Christmas and the Destruction of Value

December 25, 2009
Posted by Jay Livingston

What was in those boxes we unwrapped and opened today? Gifts, most people would say.
But according to a Grinch-famous 1993 economics article by Joel Waldfogel, those boxes were also crammed with “deadweight loss” – the difference between what the giver paid for the book or bauble and what it was actually worth to the recipient. Waldfogel surveyed Yale undergrads and concluded that “between a tenth and a third of the value of holiday gifts is destroyed by gift-giving.” Destroyed. That $40 sweater you gave to your cousin’s husband – you destroyed $10 of its value. Here’s the key question Waldfogel put to his Yalies about gifts they’d received: “If you did not have them, how much would you be willing to pay to obtain them?”* By this method, a really good gift would mean a high deadweight loss. For example, I would never pay more than $40 for a sweater for myself. No sweater to me is worth more than that. But suppose a good friend bought me a really, really nice $200 sweater. I love that sweater. I love it precisely because it’s an extravagance I never would have allowed myself. But the most I’d be willing to pay for it is $40. So according to Waldfogel, my friend destroyed $160 (80%) of the sweater’s value. When I first heard about the Waldfogel study, I thought it was a bit of self-parody – like those jokes about engineers , where the engineer sees everything in terms of the concepts of his profession and thus misses the point. (Waldfogel, for example, refers to the “inefficiency” of gift-giving, as though the point of gift-giving were efficiency.) But Waldfogel wasn’t kidding. He just published a follow-up book, Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays. In fact, gift-giving has become increasingly rationalized and efficient. Children write letters to Santa specifying what they want; brides and grooms have bridal registries that do the same. Cash and gift cards are becoming more popular as gifts. There is no doubt that gift-giving is an economic exchange, and it would be silly to pretend thateconomic value has nothing to do with it (it’s the thought that counts). But it’s equally silly to think that it gifts are only economic and that they have no social meaning.

MERRY CHRISTMAS

*The Form-1040-instructions quality of the prose is typical. For example, the Waldfogel survey also asks respondents to estimate the value of the gifts as “the amount of cash such that you are indifferent between the gift and the cash, not counting the sentimental value of the gift. If you exchanged the original gift, assess the value of the object you got in exchange for the original gift. If you exchanged the original gift for cash, put the cash amount you received here.”

Sexting and Percentaging - The Wrong Way

December 23, 2009
Posted by Jay Livingston

The Pew survey on sexting – it came out over a week ago. I don’t know how I missed it. Must be the holiday blahs. And where was the media hysteria? Most news outlets ignored it, probably because the results weren’t all that alarming.

For the entire sample of eight hundred 12-17 year olds, the estimated proportion who sent “sexually suggestive nude or nearly nude images of themselves” was 4%. Given the margin of error, that means that the actual percentage, as Dan Ryan at Sociology of Information notes, is somewhere between 0% and 8%.

Of course, we’re not going to see a headline like “Sexting Teens May be 0%.” Not when you can goose up the numbers to 30%. Here’s the headline that ran in The Washington Post:

Sexting hasn't reached most young teens, poll finds;
30% of 17-year-olds report getting nude photos on their cells

That subhead manages to get the highest percentage by

• using only the oldest subgroup in the sample
• measuring receiving rather than sending

Dan has some other methodological criticisms, including this one. First the Pew summary paragraph:

One parental intervention that may relate to a lower likelihood of sending of sexually suggestive images was parental restriction of text messaging. Teens who sent sexually suggestive nude or nearly nude images were less likely to have parents who reported limiting the number of texts or other messages the teen could send. Just 9% of teens who sent sexy images by text had parents who restricted the number of texts or other messages they could send; 28% of teens who didn’t send these texts had parents who limited their child’s texting.

I spent the last two weeks of the semester trying to get students to percentage tables correctly. “Percentage on the independent variable,” I repeated and repeated. And now Amanda Lenhart at the Pew Foundation undermines all my good work. As Dan says,

It is unlikely that the authors are thinking that sexting causes parental restrictions – the sense is just the opposite – and so the percentaging should be within the categories of parental behavior and comparison across these.

Dan even does the math and finds:

• Children of restrictive parents who ever sent a sext: 1.4% (3 of 218)
• Children of non-restrictive parents who ever sent a sext: 5% (29 of 572)

Read Dan’s entire critique. Or for the truly absurd and probably counter-effectual, see the anti-sexting videos featuring (I am not making this up) James Lipton.

Max Weber Takes on the Left and Lieberman

December 19, 2009
Posted by Jay Livingston

The politics of health care reform presents a dilemma for those who want change. It’s the dilemma of compromising with evil. Do we sacrifice real improvement for the sake of ideological purity?

MoveOn.org wants me to sign a petition that says, “America needs real health care reform—not a massive giveaway to the insurance companies. Senator Bernie Sanders and other progressives should block this bill until it’s fixed.”

With illness, we have to understand that bad things happen to good people. But with health care (and other issues) the difficulty is that good things may happen to bad people. With the bailout, it was galling that in order to save the country (i.e., most of us) from economic disaster, we wind up rewarding the bankers and traders who got us into this mess.

With health care, it’s the insurance companies. MoveOn.org says better to risk letting the whole bill fail, with its added protections for millions of people, than to let the bad guys continue make a profit.

The dilemma sent me back to Max Weber’s “Politics as a Vocation” (and not just because the squabbles on the left made me think that maybe the German title was “Politik als Beirut”).

Weber distinguishes between the politics of purity (“ethic of ultimate ends” and the politics of the possible (“ethic of responsibility”)

There is an abysmal contrast between conduct that follows the maxim of an ethic of ultimate ends – that is, in religious terms, ‘The Christian does rightly and leaves the results with the Lord’ – and conduct that follows the maxim of an ethic of responsibility, in which case one has to give an account of the foreseeable results of one’s action.

I like “abysmal.”

The believer in an ethic of ultimate ends feels ‘responsible’ only for seeing to it that the flame of pure intentions is not quenched: for example, the flame of protesting against the injustice of the social order. To rekindle the flame ever anew is the purpose of his quite irrational deeds, judged in view of their possible success. They are acts that can and shall have only exemplary value.

I like “quite irrational.”

So Weber knew about the MoveOn.orgs in his day and in history. Weber also had this to say about Joe Lieberman.

Vanity is a very widespread quality and perhaps nobody is entirely free from it. . . . The sin against the lofty spirit of [the politician’s] vocation, however, begins where this striving for power ceases to be objective and becomes purely personal self-intoxication, instead of exclusively entering the service of ‘the cause.’ For ultimately there are only two kinds of deadly sins in the field of politics: lack of objectivity and – often but not always identical with it – irresponsibility. Vanity, the need personally to stand in the foreground as clearly as possible, strongly tempts the politician to commit one or both of these sins.

Weber, however, lacked YouTube and sock puppets.



Hat tip Ezra Klein.

The Best Way to Travel

December 17, 2009
Posted by Jay Livingston

When you take your seat on JetBlue, here’s what you see on the screen – the one on the back of the seat in front of you, the seat your knees are pressing into unless you paid the extra $3-4 an inch for more leg room.

(Click on the picture for a larger view.)

Yes, while the plane sits on the runway, before it lifts off and that screen now offers you 43 television channels and 94 XM channels, you see this picture, and you think, Ah, that’s the way to travel.

It’s a train – the ocean on one side, trees on the other, and it’s whizzing along the coast so rapidly that that it appears slightly blurred in the photo. (That’s JetBlue’s camera blur, not mine. Compare the sharpness of the Fasten Seat Belt message.) Meanwhile, you sit on the runway, looking out at the tarmac and wishing that your seat wasn’t so close to the toilet and that the woman squeezed in next to you wasn’t wearing all that perfume. You hear the pilot’s voice crackling on the PA to tell you that we’re now fourth for takeoff.

And you look at this picture of the train. What is JetBlue trying to tell you?