24 results back to index
Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip
Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Asian financial crisis, asset-backed security, bank run, banking crisis, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, Kenneth Rogoff, lateral thinking, London Whale, Long Term Capital Management, market bubble, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, technology bubble, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game
,” in Safety in Ice Hockey, vol. 2, Cosmo R. Castaldi and Patrick J. Bishop, eds. (1993). 9 Peltzman grew up in the Bensonhurst: For Sam Peltzman’s life and his work I relied principally on interviews and follow-up correspondence. 10 In a controversial 1973 paper: Sam Peltzman, “An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments,” Journal of Political Economy 81, no. 5 (1973): 1049–1091. 11 Peltzman felt his results were: Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy 83, no. 4 (1975): 677–726. 12 Peltzman didn’t stop with autos: “The Health Effects of Mandatory Prescriptions,” Sam Peltzman, University of Chicago Center for the Study of the Economy and the State, Working Paper #38, April 1986. 13 Wilde illustrated his point: Gerald Wilde, “Does Risk Homeostasis Theory Have Implications for Road Safety?
Controlled fire was “the most ‘natural’ and much the cheapest and easiest to apply,” his report said. In economics, a similar shift was under way. Scholars, many working out of the University of Chicago, argued that government management of the economy was backfiring by failing to consider how people would adapt. Though federal regulation had continued to expand, George Stigler argued that regulators often ended up serving the regulated, not consumers. Stigler’s student Sam Peltzman made an even more audacious claim: regulations aimed at making consumers safer might be doing the opposite. In 1975 he published a provocative study that claimed that seat belts were causing drivers to drive more recklessly, resulting in more pedestrian deaths. Scholars were soon finding similar behavior in fields as diverse as shipping and football, and labeling the phenomena “risk compensation,” “risk homeostasis,” and “human factors.”
Unsafe at Any Speed triggered several congressional hearings and was instrumental in the passage of the National Traffic and Motor Vehicle Safety Act in 1966, which for the first time gave the federal government authority to set standards for automobile and highway safety. Among the first standards passed were rules requiring seat belts for all occupants, energy-absorbing steering columns, a padded instrument panel, and dual braking systems. But just as government control of the economy and the environment had by this point come under fire, so did safety regulation. Leading the backlash was Sam Peltzman, the University of Chicago economist we met in Chapter 1. I visited Peltzman one afternoon at his office at the university’s business school on the city’s South Side. Seventy-three years old, he had retired some time ago from active teaching but was still writing and speaking. Peltzman dresses like a hippie. He favors loud checked pants, Hawaiian shirts, and sports jackets in blinding fuchsia or lime green.
Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.
Alistair Cooke, American ideology, business cycle, clean water, collective bargaining, creative destruction, credit crunch, declining real wages, endowment effect, fiat currency, fixed income, full employment, hiring and firing, income per capita, Jones Act, Joseph Schumpeter, laissez-faire capitalism, manufacturing employment, means of production, minimum wage unemployment, plutocrats, Plutocrats, post-industrial society, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Sam Peltzman, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration
Furthermore, to assume that government always transfers income to lower-income recipients flies in the face of facts too numerous and familiar to require recitation. As Mancur Olson has observed, governmental redistributions typically "have arbitrary rather than egalitarian impacts on the The Sources of Big Government 13 distribution of income-more than a few redistribute income from lower to higher income people." Many governmental activities are "of no special help to the poor" and many others "actually harm them."24 Sam Peltzman's version of the Political Redistribution Hypothesis holds that "governments grow where groups which share a common interest in that growth and can perceive and articulate that interest become more numerous." Here governmental growth is seen as driven exclusively by citizen demands, governmental response being taken for granted. Peltzman maintains that "the leveling of income differences across a large part of the population ... has in fact been a major source of the growth of government in the developed world over the last fifty years" because the leveling created "a broadening of the political base that stood to gain from redistribution generally and thus provided a fertile source of political support for expansion of specific programs.
Hence the more rapid growth of governmental employment at the lower levels than at the federal level since World War II is neither surprising nor especially significant. 21 Despite the many defects of the quantitative measures presented in Table 2.1, economists and political scientists, with few. exceptions, continue to focus their studies of the growth of government on that kind of evidence. Some are aware of the problems inherent in a reliance on such ambiguous data. Sam Peltzman, for example, begins his study by observing that "to equate government's role in economic life with the size of its budget ... is obviously wrong since many government activities (for example, statutes and administrative rules) redirect resources just as surely as taxation and spend- 32 Framework ing." Having recognized the problem, however, he immediately dismisses it with the declaration that "the available data leave no other choice."22 One is reminded of the drunkard searching for his lost keys under the corner street lamp "because the light's better here."
Given the multitude of indirect as well as direct ways 278 Notes that governmental policies effect redistributions, the measure is not operational and hence the hypothesis cannot be tested empirically. A subsequent paper by Meltzer and Richard fails to recognize the problem and its test of the authors' hypothesis is therefore unpersuasive. "Tests of a Rational Theory of the Size of Government," Public Choice 41 (1983): 403-418. 24. Olson, Rise and Decline, p. 174. 25. Sam Peltzman, "The Growth of Government," Journal of Law and Economics 23 (Oct. 1980): 285, emphasis in original. 26. Ibid., pp. 221-223, 233-234. Political scientist Morris P. Fiorina has aptly remarked that "most economists receive a tolerably good training in statistical method, so they are capable of producing analyses which have the appearance of thoroughness and sophistication, but ... their lack of contextual knowledge leads them to rely on naive model specification.
When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants by Steven D. Levitt, Stephen J. Dubner
Affordable Care Act / Obamacare, Airbus A320, airport security, augmented reality, barriers to entry, Bernie Madoff, Black Swan, Broken windows theory, Captain Sullenberger Hudson, creative destruction, Daniel Kahneman / Amos Tversky, deliberate practice, feminist movement, food miles, George Akerlof, global pandemic, information asymmetry, invisible hand, loss aversion, mental accounting, Netflix Prize, obamacare, oil shale / tar sands, Pareto efficiency, peak oil, pre–internet, price anchoring, price discrimination, principal–agent problem, profit maximization, Richard Thaler, Sam Peltzman, security theater, Ted Kaczynski, the built environment, The Chicago School, the High Line, Thorstein Veblen, transaction costs, US Airways Flight 1549
Jacob and Levitt, “Rotten Apples: An Investigation of the Prevalence and Predictors of Teacher Cheating,” The Quarterly Journal of Economics (August 2003). CHAPTER 7: BUT IS IT GOOD FOR THE PLANET? 165 “IS THE ENDANGERED SPECIES ACT . . .”: “He’s got a new working paper”: See John A. List, Michael Margolis, and Daniel E. Osgood, “Is the Endangered Species Act Endangering Species?,” NBER working paper 12777, December 2006. / 166 “Sam Peltzman’s observation that only 39 of the 1,3000 species list have ever been removed”: See Sam Peltzman, “Regulation and the Natural Progress of Opulence,” American Enterprise Institute monograph, May 23, 2005. 166 “BE GREEN: Drive”: “via John Tierney’s blog”: John Tierney, “How Virtuous Is Ed Begley Jr.?,” The New York Times (TierneyLab), February 25, 2008. / 167 “Goodall is no right-wing nut”: See Chris Goodall, How to Live a Low-Carbon Life (Earthscan, 2007). 168 “DO WE REALLY NEED A FEW BILLION LOCAVORES?”
In the meantime, while this debate is ongoing, there are strong incentives for private parties to try to develop land that they fear they may in the future be prevented from developing by the endangered species status. So in the short run, destruction of habitat is likely to actually increase. Based on this theory, List et al. analyze the data for the cactus ferruginous pygmy owl near Tucson, Arizona. Indeed, they find that land development speeds up substantially in the areas that are going to be designated critical habitats. This result, combined with the economist Sam Peltzman’s observation that only 39 of the 1,300 species put on the endangered species list have ever been removed, do not paint a very optimistic picture of the efficacy of the Endangered Species Act. Be Green: Drive (SDL) When it comes to saving the environment, things are often not as simple as they seem at first blush. Take, for instance, the debate about paper bags versus plastic bags. For a number of years, anyone who opted for plastic bags at the grocery store risked the scorn of environmentalists.
The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan
activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airline deregulation, Albert Einstein, Andrei Shleifer, banking crisis, barriers to entry, basic income, battle of ideas, Bernie Sanders, blockchain, borderless world, Bretton Woods, British Empire, Build a better mousetrap, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, computer vision, conceptual framework, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, data acquisition, David Brooks, Deng Xiaoping, desegregation, deskilling, disruptive innovation, Donald Trump, Edward Glaeser, facts on the ground, financial innovation, financial repression, full employment, future of work, global supply chain, high net worth, housing crisis, illegal immigration, income inequality, industrial cluster, intangible asset, invention of the steam engine, invisible hand, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, labor-force participation, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, means of production, moral hazard, Network effects, new economy, Nicholas Carr, obamacare, Productivity paradox, profit maximization, race to the bottom, Richard Thaler, Robert Bork, Robert Gordon, Ronald Reagan, Sam Peltzman, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South China Sea, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, superstar cities, The Future of Employment, The Wealth of Nations by Adam Smith, trade liberalization, trade route, transaction costs, transfer pricing, Travis Kalanick, Tyler Cowen: Great Stagnation, universal basic income, Upton Sinclair, Walter Mischel, War on Poverty, women in the workforce, working-age population, World Values Survey, Yom Kippur War, zero-sum game
Gustavo Grullon, Yelena Larkin, and Roni Michaely, “Are US Industries Becoming More Concentrated?” August 31, 2017, available at https://pdfs.semanticscholar.org/138f/249c43bfec315227a242b305b9764d57a0af.pdf. Of course, average size would also increase if small firms no longer enter. 48. See Sam Peltzman, “Industrial Concentration under the Rule of Reason,” The Journal of Law and Economics 57, no. S3 (August 2014): S101–20. 49. “Too Much of a Good Thing,” The Economist, March 26, 2016, https://www.economist.com/briefing/2016/03/26/too-much-of-a-good-thing. 50. Sam Peltzman, “Industrial Concentration.” 51. Robert Bork, The Antitrust Paradox: A Policy at War With Itself (New York: Basic Books, 1978). 52. “AT&T and Time Warner Are Cleared to Merge,” The Economist, June 16, 2018, https://www.economist.com/news/leaders/21744068-more-consolidation-will-follow-consumers-ought-worry-att-and-time-warner-are-cleared?
The average US public firm today is three times larger, even after correcting for inflation, than it was two decades ago.47As a number of studies have shown, US industries are becoming more dominated by a few large firms today—they are becoming more concentrated, in econ-speak.48 For example, between 1982 and 2012, retail trade saw the share of the top four firms double from 15 percent to 30 percent. In the critical sector of information technology, media, and communications, the Economist magazine found the top four firms now accounted for nearly 50 percent of the revenue.49 Concentration has been made easier by a more lax antitrust environment, as argued by my colleague Sam Peltzman.50 Right until the early 1980s, antitrust authorities were quite active in preventing mergers that increased industry concentration substantially. The legal scholar Robert Bork (yes, he of the failed Supreme Court nomination) argued in his book The Antitrust Paradox in 1978 that it is possible that rising concentration in an industry may reflect gains in market share for more efficient players rather than growing monopolization.51 He urged antitrust regulators to focus on whether the consumer was better off rather than whether industry was dominated by a few firms.
Work with Rodney Ramcharan has also been enormously relevant to some of the themes in this book. Both were very generous with their comments on an earlier draft. I have also benefited from discussions with, and comments from, Marianne Bertrand, Steve Davis, Douglas Diamond, Eugene Fama, Rob Gertner, Chang-Tai Hsieh, Erik Hurst, Steven Kaplan, Anil Kashyap, Yueran Ma, Bhanu Pratap Mehta Lubos Pastor, Sam Peltzman, Eswar Prasad, Ram Shivakumar, Amir Sufi, Chad Syverson, Richard Thaler, Rob Vishny, and Eric Zwick. Rohit Lamba and Prateek Raj were especially kind in going through the early chapters and giving me detailed useful comments. Krishna Kamepalli and Adarsh Kumar provided very helpful research assistance. I had very useful conversations with Douglas Baird, Marshall Bouton, Mark Carney, Dipesh Chakrabarty, Raj Chetty, John Cochrane, Matt Gentzkow, Rakesh Kochhar, Prachi Mishra, David Nirenberg, Josh Rauh, and James Robinson over the course of this book.
The Armchair Economist: Economics and Everyday Life by Steven E. Landsburg
Albert Einstein, Arthur Eddington, business cycle, diversified portfolio, first-price auction, German hyperinflation, Golden Gate Park, information asymmetry, invisible hand, Kenneth Arrow, means of production, price discrimination, profit maximization, Ralph Nader, random walk, Ronald Coase, Sam Peltzman, sealed-bid auction, second-price auction, second-price sealed-bid, statistical model, the scientific method, Unsafe at Any Speed
Here is a striking way to frame the question: The regulations tend to reduce the number of driver deaths by making it easier to survive an accident. At the same time, the regulations tend to increase the number of driver deaths by encouraging reckless behavior. Which effect is the greater? Is the net effect of the regulations to decrease or to increase the number of driver deaths? This question cannot be answered by pure logic. One must look at actual numbers. In the middle 1970s, Sam Peltzman of the University of Chicago did just that. He found that the two effects were of approximately equal size and therefore cancelled each other out. There were more accidents and fewer driver deaths per accident, but the total number of driver deaths remained essentially unchanged. An interesting side effect appears to have been an increase in the number of pedestrian deaths; pedestrians, after all, gain no benefit from padded dashboards.
I also believe that in the absence of explicit contracts, people who lecture other people on their "responsibilities" are almost always up to no good. I tell my daughter to be wary of such people—even when they are preschool teachers who have otherwise earned a lot of love. Sincerely, Steven Landsburg APPENDIX Notes on Sources This book contains many ideas and arguments mat I lifted from other people. My memory is not good enough to accurately acknowledge them all. In this appendix I will do the best I can.* The Power of Incentives: Sam Peltzman's work on auto safety was published in the Journal of Political Economy in 1975. Isaac Ehrlich's work on capital punishment was published in the American Economic Review, also in 1975. Ed Learner's article on taking the "con" out of econometrics was published in the American Economic Review in 1983. The experiments on rats were reported in several journals including the American Economic Review in 1981.
Narconomics: How to Run a Drug Cartel by Tom Wainwright
Airbnb, barriers to entry, bitcoin, business process, call centre, collateralized debt obligation, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, failed state, financial innovation, illegal immigration, Mark Zuckerberg, microcredit, price mechanism, RAND corporation, Ronald Reagan, Sam Peltzman, Skype
Dudley, “Drug Trafficking Organizations in Central America: Transportistas, Mexican Cartels and Maras,” Wilson Center, 2010, at http://www.wilsoncenter.org/sites/default/files/Chapter%202-%20Drug%20Trafficking%20Organizations%20in%20Central%20America%20Transportistas,%20Mexican%20Cartels%20and%20Maras.pdf. 4. US Securities and Exchange Commission, see p. 15 at http://www.sec.gov/Archives/edgar/data/1467858/000146785812000014/gm201110k.htm#s8EF7834BE4E777188CAF1031CB30C168. 5. Gianluca Fiorentini and Sam Peltzman, eds., The Economics of Organised Crime (Cambridge: Cambridge University Press, 1997). 6. Christina Villacorte, “Tattoo Removal in Prison Gives Inmates a Second Chance,” Huffington Post, September 4, 2013, at http://www.huffingtonpost.com/2013/09/04/tattoo-removal-prison_n_3864222.html. CHAPTER 3 THE PEOPLE PROBLEMS OF A DRUG CARTEL: WHEN JAMES BOND MEETS MR. BEAN 1. “The Illicit Drug Trade in the United Kingdom,” Matrix Knowledge Group/Home Office, 2007, at http://webarchive.nationalarchives.gov.uk/20110220105210/rds.homeoffice.gov.uk/rds/pdfs07/rdsolr2007.pdf. 2.
Alison Smith, “Fortune 500 Companies Spend More Than $500bn on Corporate Responsibility,” Financial Times, October 12, 2012, at http://www.ft.com/cms/s/0/95239a6e-4fe0-11e4-a0a4-00144feab7de.html#axzz3lqtuDTmC. 8. As quoted in La Jornada, September 20, 2005 (in Spanish), at http://www.jornada.unam.mx/2005/09/20/index.php?section=politica&article=022n1pol. 9. Herschel I. Grossman, “Rival Kleptocrats: The Mafia Versus the State,” in Gianluca Fiorentini and Sam Peltzman, The Economics of Organised Crime (Cambridge University Press, 1997). 10. Leopoldo Franchetti, Political and Administrative Conditions in Sicily (1876). 11. Diego Gambetta and Peter Reuter, “Conspiracy Among the Many: The Mafia in Legitimate Industries,” in Fiorentini and Peltzman, The Economics of Organised Crime. 12. FBI, “Investigative Programs: Organized Crime,” at http://www.fbi.gov/about-us/investigate/organizedcrime/cases/carting-industry. 13.
Traffic: Why We Drive the Way We Do (And What It Says About Us) by Tom Vanderbilt
Albert Einstein, autonomous vehicles, availability heuristic, Berlin Wall, call centre, cellular automata, Cesare Marchetti: Marchetti’s constant, cognitive dissonance, computer vision, congestion charging, Daniel Kahneman / Amos Tversky, DARPA: Urban Challenge, endowment effect, extreme commuting, fundamental attribution error, Google Earth, hedonic treadmill, hindsight bias, hive mind, if you build it, they will come, impulse control, income inequality, Induced demand, invisible hand, Isaac Newton, Jane Jacobs, John Nash: game theory, Kenneth Arrow, lake wobegon effect, loss aversion, megacity, Milgram experiment, Nash equilibrium, Sam Peltzman, Silicon Valley, statistical model, the built environment, The Death and Life of Great American Cities, traffic fines, ultimatum game, urban planning, urban sprawl, women in the workforce, working poor
The most troublesome possible answer, one that has been haunting traffic safety for decades, suggests that, as with the roads in Chapter 7, the safer cars get, the more risks drivers choose to take. While this idea has been around in one form or another since the early days of the automobile—indeed, it was used to argue against railroad safety improvements—it was most famously, and controversially, raised in a 1976 article by Sam Peltzman, an economist at the University of Chicago. Describing what has since become known as the “Peltzman effect,” he argued that despite the fact that a host of new safety technologies—most notably, the seat belt—had become legally required in new cars, the roads were no safer. “Auto safety regulation,” he concluded, “has not affected the highway death rate.” Drivers, he contended, were trading a decrease in accident risk with an increase in “driving intensity.”
Interestingly, though, in a passage that still applies today, he noted that accidents at grade crossings, then as now, seemed to happen under what would be presumed to be the least likely, or “safest,” of conditions: “The full average of accidents of the worst description appear to have occurred under the most ordinary conditions of weather, and usually in the most unanticipated way. This is peculiarly true of accidents at highway grade crossings. These commonly occur when the conditions are such as to cause the highway travelers to suppose that, if any danger existed, they could not but be aware of it.” From Charles Francis Adams, Notes on Railroad Accidents (New York: G. P. Putnam’s Sons, 1879). “the highway death rate”: Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy, vol. 83, no. 4 (August 1976), pp. 677–726. reason to feel less safe: Decades later, people are still sifting through the data, trying to refute or defend Peltzman’s hypothesis. He has been questioned for, among other things, including motorcyclists in his count of nonoccupant fatalities—that is, along with pedestrians and cyclists—as if they were a similar beast.
fatalities by some 25 percent: A. J. McLean, B. N. Fildes, C. J. Kloeden, K. H. Digges, R. W. G. Anderson, V. M. Moore, and D. A. Simpson, “Prevention of Head Injuries to Car Occupants: An Investigation of Interior Padding Options,” Federal Office of Road Safety, Report CR 160, NHMRC Road Accident Research Unit, University of Adelaide and Monash University Accident Research Centre. seat belts and air bags: Sam Peltzman, “Regulation and the Natural Progress of Opulence,” lecture presented at the American Enterprise Institute, September 8, 2004, AEI-Brookings Joint Center for Regulatory Studies, Washington, D.C. Simpson has suggested: Joe Simpson, writing about “super-share ice screws” and other technological innovations, notes that “one would have thought these welcome developments would have made the sport considerably safer.
The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum
"Robert Solow", airline deregulation, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, ending welfare as we know it, financial deregulation, financial innovation, fixed income, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Growth in a Time of Debt, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Long Term Capital Management, low cost airline, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, oil shock, Paul Samuelson, Philip Mirowski, plutocrats, Plutocrats, price stability, profit motive, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Peltzman, Silicon Valley, Simon Kuznets, starchitect, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus
Prices were quite different in regulated and unregulated states, and the paper’s conclusion — that this could be explained by factors other than regulation — rested on some odd assumptions. Price changes during the first three years after regulation began, for example, were not attributed to regulation. Two decades later, a Chicago graduate student asked Friedland for the data and found a basic math error.13 Stigler’s most important disciple, Sam Peltzman — whom Stigler feted as “the best purchase the Walgreen foundation has yet made” — later described Stigler’s work on regulation as propaganda.14 “He was very much the kind of a person who would say, ‘I’ll state this result as strongly as I possibly can, even if it’s not completely justified by the evidence,’ ” Peltzman said of Stigler. “He was using a bully pulpit that he had acquired from his stature in the profession.”15 The propaganda worked.
Weidenbaum’s work was funded by companies including General Electric, and his techniques included double counting.53 But the new administration took the view that the burden of proof rested with proponents of regulation. “There is no reason,” said the 1982 Economic Report of the President, “to think that commands from the government can do a better job of increasing an individual’s economic welfare than the individual can by making choices himself.” Indeed, a growing literature suggested that regulation often had unanticipated adverse consequences. An early classic in this genre was a 1975 paper by Sam Peltzman, George Stigler’s protégé, arguing that seat belt laws killed pedestrians because drivers felt safer and therefore took larger risks. In February 1981, the White House summoned representatives of regulatory agencies to a meeting in the old office building that sits on the west flank of the White House, an odd Second Empire confection in a city of neoclassical temples. Their host was James C.
See Edward Nik-Khah, “George Stigler, the Graduate School of Business and the Pillars of the Chicago School,” in Building Chicago Economics: New Perspectives on the History of America’s Most Powerful Economics Program, ed. Robert Van Horn et al. (Cambridge, Eng.: Cambridge University Press, 2011), 148. 15. Freedman, In Search of the Two-Handed Economist, 386. 16. James Allen Smith, Brookings at 75 (Washington, D.C.: Brookings Institution, 2010), 89. 17. Martha Derthick and Paul J. Quirk, The Politics of Deregulation (Washington, D.C.: Brookings Institution, 1985), 34, 56. 18. Sam Peltzman, “Entry in Commercial Banking,” Journal of Law and Economics 8 (October 1965): 11–50. The paper is a condensed version of Peltzman’s dissertation. Peltzman later recounted Stigler told him he didn’t like the results, but couldn’t find any errors. See Freedman, In Search of the Two-Handed Economist, 380. The observation about taxi medallions was made by the economist Alfred Kahn. 19. George J.
The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper
Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game
When markets have become more concentrated after merger waves, income inequality has risen. When antitrust laws have been vigorously enforced, income inequality has been lower (Figure 10.7). Figure 10.7 Income Inequality in the United States versus Antitrust Enforcement SOURCE: Einer Elhauge, “Horizontal Shareholding,” Harvard Law Review 129, no. 5 (March 2016). The increase in inequality started after the antitrust revolution under President Ronald Reagan. Sam Peltzman, an economist at the University of Chicago, found that that concentration, which had been unchanged over the previous decades, began rising at the same time that merger policy changed. Concentration has increased steadily over the entire period after antitrust policy changed. He noted that the increase has been especially pronounced in consumer goods industries.13 The role of high industrial concentration on inequality is now becoming clear from dozens recent academic studies.
In many countries, particularly Europe, the poor do receive large payments from the government, which is why their measures appear lower. 9. www.ampcapital.com.au/article-detail?alias=/olivers-insights/august-2017/inequality-is-it-increasing. 10. http://www.epi.org/publication/ceo-pay-continues-to-rise/. 11. http://work.chron.com/ceo-compensation-vs-world-15509.html. 12. Gustavo Grullon, Yelena Larkin, and Roni Michaely, “Are U.S. Industries Becoming More Concentrated?” (August 31, 2017). Available at SSRN: https://ssrn.com/abstract=2612047. 13. Sam Peltzman, “Industrial Concentration under the Rule of Reason,” The Journal of Law and Economics 57, no. S3 (August 2014): S101–S120, https://doi.org/10.1086/675719. 14. Jonathan Baker and Steven Salop, “Antitrust, Competition Policy, and Inequality,” American University Washington School of Law Working Papers, February 25, 2015, http://digitalcommons.wcl.american.edu/fac_works_papers/41/. 15. Lina Khan and Sandeep Vaheesan, “Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents” (April 22, 2016), Harvard Law & Policy Review 235 (2017).
Making a Killing: The Deadly Implications of the Counterfeit Drug Trade by Roger Bate
Baker Professor of Economics Harvard University President and CEO National Bureau of Economic Research Gertrude Himmelfarb Distinguished Professor of History Emeritus City University of New York R. Glenn Hubbard Dean and Russell L. Carson Professor of Finance and Economics Columbia Business School Samuel P. Huntington Albert J. Weatherhead III University Professor of Government Harvard University William M. Landes Clifton R. Musser Professor of Law and Economics University of Chicago Law School Sam Peltzman Ralph and Dorothy Keller Distinguished Service Professor of Economics Graduate School of Business University of Chicago George L. Priest John M. Olin Professor of Law and Economics Yale Law School Jeremy Rabkin Professor of Law George Mason University School of Law Murray L. Weidenbaum Mallinckrodt Distinguished University Professor Washington University Richard J. Zeckhauser Frank Plumpton Ramsey Professor of Political Economy Kennedy School of Government Harvard University Research Staff Gerard Alexander Visiting Scholar Joseph Antos Wilson H.
Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford
"Robert Solow", 3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, debt deflation, deskilling, disruptive innovation, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, Gunnar Myrdal, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kenneth Arrow, Khan Academy, knowledge worker, labor-force participation, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, Marc Andreessen, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, Paul Samuelson, performance metric, Peter Thiel, plutocrats, Plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Rodney Brooks, Sam Peltzman, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, The Future of Employment, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, uber lyft, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce
To some extent, you can make a reasonable argument that all these accumulated advances—as well as the economic and political institutions that enable a vibrant market economy—are really a resource that belongs to all citizens. A term often used in place of “guaranteed income” is “citizen’s dividend,” which I think effectively captures the argument that everyone should have at least a minimal claim on a nation’s overall economic prosperity. The Peltzman Effect and Economic Risk Taking In 1975, the University of Chicago economist Sam Peltzman published a study showing that regulations designed to improve automobile safety had failed to result in a significant reduction in highway fatalities. The reason, he argued, was that drivers simply compensated for the perceived increase in safety by taking more risks.14 This “Peltzman effect” has since been demonstrated in a wide range of areas. Children’s playgrounds, for example, have become much safer.
John Schmitt, Kris Warner, and Sarika Gupta, “The High Budgetary Cost of Incarceration,” Center for Economic and Policy Research, June 2010, http://www.cepr.net/documents/publications/incarceration-2010–06.pdf. 13. John G. Fernald and Charles I. Jones, “The Future of US Economic Growth,” American Economic Review: Papers & Proceedings 104, no. 5 (2014): 44–49, http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.5.44. 14. Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy 83, no. 4 (August 1975), http://www.jstor.org/discover/10.2307/1830396?uid=3739560&uid=2&uid=4&uid=3739256&sid=21103816422091. 15. Hanna Rosin, “The Overprotected Kid,” The Atlantic, March 19, 2014, http://www.theatlantic.com/features/archive/2014/03/hey-parents-leave-those-kids-alone/358631/. 16. “Improving Social Security in Canada, Guaranteed Annual Income: A Supplementary Paper,” Government of Canada, 1994, http://www.canadiansocialresearch.net/ssrgai.htm. 17.
More Guns, Less Crime: Understanding Crime and Gun-Control Laws by John R. Lott
affirmative action, Columbine, crack epidemic, Donald Trump, Edward Glaeser, G4S, gun show loophole, income per capita, More Guns, Less Crime, Sam Peltzman, selection bias, statistical model, the medium is the message, transaction costs
Another concern is that otherwise law-abiding citizens may have carried concealed handguns even before it was legal to do so.22 If nondiscretion- HOW TO TEST THE EFFECTS OF GUN CONTROL | 35 ary laws do not alter the total number of concealed handguns carried by otherwise law-abiding citizens, but merely legalize their previous actions, passing these laws seems unlikely to aﬀect crime rates. The only real eﬀect from making concealed handguns legal could arise from people being more willing to use them to defend themselves, though this might also imply that they would be more likely to make mistakes in using them. It is also possible that concealed-firearm laws both make individuals safer and increase crime rates at the same time. As Sam Peltzman has pointed out in the context of automobile safety regulations, increasing safety may lead drivers to oﬀset these gains by taking more risks as they drive.23 Indeed, recent studies indicate that drivers in cars equipped with air bags drive more recklessly and get into accidents at suﬃciently higher rates to oﬀset the life-saving eﬀect of air bags for the driver and actually increase the total risk of death for others.24 The same thing is possible with regard to crime.
While no reliable data are available on this question, a couple of polls indicate that the number of otherwise law-abiding citizens who carry concealed handguns may be substantial. The results of a recent Oklahoma poll showed that up to 6 percent of Oklahoma residents already carry concealed handguns either on their persons or in their cars; see Michael Smith, “Many Permits to Go to Lawbreakers,” Tulsa World, May 5, 1996, p. A15. The margin of error in the poll was 3.5 percent, which is substantial, given the small value with which this error is compared. 23. Sam Peltzman, “The Eﬀects of Automobile Safety Regulation,” Journal of Political Economy 83 (Aug. 1975): 677–725. 24. Steven Peterson, George Hoﬀer, and Edward Millner, “Are Drivers of Air-BagEquipped Cars More Aggressive? A Test of the Oﬀsetting-Behavior Hypothesis,” Journal of Law and Economics 38 (Oct. 1995): 251–64. 25. Kieran Murray, “NRA Taps into Anger of Mid-American Gunlovers,” Reuters Newswire, dateline Dallas, Apr. 21, 1996. 26.
In contrast, if we had instead inquired what diﬀerence it would make in crime rates if either all states or no states adopted right-to-carry concealed-handgun laws, the case of all states adopting concealed-handgun laws would have produced 2,000 fewer murders; 5,700 fewer rapes; 79,000 fewer aggravated assaults; and 14,900 fewer robberies. In contrast, property crimes would have risen by 336,410. 10. Ted R. Miller, Mark A. Cohen, and Brian Wiersema, Victim Costs and Consequences: A New Look (Washington, DC: National Institute of Justice, Feb. 1996). 11. See Sam Peltzman, “The Eﬀects of Automobile Safety Regulation,” Journal of Political Economy 83 (Aug. 1975): 677–725. 12. To be more precise, a one-standard-deviation change in the probability of arrest accounts for 3 to 11 percent of a one-standard-deviation change in the various crime rates. 13. Translating this into statistical terms, a one-standard-deviation change in the percentage of the population that is black, male, and between 10 and 19 years of age explains 22 percent of the ups and downs in the crime rate.
Free to Choose: A Personal Statement by Milton Friedman, Rose D. Friedman
affirmative action, agricultural Revolution, air freight, back-to-the-land, bank run, banking crisis, business cycle, Corn Laws, Fractional reserve banking, full employment, German hyperinflation, invisible hand, means of production, minimum wage unemployment, oil shale / tar sands, oil shock, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, Sam Peltzman, school vouchers, Simon Kuznets, The Wealth of Nations by Adam Smith, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration
Now that's fine if what you are trying to do is minimize drug toxicity for the whole population, but if you happen to be one of those "not enough patients," and you have a disease that is of high severity or a disease that's very rare, then that's just tough luck for you. Granted all this, may these costs not be justified by the advantage of keeping dangerous drugs off the market, of preventing a series of thalidomide disasters? The most careful empirical study of this question that has been made, by Sam Peltzman, concludes that the evidence is unambiguous: that the harm done has greatly outweighed the good. He explains his conclusion partly by noting that "the penalties imposed by the marketplace on sellers of ineffective drugs before 1962 seems to have been sufficient to have left little room for improvement by a regulatory agency." 12 After all, the manufacturers of thalidomide ended up paying many tens of millions of dollars in damages—surely a strong incentive to avoid any similar episodes.
Thomas Gale Moore, "The Beneficiaries of Trucking Regulation," Journal of Law and Economics, vol. 21 (October 1978), p. 340. 6. Ibid., pp. 340, 342. 7. Gabriel Kolko, The Triumph of Conservatism (The Free Press of Glencoe, 1963), quotation from p. 99. 8. Richard Harris, The Real Voice (New York: Macmillan, 1964), p. 183. 9. William M. Wardell and Louis Lasagna, Regulation and Drug Development (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1975), p. 8. 10. Sam Peltzman, Regulation of Pharmaceutical Innovation (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1974), p. 9. 11. Estimates for 1950s and early 1960s from Wardell and Lasagna, Regulation and Drug Development, p. 46; for 1978, from Louis Lasagna, "The Uncertain Future of Drug Development," Drug Intelligence and Clinical Pharmacy, vol. 13 (April 1979), p. 193. 12. Peltzman, Regulation of Pharmaceutical Innovation, p. 45. 13.
Why We Drive: Toward a Philosophy of the Open Road by Matthew B. Crawford
1960s counterculture, Airbus A320, airport security, augmented reality, autonomous vehicles, Bernie Sanders, Boeing 737 MAX, British Empire, Burning Man, call centre, collective bargaining, crony capitalism, deskilling, digital map, don't be evil, Donald Trump, Elon Musk, en.wikipedia.org, Fellow of the Royal Society, gig economy, Google Earth, hive mind, income inequality, informal economy, Internet of things, Jane Jacobs, labour mobility, Lyft, Network effects, New Journalism, New Urbanism, Nicholas Carr, Ponzi scheme, Ralph Nader, ride hailing / ride sharing, Ronald Reagan, Sam Peltzman, security theater, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, smart cities, social graph, social intelligence, Stephen Hawking, technoutopianism, the built environment, The Death and Life of Great American Cities, the High Line, too big to fail, traffic fines, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Unsafe at Any Speed, urban planning, Wall-E, Works Progress Administration
One gets the sense that these are no longer separate elites; that they have merged into a super-elite bent on controlling the narrative of progress, even if at the cost of the public interest. WE HAVE A RISK BUDGET At a conceptual level, the difficulties of disentangling the causal factors in traffic accidents, and the toll of such accidents when they occur, remain much as they were in 1975 when Sam Peltzman published his influential study Regulation of Automobile Safety. The car operates in a larger risk ecology that is affected by traffic density, speed limits, rates of traffic-rule enforcement, the design and condition of roads, the quality of driver education, the availability and quality of hospital trauma care, the percentage of drivers who are young and inexperienced, rates of drunk driving, and so on.
As a consequence, the overall 40 percent reduction in the crash rates reported by NHTSA following the installation of Autosteer is an artifact of the Agency’s treatment of mileage information that is actually missing in the underlying dataset” (“NHTSA’s Implausible Safety Claim”). 7.Timothy B. Lee, “In 2017, the Feds Said Tesla Autopilot Cut Crashes 40%—That Was Bogus,” Ars Technica, February 13, 2019. See also Timothy B. Lee, “Sorry Elon Musk, There’s No Clear Evidence Autopilot Saves Lives,” Ars Technica, May 4, 2018. 8.Sam Peltzman, Regulation of Automobile Safety (Washington, DC: American Enterprise Institute for Public Policy Research, 1975), p. 4. 9.According to the Fatal Analysis Reporting System of the National Highway Traffic Safety Administration, in the year 2000 seat belts alone were estimated to have a 48 percent effectiveness in preventing fatalities (to people over twelve years old) in crashes that otherwise would have been fatal.
The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg
affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, creative destruction, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, Norman Macrae, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, Sam Peltzman, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income, Vilfredo Pareto
"According to some reports, local small businesses in Russia have to pay 30 to 50 percent of their profits to racketeers, not just the meager 7 percent demanded from the American businessman." 16 In 1993 there were 355,500 crimes in Russia officially designated as examples of "racketeering," including almost "30,000 284 premeditated murders," mostly gangland assassinations of businessmen. According to a former interior minister, General Viktor Yerin, "The bulk were contract killings, because of conflicts in the sphere of commercial and financial activity." In most cases, authorities turned "a blind eye." Criminal organizations "through their control over coercion and corruption," as economists Gianluca Fiorentini and Sam Peltzman write in The Economics of Organized Crime, play a key role in the economy.'7 In theory, this influence can sometimes be beneficial because it constrains regulation and may encourage governments to improve their delivery of public goods. The presence of a powerful mafia "constrains the monopolistic role of government authorities." 8 Governments in territories with powerful organized crime groups can only with great difficulty entertain policies that the mafias oppose.
Fred Foldvary, Public Goods and Private Communities: The Market Provision of Social Services (Aldershot, Hants, England: Edward Elgar Publishing, Ltd., 1994). 329 33. Paul R. Krugman, "The Tax-Reform Obsession," New York Times Magazine, April 7, 1996, p.37. 34. Foldvary, op. cit., pp. 66f. Chapter II. Morality and Crime in the "Natural Economy" of the Information Age 1. Vito Tanzi, "Corruption: Arm's-length Relationships and Markets," in Gianluca Fiorentini and Sam Peltzman, eds., The Economics of Organized Crime (Cambridge: Cambridge University Press, 1995), pp.167, 170. 2. Hirshleifer, op. cit., p.176. 3. Ibid., p.169. 4. Michelle R. Garfinkel and Stergios Skaperdas, eds., The Political Economy of Conflict and Appropriation (Cambridge: Cambridge University Press, 1996), p.1. 5. Hirshlcifer, op. cit., p.173. 6. Garfinkel and Skaperdas, op. cit., p.1. 7. Ibid. 8.
Life as a Passenger: How Driverless Cars Will Change the World by David Kerrigan
3D printing, Airbnb, airport security, Albert Einstein, autonomous vehicles, big-box store, butterfly effect, call centre, car-free, Cesare Marchetti: Marchetti’s constant, Chris Urmson, commoditize, computer vision, congestion charging, connected car, DARPA: Urban Challenge, deskilling, disruptive innovation, edge city, Elon Musk, en.wikipedia.org, future of work, invention of the wheel, Just-in-time delivery, loss aversion, Lyft, Marchetti’s constant, Mars Rover, megacity, Menlo Park, Metcalfe’s law, Minecraft, Nash equilibrium, New Urbanism, QWERTY keyboard, Ralph Nader, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Rodney Brooks, Sam Peltzman, self-driving car, sensor fusion, Silicon Valley, Simon Kuznets, smart cities, Snapchat, Stanford marshmallow experiment, Steve Jobs, technoutopianism, the built environment, Thorstein Veblen, traffic fines, transit-oriented development, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Unsafe at Any Speed, urban planning, urban sprawl, Yogi Berra, young professional, zero-sum game, Zipcar
The addition of modern safety devices on cars may cause this sense of protection. Although usually having a small impact in comparison to the fundamental benefits of safety interventions, risk compensation may result in a lower net benefit than expected from new initiatives. The reduction of predicted benefit from regulations that intend to increase safety is sometimes referred to as the Peltzman effect in recognition of Sam Peltzman, a professor of economics at the University of Chicago Booth School of Business, who published "The Effects of Automobile Safety Regulation" in the Journal of Political Economy in 1975. Cars Don’t Crash It’s important to point out that currently in almost all cases of car crashes, the car itself is not at fault - a tiny percentage of car crashes are the result of mechanical failure, yet these are more tightly regulated and enforced than the humans that cause over 90% (see table below).
Milton Friedman: A Biography by Lanny Ebenstein
"Robert Solow", affirmative action, banking crisis, Berlin Wall, Bretton Woods, business cycle, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Ponzi scheme, price stability, rent control, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thorstein Veblen, zero-sum game
I thank first Milton and Rose Friedman and their children, Janet Martel and David Director Friedman, for agreeing to be interviewed and for reviewing material. I also had the opportunity to meet David’s wife, Elizabeth, and to have a telephone conversation with Milton’s nephew Alan Porter. Friedman’s longtime secretary, Gloria Valentine, was encouraging and helpful. Others who gave interviews include Gary Becker, Anna Jacobson Schwartz, Lester Telser, Larry Sjaastad, Thomas Sowell, Sam Peltzman, Stephen Stigler, Larry Wimmer, John Turner, and the late D. Gale Johnson. Paul Samuelson sent a useful letter with reactions to some questions. For my biography of Hayek, I had the opportunity to interview W. Allen Wallis, Edwin Meese, and Ronald Coase, among others, and to talk briefly on the phone with Aaron Director. I also thank in particular J. Daniel Hammond, Robert Leeson, and William Frazer for their work on Friedman; the University of California at Santa Barbara for use of its library and interlibrary loan program; the Hoover Institution on War, Revolution and Peace for use of its Friedman archive; the Intercollegiate Studies Institute and Young America’s Foundation for participation in conferences on Friedman; the Liberty Fund for participation in a conference on Frank Knight; Walter Mead for encouragement and assistance; Tom Schrock for continuing advice; Mark Skousen for calling various articles to my attention; Joe Atwill and Curtis Ridling, and Cyndy x Phillips for reviewing the manuscript; and Nik Schiffmann and Lee Gientke for research contributions.
Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein
Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, basic income, Bernie Sanders, big-box store, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, mass incarceration, minimum wage unemployment, moral hazard, moral panic, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, plutocrats, Plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Sam Peltzman, Scientific racism, Simon Kuznets, single-payer health, strikebreaker, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration
Stanley Feldman and John Zaller, “The Political Culture of Ambivalence: Ideological Responses to the Welfare State,” American Journal of Political Science vol. 36 no. 1 (Feb. 1992): 268–307. 72. Rebecca Blank, “What Drives American Competitiveness?” Annals of the American Academy of Political and Social Science vol. 663 (2016) 8–29; Joel Mokyr, Chris Vickers, and Nicholas L. Ziebarth, “The History of Technological Anxiety and the Future of Economic Growth: Is This Time Different?” Journal of Economic Perspectives vol. 29 np. 3 (Summer 2015): 31–50. 73. Sam Peltzman, “Mortality Inequality,” Journal of Economic Perspectives vol. 23 no. 4 (Fall 2009): 175–190. 74. David K. Jones, Katharine W. V. Bradley, and Jonathan Oberlander, “Pascal’s Wager: Health Insurance Exchanges, Obamacare, and the Republican Dilemma,” Journal of Health Politics, Policy and Law vol. 39, no. 1 (2014): 97–137. 75. James Tobin, “The Case for an Income Guarantee.” The Public Interest vol. 4 (1966): 31–41, at 40. 76.
Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik
3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta analysis, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, Pareto efficiency, postindustrial economy, price stability, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, special economic zone, spectrum auction, Steven Pinker, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise
., Oxford University Press, New York, 2008. 20. Isaiah Berlin, The Hedgehog and the Fox: An Essay on Tolstoy’s View of History, Weidenfeld & Nicolson, London, 1953. 21. Daniel Drezner, The Ideas Industry, Oxford University Press, New York, 2017. CHAPTER 7: Economists, Politics, and Ideas 1. George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science, vol. 2(1), Spring 1971: 3–21; Sam Peltzman, “Toward a More General Theory of Regulation,” Journal of Law and Economics, vol. 19(2), 1976: 211–240; Jean-Jacques Laffont and Jean Tirole “The Politics of Government Decision Making: A Theory of Regulatory Capture,” Quarterly Journal of Economics, vol. 106, 1991: 1089–1127. 2. Anne O. Krueger, “The Political Economy of the Rent-Seeking Society,” American Economic Review, vol. 64(3), June 1974: 291–303; Gene Grossman and Elhanan Helpman, “Protection for Sale,” American Economic Review, vol. 84(4), 1994: 833; Dani Rodrik, “The Political Economy of Trade Policy,” in Handbook of International Economics, G.
The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities by Mancur Olson
"Robert Solow", barriers to entry, British Empire, business cycle, California gold rush, collective bargaining, correlation coefficient, David Ricardo: comparative advantage, full employment, income per capita, Kenneth Arrow, market clearing, Norman Macrae, Pareto efficiency, price discrimination, profit maximization, rent-seeking, Sam Peltzman, selection bias, Simon Kuznets, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, urban decay, working poor
.), Gudmund Hernes (U. of Bergen), Sir John Hicks (All Souls, Oxford), Ursula (Lady) Hicks (Linacre, Oxford), Helen Hughes (World Bank), Charles Hulton (Urban Institute), SergeChristophe Kolm (CEPREMAP, Paris), Hans-Juergen Krupp (U. of Frankfurt), Franz Lehner (Ruhr U. Bochum), Harvey Leibenstein (Harvard U.), Edward J. Lincoln (Johns Hopkins U.), Edmond Malinvaud (Inst. National de la Statistique, Paris), R. C. O. Matthews (Clare, Cambridge), Christian Morrisson (Ecole Normale Superieure), Daniel H. Newlon (National Science Foundation), Yusuke Onitsuka (Osaka U.), Sam Peltzman (U. of Chicago), Richard Portes (Birkbeck, London), Frederic L. Pryor (Swarthmore College), Walter Salant (Brookings Institution), Hans Soderstrom (U. of Stockholm), Ingemar Stahl (U. of Lund), Carl Christian von Weizsacker (U. of Bonn), Hans Willgerodt (U. of Cologne), Wolfgang Zapf (U. of Mannheim). I am similarly indebted to Roger Benjamin for bringing early drafts of part of this work to the attention of critics in political science, to Marian Ash, Myles Boylan, Jan de Vries, Stanley Engerman, 1.
Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan
"Robert Solow", affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, business cycle, buy and hold, capital controls, Cass Sunstein, central bank independence, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, libertarian paternalism, low skilled workers, Malacca Straits, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game
Last, I would like to acknowledge those who inspired my interest in the subjects that make up this book. I’ve made the case that economics is often poorly taught. That is true. But it’s also true that the discipline can come alive in the hands of the right person, and I was fortunate to work and study with many of them: Gary Becker, Bob Willis, Ken Rogoff, Robert Willig, Christina Paxson, Duncan Snidal, Alan Krueger, Paul Portney, Sam Peltzman, Don Coursey, Paul Volcker. My hope is that this book will help to transmit their knowledge and enthusiasm to many new readers and students. naked economics CHAPTER 1 The Power of Markets: Who feeds Paris? In 1989, as the Berlin Wall was toppling, Douglas Ivester, head of Coca-Cola Europe (and later CEO), made a snap decision. He sent his sales force to Berlin and told them to start passing out Coke.
Republic, Lost: How Money Corrupts Congress--And a Plan to Stop It by Lawrence Lessig
asset-backed security, banking crisis, carried interest, circulation of elites, cognitive dissonance, corporate personhood, correlation does not imply causation, crony capitalism, David Brooks, Edward Glaeser, Filter Bubble, financial deregulation, financial innovation, financial intermediation, invisible hand, jimmy wales, Martin Wolf, meta analysis, meta-analysis, Mikhail Gorbachev, moral hazard, Pareto efficiency, place-making, profit maximization, Ralph Nader, regulatory arbitrage, rent-seeking, Ronald Reagan, Sam Peltzman, Silicon Valley, single-payer health, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, WikiLeaks, Zipcar
Interview with Larry Pressler, June 16, 2011 (on file with author). 89. The foundational work is George Stigler’s, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2 (1971): 3, and Richard Posner’s, “Taxation by Regulation,” Bell Journal of Economics and Management Science 2 (1971): 22. See also Richard A. Posner, “Theories of Economic Regulation,” Bell Journal of Economics and Management Science 5 (1974): 335; Sam Peltzman, “Toward a More General Theory of Regulation,” Journal of Law and Economics 19 (1976): 211; Burton Abrams and R. Settle, “The Economic Theory of Regulation and Public Financing of Presidential Elections,” Journalof Political Economy 86 (1978): 245; James Q. Wilson, The Politics of Regulation (1980). Steven Croley’s is perhaps the best recent effort to summarize and extend this analysis as it affects agency regulation in particular.
Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo
"Robert Solow", Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Berlin Wall, Bernie Madoff, bitcoin, Bonfire of the Vanities, bonus culture, break the buck, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, Diane Coyle, diversification, diversified portfolio, double helix, easy for humans, difficult for computers, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, interest rate derivative, invention of the telegraph, Isaac Newton, James Watt: steam engine, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, merger arbitrage, meta analysis, meta-analysis, Milgram experiment, money market fund, moral hazard, Myron Scholes, Nick Leeson, old-boy network, out of africa, p-value, paper trading, passive investing, Paul Lévy, Paul Samuelson, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, quantitative hedge fund, quantitative trading / quantitative ﬁnance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Shiller, Sam Peltzman, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, survivorship bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game
These calculations may seem quite removed from reality, but once we acknowledge the possibility that individual preferences and behavior adapt to changing environments, we realize that evidence of these adaptations has been staring us in the face for decades. In the 1960s, automobile safety became an important social issue in the United States. We passed laws mandating that cars have seatbelts, padded dashboards, safer steering columns, and safer windshields to cut down on the number of deaths caused by fatal head and chest injuries. But when the University 206 • Chapter 6 of Chicago economist Sam Peltzman looked at the data in 1975, he came to the controversial conclusion that any increases in safety were offset by a worsening of driver behavior.15 The increase in pedestrian deaths offset the decrease in driver deaths that followed the new safety features. A number of researchers disagreed with Peltzman’s conclusions, arguing that his study didn’t take into account a number of confounding factors like the skills of the drivers, the mechanical conditions of the cars, whether the accidents occurred on highways or local streets, whether the drivers were commuting or on vacation, and so on.
The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini
affirmative action, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bernie Madoff, Black-Scholes formula, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low skilled workers, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Northern Rock, Occupy movement, oil shock, price stability, quantitative easing, quantitative hedge fund, quantitative trading / quantitative ﬁnance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond
The more inelastic the demand for goods is, the more costs are passed along. 18. The Basel rules are discussed in detail in Chapter 13. 19. This concept of the danger of creating new policy without considering individual reactions is called the Lucas Critique, commonly credited to Robert Lucas of the University of Chicago. Some people call the human behavior Merton discussed the Peltzman Effect, named after economist Sam Peltzman, who first showed that regulatory changes do not always lead to the intended consequences. The No Child Left Behind Act is another example. This seemingly good rule had led to undesirable changes in behavior. On July 13, 2011, the Atlanta school system found widespread cheating among teachers and administrators, who wanted an easier way to keep up with educational standards (Timothy 2011). 20.