A Stack of Bills Reaching to the Moon: How to Quantify Our National Debt
Now that the U.S. national debt is in the headlines, the media is awash in astronomical numbers such as $14.3 trillion (the current debt). Everyone realizes that this number is incomprehensible. Even back in 1981, when the national debt was only about $1 trillion, the debt was still incomprehensible. Thus, speechwriters for Ronald Reagan created, or at least popularized, a widely used attempt to give it meaning. Speaking to Congress in February 1981, Reagan said:
A few weeks ago I called such a figure, a trillion dollars, incomprehensible, and I’ve been trying ever since to think of a way to illustrate how big a trillion really is. And the best I could come up with is that if you had a stack of thousand-dollar bills in your hand only 4 inches high, you’d be a millionaire. A trillion dollars would be a stack of thousand-dollar bills 67 miles high.
This comparison is often quoted as a stack of one-dollar bills 67,000 miles high (perhaps because thousand-dollar bills don’t exist). No matter which denomination you use, I give the explanation an A for effort, but an F for performance. For I have little idea of how far 67,000 miles is. I know it’s way too far to walk and even too far to fly (jumbo jets have a maximum range of around 7,000 miles). But is it large as a national debt? I have no idea. Perhaps a large national debt would reach all the way to Mars. The connection to a height has merely replaced one meaningless idea ($1 trillion) with another meaningless idea (a stack 67,000 miles high). Read More »
Want to Jump-Start the Housing Market? Get Rid of the Realtors!
Okay, okay, that’s not quite the message of a new working paper by Panle Jia Barwick and Parag A. Pathak called “The Costs of Free Entry: An Empirical Study of Real Estate Agents in Greater Boston.” But for those of us who have thought about the Realtor’s role in the housing market, it’s tempting to jump to that conclusion. Here’s the full version of the study, and here’s the abstract:
Read More »This paper studies the real estate brokerage industry in Greater Boston, an industry with low entry barriers and substantial turnover. Using a comprehensive dataset of agents and transactions from 1998-2007, we find that entry does not increase sales probabilities or reduce the time it takes for properties to sell, decreases the market share of experienced agents, and leads to a reduction in average service quality. These empirical patterns motivate an econometric model of the dynamic optimizing behavior of agents that serves as the foundation for simulating counterfactual market structures. A one-half reduction in the commission rate leads to a 73% increase in the number of houses each agent sells and benefits consumers by about $2 billion. House price appreciation in the first half of the 2000s accounts for 24% of overall entry and a 31% decline in the number of houses sold by each agent. Low cost programs that provide information about past agent performance have the potential to increase overall productivity and generate significant social savings.
With the NFL Lockout Just About Over, a Sports Economist Weighs In
If there was any doubt as to how valuable the NFL is, all you had to do was flip to ESPN on Thursday night. The cable network ran an hours-long, special lockout edition of SportsCenter following news that the owners approved a proposed collective-bargaining agreement. From a ratings standpoint, it probably wasn’t that hard a call: the prime-time program the network broke into was a softball game between the U.S. and Czech Republic, which got bumped to ESPN2.
The NFL players still have to ratify the deal, and have until next Tuesday to do so. If they sign, free agency and training camp would begin on July 27, not soon enough to salvage the Hall of Fame game. One clear loser in this whole lockout situation is the city of Canton, Ohio, which according to Fox Sports Midwest, will lose out on millions of dollars of economic impact. As I thought about the broader implications that the four-month lockout has had on the country’s most lucrative professional sports league (the NFL brings in $9 billion of annual revenue), I fired off some questions to sports economist Dave Berri, who was kind enough to offer some quick responses. Read More »
FREAK-est Links
The economics of law schools (now more expensive than 4 years of college), a fake Apple store in China, what Carmageddon taught us about behavioral economics, JSTOR hacker gets indicted on felony charges, and an insect that’s survived for a million years without sex. Read More »
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 