Review of Levitt and Dubner's "Think like a Freak" in Barron's: "Beware of Populist Economics"

This is a copy of my review from Barron's:

The new lessons from the Freakonomics guys are compelling, but deeply flawed. 

Reviewed by John R. Lott Jr. 

The Freakonomics franchise certainly has legs. According to legions of admirers, in their best-selling series that includes Freakonomics, SuperFreakonomics, and now Think Like a Freak, University of Chicago economics professor Steven Levitt and journalist Stephen Dubner have taught us to use economic reasoning to shed light on real-life situations.  In the process, they have also shown that economics can be fun. 

But the fun quotient is ultimately diminished by the fact that their stock in trade is naive economics. Typically, Levitt and Dubner fail to understand that when a problem arises in a market, it generally provides an incentive for those involved to remedy the problem.Take the sour-lemon story. "A new car that was bought for $20,000," they assured us in Freakonomics, "cannot be resold for more than perhaps $15,000. Why? Because the only person who might logically want to resell a brand-new car is someone who found the car to be a lemon. So if the car isn't a lemon, a potential buyer assumes that it is."  

Stories like these have clearly appealed to those who enjoy clever portrayals of a dysfunctional world. But a little research would have revealed that, contrary to Levitt and Dubner, used cars with only a few thousand miles on them sell for almost the same price as when new. One obvious reason: Since car manufacturers allow warranties to be transferred to new owners, potential buyers know that even if they do buy a lemon, they will not be stuck with it. 

In Think Like a Freak, the authors promise to teach us what "it takes [to be] a truly original thinker." But rather than promoting original or critical thought, their book tries to convince us of one main thing: People are stupid. We are thus confronted with half-baked theories similar to those in their previous books. 

Take the example that Think Like a Freak starts out with: soccer players in the World Cup doing what is best for their own reputations rather than what is best for their team. We are told that, when a player kicks penalty shots, aiming toward the center has a better chance of success, but that fear of shame prevents players from doing so. The potential shame of kicking the ball right into the hands of a goalie standing in the middle of the goal, especially during the World Cup, keeps players from doing what is best for the team. 

The data cited to support this view are a bit rough. We are informed that "only 17% of kicks are aimed" at the center of the goal, even though "75% of penalty kicks at the elite level are successful." But the real problem is that, per their usual habit, the authors assume no one else involved is smart enough to detect this cheating. If, by kicking the ball to the side, players really are failing to score, it defies belief that team owners and coaches would be blind to this abuse and allow it to continue. 

Since the team's gain from winning is far greater than any shame the player risks, incentives can be used to make sure that players do what is best for the team. Stiff financial penalties can be imposed, including the penalty of being fired from the team. Then there are other kinds of possible shame, meted out to these players in front of other team members, for not serving the interests of the team. 

In the ivory-tower world of Levitt and Dubner, however, owners and coaches are completely ignored, since including them would only ruin a clever insight. I contacted actual soccer coaches at three different colleges, and found that they did not agree with the authors' premise that the center shot in a penalty kick is the best strategy. Not surprisingly, then, players seem to obey their coaches' dictates on penalty kicks. . . .

The rest of the review is available here.

________________________________

Space constraints limited what I was able to write.  For those interested, here is part of what I had originally included in the review that I sent in.

Or take their discussion about wines.  People supposedly keep buying the expensive wine even though they really can’t tell which is the premium wine and the cheap stuff.  If you believe Levitt and Dubner, these wine drinkers are making a mistake to pay more for the so-called higher quality wine. 

 Again, possibly people are just self-deluded or dumb, but there are other possibilities.  Aged wines may not taste better, but simply different.  For example, it is costly to store wine for decades.  As wine ages, the tannins in the wine disappear and one can find out how the wine tastes uninhibited by the tannins.  Price differences would thus be due to the different costs of producing different wine, not a result of differences in demand.
 Alternatively, Professor Orley Ashenfelter at Princeton found that he could very accurately predict the price of wine by simply looking at the amount of winter and harvest rainfall and the average summer temperature in the vineyard.  If wine prices are random, how is it that prices can be predicted so accurately based on growing conditions? 

 As a primary example of the “truly original” thinking Levitt and Dubner claim to have done, they point again to the assertion discussed in Freakonomics that liberalizing abortion lowers crime rates.  The problem with this bragging is that neither the basic idea that “unwanted children” who are brought up in bad environments that lead to crime was not a new idea nor was their test of it. 

 While these authors take credit for the idea, it is actually an old argument.  The 1972 Rockefeller Commission on Population and the American Future cited research purporting that the children of women denied an abortion didn’t get the attention that others received and “turned out to have been registered more often with psychiatric services, engaged in more antisocial and criminal behavior, and have been more dependent on public assistance.”  Roe v. Wade even discusses the consequences of “unwanted children” not getting the attention that they need. 

The research the commission cited went back even further.  For example, a 1966 study followed the lives of children born to 188 women who were denied abortions from 1939 to 1941 at the only hospital in Gothenburg, Sweden.  They compared the lives of these kids over the next twenty years to the next child of the same sex who was born after them.

Something to think about including if you want to explain the changes in the number of robberies over time

Using electronic payments won't only reduce bank robberies, it should also reduce street robberies. But as this article points out, you will see more cybercrime (so-called substitution effects). It isn't just for underground economies that people like cash. They also like it sometimes to protect their privacy. From CBS News:

The Swedish Bankers' Association says the shrinkage of the cash economy is already making an impact in crime statistics.

The number of bank robberies in Sweden plunged from 110 in 2008 to 16 in 2011 — the lowest level since it started keeping records 30 years ago. It says robberies of security transports are also down.

"Less cash in circulation makes things safer, both for the staff that handle cash, but also of course for the public," says Par Karlsson, a security expert at the organization.

The prevalence of electronic transactions — and the digital trail they generate — also helps explain why Sweden has less of a problem with graft than countries with a stronger cash culture, such as Italy or Greece, says economics professor Friedrich Schneider of the Johannes Kepler University in Austria.

"If people use more cards, they are less involved in shadow economy activities," says Schneider, an expert on underground economies.

In Italy — where cash has been a common means of avoiding value-added tax and hiding profits from the taxman — Prime Minister Mario Monti in December put forward measures to limit cash transactions to payments under euro1,000 ($1,300), down from euro2,500 before.

The flip side is the risk of cybercrimes. According to the Swedish National Council for Crime Prevention the number of computerized fraud cases, including skimming, surged to nearly 20,000 in 2011 from 3,304 in 2000.

Oscar Swartz, the founder of Sweden's first Internet provider, Banhof, says a digital economy also raises privacy issues because of the electronic trail of transactions. He supports the idea of phasing out cash, but says other anonymous payment methods need to be introduced instead.

"One should be able to send money and donate money to different organizations without being traced every time," he says. . . . .

Newest Fox News Piece: The China Currency Bill Will Make Americans Poorer, Not Richer

My newest piece starts this way:

We seem determined to repeat the policy mistakes that made the 1930s Great Depression so deep. Already we have seen the massive increases in government spending and regulation. Today's vote on the China currency bill by the Senate adds another mistake. It resembles the infamous 1930 Smoot-Hawley tariff law.

True, China is manipulating its currency to lower the value of the Yuan relative to the US dollar. This manipulation makes it cheaper for Americans to buy their exports, be it toys, furniture, or manufactured goods. It also makes it cheaper for us to purchase whole companies or shares in Chinese companies. It also means that the Chinese have to pay “too” much for American bonds and American products.

If passed, the Currency Exchange Rate Oversight Reform Act of 2011 would force China to raise the value of the Yuan. And if they refuse to comply, we will increase the tariffs on what we buy from them, equivalent to putting a special tax on the goods we buy.

China’s currency manipulation is a mistake. Yet, their mistake doesn’t mean we should make one also. If Chinese leaders are stupid enough to subsidize Americans by selling their goods and assets too cheaply, why should we stop them? . . .

An easy way to find illegal aliens

The new Alabama law shows that illegals respond to incentives. Will the schools look at those who started not showing up to school after the judge's decision? From the Associated Press:

Education officials say scores of immigrant families have withdrawn their children from classes or kept them home this week, afraid that sending the kids to school would draw attention from authorities.
There are no precise statewide numbers. But several districts with large immigrant enrollments -- from small towns to large urban districts -- reported a sudden exodus of children of Hispanic parents, some of whom told officials they planned to leave the state to avoid trouble with the law, which requires schools to check students' immigration status.
The anxiety has become so intense that the superintendent in one of the state's largest cities, Huntsville, went on a Spanish-language television show Thursday to try to calm widespread worries. . . .

Obama still doesn't get it on economics

Reuters writes: "Obama blames speculators for rising fuel prices"

Obama doesn't understand that "speculators" smooth the swings in prices. Speculators make money by eliminating price differences over time. If they think that prices will rise, they buy oil now and store it to sell when those higher prices arise. If prices don't rise, those speculators LOSE money, losing their OWN money. Obviously there is a lot of turmoil in the Middle East. If Saudi Arabia has political trouble or other oil countries have problems, what happens to the price of oil then? BY storing some oil in case those events occur, speculators will make oil available when that short fall occurs.

President Barack Obama on Tuesday blamed speculators for driving gasoline prices higher and straining American consumers, saying there was enough oil in world markets to meet demand.

Speaking at a community college in suburban Virginia, Obama said increasing production of U.S. oil and creating a market for fuel-efficient cars would help meet the country's energy challenges. . . .

Rising fuel prices are a persistent concern for the White House, which is concerned about their impact on the economy and on voters' wallets as Obama runs for re-election.

Average U.S. gasoline prices hit $3.84 a gallon last week, the most expensive since August 2008, as oil prices have soared above $100 a barrel. . . .

Obama said that global oil supply is adequate and that speculators are driving up prices significantly.

"It is true that a lot of what's driving oil prices up right now is not the lack of supply. There's enough supply. There's enough oil out there for world demand," Obama said.

"The problem is ... speculators and people make various bets, and they say, you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we're going to bet that oil is going to go up real high. And that spikes up prices significantly." . . .

One way to raise the cost of food to college students

Guess what. When the marginal cost of food is zero students waste huge amounts of food. Rather than putting a price on the food, colleges are trying to raise the cost of students carrying away the food.

When Virginia Tech's largest dining hall reopened several years ago, some administrators jokingly dubbed it the "freshman 25" cafeteria, for the number of pounds some students might gain from the tasty fare.

Students loaded their trays with Belgian waffles, brick-oven-baked pizza, falafel, Brazilian skewered meat, pad Thai, fruit juice concoctions and elaborate desserts - so much food that even the biggest of guys with the biggest of appetites could not always clean their plates.

As food service workers watched thousands of pounds of food go to waste, the university decided to make a move increasingly common at higher-education institutions nationwide: It got rid of cafeteria trays.

The change was immediate. "The plates were coming back basically cleaned," said Ted J. Faulkner, Tech's senior associate director of housing and dining services. "It was astounding."

Most schools in the Washington region have gone "trayless" in at least one dining hall, and several nationwide have banned them altogether.

But perhaps inevitably, there has been a backlash - in part because cafeteria trays had alternative lives as sleds and collegiate souvenirs. When the University of Massachusetts at Amherst got rid of trays in several dining halls last academic year, a group of students formed a "Bring back the trays" Facebook group. One argument posted on the group wall: "What will we use for sleds now?"

Without a tray, students have to be pickier during the first sweep of the cafeteria line and make trips back for more. It results in as much as 25 to 30 percent less wasted food, according to a 2008 study of 25 campuses by food services provider Aramark.

"It's a better pace. You have to get up and walk it off" in between courses, said Cody Erickson, 20, a junior horticulture major from Sandy Spring, sitting with a small pile of cleaned-off lunch plates in Virginia Tech's D2 dining hall last week. . . .

Economists say that the Stimulus didn't help economy

It is disappointing that only 73 percent of National Association for Business Economics respondents had no impact of the recovery. I wish that some more of them had said that it had harmed the recovery.

The [National Association for Business Economics] April 2010 Industry Survey report presents the responses of 68 NABE members to a survey conducted between March 25, 2010, and April 10, 2010, on business conditions in their firm or industry and reflects first-quarter 2010 results and the near-term outlook. . . . The vast majority (73%) of respondents reported the fiscal stimulus enacted in February 2009 has had no impact on employment to date. While 68% also believe a jobs bill, such as the one recently enacted into law, will have no impact on payrolls, 30% do believe it will boost payrolls moderately.

Speeding tickets based on the driver's income?

Europe has all sorts of progressive taxation, so why not have progressive income based penalties for speeding? It doesn't make any more sense than having the price of cars or bread or anything else based on income. Efficiency requires that people buy goods up to the point where the marginal benefit that they receive is equal to the marginal cost. Varying prices with income will move the market away from that optimal output. The traditional argument for penalties for speeding is the same. There is a cost from speeding in terms of increasing the likelihood of accidents, and there is a benefit in terms of saving time by getting to the driver's destination faster. Unless one wants to argue that the expected damage from a wealthy speeder going a certain speed is greater than a poorer one going the same speed, one wouldn't want the penalty for speeding to vary with the wealth of the speeder. The only exceptions would be if wealthier criminals were some how harder to catch to begin with. From Fox News:

European countries are increasingly pegging speeding fines to income as a way to punish wealthy scofflaws who would otherwise ignore tickets.

Advocates say a $290,000 speeding ticket slapped on a millionaire Ferrari driver in Switzerland was a fair and well-deserved example of the trend.

Germany, France, Austria and the Nordic countries also issue punishments based on a person's wealth. In Germany the maximum fine can be as much as $16 million compared to only $1 million in Switzerland. Only Finland regularly hands out similarly hefty fine to speeding drivers, with the current record believed to be a $190,000 ticket in 2004.

The Swiss court appeared to set a world record when it levied the fine in November on a man identified in the Swiss media only as "Roland S." Judges in the eastern canton of St. Gallendescribed him as a "traffic thug" in their verdict, which only recently came to light.

"As far as we're concerned this is very good," Sabine Jurisch, a road safety campaigner with the Swiss group Road Cross.

She said rich drivers were lightly punished until Swiss voters approved a 2007 penal law overhaul that let judges hand down fines based on personal income and wealth for moderate misdemeanors including excessive speeding and drunk driving. Before, they had to assign relatively small fixed penalties or — rarely — a few days in prison.

The fines were traditionally insignificant for rich people, and in the rare cases where prison terms for small-time offenders were handed down, they were usually suspended anyway. And even when they were sent to jail, the deterrent was limited compared with the costs of incarceration borne by the taxpayers, officials said. . . .

Higher Prices, Lower Sales: It works even for music

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). . . .

Walter Williams discusses Freedomnomics

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

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

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

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

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?

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." . . .

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

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: '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. . . .

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).

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.

The high cost of regulation: compact fluorescent lights

CFLs contain mercury. If one breaks in your home, Kazman says, EPA guidelines suggest you open windows and leave the room for at least a quarter of an hour before trying to clean up the mess. And for God's sakes don't use a vacuum, which could disperse the poison into the air. Even when they're intact, U.S. News happily tells us, "the bulbs must be handled with caution. Using a drop cloth might be a good new routine to develop when screwing in a light bulb."

I really wonder whether people have thought of these bulbs being used in real world use. How will be dispose of them? Will people actually keep them on for 15 minutes after they have been turned on? Suppose that you just want to temporarily turn on the light when you go into a room. What about the time costs of people having to come back a second time to turn it off? What about the costs of people's time waiting for these lights to warm up? What about the fact that people might have to turn on more lights because these new bulbs don't produce as much light? This has to be one of the dumber regulations in a long time.