Monday, January 28, 2008

New Op-ed: 'Stimulus' Package Won't Jolt Economy

I have a new op-ed up atFox News:

There is a lot of hysteria about the economy. Politicians worried about a voter backlash want to show voters that they are willing to do something.

Yet, the White House and Congressional proposal last week to send $100 billion in checks to Americans will not stimulate the economy, only waste taxpayers’ money. Instead of growing the economy as claimed, the expanded unemployment benefits being pushed by Senate Democrats will only shrink it. . . .

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Saturday, January 26, 2008

The Cost of Owning Hybrids

I was reading about the Toyota Highlander Hybrids. The identical hybrid version of the Highlander apparently costs $5,100 more. On the highway, the hybrid gets 27 mpg versus 24 mpg for the regular version -- a 12.5 percent improvement. For city driving, it looks as if the improvement is much larger 18 to 25 mpg -- a 38 percent improvement. Assume an average improvement of 25 percent. A couple of simple calculations indicate that this is unlikely to be a wise investment for most people. First some assumptions:

1) Own the car for 10 years
2) Put 150,000 miles on the car
3) 22 mpg average
4) $3.00 in current dollars
5) 3 percent real interest

Over the lifetime of the car you would buy 6,818 gallons. The present value of those purchases in today's dollars over those 10 years are as follows:

Year 1 $496.46
Year 2 $482.01
Year 3 $467.97
Year 4 $454.34
Year 5 $441.11
Year 6 $428.26
Year 7 $415.79
Year 8 $403.68
Year 9 $391.92
Year 10 $380.50

$4,362.04 versus a payment today of $5,100. You are about $738 poorer for buying the hybrid. The day that you buy the hybrid you might as well throw out $738.

There is one caveat regarding resale value for the car and how much being a hybrid would increase its value. I looked up the 1997 Toyota Tacoma Xtra Cab's trade-in value (the Highlander only started in 2001). If the truck is in good condition, the value would be $2,300 (again assuming a 3 percent real interest rate that is the equivalent of $1,711). Assuming that the hybrid equipment depreciates at the same rate as the rest of the car, that would leave you with $296 from the sale.

A final net loss of $442. I don't know about you, but I wouldn't want to throw away $442.


Friday, January 18, 2008

The Changing cost of making decisions

There are lots of costs in decision making. Most focus on the costs of information, but another important factor is the amount of time that we have to make decisions. Today's WSJ references an example of this last point and the obvious consequence of making it more costly to make decisions:

I have referred several times before in this space to Tony Blair's observation, after resigning last year, that the pressure of 24/7 electronic media has drastically cut the time available to make judgments, and so the quality of decisions has declined. The missed call in New Hampshire is the first sharp demonstration of this truth for journalism itself. Odds are that nothing will be learned from this because no one has time to think about it.

Of course, there are other costs of making decisions that have been declining. For example, it is easier to quickly get a hold of the people who you need to talk to (cell phones) and quickly search files and databases (computers).


Monday, January 14, 2008

New Op-ed: Bad Brief: The Bush DOJ shoots at the Second Amedment

Here is the new op-ed that I have this morning at National Review Online:

A lot of Americans who believe in the right to own guns were very disappointed this weekend. On Friday, the Bush administration’s Justice Department entered into the fray over the District of Columbia’s 1976 handgun ban by filing a brief to the Supreme Court that effectively supports the ban. The administration pays lip service to the notion that the Second Amendment protects gun ownership as an “individual right,” but their brief leaves the term essentially meaningless. . . .


Another Review of Freedomnomics

This review by Nathan was somewhat mixed:

I read it because I read Freakonomics, which, like other political (and semi-political) books, I found to be about "half-right," which is to say that a critical reading reduces it to the level of fiction; Freakonomics is opinion mixed in with statistics.

Freedomnomics proved to be exactly what I expected, which is to say, exactly the same but with different opinions. Where Freakonomics contests that Abortion decreased crime, Freedomnomics contests the opposite. Where Freakonomics says you shouldn't trust your Real Estate agent, Freedomnomics suggests otherwise.

I enjoy reading these kinds of books because I do read them through a critical lens, and I enjoy the facts that come out of them. Usually, a critical reading of these books allows the reader to examine the statistics and draw his own conclusions, often completely different than the opinions presented by the author(s).

For example, I learned from Freedomnomics that the "lemon effect" on new automobiles presented in Freakonomics is not true. This makes sense - the idea had long since made very little sense to me, as cars usually have warrantees that transfer with ownership transfers. Though Freedomnomics presented some opinions that seemed unfounded, the facts concerning automobiles (in the form of Kelly Blue Book prices) were also present, and these are indisputable . . .


Tuesday, January 8, 2008

Another example that incentives matter

Dixville Notch, NH sure gets a lot of news attention for a town that has only 17 voters. Perhaps it is then not too surprising that the town also gets a lot of attention from the presidential candidates:

Neil Tillotson Jr.’s dad started the Dixville Notch tradition in 1960, after he ran into an Associated Press reporter who saw the humor in letting a small town “way up in the middle of nowhere be a part of the voting process.”

“Because of the publicity we get a disproportionate number of candidates coming by,” Tillotson said, noting that he’s met every president – when they were candidates – except Richard Nixon, dating back to 1972 when he took over the role as elections supervisor.

Note further that the turnout rate in Dixville Notch was 100 percent. Their votes matter more than others and they are more likely to vote.

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Monday, January 7, 2008


Tuesday, January 1, 2008

Another (very long) review of Freedomnomics

Economist WIlliam Sjostrom has a very nice review of my book up on his website. It was very nice of him to take this much time to review it.

The short version: my doubts are small. Read it, read it, read it, and, oh yeah, read it.