Different River

”You can never step in the same river twice.” –Heraclitus

February 7, 2005

The Economics of Being Late

Filed under: — Different River @ 11:42 pm

Ever wonder why meetings usually start late? Andrew Chamberlain over at The Idea Shop has an economic explanation, based on game theory, as to why punctuality is inefficient, or in other words, why people are consistently late for meetings. You have to read all the way through the “Update” at the end to get the full story.

(Hat tip: Ashish’s Niti. Ashish’s objection is correct, and is answered by Andrew in the update.)

This reminds me of the statement Steven Landsburg makes in The Armchair Economist that: “If you never miss a flight, you’re spending too much time waiting around in airports.”

In this case, you don’t need another person waiting for you; all you need is some uncertainty about how long it will take to get to the plane. The idea here is simple: Missing the plane is costly, but waiting is also costly. You know approximately, but not exacltly, how long it will take you to get to your flight, and you leave with that amount of time, plus an extra amount of time to take into account the fact that missing the plane is costly. But that “extra amount” is limited by the fact that waiting around at the airport is also costly. So the goal is to leave “enough” extra time, but not “too much.”

One way we can test this theory in practice is to see if people allow more time when the cost of missing the flight is obviously higher (compared to other times). For example, the cost of missing the flight is not very much if there is likely to be another flight on the same airline to the same place leaving shortly, with seats available — and the cost of missing the flight is higher if those things are not true. So, we should expect people to leave for the airport earlier when travel is heavier and there is less likely to be an open seat on the next flight (e.g., holiday travel times), when flights are infrequent (international flights, flights to/from small airports) and so one. On the other hand, we should expect lots of people to cut it close when flying between destinations with very frequent service, such as Los Angeles to San Francisco or Phoenix, or New York to Washington, DC or Boston.

I’ll bet if we went out and got some data, we find that that’s true. In fact, we wouldn’t need data on when people leave for the airport; we’d just need data on what percentage of the passengers miss the flight and show up late to re-book for the next one. I bet people are doing that all the time for flights from Los Angeles to San Francisco, and only rarely for flights from Los Angeles to Hong Kong.

Arthur Laffer: Myths and Facts

Filed under: — Different River @ 10:34 pm

A friend pointed me to this one today: Bill Steigerwald of the Pittsburgh Tribune-Review has an interview with Arthur Laffer. Laffer is the economist known most prominently for pointing out — using a graph now called the “Laffer Curve” — that it’s possible to increase tax revenues by reducing tax rates. It’s an amazingly optimistic interview, for anyone to give, especially an intellectual of any sort, let alone an economist.

I’ve heard a lot of bizarre things about Arthur Laffer over the years, many of them from economists who really should have known better. Here are some of the real zingers.

  1. Myth: “Hasn’t all that Reaganomics stuff been discredited among serious economists?” Oh, you mean the stuff about how reducing tax rates can increase tax revenues? (“Yeah!”) It’s about as discredited among economists as the non-flat-earth theory is discredited among geographers. If you don’t believe it, consider this: If you were charged 100% of your income as income tax, would you get a job? Of course not — not if you were going to report the income, anyway. So if the tax rate is 100%, the tax revenue actually collected is 0%. If you reduce the tax rate — say, to what it actually is right now in the U.S., you can collect trillions of dollars in revenue. So obviously, it’s possible to increase tax revenues by reducing tax rates. Some people argue about whether a reduction from current rates would increase current revenues, and that’s a legitimate question. Most tax-rate decreases (in the last 50 years, in the U.S.) have been followed by increases in tax revenue, but critics argue that there’s always another cause, and the economy is complex enough that it’s hard conclusively prove them wrong. However, if the “other cause” they cite is “economic growth” (or equivalently, “the recession ended”) then that reinforces rather than discredits the Laffer Curve theory, since increased economic growth due to lower tax rates is part-and-parcel of the theory.

    Remember this next time one politician proposes tax cuts and another asks, “But how are you going to pay for it?” That’s the economics version of one person saying, “I’m going so fly this plane all the way around the world” and another asking, “But how are you going to get back here?”

  2. Myth: “Arthur Laffer never got a Ph.D. in economics.” When I was an undergraduate, I actually heard this from one of my economics professors, who told a story about how another economist (whom I won’t name, because the story is probably an urban legend) kept calling him “Mister Laffer” at some economics meeting so people would ask why and he would have an excuse to point out that he’s not “Doctor Laffer.” Trouble is, he actually is Doctor Laffer, having completed a Ph.D. in economics at Stanford University in 1971. In the age of the Internet, this is easy to verify; just enter his name into the search box at the Stanford University library search page and click on “Author.” His dissertation, “Private Short-term Capital Flows,” is clearly listed among the library’s holdings. (Scroll down; it’s the only item from him authored in 1971.) It’s also listed in Dissertation Abstracts, though you have to be at a university or similar place to access it from that web site.

  3. Myth: “But Arthur Laffer has never really been a real economist.” The last time I checked, which was about 10 years ago (gasp!), Laffer had, from 1969-85, published 13 articles in indexed, peer-reviewed economics journals, including the Journal of Political Economy, the Review of Economics and Statistics, and the American Economic Review, three of the consensus “top 7″ economics journals. He also had prestigious faculty positions — at the University of Chicago Graduate School of Business, as the Charles B. Thornton Professor of Business Economics at the University of Southern California Marshall School of Business, and as a Distinguished University Professor at Pepperdine University. He then started a couple of consulting and investment businesses, but I don’t think that erases his academic career.

  4. Myth: “Arthur Laffer is a complete right-wing ideologue.” According to the recent interview and this article in U.S. News & World Report, after serving in the Nixon-Ford administration and serving as a top economic adviser to President Reagan, and running unsuccessfully for the Republican nomination for the Senate in 1986, Laffer voted for Clinton twice. He also helped craft a tax plan for Democrat Jerry Brown (!!!) when he was running unsuccessfully for the Democratic nomination for President in 1972. (On Brown: “He’s a weird guy, but he would have made a great president.”) He is now meeting with Bush administration officials about once a quarter to consult on economic policy.

His biography for the speaking circuit is here.

If there’s enough interest (i.e., 1-2 requests), I’ll post a list of his peer-reviewed articles in the comments.

True Entrepreneurship in action

Filed under: — Different River @ 7:39 pm

Here’s an inspiring story of someone with enough entrepreneurship and just enough naïveté (i.e., not too much cynicism) to rise to a completely unexpected challenge. If I were running a business, I’d want someone with this level of initiative and desire-to-take-responsibility working for me.

From the Seattle Times:

Dawna Lentz, the manager who ran a Quiznos Sub shop on a shoestring after the owners went absent, won’t lose her job as she’d feared.

On the contrary, Quiznos is flying the 25-year-old to its Denver headquarters to meet company President Steve Shaffer and to go through training to become a certified manager.

“She’s shown loyalty to Quiznos like no other employee has,” corporate spokeswoman Stacie Lange said yesterday. “Her ability to keep that store afloat through a very difficult time needs to be commended.”

Lentz and her crew of three had kept the franchise afloat since November, when the bank account ran dry and one of the principal owners stopped showing up. The other partner, an absentee owner, would check in occasionally but hadn’t been seen for weeks, Lentz said.

Like the abandoned kid in “Home Alone,” Lentz learned how to run the business by necessity and ingenuity. With paychecks bouncing and vendors refusing to deliver on credit, she used cash from the till to buy cold cuts and bread each morning.

She paid herself and her crew in cash, too, tallying each day’s wages on the back of their worthless paychecks, deducting the amount that would go for payroll taxes. There wasn’t enough cash at the end of every day to pay all the wages owed, however, and Lentz’s back wages had reached $900.

Lentz worried that she’d lose her job over the mess. Instead, Quiznos brought in corporate staff to help her out, replenished the food supply and made sure that she and the other employees’ wages were up to date.

After reading about her determination, other employers expressed interest in having Lentz work for them.

“Ms. Lentz did a remarkable job of overcoming adversity through persistence and creativity,” Jim Cravens, a division vice president for Wendy’s, wrote in an e-mail. “We would love to have Dawna on our team.”

Lentz, who is trying to earn enough to pay for tuition to nursing school, said she is overwhelmed by the public response, ….

“I didn’t expect people to come to me at the restaurant and offer me jobs,” she said.

She would have if she knew how hard it is for companies to find good employees.

Tom Daschle is still raising money

Filed under: — Different River @ 7:30 pm

Tom Daschle, the now-former Senate Minority Leader, lost his own Senate seat in the last election, but apparently he is still fundraising.

Before he narrowly lost his race to now-Sen. John Thune (R), Daschle operated one of the most active PACs on Capitol Hill. But now Daschle and his advisers want to marry the success and efficiency of the PAC with the massive fundraising operation of his re-election effort, which, while unsuccessful at the ballot box, blew away all expectations financially.

If you can’t get the votes, raise the money anyway?

Suing Nice Neighbors (Update #1)

Filed under: — Different River @ 7:20 pm

If you haven’t already, read the post below before reading this one. These are all updates to that one.

  1. I should have mentioned this more explicitly before, but this lawsuit was filed and decided in Small Claims Court. I don’t know if this means the same thing in Colorado that it means in some other places, but if it does, it means the case was filed without a lawyer. From this we can conclude:

    1. It is possible to file a completely frivolous and idiotic lawsuit without consulting a lawyer. (I’m not sure if this make the legal system look better or worse!); and

    2. It is possible for a judge to make a completely idiotic decision, allowing a completely frivolous and idiotic lawsuit to succeed, without being boxed in by complex briefs filed by lawyers. (I know this makes the legal system look worse!)

  2. Switchboard alert: There is at least one other “W. Young” in Durango, one William H. Young Jr. It’s not clear if William H. Young, Jr. is related to Wanita Renea Young. It’s possible the phone listing for “W. Young” refers to either or both of them. Wanita’s husband’s first name is “Herb”; that could be short for what the “H.” stands for. Or not.

  3. The Durango Herald has a story with more details here, including pictures of both the plaintiff (who was the “victim” of the free cookies) and the defendents (the girls who made the cookies). It also has expanded versions of quotes in the previous story, such as:

    “This has turned into quite a fiasco,” Young said. “It’s something that never should have happened and it’s just devastating. My phone hasn’t stopped ringing. My life has been threatened and I’ll probably have to move out of town.

    Wanita, if you “have to” move out of town, it’s not because they knocked on your door, it’s because you sued the girls for giving you some freshly-baked cookies! Now don’t go suing for moving costs or something!

    “All I wanted was for those girls to admit that they used poor judgment and apologize in person. If they had done that, I wouldn’t have even asked for the money. I just hope they learned a lesson.”

    Let me get this straight: They knocked on your door once to do something nice (free freshly-baked cookies), and you called the police. So, now, you want them to knock on your door again to apologize “in person”? What do you think they are, crazy? So they are quite reasonably afraid to knock on your door again … so you sue them?

    And then you wonder why people in Durango thing you might not be the best neighbor to have?

    I just hope Wanita learns a lesson. I’m not betting on it, though.

  4. The Durango Herald story also has the following nice tidbit:

    Denver radio station KOA-AM raised more than $1,900 from listeners Friday to pay the girls’ $930.78 fine. The remaining sum will go to a charity dedicated to victims of the Columbine High School massacre.

    I bet the Youngs are sore about that, too. I mean, what kind of “lesson” are the girls going to learn from that? That if you do a nasty mean thing like give someone some cookies, you won’t have to pay the consequences?

    And there is this:

    As the radio station raised the money, Taylor Ostergaard and Lindsey Zellitti, both 18, flew to New York City to tape a segment about the cookie caper for ABC’s “Good Morning America.” But not before the father of one of the girls filed a restraining order against the husband of the litigious neighbor.

    Richard Ostergaard successfully filed a restraining order against Young’s husband, Herb, on Friday afternoon in county court, claiming he continues to make harassing telephone calls to the Ostergaard residence.

    Harassing them for what? Losing the lawsuit?

  5. The “Good Morning America” story is here. Nice summary of the ending, and a picture.

  6. And there’s a follow-up story here, with offers of an appearance on Jay Leno, an event by the Otis Spunkmeyer cookie-making company, and a whole bunch of creative insults. (Is Wanita a “cookie monster” or a “cookie batterer”?)

  7. The folks on Dave Barry’s blog are having quite a time of this here and here. One of them suggested this was an appropriate time to use this product.

OK, enough cookie-blogging for now. I think I’m gaining weight just from thinking about all this.

Suing Nice Neighbors

Filed under: — Different River @ 4:03 pm

This has got to be one of the most preposterously ridiculous lawsuits I’ve ever heard of — and I’ve heard of a lot! Two teenage girls in Durango, Colorado, decided to make cookies for their neighbors, just to be nice. In response, one of the neighbors sued them — and won damages!!!

Apparently, two teenage girls decided to skip school a dance where there might be cursing and drinking. Instead, they baked cookies for their neighbors and delivered them anonymously — with a note that said, “Have a great night. Love, the T and L Club.” (Their first names are Taylor and Lindsey.)

One recipient of the free cookies, Wanita Renea Young, sued them.

She said she became so terrified by the knocks on her door around 10:30 p.m. that she called the sheriff’s department. Deputies determined that no crime had been committed. So, she found out who gave here the delicious cookies, and sued the girls.

A Durango judge Thursday awarded Young almost $900 to recoup her medical bills for an asthma attack she suffered the next day, which she allegedly thought was a heart attack because she’d been so scared by the cookies. She received nothing for pain and suffering.

Her comment? “I’m not gloating about it. I just hope the girls learned a lesson.”

Yeah, I’ll bet they learned a lesson — like, never do anything nice for you neighbors! They might sue you!

Another lesson they might have learned — better to go to the dance with all that drinking and cursing, than have some good clean fun like baking cookies for your neighbors.

I don’t wish ill on anybody, but it would be poetic justice if Ms. Young were to get a flat tire on the median strip of a busy highway, and have 5,000 cars pass by over the next six hours with no one stopping to help or call the auto club.

Taylor’s mother, Jill Ostergaard, said her daughter “cried and cried” after hearing the judge’s decision, and said, “She felt she was being punished for doing something nice.”

Well, that’s because she was being punished for doing something nice. Smart girl!

The judge said it was pretty late at night for the girls to be out.

Yeah, they shouldn’t have been out making cookies. They should have been at the dance, cursing and drinking! Judge, that’ll be an excellent defense next time some 17- and 18-year-olds are hauled into your court for underage drinking. “Your honor, we were going to make cookies for our neighbors, but we heard what you did to those other kids and didn’t want to get on the wrong side of the law. So we had to go out drinking instead!”

I don’t wish ill on anybody, but it would be poetic justice if the judge’s car got smashed by a drunk driver heading home from a dance after deciding it was too risky to make cookies for the neighbors — and have 5,000 cars pass by over the next six hours with no one stopping to help or call the auto club.

It was reported that Taylor and Lindsey declined to comment Thursday, saying only that they didn’t want to say anything hurtful.

Translation: They were afraid they might get sued for slander if they said what any intelligent person would say in those circumstances.

The bad part is, they’re right!

The girls wrote letters of apology to Young. Taylor’s letter, written a few days after the episode, said in part: “I didn’t realize this would cause trouble for you. … I just wanted you to know that someone cared about you and your family.”

They apologized! They offered to pay! For the offense of giving free cookies!

But was that good enough for Wanita Renea Young? Of course not! Time to sue! She said the apologies “weren’t delivered in person.”

The apologies weren’t delivered in person?!?!?!? What is this, some kind of trap? The cookies themselves were delivered in person, and look what happened to girls after that? Why did Wanita Renea Young want the girls to deliever the apologies in person? So she could shoot them? If you were those girls, would you ever deliever anything in person to that woman, ever again?

Young also thought they shouldn’t have been out so late. Something bad could have happened to them.

Yeah, they could have gotten sued! By someone who thought an apology was not enough to make up for the horrible offense of delivering cookies!

(Hat tip: James Taranto.)

By the way, if you would like to give Wanita Renea Young a piece of your mind, I don’t know how to reach her, but I do know there is only one person with last name Young and first initial W in Durgango, CO, listed in the white pages at Switchboard.com. And if you’d like to have a word with the (mis)judge, he is listed as a licensed attorney in the Colorado Bar and his attorney registration number is 10004.

Of course, if you’d like to send a message of support, the Ostergaard and Zellitti families are also listed at Switchboard.com, where they are the only families in Durango, CO with those names.

Perhaps we should take up a collection to pay the judgement, with the proviso that they use any excess funds for college expenses, or cookies they eat themselves.

By the way, any comment on this from the Girl Scouts?

Sorry for the interruption

Filed under: — Different River @ 3:05 pm

Sorry for the recent blogging hiatus — one two-sentence post in three days is not exactly an active blog. To the charge of “blog abandonment,” I plead not guilty by reason of bronchitis. See you shortly!

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