The Liberal Order

The Ranking of Cities Based on the Integrity of Auto Repair Shops

Raleigh ranks 45th out of 50. In other words, you better be alert when getting your car worked on in Raleigh.

Neighborhood Schools and Poverty

The Raleigh News & Observer's Steve Ford argues in favor of diversity assignments for government schools, contending that assignment based on neighborhoods favors kids from wealthy families at the expense of kids from poorer families.

I grew up in Fairfax County and graduated from high school there (Lee High, Springfield, Class of '64). Lee, like all of Fairfax's schools, was racially segregated during my time. In that regard it's come a long way: During the last school year it had a rainbow enrollment that was 28 percent white, 26 percent Asian, 26 percent Hispanic and 16 percent black. Thirty-nine percent of the students were classified as economically disadvantaged.

At McLean High School across the county to the northwest, in one of the region's more affluent communities, the enrollment was 63 percent white, 19 percent Asian, 9 percent Hispanic and 4 percent black. Eight percent of the students qualified for free or reduced-price meals.

Granted that the pool was smaller, but among McLean's "poor" students who took the SAT two years ago, the average combined SAT score for reading and math was 1029. Something wasn't working as well for Lee's disadvantaged students. Their comparable score was 936.

Presumably the McLean students benefited from the school's upper middle class ambience, bringing high academic expectations and levels of support. That is the kind of boost Wake's diversity policy seeks to impart when it distributes kids from poor neighborhoods into schools in the well-off suburbs.

Households are not randomly distributed across geographic regions so that a certain percentage of whites are dropped off in this neighborhood along with a randomly chosen percentage of blacks, some Asians and a few Hispanic families sprinkled among the mix. This is likely a selection bias issue in that families more inclined to care about and be involved in their child's education are more inclined to move to neighborhoods within the McLean school district (or other school districts with more dedicated students) rather than in neighborhoods in the Lee district (or other school districts with less dedicated students). Families that choose to live in McLean neighborhoods are willing to make the sacrifices necessary for their children to obtain a better education that families with similar incomes that have chosen to live in the Lee neighborhoods are less likely to make.

It is naive to believe that by forcing kids who are motivated educationally to attend schools with those who aren't, the latter will magically rise to the challenge. In fact, it's more likely that the latter will bring down the education potential of the former. If Ford and other supporters of diversity assignments truly desire improving the educational opportunities for motivated students of any income level, why not support private school vouchers? Or even tax credits? The answer might be found in the following Ford statement.

In describing his search for a home near Philadelphia in the early 1980s, Ford realized that purchasing a home in Trenton would condemn his child[ren] to receiving a poor quality education. Consequently, rather than buy the home in Trenton and send his child[ren] to private school, they chose to purchase a home in Yardley, PA. (Notice the selection bias again?) He comments,

We investigated private schools, but our heart wasn't in it. We believed in public education and wanted our child to go that route.

I don't quite understand what it means to "believe in public education"? Does he believe that private schooling is inferior to public schooling? That private schools are inferior at educating students in reading, writing and math relative to government schools? Does he believe the same thing about newspapers? That private newspapers are inferior to public newspapers? Or is there some orthodoxy that permeates the public school system that Ford is concerned economically disadvantaged students would not be exposed to in a private school should they be awarded vouchers?     

A Hilarious Parody of Special Interest Television News Reporting

Via Craig Newmark (the economist).

Reputation, Profit, and an Incentive to Extort

Years ago, Tyler Cowen and Sam Papenfuss wrote an article explaining why there are not-for-profit firms such as colleges/universities, charitable organizations, and ratings agencies for goods and services. They concluded that the not-for-profit status is for signaling reputation for honesty. For example, having to serve shareholders' interests by earning profits would jeopardize the objectivity of the information provided by Consumer Reports if this consumer ratings company acted as a for-profit enterprise, which it does not.  

A class action lawsuit has recently been filed against Yelp, an online for-profit company that rates, and provides direct information from customers about, firms (i.e., restaurants, hotels, vets, etc.) in specific geographical locations. The plaintiff alleges that a salesperson of this provider of information - good and bad - attempted to extort its business, which had received unfavorable information and ratings on Yelp's website.

"The plaintiff...asked that Yelp remove a false and defamatory review from the Web site," a release from the law firms alleges. "In response, as set forth in the lawsuit, Yelp refused to take down the review. Instead, the company's sales representatives repeatedly contacted the hospital and demanded a roughly $300 per-month payment in exchange for hiding or removing the negative review." That payment is "in the guise of 'advertising contracts,'" the release explained.

First, this is simply an allegation, which will have to go through trial to prove if the accusation is valid. More importantly, this may be an example of a principal-agent problem. If the salesperson is paid on commission, it could simply be a rogue employee out to increase his or her commission by increasing advertising sales using tactics that do not comply with Yelp's "official" policy.

This still does not exonerate the ratings company, but if it turns out that such tactics were encouraged by Yelp, it will be a tough road to regain its reputation as an objective source of information.

More Gloom for the Housing Market

More bad news for the housing market. This of course is more bad news for the financial sector, which is now struggling with commercial real estate problems as well, and is likely to stall further economic recovery.

The housing market is having a winter of major discontent. Millions of homeowners owe more on their mortgage than their home is worth on the current market, a real problem for those who want to sell. New-home sales are at a record low, in large part because so many homeowners who might buy new homes don't want to venture into this market to sell their existing house.

Oh Snap!

Ouch! Tim Harford cracks on economists. In providing advice to a student considering studies in economics without a proper math background, Harford claims,

You have theorised on the basis of neat concepts without any real-world knowledge – in some ways, ideal preparation to be an economist.

Here's James Buchanan's take on the feckless state of the profession following economists' bumbling of the financial crisis and events leading up to, and following, it.

NC U.S. Senate Candidate Cal Cunningham Runs on Platform of Abolishing the U.S. Constitution

All right, that's not completely true. But it's not that far off.

Cal Cunningham, a democrat running for the U.S. Senate in North Carolina, is calling to end the filibuster as part of his campaign platform.

"The real travesty is that an outdated Senate procedural rule, the filibuster, empowers a few dozen obstructionists like Richard Burr to effectively guarantee the special interest groups get their way," Cunningham said in a news release.

Yes, the Republicans have obstructed the Democrats' plans, as did the latter when the former had the majority in the Senate. That's a feature, not a bug, of our constitutionally constrained government. It was purposefully intended as a means of safeguarding 49% of the population from being tyrannized by the other 51%.

David Rivkin and Lee Casey comment:

When they gathered in Philadelphia in 1787, the Constitution's framers had three goals: Establish a strong national government that nevertheless respected states' lawful prerogatives; impose limits on the exercise of government power so as to protect the citizenry's life, liberty and property; and create a stable and enduring political system. These men had lived through a revolution and war, and they understood the importance of regulating "by a system cautiously formed and steadily pursued," as noted by John Jay in the Federalist Papers.

The Framers achieved this stability by generally requiring a high level of consensus in support of governmental action. Accordingly, the Constitution deliberately makes achieving "legislative accomplishments" difficult.

Far from being outdated, it's even more important as we become wealthier and our socio-economic lives involve more complex relationships. 

Me-dictator is a fine world in which to live . . . as long as I'm the dictator. Once someone else becomes dictator, however, it might not be so good. Maggie Mahar explains.

Changing the Rules Alters Behavior

When the rules regulating an activity change, people alter their behavior in response to that change. The current credit crisis is due in part to banks' altering their behavior in response to changes in capital requirements.

Relating to sports, improvements in the safety attributes of football helmets has led to more forceful collisions and, therefore, more head injuries. And the advent of the designated hitter rule in the American League caused more batters to be hit by pitches thrown from pitchers who would now not have to face the opposing pitcher at the plate.

Now comes another example of rule changes affecting the behavior of athletes - this time in the NHL.

First, let’s start with a bit of back-story for those not familiar with hockey. The rules of the game allow for a great deal of contact, called checking, during play on the ice. Legally, only the player who controls the puck can be checked, and contact is allowed anywhere on the ice, even near the boards. As modern medical understandings of head injuries and long-term brain damage have advanced, the hockey community, and specifically the NHL, has made efforts to further protect its players. In the past three seasons, a large emphasis in rule enforcement has been made to prevent hits from behind that would send a player head-first into the boards without warning. There is no debate in my eyes that the intent of this policy should be supported in every way. The economics in all this stems from the fact that players have begun to play the game differently due to a change in incentives.

Murphy outlined how current players now take a more aggressive position on the ice because they no longer have to protect themselves; rather, the players know that the referees will protect them by calling penalties. From an economic standpoint, defensemen now face different incentives than they did before the rule change occurred. The risks associated with being hit from behind can be viewed as the cost associated with turning around on the ice. Since the new rules make those dangerous hits less likely, they essentially lower the cost defensemen face when deciding if they should put themselves in a vulnerable position. Economists refer to a moral hazard as any time a change in the larger economic system designed to protect an individual causes that person to alter his behavior to be more risky.

Gandalf and Ostrom

Pete Boettke quotes Vincent Ostrom:

"The greatest evils inflicted upon humanity have been the work of those who are so confident of their efforts to do good that they do not hesitate to use the instruments of evil available to them on behalf of their righteous cause."

This reminds me of Gandalf's great quote from Fellowship of the Ring:

Understand, Frodo, I would use this ring from a desire to do good, but through me, it would wield a power too great and too terrible to imagine.

Churchrater.com

If you can rate books and people with whom you trade on eBay, why not churches?

"We really believe in the democratization of information," said Tyler Mahoney, one of four co-founders of ChurchRater.com and a Duke Divinity School student. "The more information we put in the hands of people, the more power we give them."

What if you're home-churched?