charity inside a church, synagogue, or mosque than outside. If charity is indeed a learned behavior, it may be that houses of worship are only one means (albeit an especially efficacious one) to teach it. Secularists interested in increasing charitable giving and volunteering among their ranks might spend some effort thinking of alternative ways to foster these habits.

Hat tip to Justin Scott.

Toronto's Human Library

Earlier this month I praised the efforts of fellow blogger Justin Wehr for offering his expertise free on Craigslist. Similarly, reader, commenter and old friend Cheryl recently pointed me towards this:

On Nov. 6, 2010, over 200 Torontonians checked out a "human book" from Toronto Public Library's inaugural Human Library collection.

The one-day pilot event was held at Toronto Reference Library, North York Central Library, Bloor Gladstone Branch, Lillian H. Smith Branch and Malvern Branch.

The library's 60 "human books" came from all walks of life. They spoke about a wide range of life experiences - from living in poverty or living with a disability, to immigrating to Canada, to serving in war, and much more.

It seems like most of them were something like non-fiction novels. Is there no room for a "human book" on introduction economics?