“Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records” (with Minoru Nakazato and J. Mark Ramseyer). Most studies of executive pay have data on pay, but not on total income. Studies of executives in Japan do not even have good data on pay. We, too, lack direct data on Japanese executive salaries, but we do have data on the incomes of the richest executives, and some indication of which executives have substantial capital income. From this, we use tobit regression analysis to conclude that executive pay in Japan depends on firm size, and to a lesser extent on performance as measured by accounting indicators, but not on stock price. We find that corporate governance variables such as board composition, have mixed effects. Paper, data, and programs at http://www.rasmusen.org/papers/exec/exec.htm.

Here is the rejection letter:

Dear Professor Eric Rasmusen,

This email deals with your manuscript, Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records. I have read the paper and at the moment it is not ready to send to a referee. It is potentially an interesting topic but you really test no hypotheses and the paper is in a form that is very difficult to read. You basically throw a lot of facts and some regressions at the readers. It is not in standard presentation style for finance journals (single spaced for one). The JCF has moved to a highly rated finance journal by providing papers that are readable, usuable and analyze an important question. You at most have the third. Plus you have not really placed your work in the context of JCF articles (we have several interesting articles on compensation).

Because the topic is interesting and important (assuming you are testing something), I am willing to consider a revision. I must also note the realities of the journal. In today’s environment the Journal of Corporate Finance must reject most papers. The number and quality of submissions has grown tremendously in the last year and unfortunately the rejection rate is becoming very high. We are able to accept only approximately 5 percent of submissions. Thus, we must reject some very good papers and usually do not work with papers that need major revisions. Two editors must accept the paper. It is a very high hurdle and this letter in no way promises publication.

In the book he fiercely opposes the Bush tax cuts. He feared the budget surpluses enjoyed in 2000 would be transformed into long-term deficits. He worried that entitlement spending would leave “a very large hole in future budgets.” Not facing this was “a failure.” He disdains the Great Pork Spree of the ’00s. …

But when the tax cuts, and the impact of spending, were being debated, Mr. Greenspan allowed his congressional testimony to be interpreted as supportive of the Bush plan. And he did this even though he had been warned in advance by those who’d seen his testimony that it would be seen as an endorsement of the tax plan….

But he never quite cleared it up, not at the time. He does it now, with the book, and after the advance. As a writer I am in passionate support of large advances, but $8.5 million to tell the American people what he should have told them when his views might have had an impact?

The irony is delicious. Environmentalists are opposed to trash that is nonbiodegradable. Ideally, they want trash to be recycled. As a second- best, they’d like it to be incinerated with scrubber smokestacks to make sure that pollutants don’t reach the air. Yet what is the effect of that? Recycling plastic means less demand for the oil from which it is made, lower gasoline prices, more oil being burned instead of turned into plastic, and hence more gasoline. Scrubber smokestacks make sure that the old plastic is efficiently and completely converted to carbon dioxide instead of more complicated chemicals.

To reduce the amount of carbon dioxide and reduce global warming, one has to make sure that carbon is converted into some inert form. Biodegradable wrapping won’t fit the bill— the bio’s that degrade it (bacteria, fungus, termites, whatever) turn it into carbon dioxide eventually. Plastic, on the other hand, does just fine, especially if you bury it deep enough in a landfill that sunlight can’t degrade it. Even if it isn’t buried, though, it’s better than something biodegradable.

So, every time you throw a pop bottle out of your car window onto the country lane, you’re helping stop global warming.

I’ll add an related point about recycling: I bet the benefits from it in terms of landfill expense saved are overstated. Landfills are expensive because of the need to avoid leakage of pollutants. Dirty diapers are one of the biggest problems, because we don’t want all that bacteria leaking out into the water supply. We don’t recycle diapers, though. What do we recycle? The parts of trash which aren’t poisonous— bottles, cans, and paper. Those products aren’t what create the landfill expense. In fact, if we separate them out, we could send them to a special, dirt-cheap, landfill that is just a big hole in the ground. No need for geological studies or special containment.

The Northern Rock bank run is interesting (background below from a newspape account). I’ll make three points: 1. Stupidly low deposit insurance limits caused a rational run, 2. The government should have made Northern Rock pay for the free full deposit guarantee it just got, and 3. It’s time to get out of savings accounts and bank stock shares if you’re British..

1. Stupidly low deposit insurance limits caused a rational run. In the U.S., up to 100,000 dollars of a depositor’s account are fully covered. That is way more than any person ought to have in a savings account anyway, so depositors can and do feel safe. In the UK, only about the first 4000 dollars are fully covered. The next 66,000 dollars or so are 90% covered. Suppose you have $10,000 in savings. That’s not a lot, and you might need to spend it on short notice, so you rationally do not think about buying fancy securities or splitting it among three banks. Instead, you put it in a savings account. Now you hear that the bank might possible be insolvent. If it is, you could lose up to $600, plus all your assets might be frozen for some time. For that, it’s worth spending an hour in line in a bank run to get your money out..

Why is the coverage limit so absurdly low? Did they forget to raise the limit after 1940?.

2. The government should have made Northern Rock pay for the free full deposit guarantee it just got.. The government swung to the opposite extreme of covering all depositors, regardless of size. Naturally, this helps with the bank run, but (a) it is perceived as, and is, a gift to Northern Rock, and (b) it encourages people to put huge deposits in reckless banks..

What the government should have done instead was (a) to extend the coverage limit to some reasonable level such as 30,000 pounds, and (b) make this guarantee a business offer to Northern Rock, for a substantial price (say, 10 million pounds). Then, once the crisis was over, they should have raised the deposit insurance limit for all banks, at a small charge to them..

3. It’s time to get out of savings accounts and bank stock shares if you’re British. If the current limit is not raised, savings accounts of more than 2000 pounds are a risky investment. Beyond the limit, if you put 8000 pounds in a savings account, it is like putting all your assets into the commercial paper of a single bank. Nobody should put all their savings into a single company’s assets. Banks are especially risky companies too– essentially they are investing in real estate (though with reverse leverage at least). It would be better to put your money into a money market fund, which at least invests in many companies’ commercial paper..

I predict bank earnings will fall now, so bank stock prices will fall too, and this will be true for all banks in Britain, not just speculative ones. The reason is that people will follow the advice I just gave and reduce their savings accounts. In particular, the foolish people who have put 100,000 pounds in savings accounts thinking they are safe will realize they are not. In fact, they will probably swing to the opposite extreme. The banks will thus lose a source of below-market credit. And it won’t help much with this kind of depositor even if the government increases the deposit insurance limit to a million pounds. These depositors only have a rough idea of finances, and they have learned two things: (a) deposit insurance limits are a lot lower than they thought, and (b) the government is willing to wildly shift its deposit insurance policy from one day to the next during an emergency. They won’t trust what the government says, at least for a few years..

September 19 evening postscript:
Professor Buiter has several good posts on Northern Rock. I thank Graeme for linking to it in his comment below. He says that the Bank of England had an unlimited line of credit out to Northern Rock already, even before the government deposit guarantee, so deposit insurance is unimportant. The line of credit strikes me as even worse, though. It would allow all kinds of crazy borrowing by Norhtern Rock. Moreover, it is secured lending, which is good in that it does limit the borrowing in effect, but bad in that it soaks up all the bank’s assets as collateral, leaving nothing for general creditors such as the depositors. A bank could leverage up by mortgaging ll its assets to get BE money, use the money for pure speculation, and then declare bankruptcy if the gamble didn’t pay off, leaving the depositors with zero. Maybe there are bond covenants that would prevent that, but if there are, they would block the BE credit too.

As I comment below, another thing to do is to make bankruptcy law to give high priority to small creditors. That should be done for all businesses, to save on transaction costs, but especially for banks, with their thousands of small depositors.

Here’s a newspape account:.

.

The panic surrounding the future of Northern Rock finally began to subside yesterday as savers took comfort from the Government’s promise to underwrite the bank’s entire £28bn savings book..

Queues formed outside just four of Northern Rock’s 76 branches yesterday, while the bank’s internet site saw half as many people logging in as the previous day – most of whom, the bank said, were successful at the first attempt….

The Newcastle-based bank has promised to refund all lost interest and charges incurred by savers who withdrew their money out of concern about the current situation, as long as they pay the money back into their accounts by 5 October. ….

The stock markets also reacted positively to the Government’s pledge yesterday, with shares in all the banks rising, and the FTSE 100 closing up almost 100 points. Shares in Northern Rock bounced more than 8 per cent to close the day at 306p. However, they are still 75 per cent below the highs they hit earlier this year…..

Alliance & Leicester, which saw its share price dive more than 30 per cent in the last half an hour of trading on Monday – as rumours circulated that it was about to become the next victim of the credit crisis – recovered almost all of the previous day’s losses, rising more than 32 per cent. Bradford & Bingley, whose shares also fell sharply on Monday, saw a 6 per cent bounce..

The Prime Minister, Gordon Brown, reiterated yesterday that the Government was doing everything in its power to bring the situation under control, while the Chancellor of the Exchequer, Alistair Darling, confirmed that the Treasury would be willing to extend its financial backing to any other British bank affected by the current turmoil in the credit markets. ….

Mr Darling held talks with both the Bank of England and the Financial Services Authority to assess the current situation. One of the topics for discussion was an extension of the Financial Services Compensation Scheme, which is designed to protect savers in the event of a large financial institution going bust..

Currently, the FSCS only guarantees 100 per cent of the first £2,000 of any bank deposits, and 90 per cent of the next £33,000. Furthermore, it can take several months to pay out. The FSA’s chief executive, Hector Sants, said the regulator would now look at the possibility of improving the scheme’s protection, conceding that the run on Northern Rock may have been exacerbated by the compensation scheme’s limitations. “Investors are aware of the limitations of the scheme, and in the light of events it would be right to look at it again,” he said..

Suppose we have 100 buyers, each with 1% of the market, one upstream incumbent seller who charges the monopoly price. Everybody knows that in a year a potential entrant seller will arise, and that he will need 15% of the market to achieve the necessary scale economies.

Ramseyer-Rasmusen-Wiley (AER), with elaboration by Sigel and Whinston, pointed out that the incumbent would be willing to offer the buyers 1 dollar each to sign an exclusive-dealing contract with him. Each buyer knows that the incumbent will then charge the monopoly price, and the entrant would charge marginal cost, but they also know that if the other buyers all sign up, the entrant won’t bother to enter. Thus, one equilibrium is for them all to sign up. (If a buyer expects other buyers to refuse to sign, he won’t sign, though. And we can complicate the story with sequential offers, high offers to the first 86 buyers, and so forth.)

But what if the buyers are not final consumers, but retailers in competition with each other? Fumagalli and Motta (AER 2006) note that then the entrant can survive serving just one retailer, because that retailer can sell to the entire consumer market, as much as the other 99 were selling and plenty to get the necessary economies of scale. Thus, exclusive contracts won’t work to create a monopoly.

Simpson and Wickelgren’s comment of June 2005 and their own paper (forthcoming AER?) also analyzes retailers, but concludes that exclusion *will* work. Their main argument is that since retailers compete, they will get little advantage from not signing the exclusionary contract. Suppose 99 retailers sign, but one does not. Will that 1 seize the entire market in conjunction with the low-priced entrant seller? No. The incumbent will be forced to choose a low price for his captive retailers, since otherwise they won’t be able to compete against the holdout. Thus, none of the retailers, including the holdout, would make any profit. Foreseeing this, no retailer would want to give up the one-dollar signing fee and be a holdout.

This argument is not as powerful as it sounds, though. It is valid in the model as I described it, but let’s think about the real world. If the incumbent has 99 captive retailers, would he really lower the price to marginal cost to match the entrant’s price to the holdout retailer? No. He’d do better with a higher price. He’d sacrifice volume, but the 99 retailers would not, in fact, lose all their customers if they charged more than the holdout. Because of product differentiation, differing locations, switching costs, or poor consumer information about prices, the 99 retailers would keep some of their customers. In that case, exclusion won’t work.

It’s a twisty argument, because it is the profitability of the captive retailers that is the undoing of the incumbent’s scheme. Because they are so profitable, being a holdout will be profitable for a retailer, so there will be a holdout.

I think there’d actually be a mixed-strategy equilibrium, though, and the exclusionary contracts *would* be profitable in the end. That is because it would not be an equilibrium for nobody to sign the exclusionary contract either. If there are 2 or more holdouts, then they will compete retailer profits to zero, in which case the captives, who at least get the signing fee, will have higher payoffs. What will happen is that the incumbent will choose the signing fee that maximizes his profit (which will be bigger then epsilon), retailers will be indifferent about signing, and exclusion will often but not always work. Sometimes all 100 retailers will sign, sometimes there will be 1 holdout (which will be profitable for that retailer), and sometimes there will be more than one holdout (which will yield zero payoffs to the holdouts).

Simpson and Wickelgren have a separate argument, though: fancier contracts will restore exclusion. Suppose the incumbent offers price- matching as part of his exclusionary contract: if the entrant enters with a lower price, he will match it. That will deter entry. Or suppose he uses a two-part tariff where he offers to sell a limited amount at marginal cost in return for a sign-up fee, with the proviso that if entry occurs he will sell unlimited amounts at that price.

That is a good point. Below I’ve excerpted Simpson and Wickelgren’s comment and some testimony of Joe Farrell’s. Farrell wonders whether courts, or anybody, can make much use of these ideas at the moment, since the conclusions are so tangled. I think they can, without much difficulty. Here’s what I conclude:

1. Exclusive-dealing contracts are something to worry about if scale economies are big enough, but not otherwise.

2. What matters is whether the amount of the market foreclosed is big enough to entirely deter or expel a rival, not whether it hurts his profit. If it can’t kill him, it doesn’t fit the monopolizing motive of these models.

3. Courts should look at the details of the contracts and contracting process if the prosecutor leaps hurdles 1 and 2 and proves possible monopolizing. If the excludor seems to be trying to panic buyers, or makes discriminating offers in sequence, for example, that looks bad. If he includes a price-matching clause, that’s bad. If he uses some kind of conditional two-part tariff, that’s bad.

These models are, in the end, story-telling. Courts can understand that. The stories depend crucially on assumptions which are relatively easy to check. The most common problem for antitrust authorities is deciding what mergers to allow. That is not a hard theoretical problem, but it is a very hard practical problem, because it requires estimating elasticities of demand and predicting cost savings and product improvements from a merger. That’s a lot harder than checking on whether a firm can survive with 30% of the market or whether a contract includes a price-matching clause.

Simpson and Wickelgren, “Exclusive Dealing and Entry, when Buyers Compete: Comment,” June 2005, says:

Vigorous downstream competition affects the ability of exclusive contracts to deter entry in two ways. First, vigorous downstream competition substantially reduces the benefit a buyer obtains from securing a lower input price: Because downstream competition drives price toward marginal cost, most of the benefit from lower input costs are passed on to final consumers. This means that an upstream incumbent can induce downstream buyers to sign exclusive contracts by offering them a small side payment even where upstream scale economies are absent (See Simpson and Wickelgren (2004). Thus, the Chicago School argument (Richard Posner 1976; Robert Bork 1978) that exclusion is unlikely because upstream competition maximizes the joint surplus of the incumbent and buyers does not apply when buyers compete vigorously in a downstream market.

Second, vigorous downstream competition reduces the importance of upstream scale economies as a barrier to entry. Focusing on buyers as final consumers, Eric Rasmusen et al. (1991) and Ilya R. Segal and Michael D. Whinston (2000) (henceforth RRW-SW) found that exclusive contracts can deter entry when an entrant must sell to multiple buyers in order to attain scale economies. Given the entrant’s need to attain scale economies, a buyer imposes a negative externality on other buyers when it signs an exclusive contract. In the RRW-SW model, the incumbent monopolist gets buyers to sign exclusive contracts that inefficiently deter entry by exploiting this externality. Where buyers are downstream competitors rather than final consumers, a downstream firm with lower costs than its rivals can expand its market share and thus its purchases of the upstream input. Consequently, given sufficiently intense downstream competition, a single buyer can enable an upstream entrant to attain scale economies. FM’s paper focuses on this second effect while ignoring the first effect.

Joe Farrell speaking in “UNITED STATES FEDERAL TRADE COMMISSION 2 and 3 UNITED STATES DEPARTMENT OF JUSTICE 7 SHERMAN ACT SECTION 2 JOINT HEARING 8 UNDERSTANDING SINGLE- FIRM BEHAVIOR: 9 EXCLUSIVE DEALING SESSION 10 WEDNESDAY, NOVEMBER 15, 2006″, which is on the web at a 4- line address (google it) says:

Now, what about the other side of the courtroom, divide and conquer exclusion, Rasmussen and Ramseyer and Wiley, 1991, corrected, beefed up and radically improved by Segal and Whinston in the American Economic Review, 2000, show that exclusion can profitably and harmfully work against end users; however, although I think that is very well understood and accepted, the fact is their models involve buyers who are end users.

In most cases that I am aware of, exclusive dealing is not a deal struck with end users. It is a deal struck with retailers or distributors or someone else intermediate in the value chain between the manufacturer and the end users. That makes a lot of difference.

So, interestingly, a year or two ago, there appeared to be economics literature, two broadly parallel articles, papers, one by Fumagalli and Motta, which I believe has been published or is about to be published in the American Economic Review, and one by John Simpson and Abraham Wickelgren, and within the last 24 hours, I have learned about other articles by Yong and Shaffer that may be somewhat along the same lines, and both of these articles address the question, how does the RRWSW theory of anticompetitive exclusive dealing change when you recognize that the buyers in the model, in practice, should be replaced by buyers who are not end users?

Well, there are two forces, okay? One force is that intermediate buyers, nonfinal buyers, actually do not care that much if the price goes up or stays high, provided it goes up or stays high to all of them, because then it gets passed through downstream, okay? How much that is true depends on the details of the market structure and so on, but that tends to be true. That lowers their resistance to things that maintain monopoly upstream relative to what it would be if they were end users. So, that you would expect would make anticompetitive exclusive dealing easier.

Another force, however, is that if you have a nonfinal buyer who holds out and does not sign the exclusive deal, then an entrant can come to him and say, “Aha, I will give you a lower price than all your tied up rivals will be getting. You can expand. You and I can meet my scale requirements, and you will make a bundle of money.” So, that dynamic potentially makes it harder to have anticompetitive exclusive dealing. Well, Fumagalli and Motta found conclusively that it went one way, and Simpson and Wickelgren found conclusively that it went the other way, and which way Yong and Shaffer come out, I do not know yet. Which of them is right and when? Well, I attempted to diagnose this in my Antitrust Bulletin article last year. My attempted diagnosis is that it depends on whether in that last situation where you had one hold-out buyer, the incumbent is then able to or does adjust the price that it charges the tied buyers. So, I believe Fumagalli and Motta assumed that it does not, and Simpson and Wickelgren assumed that it does, or maybe it is the other way around, okay?

When I put this tentative diagnosis to one of the four economists — and I will not say which one — the response I got was, “Ah, that is interesting, I am not sure.” That is telling, I think, because it says that it is kind of unlikely that a court is going to do a very good job of disentangling all of these difficult concepts. Now, the optimistic view is this is just the beginning of the economic exploration of this topic, and come the year 2010, we will understand it well and in a way that is good enough for us to brief courts on it, and maybe that will happen, …

The London School of Economics has a great idea: a computerized seminar sign-up list. You choose the seminars that interest you, and get email notifications.

width= "240" >

In effect, the government decided to get out of the business of providing academic secondary education, a libertarian step. That’s ironic, though, because it would have made more sense to keep the academic schools and privatize the vocational ones. Smart kids are more likely to have parents who can judge when the government school is doing a bad job and complain, or who will remedy its deficiences. Ordinary kids are more likely to have parents who can tell whether school A is better than school B from their advertizing, but can’t tell whether a monopoly is doing well or poorly.
]]> http://www.rasmusen.org/x/2007/08/30/eliminating-grammar-schools/feed/ 1 http://www.rasmusen.org/x/2007/08/28/writing-a-vitae-for-the-job-market/ http://www.rasmusen.org/x/2007/08/28/writing-a-vitae-for-the-job-market/#comments Tue, 28 Aug 2007 15:44:51 +0000 admin http://www.rasmusen.org/x/2007/08/28/writing-a-vitae-for-the-job-market/ I was just giving advice to my student Changmin Lee about going on the American academic job market. Some of the advice I’ll want to repeat, so I’ll put it here. If every foreign student takes this advice, it will help the market work a lot better. And it is a good illustration of how to apply game theory thinking to real-world situations.

1. On your curriculum vitae (resume), put somewhere “A recording of me speaking English is available at http:/www.iu.edu/jkjkjk.mp3, and a movie of me teaching is available at http:/www.iu.edu/jkjkjk.mov.”

You might want to omit the movie, but for a foreign student the recording is crucial. Think of it this way. For Korean students, the employer’s prior is that the job applicant can’t speak English well enough to be worth looking at seriously. You need to provide information to possibly change that belief.

Advisors’ letters are information, but extremely poor information, and unless your advisor can truthfully put you in the top 5% in terms of English-speaking ability, his letter won’t help. (If he lies, and you are only top 10%, not 5%, in English, then when the employer finds out, your advisor won’t be believed on anything else either and you’ll lose your research credibility.)

To be sure, your web recording will show that you have a heavy accent. But that won’t change your employer’s belief– that’s his prior anyway. Without the recording, you have zero chance of being interviewed in person; with the recording, you have a positive chance. The employer may decide, “Yes, he speaks English poorly, but he’s not as bad as I thought he might be, and it’s hard to find good applicants, so let’s try him out.”

You will have changed the employer’s belief in two ways. First, you may be able to increase the expected value of his belief as to your ability. Second, even if you actually reduce the expected value because you speak English poorly even for a Korean, you will still have reduced the variance of his belief. He will at least learn that you are not in the bottom 10%, and that may be enough for him to be willing to interview you.

2. Include your photo on your vitae, first page. That will help readers spot which is yours in a big pile and help them connect vitae to you around interview time.

3. Include the websites of your thesis committee, so employers who become seriously interested can check out members they haven’t heard of.

4. Do include the fact that you were invited to give papers at conferences, but don’t give that a lot of space. Don’t bother to include the titles of the papers, for instance.

“I have been invited to present papers at The Fourth Annual Corporate Reporting & Governance Conference/ The Sixth Annual SEC Financial Reporting Conference, Irvine, California (September 2007), The VII International Finance Conference, Monterrey, México (September (2007), and The International City Break Conference on Business and Economic Research, Athens, Greece (October 2007).”

5. Put the list of committee members on the first page, but don’t put the addresses till the last page. You need to save space on the first page for the titles of your thesis papers. Keep in mind that most readers will throw away your vitae before reading the second page.

It is okay to repeat information. You can have a long vitae with lots of junk on it, so long as the first page contains everything that really matters. Imagine your readers has having a stack of 200 vitaes and one hour in which to select the best 20.

6. If you have done lots of teaching, list it all but at the start give a summary such as “I have taught 5 sections as a principal instructor and 4 sections as a teaching assistant over the past 3 years.” Get that statement on the first page of the vitae.

Until 2003, the discount rate was always below the fed funds rates. After that point it has been 100 basis points above the fed funds rate (it is now 50 bps above fed funds). Despite the discount’s rate relation to fed funds (and despite seasonal blips), borrowing at the window has historically been less than $1 billion a week. Considering the trillions that banks borrow and lend from each other over night, $1 billion a week is like a twig on the banks of a mighty river. In terms of solving the liquidity problem, this is really kind of a joke.

Tyler Cowen’s post to which this is a comment quotes someone as saying:

Citigroup , Bank of America and other top banks took the rare step of borrowing $2 billion from the U.S. Federal Reserve on Wednesday, in a bid to reassure markets and remove the stigma associated with getting financing from the central bank….

Borrowing money directly from the Fed has historically been seen as a sign of weakness, but Bank of America, JPMorgan Chase & Co, and Wachovia Corp said they did it for the sake of the financial system. All four banks emphasized they have access to other, cheaper funds.

Professor Cowen himself says:

I don’t know if this will work, but it is a neat trick. Imagine that you, as a smart person, went around saying stupid things, in an attempt to limit discrimination against the stupid.

Why indeed would banker X say that he is borrowing at above-market rates because he thinks banker B would otherwise be too embarassed to borrow, preferring to let his, banker B’s, bank and career collapse? Maybe because that is so stupid that X knows nobody will believe him– it is mere “babbling”, to use the economic term. Or maybe X’s audience is made up entirely of stupid people, who would otherwise start a run on the banks.

I think it is because it is a tax on virtuous behavior. Saving is virtuous compared to spending now. Giving away money is virtuous compared to spending it on oneself. Bequests are both saving and gifts. Hence, to impose a massive tax (say, 40%) on a bequest while imposing small taxes (say, 4%) on selfish consumption is unfair.

From a value-maximizing point of view, the giving away of money has the benefit that it makes two people happy — the giver, and the donor. Also, if taxing investment income is value-demaximizing, inheritance taxes are bad because they are a tax on saving. They tax the principle of saving, not just the return.

Windows is awesomely bad. How can as big a company as Microsoft do things so poorly? I do not mean that rhetorically. Rather, why don’t they spend a little more money and make a far better product, for which they could charge more? I suppose Bill Gates must be blamed– he controls the company, and he must not have a good feel for technology and so doesn’t understand why good design matters. There is not market corrective for the problem of a monopolistic leader who fails to see something imoprtant. This matters for policy purposes, because such incompetence only survives because of a government-granted monopoly— copyright and patent on software.

Here’s an example, which I’ll list so I can use it as a standard reference. What matters is not that this is so important to operation, as that it shows such incompetence in design.

I want to cancel all my print jobs, because one job is jamming the printer for some reason. Windows has a window that shows print jobs and supposedly allows the user to cancel any one of them, but as often as not, that command is ignored by the computer. Probably that’s incompetent design too, but let’s give Microsoft the benefit of the doubt– maybe there is some technical reason why some print jobs can’t be cancelled without restarting the machine. So I went to the Web.

It turns out that there is a command line command to cancel print jobs: prnjobs -x. This is put onto one web page with various other commands.

Point one: Microsoft hides many of Windows features in command-line commands that go unmentioned in its standard documentation. It would be easy enough to link them to the standard help, but MS doesn’t.

Point two: Instead of using HTML properly, MS slaps together a bunch of commands onto one web page just like a computer manual, except without professional typesetting layout.

There seems to be no way to cancel all jobs at once, though. The MS documentation instead says that the user must first find the job id of each print job that is to be cancelled, using a separate command, prnjobs -l.

Point three: There ought to be a command to cancel all jobs at once.

The prnjobs -l command fails, though. It turns out that you have to take the comamnd-line window to a special directory for the command to work, though the MS documentation doesn’t tell you that.

It’s important to understand that running the printer utilities can be a bit tricky due to the terse rules governing command line scripts. Techrepublic, having billions of dollars less than Microsoft, but billions of brains more, tell us this:

It’s important to understand that running the printer utilities can be a bit tricky due to the terse rules governing command line scripts.

To begin with, the six printer utilities are located in the systemroot\system32 folder, which on most Windows XP installations is C:\Windows\System32. Now, even though this folder is listed in the path by default, you must actually change to this folder in order to run the utilities. And, since these utilities are designed to run from the command line, you’ll need to launch them from a command prompt, and you must run them using Windows Script Host’s command line script host (Cscript.exe).

Point four: Windows only lets the command be issued after moving to a particular directory.

Even Techrepublic fails to note another problem: the actual command is not prnjobs, but prnjobs.vbs. Prnjobs by itself fails. You need to issue

c:/windows/system32/cscript prnjobs.vbs -l

c:/windows/system32/cscript prnjobs.vbs -x 4

(if 4 turns out to be the job number)

Point six: The MS documentation gives the wrong command in all its examples.

Point seven: Windows requires the suffix *.vbs, for no good reason.

I should mention, too, that cut-and-paste doesn’t work in the DOS-style command-line window, even though practically always when I use it, I am typing in commands that need to be typed verbatim from some other source.

Point eight: Windows blocks cut-and-paste into the DOS-style command-line window.

And also: if you make a mistake,although a window comes up to tell you, you can’t simultaneously look at the help window for what to do and do it– you have to close the window first. (And remember–no cutting and pasting allowed!)

Point nine: Help windows must be closed before you can use them. You presumed to have a photographic memory.

Finally, the command doesn’t work. We’re back to where we started.

I succeeded eventually. Disconnecting the printer’s power and USB failed to work. But I tried deleting some plausible processes in the Windows Task Manager and got the job deleted (I also deleted the printer’s operating process too, and had to get it started up again, though.)
]]> http://www.rasmusen.org/x/2007/07/31/an-extended-example-of-microsoft-windows-incompetence-printing-deletion/feed/ 2 http://www.rasmusen.org/x/2007/07/24/the-democrats-free-trade-columbia-korea-and-peru/ http://www.rasmusen.org/x/2007/07/24/the-democrats-free-trade-columbia-korea-and-peru/#comments Wed, 25 Jul 2007 01:27:45 +0000 admin http://www.rasmusen.org/x/2007/07/24/the-democrats-free-trade-columbia-korea-and-peru/ Remember how so many people were saying that Bush was such a protectionist? (based on the admittedly bad steel policy but nothing else, as far as I could see) The Democrats are now showing that they are the protectionist party, and, at the same time, that they don’t really care about international public opinion, just about European and Arab public opinion. The
Wall Street Journal writes:

Democrats are promising to improve America’s image in the world if they retake the White House next year. Tell that to Peru and Colombia, which are watching Democrats in Congress renege on free-trade assurances that are barely a month old.

House Democrats pulled that fast one late last Friday, shortly before a holiday weekend when few were watching. They also announced their opposition to a free-trade pact with South Korea only a day before the deal was signed, and for good measure they announced that an extension of trade promotion authority (which expired June 30) is essentially dead as long as they run Congress. Ah, bipartisanship.

All of this is particularly embarrassing for Charlie Rangel, the Ways and Means Chairman, who has tried to strike a trade compromise with President Bush. We’ve praised him for his efforts, and a month ago Republicans swallowed hard to give Mr. Rangel concessions on labor and the environment that he could bring to his fellow Democrats. The Administration even agreed to weaken drug-company intellectual property rights to make Democrats happy. Speaker Nancy Pelosi accepted the terms, and Ways and Means issued a rare bipartisan statement saying, “This new policy clears the way for broad, bipartisan Congressional support for the Peru and Panama FTAs.” Mr. Rangel called it “truly an historic breakthrough,” and Democrats hailed it as proof of their ability to govern.

But they lacked the nerve to stand up to the AFL-CIO, which frowned on the deal and proceeded to lobby the rank-and-file to revolt. Mr. Rangel soon admitted privately to Treasury Secretary Hank Paulson that he couldn’t deliver on the bargain after all. And then came Friday’s announcement that Democrats won’t even take up the Peru trade bill until Peru first changes its labor and environmental laws. They also said Mr. Rangel will personally fly to Lima in August to instruct Peru’s government on what Congress demands.

“The Constitution confers upon Congress the authority to regulate foreign commerce under Article I, Section, 8,” the Democratic statement said to justify Mr. Rangel’s Lima summit. So forget the Secretaries of State and Treasury and the U.S. Trade Representative; Congress is cutting out the diplomatic middlemen and renegotiating trade deals as it sees fit.

This unilateral high-handedness is even worse for the Colombia-U.S. trade pact, which Democrats seem prepared to kill outright. Colombia has been fighting the war on drugs for decades for the U.S., and suffering disproportionately for it. Popular President Àlvaro Uribe, now in his second term, has reduced violence by almost every measure, including murder, terrorist attacks, robbery and kidnapping. …

Good idea, right? Not to Democrats, who said Friday that they’ll oppose the pact on human rights grounds until they “see concrete evidence of sustained results on the ground in Colombia.” What Colombians think about their president and his policies is apparently meaningless. Mr. Uribe replied that he isn’t interested in “a relationship wherein the U.S. is master and Colombia a slave republic”; good for him.

House Democrats also declared the South Korea trade deal dead on arrival, based mainly on the issue of automobiles. South Korea has long been protectionist on cars, but the trade deal would gradually open its market. Tariffs would disappear, and Korea would level the playing field on non-tariff barriers such as its engine-size tax and “safety standards.” The U.S. can also reimpose its 2.5% tariff on passenger cars if Seoul backslides. Some $1.6 billion in U.S. farm exports would become duty free immediately; services, where the U.S. has a clear advantage, would open substantially. But again, none of that is good enough for Democrats.

Colin Bird asked what I thought about Hayek’s view of economic methodology, in particular, about his criticism of it in his 1937 Economica article. I might not be understanding it fully, but my impression is that what he doesn’t like about the economic theory of his day is that it:

1. Ignores the fact that people are imperfectly informed and differently informed about prices, products, and methods;

2. Ignores the interesting question of how people become informed;

3. Makes policy conclusions on the basis of theories deficient in their treatment of information (i.e., from points 1 and 2).

This is clearest in his 1945 AER article, the most famous one, which is mostly about the role of prices rather than methodology:

I fear that our theoretical habits of approaching the problem with the assumption of more or less perfect knowledge on the part of almost everyone has made us somewhat blind to the true function of the price mechanism and led us to apply rather misleading standards in judging its efficiency. The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly; i.e., they move in the right direction. This is enough of a marvel even if, in a constantly changing world, not all will hit it off so perfectly that their profit rates will always be maintained at the same constant or “normal” level….

…there is something fundamentally wrong with an approach which habitually disregards an essential part of the phenomena with which we have to deal: the unavoidable imperfection of man’s knowledge and the consequent need for a process by which knowledge is constantly communicated and acquired. Any approach, such as that of much of mathematical economics with its simultaneous equations, which in effect starts from the assumption that people’s knowledge corresponds with the objective facts of the situation, systematically leaves out what is our main task to explain. I am far from denying that in our system equilibrium analysis has a useful function to perform. But when it comes to the point where it misleads some of our leading thinkers into believing that the situation which it describes has direct relevance to the solution of practical problems, it is time that we remember that it does not deal with the social process at all and that it is no more than a useful preliminary to the study of the main problem. (The Use of Knowledge in Society F. A. Hayek The American Economic Review, Vol. 35, No. 4. (Sep., 1945), pp. 519-530.)

Hayek’s 1937 article in Economica, also well-known, is mainly about method.

I am certain there are many who regard with impatience and distrust the whole tendency, which is inherent in all modern equilibrium analysis, to turn economics into a branch of pure logic, a set of self-evident propositions which, like mathematics or geometry, are subject to no other test but internal consistency. But it seems that if only this process is carried far enough it carries its own remedy with it. In distilling from our reasoning about the facts of economic life those parts which are truly a prior;, we not only isolate one element of our reasoning as a sort of Pure Logic of Choice in all its purity, but we also isolate, and emphasise the importance of, another element which has been too much neglected. My criticism of the recent tendencies to make economic theory more and more formal is not that they have gone too far, but that they have not yet been carried far enough to complete the isolation of this branch of logic and to restore to its rightful place the investigation of causal processes, using formal economic theory as a tool in the same way as mathematics…. (Economics and Knowledge F. A. von Hayek Economica, New Series, Vol. 4, No. 13. (Feb., 1937), pp. 33-54.)

I see this as saying that he does not object to rigorous theory, but one of its advantages is that a tight, ceteris paribus theory highlights its own flaws, by making it clear if something importan– information, in this case— is omitted.

He says that:

…price expectations and even the knowledge of current prices are only a very small section of the problem of knowledge as I see it. The wider aspect of the problem of knowledge with which I am concerned is the knowledge of the basic fact of how the different commodities can be obtained and used,l and under what conditions they are actually obtained and used,…

…economics has come nearer than any other social science to an answer to that central question of all I social sciences, how the combination of fragments of now- ledge existing in different minds can bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess. To show that in this sense the spontaneous actions of individuals will under conditions which we can define bring about a distribution of resources which can be understood as if it were made according to a single plan, although nobody has planned it, seems to me indeed an answer to the problem which has sometimes been metaphorically described as that of the ” social mind “.

At one point, though, he does seem to be attacking modelling, and attacking it simplistically:

The device generally adopted for this purpose is the assumption of a perfect market where every event becomes known instantaneously to every member. I t is necessary to remember here that the perfect market which is required to satisfy the assumptions of equilibrium analysis must not be confined to the markets of all the individual commodities ; the whole economic system must be assumed to be one perfect market in which everybody knows everything. The assumption of a perfect market then means nothing less than that all the members of the community, even if they are not supposed to be strictly omniscient, are at least supposed to know automatically all that is relevant for their decisions….

I wonder whether he really means that, since surely he knows that perfect information can be made as a simplifying assumption, not as a substantive assumption. If people’s info is a little imperfect, it does not change the conclusions of the perfectly competitive models to any important degree.

I think Hayek would be quite happy with the direction economics has taken. The economics of knowledge is a huge part of the theory by now– both of the effects of imperfect information, and teh process of information acquisition.

How much does crime by illegal immigrants cost America each year? My estimate is $84 billion per year.

Crime costs America about $400 billion per year, of which about $167 billion per year is government spending– $72 billion on police, $57 billion on imprisonment, and $38 billion on courts. My blogpost Illegal Immigrants Cause 21% of Crime shows that by a conservative estimate, illegal immigrants cause 21% of crime. 21% of $400 billion is $84 billion, and 21% of $167 billion is $35 billion. (See these powerpoints for sources.)

This totally wipes out the gain from immigration generally estimated in the June 20, 2007 CEO report Immigration’s Economic Impact, which says immigration has a net benefit of $30 billion per year, including both legal and illegal immigrants. It says:

Immigrants have lower crime rates than natives. Among men aged 18 to 40, immigrants are much less likely to be incarcerated than natives. (Source: Butcher and Piehl)

I won’t go into a fullscale critique of Butcher and Piehl’s paper, Why Are Immigrants’ Incarceration Rates So Low? Evidence on Selective Immigration, Deterrence, and Deportation , which concludes that immigrants have lower crime rates than native- born Americans. Points to note, however, are:

1. They lump together legal and illegal immigrants.

2. They adjust for age and sex and education. If a lot of immigrants are young men aged 16 to 30 without high school degrees, it might well be that they commit crimes at no higher a rate than young American male high school dropouts, but the immigrants will still add a huge amount to crime in the United State, all out of proportion to their numbers. Moreover, they won’t “grow out of it”, if they go back to Mexico on reaching age 30– immigrants will still be spending their criminal years in the United States. Also, adjusting for education is misleading. An American who fails to get a high school degree is unusual. I would not be surprised if it is common for an illegal immigrant to fail to have gotten a high school degree. If so, that is comparing underclass Americans to typical immigrants.

Point (2) means that the Butcher-Piehl results are not useful for addressing the question of how expensive immigrants are. Rather, it says that increasing the number of foreign-born high school dropout young males wouldn’t increase the crime rate any more than increasing the number of their domestic equivalents– but either increase would increase crime a lot.

It’s important in typesetting to be accurate and on time, and to coordinate one’s activities with other people (author and publisher) honestly and clearly. The page proofs of the third edition of my book, typeset in India, had a huge number of errors compared to the first and second, typeset in England. The fourth edition was a highly frustrating experience, with the Indian typesetter, Newgen, not only making errors but failing to correct them, being slow, and missing deadlines. Now Vtex, in Lithuania, has been typesetting a book chapter I wrote, and they have missed their deadlines and thought they emailed the page proofs to me and my co-author 2 weeks ago though neither of us received them.

Dependability does require some management skill, and it does require experience (knowing to ask for confirmations when you send important emails, for example), but it seems so much easier to be dependable than to acquire technical skills. Apparently not.

Thus, the dependability of business in the United States will remain a big source of comparative advantage.

Many legal outcomes can be explained, and future cases predicted, by asking a very simple question: is there a plausible result in this case that will significantly affect the interests of the legal profession (positively or negatively)? If so, the case will be decided in the way that offers the best result for the legal profession.

Fischel, I think, had a good article on the Professional Ethics part of this.

• In 2001, the average charge for a surgical abortion at 10 weeks’ gestation was $468; but since most abortions in the United States are performed at low-cost clinics, women on average paid $372 for the procedure. (31)

How much does a medical abortion cost? In 2001, the average charge for a medical abortion was $487. (31)

Who pays for abortions?

• Some 74% of women pay for abortions with their own money; 13% of abortions are covered by Medicaid, and 13% are billed directly to private insurance. Some women who pay for the procedure themselves may receive insurance reimbursement later. (31)

Does the U.S. government help poor women who need abortions pay for them?

• Congress has barred the use of federal Medicaid funds to pay for abortions, except when the woman’s life would be endangered by a full-term pregnancy, or in cases of rape or incest. As of November 2006, 17 states used their own funds to subsidize abortion for poor women. (38)

(1) “If x =2z, then y = 3z; and if x =2v, then y = 3g.”

(2) “If x =2z then y = 3z, and if x =2v then y = 3g.”

(3) “If x =2z, then y = 3z and if x =2v, then y = 3g.”

(4) “If x =2z, then y = 3z, and if x =2v, then y = 3g.”

I had read Arroyo’s book (an outstanding biography of Mother Angelica!) but had forgotten about Harry John.

Mother Angelica’s caution about giving control of her endeavor to Harry John also extended to great concern about giving control to the Catholic Church or the bishops. In the book, there is a thrilling story about the American bishops trying to take over EWTN after Mother had made it successful (which Mother would not stand for, because she knew EWTN’s orthodoxy would be threatened with the bishops in control). If I remember the story correctly, the bishops attempted to gain control of EWTN through Mother: as a religious community in a diocese, Mother and her order were subject to the bishop, and thus, EWTN may have been subject to the bishop. Mother anticipated the bishops’ checkmate and preemptively called an unscheduled emergency EWTN board meeting where she (and her loyal laypeople) passed a new set of bylaws giving all control of the board to lay people and not to any religious or diocesan members, and then Mother immediately resigned from the board, cutting off the conduit between EWTN and the religious community through which the bishops were trying to gain control. A great story of political and church intrigue.