Freedom, Justice, and Economics

I’ve needed the several weeks since the Friday, April 4, show to achieve sufficient composure to write about the Royal Shakespeare Company’s current incarnation of The Merchant of Venice in Stratford-upon-Avon. The play of course is inherently incendiary. I have nothing to contribute to the longstanding debate about whether the Bard was Anti-Semitic. But I left the Courtyard Theater that night horrified at this production’s choices, with only one possible source of redemption for it in sight (and, I fear, lost to near all the inattentive audience).

This production matter-of-factly illustrated every evil of a calculating Shylock. He was unfair and unsympathetic in his business dealings; he loved his daughter little, and his gold much; he would never share a table with a Gentile. Beyond the text, in the courtroom, when Shylock is about to use his knife to extract his pound of flesh, he perches above a prostrate Antonio who has his arms outstretched. This image, with Antonio as Christ, invokes the most pernicious of the historical calumnies against Jews.

After the lamb is saved, and Shylock’s level (pointed?) “Is it the law?” is answered affirmatively, the production lightly carries on to Portia’s and Nerissa’s practical joke and the standard comedic ending of multiple nuptials. Shylock appears again only in the musical reprise, interrupting a bit of the dancing to angrily twist arms with his new son-in-law.

What do director and cast hope to achieve with–what could be redemptive about– this portrayal of an irredeemable Shylock? My best speculation is that they wish to offend as thoroughly as Borat.

In contrast to John Peter of The Sunday Times, I didn’t find the production “sloppily directed,” but rather distressingly directed.  In contrast to Michael Billington of The Guardian, I found nothing to “enjoy” about this excruciating production. I’m not sure I could find anything enjoyable about any production of this play. But many wisely directed productions could give me leave to depart with faith in what humanity has learned, rather than fear about what it may have not.

In all the voluminous academic and political debates about optimal taxation, I think one argument should get considerably more attention.  People who have higher earnings derive greater benefits from government.  Social stability, provided in the form of police, defense, and the legal system, preserves property rights and makes productive activity and wealth accumulation possible.  For this, the high-income and high-wealth people who benefit most should pay most.

Before you all go back to talking about incentive effects of taxation, do recall that reference points may matter, and talking about fair benchmarks may help to set them justly.

Hooray.

One of many disappointments I’ve had during the current administration is the dearth of principled resignations.  No small number of Bush appointees have left their posts, but most have wanted “more time with their families” rather than a fire of vitriol.

Two examples are particularly obvious.  Christine Todd Whitman was sidelined at EPA, reduced from Republican moderate stardom to whining “it’s my party, too” after playing chief apologist for anti-environment crusades.  And Colin Powell’s four years as Secretary of State were an extended exercise in quietly suffering humiliation.

Would that they and others departed with flourish, perhaps even with the words of this brilliant, unsigned Time magazine piece from the pre-Watergate Nixon era channeling Nathan Hale: “I am sorry that I have only one job to give for my country.”

Statistics on undergraduate admission rates at the University of Oxford ought to be a scandal.  First, examine Table 5.  The racial groups designated White or White&Other represent 84.2+0.4+0.3+2.2 = 87.1% of applicants.  Despite this overwhelming share (comparable to the share in the general population), the combined admissions rate for these groups substantially exceeds the admissions rate for the combined pool of non-white applicants.

Table 6 implies the even more astonishing fact that gender disparities are also exacerbated by the Oxford admissions process.  Even though 2% more men apply than women, the overall acceptance rate for men exceeds the acceptance rate for women by 2.3%.  In the sciences, where the applicant pool is nearly 3/5 male, the acceptance rate gap is even larger, 3.1%.

Likewise, only 5 out of the 30 colleges listed in Table 8a have higher three-year average admission rates than application rates from “maintained” high schools (ie, the equivalent of “public schools” in the US, which are maintained by the state).

I am not claiming that these statistics imply Oxford admissions officers practice discrimination.  Despite the numbers, it could be the case that the marginal racial minority, female, and maintained school applicant is less distinguished than the marginal white, male, prep school applicant.

However, these numbers imply that disparities in applications expand during the Oxford admissions decision process, contrary to diversity’s recognized essentiality for education in a modern, interconnected world.  Oxford should lead the way in extending opportunity to underrepresented groups, and consequently the Oxford admissions statistics should be a scandal.  The central administration may only partially be to blame, since admissions decisions are made by individual colleges.  Non-discrimination rules may be applied in the UK in the way that opponents of affirmative action would interpret the equal protection doctrine in the US.  Nevertheless, I hope to see fast action to raise application rates of qualified members of underrepresented groups, and equally fast rises to statistical parity in acceptance rates.

… throughout Africa, says a wise former teacher in The Gambia, would make a world of difference.  Why not flood schools with Dr. Seuss?

Most papers written by university students are seen by two people:  the student and her TA.  I think this should change radically:  the default should be that all student work is published to the web.  This would give students output to point their friends and family to; it would encourage students to take more pride in their written work; and it would promote discourse about class subjects among students who could read each other’s work.

The technology is there.  The students are more than talented and diligent enough that  we should have faith in them and their writing.  How could universal web publication be made to happen?

Though transit passengers have to go through immigration and customs at the Halifax Airport, all the rest more than made up:

• Going back through security, there was no line. I repeat this astonishing fact: I walked directly up to the x-ray machine.
• After going through security, I went through US immigration. How brilliant to run the checks before departure!
• Wi-fi is proudly supplied free by the airport.
• At the Spirit of the Maritimes pub they happily brewed my decaf coffee fresh. I write this from their high counter facing the runways and pines beyond, with mottled cotton-ball clouds drifting across half the sky, and bright blue in the other half, down to the distant mother-of-pearl horizon.

The New York Times is running a series of articles on environmental degradation in China.  The newest feature (perhaps others too?) is available in Mandarin translation, as both text and audio.

In the UK, prices for broadband contracts are generally quoted in terms of an introductory rate and a post-introductory rate. For example, the twelve-month version of BT’s “Option 1″ costs 12.99 for the first three months and 17.99 thereafter. This structure is notable because it pertains to FIXED TERM CONTRACTS. Most of the economics literature on behavioral contract theory, stemming from the brilliant paper of Stefano Dellavigna and Ulrike Malmendier, has focussed on cases where consumers have post-adoption choices about service use. For example, credit card adopters can decide how much to borrow; cell phone adopters can decide how many minutes to talk; gym members can decided how often to work out. In the UK broadband case, subsequent prices are unconditional on use: They are merely the way the firms partition the annual contract price into installments.

BT is not unusual in quoting its contracts in these terms. AOL UK, Tiscali, and Virgin are included in its company (though not TalkTalk and Orange). The quotes generally have a few features:

• The introductory period tends to be 3 months for 12 month contracts and 6 months for 18 month contracts.
• The introductory monthly rate is 20-50% less than the post-introductory monthly rate.
• Firms generally require that early termination results in responsibility for payment of all the contract’s remaining installments.

As I see it, there are two main reasons firms may offer contracts structured this way. First, consumers may be more liquidity constrained at the time of adoption than later during the contract term. However, it seems implausible that differences of a few pounds from month to month, within a given year, would make a difference for the typical consumer.

The second reason strikes me as the correct one: firms want to confuse consumers about the true price of the offered contracts. Firms often advertise the introductory rate, and many of the price-comparison websites report this rate despite its irrelevance.

Two questions come to mind. First, given the way (boundedly rational) consumers make decisions about contracts, how should monopolists and competitive firms design their installments? For example, why is it that we don’t see offers like “FIRST MONTH FREE! Next three months only 4.99! Last 69 weeks 39.21.”  Maybe then termination rates would rise, and enough consumers would get irritated to decrease brand karma.  Also, too much complexity could cause consumers to throw up their hands and turn to a competitor.  (Some consumers might also notice a rip-off when confronted with one.)

The second question I find interesting is how regulators should act in these markets.  For example, should there be limits on how long a non-renegotiable contract consumers can sign to?  Should firms be required to quote their contract offers’ total annual costs?  (Certainly, extended agreements shouldn’t be prohibited entirely, because firms face fixed costs of signing up new customers, which must be recouped over time.)

My feeling on the second question is that regulators should require the most prominent advertised price to be the total price for the duration of the contract.  If the firm wants to offer financing (an installment loan), I suppose it’s fine to let them arrange that offer however they wish– though I would probably end up advising everyone to pay up-front if possible, since installment credit is usually very expensive.  Alternatively, (and almost equivalently) regulators could prohibit contracts that ex ante specify varying payments for materially identical services, forcing the broadband providers to advertise only the weighted averages of their streams of monthly prices.