The Freedomnomics Blog

Hardcover Freedomnomics at new low paperback price

johnrlott@aol.com (John Lott) — Sun, 27 Sep 2009 21:28:00 +0000

Freedomnomics is now 63 percent off and selling for only $10.26, cheap even for most paperbacks.

Another review of Freedomnomics

johnrlott@aol.com (John Lott) — Sat, 19 Sep 2009 01:43:00 +0000

Reading Freedomnomics will enlighten the reader relating facts which will astonish and sometimes make you want to applaud the free market system. John Lott educated me with other examples of how the free market works, and further explains in a narrative and easy to follow manner why we should continue to allow the free markets to prevail. The statistics and examples he uses are indisputable. This book should be retained as an affirmation when you doubt the benefits of the free market system.

Higher Prices, Lower Sales: It works even for music

johnrlott@aol.com (John Lott) — Fri, 10 Apr 2009 21:20:00 +0000

If you understand that demand curves slope downward, you will understand all of economics that it is worthwhile to understand. Apple iTunes Music Store had to raise the price of some individual tracks as part of an agreement with the music industry. Guess what? The songs that increased in price, songs that tend to be the most popular, saw their rankings on iTunes fall. Billboard has the story here:

Two days after the Apple iTunes Music Store raised prices on some individual tracks, there was evidence the increases have hurt the sales rankings of songs given the higher $1.29 price.

While it is difficult to say with certainty whether a price increase had resulted in less revenue, rough estimates reveal slight, negative changes in chart position would result in a positive change in revenue. The changes in chart position between Tuesday and Thursday, however, clearly show that higher prices had forced many songs to cede chart position to lower-priced songs.

On Wednesday, one day after the price increase, the iTunes Top 100 chart had 40 songs priced at $1.29 and 60 with the original $0.99 price point. The $1.29 songs lost an average of 5.3 places on the chart while the $0.99 songs gained an average of 2.5 chart positions.

Seven of Wednesday’s $1.29 songs had been priced at $0.99 on Tuesday (there were 33 songs priced at $1.29 on Tuesday morning). Those seven songs lost an average of 1.9 chart positions from Tuesday to Wednesday; one of them gained ground, eight lost position and one remained the same. The remaining 33 songs priced at $1.29, whose prices went unchanged from Tuesday to Wednesday, lost an average of 7.7 chart positions.

A similar trend was seen the following day. The 53 songs priced at $0.99 rose an average of 1.66 places on the chart; 24 rose on the chart, 18 dropped and 11 remained even. The 47 songs priced at $1.29 lost an average of two chart positions; 11 rose on the chart, 27 dropped and nine remained even. Ten of the $1.29 tracks were priced at $0.99 the day prior and they lost an average of 12.4 chart positions. A number of the tracks with a Tuesday-to-Wednesday price increase that gave up chart position were from Rascal Flatt’s Unstoppable (and one track from Unstoppable dropped off the Top 100 altogether). . . .

New Kindle Version of Freedomnomics is available

johnrlott@aol.com (John Lott) — Sun, 04 Jan 2009 02:17:00 +0000

For those who are interested, a Kindle version of Freedomnomics is now available. A Kindle version of the book works with Amazon.com's portable electronic book reader. I don't have one yet, but a few friends tell me it is a handy way for they to travel with multiple books at the same time. If you haven't read Freedomnomics yet, I think that it is my best book.

Thanks.

Reviews at Facebook of Freedomnomics

johnrlott@aol.com (John Lott) — Sun, 04 Jan 2009 02:15:00 +0000

Many are extremely nice, a few aren't, but I still appreciate people reading the book. The reviews are here.

Walter Williams discusses Freedomnomics

johnrlott@aol.com (John Lott) — Tue, 19 Aug 2008 21:52:00 +0000

Walter's entire piece can be seen here:

By taking a couple of courses in economic theory, we could immunize ourselves from nonsense spouted by politicians and pundits, but in the meantime check out Professor John R. Lott's "Freedomnomics: Why the Free Market Works."

His first chapter is "Are You Being Ripped Off?" It addresses myths about predation where it's sometimes alleged that corporations will charge below-cost prices to bankrupt their rivals and then charge unconscionable prices. There's little or no evidence that corporations would choose predation as strategy; there are too many pitfalls. A major one is that in order to recoup losses from charging low prices to bankrupt rivals, the predator would later have to charge higher-than-normal prices. That would attract new rivals who might have purchased the bankrupt assets of the predator's prey and be able to undercut the predator's prices. . . .

Thanks, Walter.

UK Surgeons to have pay based on how patients do after surgery

johnrlott@aol.com (John Lott) — Sun, 20 Jul 2008 17:37:00 +0000

Paying surgeons based upon how good of a job they do seems to have generated all sorts of concerns in the UK. The most bizarre response though is this:

Patients' groups said those facing surgery would be "horrified" by the proposals and questioned why doctors should be paid a premium for fulfilling their basic duty. . . .

Why should patients mind this? After all, they don't have to pay directly for the service and if it generated higher quality care, they are better off. Of more concern is this:

Leading surgeons said that this could deter doctors from taking on higher-risk patients, such as the frail and elderly, and from carrying out complex operations. . . .

But the simple way to deal with this is to figure out what the right yardstick is to measure the job that the surgeons are doing. If they save a high risk life, they could get paid more. Indeed, if the pay was enough, you would have the opposite of what the surgeons here fear -- everyone would want to do the high risk patients. Yet, it sounds from the discussion that the payment schemes are not going to differentiate the risks involved.

Incentives matter, an example of where students want to work

johnrlott@aol.com (John Lott) — Wed, 02 Jul 2008 15:40:00 +0000

Higher salaries do attract people to study for those jobs.

It was these gender differences that Katz and Goldin set out to study with their survey, dubbed “Harvard and Beyond,” conducted in 2006 and 2007. Men still command higher salaries, on average, than women with the same educational attainment, and even in some cases with the same type of job; this appears to be due to women’s preference for family-friendly jobs and employers (see “Girl Power: What’s Changed for Women and What Hasn’t,” January-February, page 34). Goldin is the author of Understanding the Gender Gap: An Economic History of American Women, and the two previously collaborated on a study of the role of the birth-control pill vis-à-vis women’s decisions regarding career and marriage.

But the new survey also turned up plenty of other things, including the size of the shift into finance, and the reason for that shift. For the entire respondent pool, across all occupations, the median income for men was $162,000, and for women $90,000; graduates working in finance earned nearly three times that median, in a pool of people already paid far more than average. (Among the general U.S. population in 2006, men’s median income was just over $42,000, and women’s was under $33,000.)

Finance’s extremely high compensation has lured Harvard graduates who might otherwise have pursued law or medicine: the prevalence of those fields, combined, declined from 39 percent to 30 percent between the two cohorts. Although some of those employed in finance have M.B.A.s, many of the jobs, unlike those in law and medicine, require no advanced degree.

This pattern among Harvard graduates reflects a similar pattern in the wider society. The finance sector’s contribution to the U.S. gross domestic product swelled from 4.4 percent in 1977 to 7.7 percent, or roughly $950 billion, in 2005, according to a report on the survey by Wall Street Journal columnist David Wessel. One of every 13 dollars of employee compensation in the United States today goes to people working in finance, the column noted, and in 2004, the combined income of the top 25 hedge-fund managers exceeded the combined income of the CEOs of all Standard & Poor’s 500 companies. . . .

Hat tip to Craig Newmark on this.

New Op-ed at Fox News: Why Political Flip-Flopping Matters

johnrlott@aol.com (John Lott) — Mon, 23 Jun 2008 17:18:00 +0000

My newest op-ed at Fox News can be read in full here:

What restrains politicians and businesses from acting dishonestly? A lot of people would answer: nothing.

Periodic political and corporate scandals have created a popular image of politicians and businessmen as little more than a collection of cheats, liars and crooks. However, while there will always be some dishonest people in any profession, the vast majority of American politicians and businessmen do not end up being frog marched out of their offices in handcuffs with their heads held low in shame before a gaggle of news cameras.

What helps keep companies honest is the threat that if they cheat customers, people won’t buy from them again. But that won’t work for politicians. Politicians don’t always have the incentive of re-election because eventually they all face a last term in office. Politicians retire at some point. They can’t live forever.

So, if it isn't the threat of facing the voters, what could ensure that politicians keep their promises?

There has been a lot academic work studying this question, and the way to solve the problem is to elect politicians who inherently value the policy positions that they take. . . . .

Discussion of impact of women's suffrage on government growth

johnrlott@aol.com (John Lott) — Sun, 08 Jun 2008 23:28:00 +0000

Gaston Phebus has this discussion of Freedomnomics:

Celui qui a découvert pourquoi l’État-Providence (qui s’est subséquemment révélé comme le parfait aspirateur d’immigration) a été mis en place, c’est John Lott. Je le considère comme l’un des meilleurs économistes américains de la jeune génération, même s’il est loin d’avoir recueilli les lauriers qu’il méritait. Il a une fâcheuse tendance à s’intéresser à des questions si chargées au niveau politique qu’elles peuvent torpiller une carrière. Il s’est plus d’une fois fait éjecter d’une université prestigieuse sous la pression du maire ou du gouverneur parce qu’il avait dit haut et fort ce qu’il fallait taire.

Ses recherches montrent que l’inflation sans précédente (et insoutenable) du rôle de l’État est due au vote des femmes. Dès qu’on permet aux femmes de voter, bingo ! l’État commence à s’occuper de corriger tout un tas d’ « injustices sociales » en mettant en place des mécanismes de redistribution massifs – qui aspirent aussi toute la misère du monde.

Voici un graphique montrant comment, dans les 10 années qui suivent l’obtention du droit de vote par les femmes, les dépenses de l’État doublent. Ce doublement est dû à la mise en place des allocation en tous genres qui forment l’État-Providence. C’est extrait de la page 163 du livre Freedomnomics de John Lott.

Brave or foolish?

johnrlott@aol.com (John Lott) — Tue, 03 Jun 2008 16:11:00 +0000

A nice note on my work can be found here:

John R. Lott, economist and senior research scientist at the University of Maryland is a brave man. In 2001 he published a study that concluded that legalized abortion increased murder rates from 1/2 to 7%. This refuted the study by the authors of Freakonomics.
According to this article in Cybercast News Service, the Economist magazine tells of two Federal Reserve Bank of Boston economists who said the Freakonomics study was error-filled and went on to say, "To be politically incorrect is one thing; to be simply incorrect, quite another." . . .

A French Review of Freedomnomics

johnrlott@aol.com (John Lott) — Mon, 05 May 2008 14:32:00 +0000

The website Copeau Reloaded has this review here (I hope that the translation isn't too bad):

That's how in 2007 John Lott published Freedomnomics, which is meant not to be an answer little by little in Levitt, but to be a series of examples which, by drawing inspiration from the same method of presentation as Freakonomics, defends and illustrates the intrinsic superiority of free market [15]. Here are someone of his examples:

He explains that the increase in prices linked to the passage of the hurricane Katrina allowed to restrict losses linked to this one, and that the price controls by the government have contrario, as it was case for similar facts in the seventies, would have returned more hard life to the victims of the hurricane.

Other example, it supports that it is necessary that the Americans pay their medicaments a lot, not only to guarantee the dynamics of the innovation of laboratories, principally American, but also make it be of benefit the rest of the planet.

On the other hand, it shows that reputation is more important in economy than penalties caused by law or disadvantageous judgement [16].

Last example given by Lott, the abortion and the positive discrimination played in the police, augmented crimes and offences; he asserts more than the death penalty, the application of law and troubles, and right given to the citizens to hit weapon favours the fall of crime considerably. Always according to him, the age, the breed and the control of weapon would have little effects on the rate of crime.

New Op-ed up at Fox News: Obama Bitter About Free Markets

johnrlott@aol.com (John Lott) — Tue, 15 Apr 2008 03:12:00 +0000

My new Fox News piece is here:

But, while his left-wing economic views are much less well known, they show a similar pattern.

Obama also never seems to have found a market that can work without extensive government regulation. During Obama’s big economic address at the very end of March, little attention was given in the American press to his deep distrust of the free market and his laundry list of failures of deregulation.

From telecommunications to electricity to banking to accounting, he blamed the failures as a product of markets out of control, with not enough government regulations to rein in "an ethic of greed, corner cutting, insider dealing, things that have always threatened the long-term stability of our economic system." . . .

Appearance on Fox & Friends from this past Thursday

johnrlott@aol.com (John Lott) — Sat, 05 Apr 2008 18:53:00 +0000

Here is a discussion that I had on how well the economy is doing.

New Op-ed up at Fox News: The 'Recession' Is a Media Myth

johnrlott@aol.com (John Lott) — Mon, 31 Mar 2008 15:22:00 +0000

My new op-ed can be found here:

During the 2000 election, with Bill Clinton as president, the economy was viewed through rose-colored glasses. According to polls, voters didn’t realize that the country was in a recession. Although the economy started shrinking in July 2000, most Americans through the entire year thought that the economy was fine.

But over the last half-year, the media and politicians have said we were in a recession even while the economy was still growing.

Gas prices are going up. The economy is slowing. Talk of recession is seemingly everywhere. While the majority of people rate their personal finances positively, consumer confidence in the economy has plunged to a 16-year low, well below what it was during the last year of the Clinton administration when we were in a recession.

A Google search on news stories during the three-month period from July 2000 through September 2000 using the keywords “economy recession US” produces 1,610. By contrast, the same search over just the last month finds 50,763. Or, even more telling, take the three months from July through September last year, when the GDP was growing at a phenomenal 4.9 percent. The same type of Google search shows 7,310 news stories. . . .

New Op-ed up at Fox News: "Financial Markets Are in a Mess"

johnrlott@aol.com (John Lott) — Tue, 18 Mar 2008 04:25:00 +0000

This is a pretty detailed piece:

Politicians always seem to know better. Not satisfied with telling people what types of light bulbs to use and the size of cars they can drive, politicians in Washington have decided to replace financial markets and try legislating away the laws of supply and demand.

Last week congressional democrats introduced regulations to stop what they complained were "wild interest rate hikes" on credit cards. Before that Hillary Clinton advocated a 90-day moratorium on foreclosures and a five-year freeze on interest rates for sub-prime mortgages.

Yet, price controls don’t solve the problems with high interest rates. If people want to borrow more money than is available, interest rates rise, both to attract more to lend and insure that those who need what scarce money there is, are the ones who get to borrow it. If regulations prevent interest rates from going up, you get shortages and credit rationing. . . .

The main point of the op-ed is how government regulation created the current mess.

So where do you think that the best teachers are going to go?

johnrlott@aol.com (John Lott) — Sat, 08 Mar 2008 05:03:00 +0000

To the New York Times, this is an open question. The title on their article asks: "Would six-figure salaries attract better teachers?" Obviously, higher salaries mean that more teachers will apply for the jobs. The schools might not select the best teachers (public schools might hire people based upon tenure or political views or whatever. Charter schools have more of an incentive to pick the best teachers, though not as much as a private for profit operation would. From the Times:

The school, which will run from fifth to eighth grades, is promising to pay teachers $125,000, plus a potential bonus based on schoolwide performance. That is nearly twice as much as the average New York City public school teacher earns, roughly two and a half times the national average teacher salary and higher than the base salary of all but the most senior teachers in the most generous districts nationwide.

The school’s creator and first principal, Zeke M. Vanderhoek, contends that high salaries will lure the best teachers. He says he wants to put into practice the conclusion reached by a growing body of research: that teacher quality — not star principals, laptop computers or abundant electives — is the crucial ingredient for success.

“I would much rather put a phenomenal, great teacher in a field with 30 kids and nothing else than take the mediocre teacher and give them half the number of students and give them all the technology in the world,” said Mr. Vanderhoek, 31, a Yale graduate and former middle school teacher who built a test preparation company that pays its tutors far more than the competition. . . .

Some express doubt:

Yet the model is raising questions. Will two social workers be enough? Will even the most skillful teachers be able to handle classes of 30, several students more than the city average? . . .

As someone who has taught for many years, I think that a good teacher can accomplish a lot with a bunch of bureaucrats being around. If the teacher doesn't work, the key is being willing to replace them with someone else.

New Op-ed in the Wall Street Journal: Campaign-Finance Breakdown

johnrlott@aol.com (John Lott) — Wed, 05 Mar 2008 04:20:00 +0000

Bradley Smith and I have a piece on public financing of presidential campaigns:

Is 2008 the last hurrah for public-that is, taxpayer-financing of presidential campaigns? Since 1976, taxpayers have shelled out about $3 billion in current dollars to pay for presidential campaigns, including campaigns by John Hagelin, Lyndon LaRouche, Lenora Fulani, Ralph Nader, Sen. Alan Cranston, Milton Schaap, Ruben Askew, and other also rans. Funds have also paid for balloon drops at the party's conventions, negative TV ads, robocalls and more.

But this year, most leading presidential contenders refused to take the public subsidy-and accompanying spending limits-during the primaries. One exception has been Sen. John McCain. But faced with certain campaign realities, he too is now looking for a way out and is arguing that he has a constitutional right to withdraw from the public funding system for the primaries and, instead, rely on private money. Sen. Barack Obama said last year that he would accept taxpayer financing in the general election if the Republican nominee did too, but he has backed away from that promise.

All this is happening despite the fact that Republicans are nominating their champion of campaign finance reform, Mr. McCain, and a year ago Mr. Obama was lauded in the headlines and media coverage for his dedication to saving public financing of presidential campaigns. . . .

"Columbine To Va. Tech To NIU: Gun-Free Zones Or Killing Fields?"

johnrlott@aol.com (John Lott) — Tue, 26 Feb 2008 16:53:00 +0000

I have a new op-ed at Investors Business Daily:

As Northern Illinois University restarts classes this week, one thing is clear: Six minutes proved too long. It took six minutes before the police were able to enter the classroom that horrible Thursday, and in that short time five people were murdered, 16 wounded.

Six minutes is actually record-breaking speed for the police arriving at such an attack, but it was simply not fast enough. Still, the police were much faster than at the Virginia Tech attack last year.

The previous Thursday, five people were killed in the city council chambers in Kirkwood, Mo. There was even a police officer already there when the attack occurred. . . .

UPDATE: Fox News is reporting a gun threat at at small Ferrum College (1,000 students). I guess I would like to know if this is a concealed handgun permit holder. If it is the school's president is threatening suspension as a first initial response. The president obviously doesn't understand the notion of deterrence. From Fox News:

Ferrum College canceled classes and went on lockdown Tuesday as police searched for a suspicious person on campus.

A Franklin County Sheriff's Department spokeswoman said college President Jennifer Braaten activated an alert system and ordered the lockdown after receiving reports of a suspicious male on the campus. Classes were canceled for the day. . . .

No shots have been fired and there have been no injuries.

Is the "high price" of everything from coffee in restaurants to popcorn in movie theaters due to monopoly power?

johnrlott@aol.com (John Lott) — Tue, 26 Feb 2008 16:52:00 +0000

A new paper by Richard Gil and Wesley Hartmann provides an explanation for the "high price" of popcorn in movie theaters:

Prices for goods such as blades for razors, ink for printers and concessions at movies are often set well above cost. This paper empirically analyzes concession sales data from a chain of Spanish theaters to demonstrate that high prices on concessions reflect a profitable price discrimination strategy often referred to as metering price discrimination. Concessions are found to be purchased in greater amounts by customers that place greater value on attending the theater. In other words, the intensity of demand for admission is metered by concession sales. This implies that while some consumers' surplus may be reduced by the high concession prices, surplus of other consumers on the margin of attending may increase from theaters' decisions to shift their margins away from movies and toward concessions.

First as a side note, most theaters, at least in the US, do not prevent people from bringing in concessions with them to the theater (I don't know about Spain), and that is at least inconsistent with the monopoly type story. It is also interesting to note that these claims about above marginal cost pricing are made for many similar product such as wine in restaurants or coffee or the differences between lunch and dinner prices, and it is hard to believe that monopoly power actually explains the "high prices" in all these cases. Russell Roberts and I provided a cost based explanation for all the phenomenon back in 1991 here. I guess that my biggest question is what else would one expect relating the log(concession revenue) with log(attendance) and Box Office revenue per attendee. Concession revenue goes up with attendance (though at a lower rate than attendance revenue -- congestion) and it goes up with box office revenue per attendee (presumably picking up the fact that higher revenue per attendee means fewer old people and very young people). What is the problem here and why is price discrimination the only answer here? By the way, when they run a regression that includes information on the number of screens and seats per screen (Table 2, specification 2), those two variables really explain all the variation in popcorn prices (something akin to the hypothesis that Russell and I advanced). I am also not clear why logs are used for concession revenue and attendance, but not box office revenue per attendee.

Another couple nice mentions of Freedomnomics

johnrlott@aol.com (John Lott) — Mon, 25 Feb 2008 04:57:00 +0000

Here is one mention:

After his book Freedomnomics, I think that Professor Lott is my favourite economist. He generally makes a lot of sense, although his blog tends to focus on the benefits of gun ownership a tad more than I would prefer (not that I am anti-gun ownership, it just is not a subject which interests me too much).

And another nice mention of Freedomnomics can be found here:

For those interested in more on the economy, I highly recommend Basic Economics by Thomas Sowell. This easy to understand book explains the basic tenets of our free market. Other great reads include Applied Economics and Freedomnomics.

Another Review of Freedomnomics

johnrlott@aol.com (John Lott) — Thu, 07 Feb 2008 15:05:00 +0000

Another review of Freedomnomics:

I recommend Freedomnomics, especially in its audio format. While it didn’t convince me to take classes in economics, it did prompt me to think a little more deeply about the way that I interact with businesses, government, and audiobooks.

Overall, I thought what he thought was the main point of the book was much too narrow.

Another Review of Freedomnomics

johnrlott@aol.com (John Lott) — Sat, 02 Feb 2008 07:15:00 +0000

Brian Shelly has a review of Freedomnomics here:

However, I read Freedomnomics by Economist Dr. John Lott. This book was a pretty easy read and I found some of the information jaw dropping. His specialty is crime and punishment and Chapter 4, which focuses on that, just blew me away. It really showed how conventional wisdom is flat out wrong when you look at the data on crime. . . .

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

johnrlott@aol.com (John Lott) — Mon, 28 Jan 2008 23:11:00 +0000

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. . . .

The Cost of Owning Hybrids

johnrlott@aol.com (John Lott) — Sat, 26 Jan 2008 10:00:00 +0000

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.