Are Rising Prices a Sign of Health in an Industry?
Or do they signify desperation? This is the question that arose earlier this month in Congress, when the House Judiciary Committee again took up the question of creating copyright protection for fashion designs.
We (really, Chris) testified as the sole opponents to the Innovative Design Protection and Piracy Prevention Act, or IDPPPA, which would for the first time in American history provide a short (3 year) copyright for fashion designs, such as the cut and look of a particular dress or suit. To bolster our argument against the IDPPPA, Chris presented data from the Bureau of Labor Statistics that showed that since 1998 apparel prices in the U.S. had dropped or stayed steady—with one exception. At the very top level, prices rose dramatically in this period—by over 200%. The full testimony and graph can be found here. Read More »
Did Rating Agencies Give Preference to Big Banks?
At the heart of the financial crisis was the market for mortgage-backed securities (MBS). These are the “toxic assets” that larded up bank balance sheets and all but froze the credit markets in the fall of 2008. Turns out a lot of those assets are still sitting there. Though they’ve mostly been downgraded to junk status, many of them began life as gold-plated investment products thanks to the AAA ratings they received from the rating agencies Moody’s, S&P, and Fitch. These firms that allowed so much junk to be passed off as gold were essentially the enablers of the financial crisis.
The relationship between the rating agencies and banks is a perfect case study of flawed incentives. With banks paying them to rate their investment products, and so much money pouring in at the height of the mortgage-boom (driving record profits for the highly competitive rating agencies), Moody’s, S&P, and Fitch had a strong incentive to play along.
A new study adds more fodder to the argument that these agencies were unduly influenced by the institutions whose products they were grading. It basically posits that the more MBS an institution issued, the better rating their stuff received. Read More »
The Virtues of Free Markets?
In our books, Dubner and I have argued that economic analysis (at least the way we try to do it) is neither moral nor immoral. We try to start with a question, obtain a set of facts, and then understand where those facts lead, trying not to be prejudiced one way or the other by moral considerations when coming to a conclusion.
Similarly, I’ve never really thought of markets as being moral or immoral.
Mark Zupan, the dean of the University of Rochester’s William E. Simon School of Business, thinks differently. In a recent piece, Zupan makes an argument that most people will find counterintuitive: he claims that free markets foster integrity and cooperation. I’m not sure I fully agree with him, but the basic idea is sensible and straightforward. Markets lead to firms that survive for long periods of time. Reputations are important to firms, which leads them to behave in virtuous ways, not because they’re inherently moral, but because virtue is good for business in the long run.
Waiting in Line Pays $3 an Hour in China
From NPR’s Beijing correspondent Louisa Lim, comes a story about China’s epic lines, and the money-making opportunity they’ve spawned:
Earlier this month, people waited four days and three nights to register for low-income housing in the central city of Xian, while admission to a certain Beijing kindergarten in Changping last year required a week-long, round-the-clock queue, for which people set up camp beds along the pavement.
A half-day wait at the bank is also apparently not unusual. It’s all led to this:
For the past two years, Li Qicai, 28, has made a career out of waiting in line. What’s more, he now outsources the waiting to others. He employs four full-time queuers and a host of freelancers, who, for a cost of about $3 an hour, will do the waiting for you.
“I’m just selling my time for money,” says Li. “You don’t need any skills, except the ability to suffer. For some jobs, you need to look good. If you want to buy things for rich people, you can’t look like a farmer or they’ll think you’re a scalper.”
The Chinese media pins the phenomenon on an economy driven by laziness, where low labor costs fuel China’s “convenience culture.”
One more point: if it takes a week to wait in line to sign up for kindergarten now, what happens if China’s most populous-province gets its wish, and the country’s one-child policy is overturned?
and 
. If you haven’t seen it yet, the movie features Steven Levitt and Stephen Dubner, and was made by a dream team of documentary directors. Paste Magazine named it one of the 