The Jolly Roger

The following passage in Pete Leeson's book on pirates reminded me of my earlier post about why rapists shouldn't be treated as harshly as rapists who are also murders (emphasis added):

The presence of these other belligerent marine vessels provides a clue why pirates went through the trouble of using the Jolly Roger when they attacked their prey: Pirates wanted to distinguish themselves from the other assaulting vessels merchant ships might encounter. Britain criticized the Spanish Guarda Costa for inhumanely treating some British prisoners it captured. Nevertheless, at least in principle, the viciousness coast guard vessels could show toward merchant crews they assaulted was limited because they were government-sanctioned cruisers. They weren't permitted to wantonly slaughter merchant crews that resisted them after these crews cried out for quarter, for instance. In contrast, pirates weren't even theoretically constrained in how they treated those they overcame. Pirates were outlaws and would be hanged if authorities captured them whether they massacred merchant crews they attacked or not. In this sense, for pirates, massacring resistors was essentially costless.

Thus, the skull-and-crossbones Jolly Roger served as a credible signal to merchant ships that they should surrender instead of face probable death.

My 16-Year-Old Self and the $89,000 Check

In high school, I had a job working at a very small tax office: just my boss and me. She was going out of the country for a while, so she asked me to monitor the mail while she was gone for a certain check and to deposit it at the bank.

When the check arrived, I was floored to see that it was for $89,000. I felt nervous handling it, driving it to the bank, and handing it over to the teller. My mom even accompanied me into the bank to make sure that everything went OK.

Of course, the teller accepted the check without batting an eye or calling over a senior manager.

Maybe I was destined to become an economist someday, because I imagined what would happen had I tried to sign the check over to myself. Perhaps it would have been technically impossible to take the money myself, but that didn't stop me from daydreaming about my ill-gotten sportscar and big-screen TV.

But I quickly realized that I couldn't live forever on $89,000, and that I'd have to sacrifice my job, my family (my boss was a good friend of my aunt), and probably all of my future academic and professional opportunities for this one-time score. Not to mention the constant need to look over my shoulder for law enforcement. It simply wasn't worth it.

Why do armored car drivers almost never take the cash for themselves (despite the recent movie)? Why do the millions of cashiers around the world rarely skim off the top? Why could merchants as early as the 11th century trust hired agents with boatloads of valuable goods (as described in Avner Greif's classic paper)?

Economists generally give two explanations:

(1) Workers are paid an efficiency wage. If the market value for carpenters is $20 an hour and I pay someone $35 an hour, that will give my employee a huge incentive to keep that job by not only working hard but also by not jeopardizing his employment by trying to steal from me.

(2) As described in Greif's paper, reputation is crucial. If you screw over one employer, your chances at future employment are vastly undermined. That's why references for job applicants are so important, and why eBay feedback can quickly sort out the good sellers from the bad.

Annoying Away Hoodlums

The Washington Post reports that a device that emits an annoying noise that only young people can hear has been installed at Gallery Place. It's an effort to drive away deviant youth that often hang out in the area.

I'm surprised that this is legal.

While the area businesses (a good chunk of which are bars) might benefit by driving young people away, plenty of young people who aren't causing trouble and who have a legitimate reason to be in that neighborhood will be harmed for no reason. Young people (yes, even potential hoodlums) should have just as much right to a public street as the businesses do.

Asinine TV Dinner Instructions

Two things jumped out at me from the instructions on the back of my Healthy Choice Cafe Steamers: General Tso's Spicy Chicken TV dinner.

CAREFULLY remove film from top as PRODUCT WILL BE HOT.

This is pretty standard, but it's still amusingly over-the-top. Anyone with the least bit of life experience knows that items placed in the microwave tend to heat up. (Also, why does CAREFULLY deserve to be in bold, but not PRODUCT WILL BE HOT?)

CHECK that product is cooked thoroughly. Internal temperature needs to reach 165 degrees F as measured by a food thermometer in several spots.

Wow. Some people are too lazy to cook, so they make TV dinners. Other people routinely check the temperature of their meals using a food thermometer in several spots. It's doubtful that there's any overlap between these two groups.

These extremely cautious directions are no doubt a result of the 1994 McDonald's coffee lawsuit. Now, consumers have no one to blame but themselves. You can almost sense the committee of lawyers that oversaw the process. Why else would the directions always refer to your food as "product" instead of "food" or "meal"?

The most litigious among us are ruining it for the rest. There are tradeoffs between how useful and how legally thorough a set of directions can be. For the sake of an extremely small group of people, companies now have to err on the side of caution, sacrificing brevity and clarity for the majority of their customers.

Why Grades Matter in Law School but not Journalism School: Part 2

(See also part 1, where I talk the signaling effects of grades for the two professions.)

Two more reasons why grades matter in law school but not for journalism school: (1) small variances in skill are more important for lawyers and (2) young talented lawyers are easier to retain.

A small skill difference in a trial lawyer can mean the difference between a legal victory and a defeat, often with millions of dollars at stake. Thus, it's worth trying to get metrics, such as grades, on the skills of prospective lawyers, even if they are imprecise.

On most traditional newspaper beats, a highly talented journalist isn't much more valuable than an average journalist. Having the best reporter in the world on the Manatee County, FL, courts beat won't generate much more revenue for the paper than an average reporter would. The potential audience for the subject is only so big; this was especially true before the Internet and widespread syndication. There's less of an incentive to hunt for the best reporters out of college, especially based on such an imprecise measure as grades.

The true cream of the reporting crop can be extremely valuable, but once these reporters have demonstrated their talent, they have every reason to leave for bigger newspapers. There, they can earn more money, reach a wider audience, and live in a bigger city. The small papers that hired them out of college don't have the resources to make an equally appealing offer. Even if small papers are successful in hiring the very best journalists out of college, the papers will have a hard time retaining them.

On the other hand, law firms can more easily hold on to young talent. A young promising lawyer may very well stay at the firm that hired him out of college, as he will begin to gain seniority and work his way up to partner. Because law firms can expect to extract so much value from young employees who blossom, they have a big incentive to try to hire the best candidates right after they graduate.

Inflight WiFi and Terrorism

An article today from Boing Boing tells how a blogger was chastised for pulling up a video chat over the plane's WiFi to say goodnight to his children. Apparently video chats are prohibited because of terrorism concerns:

The flight attendant just showed me the United policy manual which prohibits "two way devices" from communicating with the ground. However, the PLANE HAS WIFI. To combat this, not unlike China, United and other airlines have blocked Skype and other known video chat offenders. Apparently, they missed Apple iChat. Oops.

Some have pointed out how terrorism strikes on two main fronts: the initial loss of life and property caused by the attack, and the ongoing fear and lifestyle changes it provokes. September 11 happened more than 8 years ago, yet it still significantly delays air transit at substantial taxpayer expense because of the security measures that have been put in place.

Allowing access to the Internet on planes but blocking certain activities is doomed to failure. There are innumerable ways that a could terrorist could send a message via WiFi to people on the ground besides video chat, and the authorities can't possibly account for all of them.

The Boing Boing article also details another reason to ban video chats: like cellphone conversations, they annoy nearby passengers.

When to Write Poorly

Writing is a crucial skill to invest in, no matter what your field. Whatever other knowledge you have is worth little if you cannot effectively explain it to others.

In Western society, the onus for ensuring understanding falls to the writer or speaker, not the reader or listener. Malcolm Gladwell points this out in "Outliers," in which he discusses how foreign pilots would often crash because they communicated problems too subtly to air traffic control:

Western communication has what linguists call a “transmitter orientation”—that is, it is considered the responsibility of the speaker to communicate ideas clearly and unambiguously. … But Korea, like many Asian countries, is receiver orientated. It is up to the listener to make sense of what is being said.

Sometimes, however, clarity in writing is sacrificed for other goals.

In academic journals, writers aim to impress. Writing that is overly technical, poorly organized, and difficult to follow can still build prestige for the writer, even if the underlying arguments are rubbish. Additionally, complicated math is often used for show, even if simpler math would be more appropriate for the topic. Making your paper easier to understand only makes it easier for others to criticize your arguments or data.

In the legal world, writers aim to complicate. Lawyers write contracts and other legal documents in language that can only be understood by other lawyers, keeping them all in business. Lengthy, convoluted documents are less likely to be read carefully by the people signing them, to the advantage of the parties creating such documents.

In academia, writers aim to meet page requirements. A high school student might make his point in 5 pages, but he is forced to include 5 more pages of tangents, needless repetition, and other fluff to reach a 10-page minimum. Similarly, the majority of doctoral students will submit dissertations that are hundreds of pages long, no matter what the topic.

Why All Rapists Don't Get Put to Death (Nor Should They)

Rape is among the most heinous crimes one person can commit against another. It violates the victim in the most personal and perverted way. It causes intense emotional and psychological damage that can remain for decades after the crime.

Yet we typically do not put rapists--even child rapists--to death, or give them lifetime prison sentences. And we shouldn't.

As uncomfortable as this may be to accept, showing leniency toward rapists can be in the victim's favor, as it increases her chances of survival.

First, imagine the counterfactual--that the penalty for rape is death, if the rapist is caught. Now, what incentive does the rapist have not to murder his victim? Because he is already facing a death sentence, killing the victim will not make his potential punishment any worse. In fact, he will have even more incentive to kill his victim, as the crime will be much more difficult to solve with a dead victim than it would be with a survivor.

We have to dole out harsher punishments for harsher crimes. By making the punishment for rape and murder worse than the one for just rape, we are giving the rapist an incentive to keep the victim alive. As sad and seemingly unfair as it is, many victims owe their lives to this policy.

Why Grades Matter in Law School but not Journalism School: Part 1

As with my previous post, I'm interested here in how important grades really are in terms of signaling how successful a student will be in the professional workplace.

How much grades matter depends on the field.

In law school, grades are very important. At least in a student's first year or before he gets his first internship, this is the only proxy that firms have to judge his ability as a potential lawyer. He could present examples of his classwork, but firms aren't much interested in reviewing his performance in mock court or reading essays he's written about legal topics.

In journalism school, at least for those interested in print or online journalism, grades are far less crucial. This is because the firms have a much stronger proxy for determining whether a student will be successful. All journalism programs have some sort of student newspaper or other publication (at least as far as I know), and whatever articles you can produce for the student newspaper are a direct reflection on what kind of articles you can produce at a professional paper. While a professional paper will give reporters access to better sources and (maybe) better technology, it's doubtful that the change of scenery will change the inherent quality of the reporter's work much. It's easy to spot a good writer or a good investigative journalist based on only a few writing samples. Newspapers would be wise to hire based almost exclusively on the quality of prior work, assuming that the student's grades meet some minimum acceptable level.

UPDATE 3/23: I've written more on this subject here.

Athletes Behaving Badly and Endorsement Insurance

Celebrity endorsements are a high-risk, high-reward venture. A successful spokesman can turn an unknown product into a best seller (think the George Foreman Grill), while a spokesperson mired in scandal can destroy billions in shareholder wealth.

After the Tiger Woods scandal, advertisers have increasingly inquired about insurance for their ad campaigns in case their athletic spokesperson comes under media fire (NYT). But agreeing on what constitutes bad behavior is easier said than done.

In theory, if athletes could guarantee advertisers that they won't do harm to the underlying brands by making bad decisions, they would be rewarded with more lucrative deals. In the real world, advertisers have to factor in how the athlete's image may deteriorate, making the advertisements ineffective or even harmful in promoting their brands. Given the risk, the expected value of an endorsement is lower.

But how should a contract be worded to ensure that an athlete remains on good behavior? Who gets to decide whether the athlete's actions constitute a breach? Logically, the two sides have polarized visions:

Athletes usually prefer that a morals clause gives the company the right to terminate their agreement only when the player is convicted of a felony involving “moral turpitude” or worse, because a conviction could take years and the risk of conviction is relatively low.

Companies, by contrast, want the broadest rights possible to cover “any occurrence” that involves “moral turpitude, or makes any statement or commits any act disparaging of, or reflecting unfavorably upon, the company’s reputation or the company’s products and services,” according to one type of morals clause.

Had Michael Vick been under the former arrangement, he could not have been dropped by advertisers until his dogfighting conviction, which came several months after the news was first released. Had Michael Jordan been under the latter arrangement, he could have been dropped for various controversies over the years (divorce, gambling, Hall of Fame speech), even though he remains one of the world's most marketable people.

Is File Sharing Worth the Risk of a Hefty Lawsuit?

A woman was ordered to pay $1.92 million for illegally downloading 24 songs, and the verdict has recently been reduced to $54,000, reports Wired. Still, the plaintiff's lawyers aren't exactly thrilled with the latest developments:

Joe Sibley, Thomas-Rasset’s attorney, said in a telephone interview that even the reduced amount of damages is unconstitutionally excessive. It’s a penalty of 2,250 times an assumed $1 cost of a music download.

With this hefty of a penalty, does it still make sense to download music illegally (ignoring ethical considerations for the moment)? In making such decisions, economists often look at expected values. If you buy a song legally, you have a 100% chance of being out a small amount of money (99 cents). If you download the song illegally, you have a very small chance of getting sued and having to pay a very large fine. In theory, assuming the consumer is risk neutral, she should only download if the expected cost is less than a dollar.

Hard numbers for this analysis are hard to come by, as with any illegal activity. According to one widely cited study by the Institute for Policy Innovation, about 4 billion songs are illegally download each year in the United States. A PC World article from 2005 reports that there were 17,000 Recording Industry Association of America (RIAA) lawsuits from 2003 to 2005, a 3-year span. Of course, not everyone who gets sued ends up going to court, but the Wired article notes that most "were settled out of court for a few thousand dollars," so the cost of being sued is still substantial.

These figures are far from perfect, but let's assume that the expected cost of downloading a song is:

(17,000/3)/4,000,000,000 (a rough proxy for the chance of getting sued for each song downloaded)
times
$2,250 (fee per song under the above lawsuit ruling)

Which comes out to about $0.0032 per song, or several degrees of magnitude below the purchase price. Under the original verdict of $1.92 million, the expected cost of an illegally downloaded song rises to 11 cents. However, this figure is not very realistic, as no ordinary defendant could pay such a sum and the appeals courts would almost certainly reduce it.

In either case, we shouldn't ignore the nonmonetary costs of threatened prosecution (getting sued is never fun) or the cost of lawyers. Many people will decide to avoid downloading because of fear or ethical considerations instead of taking the relative "deal" that is music piracy.

Prime Time to Commit Crime

A new state law in California is letting criminals go free earlier with good behavior (from the San Diego Union-Tribune):

The new rules, which are applied retroactively, allow inmates to cut as much as one-half off their jail sentence. They were included in a bill signed as part of last year’s budget package that will reduce state prison populations.

In a recession, people are more likely to be financially (and otherwise) desperate and thus more prone to crime. In addition, they can rationally expect shorter prisoner sentences as states find other pressing needs to spend money on besides housing criminals (according to one source, it costs $79 a day to house a prisoner but $3.50 to keep the criminal on probation).

I wonder if the law (and ones like it) will be reversed once the economy picks up again. Perhaps someone could do an econometric regression to see if mean prison terms are a function of macroeconomic factors.