I hope they're not talking about me

The National Business Review, New Zealand's leading business journal, today pitches for subscriptions, promising subscriber-only online content (no link, as from the emailed pitch).

As you know, there has been endless discussion for a number of years about the crazy model adopted by newspapers in most parts of the free world in which they pay the enormous costs of running professional newsrooms only to give their content away free – while at the same time slashing newsroom numbers to save money as circulation and advertising revenues fall.

And to add to the madness it has been the aggregators that have profited the most from the supply of that free news copy. Worse still the model has spawned a huge band of amateur, untrained, unqualified bloggers who have swarmed over the internet pouring out columns of unsubstantiated “facts” and hysterical opinion.

Most of these “citizen journalists” don’t have access to decision makers and are infamous for their biased and inaccurate reporting on almost any subject under the sun (while invariably criticising professional news coverage whose original material they depend on to base their diatribes).

It is only a matter of time before the model collapses. The alternative is newsrooms decimated to the point of processing public relations handouts or unedited government propaganda from their fully staffed team of spin doctors.

I'm a fan of the NBR, and not only because they've been about the only outlet consistently covering the Hurly-BERLy. And, I'd far sooner pay for decent content than have it cease to exist. But it's a bit quick to blame the bloggers here. Bloggers aren't entirely parasitic on journalists; it's very much a two-way street. See here especially, but also here and here. In New Zealand, Kiwiblog's broken stories picked up without attribution by the mainstream.

Embrace Neurodiversity

From Tyler Cowen's discussion of autism:

In many areas of human neurodiversity, including autism, we still don't know the answers to many basic questions. There is still not even agreement on the basic definitions of autism, Asperger's, and related concepts. In the meantime we are applying lots of stereotypes and negative descriptions to autistics that we would not dream of using to describe racial or ethnic groups. It's high time that colleges and universities got out in the lead to fight these common prejudices. The rhetoric coming out of higher education needs to match up to the reality of higher education as a common avocation for autistic people.

...
It's a little tricky to talk or write about the autistics who may work in your institution. If you work at a college or university, there is a good chance you are interacting with people on the autism spectrum on a very regular basis. Maybe the reaction of the reader is to draw up a mental list of people in the workplace and start applying various stereotypes to them. Maybe you'll be on the lookout at the next dean's meeting for people who exhibit "autistic traits" and then gossip about those perceptions to your friends.

That's human nature, but I'm suggesting an alternative tack. Embrace individualism. Question your stereotypes. Maybe even look in the mirror. When you're done, it's likely that you'll see far more talent, in far more unorthodox varieties, than you expected.

HT: Arts & Letters Daily

Crashing boulders through the screen

Scott McLemee's always worth reading over at Inside Higher Ed. In today's discussion of the work of Isaac Rosenfield, he notes Scialabba's "What are intellectuals good for?"

Scialabba does not simply repeat standard complaints about the decline of free-range public intellectuals and the rise of transgressive professorial jargonization. (That is a familiar story, even perhaps too familiar.) Scialabba points, rather, to the role played by a “new variety or mutation” of thinker in the “modern, efficient machinery of persuasion” necessary to hold highly developed societies together. Scialabba calls this type “the anti-public intellectual, whose function is not criticism, not defense of the public against private or state power, but the opposite.… As a result of the intellectuals’ incorporation en masse into the ‘power elite,’ it now requires far more training, leisure, and resources to penetrate the screen of corporate or government propaganda….”

And so the critic must redouble his efforts at challenging the arts of public manipulation, however Sisyphean those effort may be. The boulder will crash through the screen every so often, with enough luck and a good aim.

Reading McLemee always winds up adding to the stack of books I hope to read while on sabbatical next year.

What do alcohol and electricity have in common?

I have been spending most of the past two weeks reading the Wolak report for the Commerce Commission into electricity pricing, in preparation for a presentation on the report next Monday at the Institute for the Study of Competition and Regulation in Wellington. This was the report that found that electricity generators had earned $4.3b from exercising market power since 2001.

I'll blog a bit next week on my take on the report, but an immediate reaction was a bit of deja vu after following Eric and Matt's work on the Berl report. In both cases, we have a public institution commissioning an independent report that produces an implausibly high number that is then put out into the public domain. Both reports were subject to external review prior to being released. And both have some questionable aspects to say the least that did not seem to be spotted by the external reviewers.

I wonder if a better approach to publically commissioned reviews of this nature would be to change the order: Release a preliminary version of the report, seek public comment, and then submit both the draft and the public feedback for external review.

Elasticity of sin

The rational addiction model predicts that the consumption behaviour of addicts in response to price signals will be, well, rational. The model predicts that the price elasticity of demand may well be low in the short term but that it's higher in the long term. It also predicts that addicts will adjust their consumption behaviour in advance of a well-known upcoming price increase. These predictions bear up in the data. But, addicts' demand elasticity will remain less elastic than for moderate consumers. Consequently, tax instruments applied to try and curb addicts will impose high deadweight costs on moderate consumers.

The interesting twist is that, the stronger is the evidence for rational addiction - in other words, the more closely the demand elasticities match for the two groups - the more likely it is that a tax increase will reduce addicts' consumption at a reasonable cost in terms of deadweight losses imposed on moderate consumers. However, if the rational addiction model really holds, then such taxes are not welfare improving absent the specification of a highly paternalistic social welfare function. So, alcohol taxes work to stop "harmful" consumers' drinking when those consumers don't really need the help.

On the flip side, if the rational addiction model fails to hold and the real story is a behavioural one about weakness of will and self-control, then "harmful consumers" might prefer that something be done to help them quit. However, in that case, we're outside of the rational addiction model and the price elasticity of demand will be near zero: in other words, taxation is no longer an effective mechanism for reducing their demand. In the state of the world where the rational addiction model does not hold, alcohol taxes will not make addicts better off even though those addicts would prefer that their consumption be reduced. Instead, the alcohol tax just imposes deadweight costs on moderate consumers.

Long story short: if alcohol taxes work to curb addicts' consumption, then we probably don't need them because that consumption is more likely to be rational. If addicts really are irrational and need help to curb their consumption, then alcohol taxes won't work to solve the problem.

On the latter point, a recent NBER working paper gives some evidence on short run demand elasticities across cohorts of drinkers. They use a finite mixture model to allow heterogeneity across latent groups. They then find that short run demand from heavier drinkers is indistinguishable from zero. They consequently argue:

[I]n the case of potentially harmful goods, sin taxes are levied in part to reduce the potential harms, external and internal, of consumption. For these drinkers, under several behavioral economic theories of addiction, taxes could increase welfare by serving as a precommitment device that serves to bolster weak self-control. However, our results suggest that the heavier drinkers are least likely to respond to the higher taxes, thus neither the externality nor 'internality’ justification for higher alcohol taxes is supported by our results.

I'd like to know what their approach would say about longer run demand elasticities. I continue to hold the view that the rational addiction model explains a lot about the real world. I'm also happy to accept that demand elasticity among high demanders is lower than that among low demanders; consequently, I worry that excise tax increases, even if effective in curbing some "harmful consumption", induces disproportionately large deadweight costs on moderate consumers.

What did I miss?

A week ago, the RBNZ worried a lot that the banks were shafting customers by not passing along the Reserve Bank's interest rate cuts. Of course, banks do have to compete for deposit funds; it's not like they can underwrite mortgages based on overnight borrowing at the RBNZ.

This week, the RBNZ instead is worried that recovery in the New Zealand housing sector may presage a return to our old "borrow and spend" ways: in other words, we need to do something to encourage more saving and less borrowing. What is it that affects that...ah, right. The interest rate. So a week ago the RBNZ berated banks for interest rates being too high; today, Bollard berates consumers for responding to interest rates being too low. Which is it? I suppose that new information could have come into the system in the interval about housing sector recovery, but it would suggest that perhaps folks oughtn't have been so quick to criticize the banks in the first place.

Matt on BERL

My coauthor, Matt Burgess, gave a short interview on Wellington's Newstalk ZB over the weekend; audio file is here.