A Simple Way to Increase Organ Donation

Have a person ask rather than just using a question on a form. From the Houston Chronicle:

Though Texas has the nation's lowest percentage of registered organ and tissue donors, several recent initiatives have more than doubled the state's donor rolls this year.

The number enrolled in the Glenda Dawson Donate Life Texas Registry has ballooned since Jan. 1, when state law required Department of Public Safety clerks to ask all driver's license and ID card applicants whether they would like to register as organ donors. Since then, nearly 70,000 donors a month have joined the pool.

HT: Nudge blog

Will the EU crumble like feta cheese?

Ask Nashville's own Merle Hazard:

The effects of "post and hold" laws

Post and Hold laws generally require that alcohol distributors “post” their proposed prices in advance, thus sharing future prices with rival distributors before they go into effect, and then “hold” these prices for a specified period of time.  These laws make price competition less profitable, and the industry less competitive.  They also have an effect on output:

• consumers in states with PH laws consume between 2-8 percent less  alcohol. 
• PH laws have no effect on drunk driving accidents and various measures of teen drinking. 

Bottom line:  these laws appear to have costs but no benefits.

What happens if the fine is less than the cost of the offense?

Firms opt for the fine:

The relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventually weigh heavily on the state’s already-stressed budget. ...

Additionally, company owners say, it has become far cheaper to pay the state penalty for not covering their workers — roughly $295 annually per employee — than to pay thousands more in premiums.

Should You Believe Equity Analysts' Forecasts?

Analysis from McKinsey indicates analysts (like almost everyone else) tend to be overoptimistic:

Moreover, analysts have been persistently overoptimistic for the past 25 years, with estimates ranging from 10 to 12 percent a year, compared with actual earnings growth of 6 percent. Over this time frame, actual earnings growth surpassed forecasts in only two instances, both during the earnings recovery following a recession (Exhibit 2). On average, analysts’ forecasts have been almost 100 percent too high.

Will the Federal Government bail out Illinois?

The state of Illinois — broke, overleveraged, is borrowing to payoff its unfunded pension system, with

... something called “Build America Bonds,” a financial instrument created by Obama’s stimulus bill, to fund what amounts to a social-services program under the guise of a “capital project.” 

When the bonds were issued, they came it at a relatively low risk premium (given the precarious state of Illinois finances).  Does this signal that the Obama administration is going to stand behind the bonds in the event that Illinois defaults, even though the law says they are not supposed to?  Apparently, the bond market thinks so.

My own suspicion is that, even though the law explicitly says otherwise, there is some suspicion on the part of investors that the Obama administration would, in a crunch, stand behind those Build Americas — especially from a big state like California or from a politically sensitive state like the president’s home turf of Illinois.

Online lectures from the book

Apple's video technology is making it easier and easier to blend lecture and animated presentations. These lectures are produced by hard-working RA's Justin Bailey and David Victor. (If any of our reader's want to write a script for one of the chapters, I am willing to pay.)

• Chapter 1 - Managerial Economics: A Problem Solving Approach
• Chapter 2 - Managerial Economics: A Problem Solving Approach
• Chapter 3 - Managerial Economics: A Problem Solving Approach
• Chapter 4 - Managerial Economics: A Problem Solving Approach
• Chapter 5: Part 1 - Managerial Economics: A Problem Solving Approach
• Chapter 5: Part 2 - Managerial Economics: A Problem Solving Approach
• Chapter 9 - Managerial Economics: A Problem Solving Approach

Beware stocks whose outside directors unexpectedly resign

New research suggests that such departures signal bad times ahead:

The obvious conclusion might be that outside directors, with inside knowledge of tricky times ahead, prefer to save their own reputations, rather than those of the company they are serving.

How does the Internet affect retailing?

A study of three industries (travel agencies, book stores, and car dealerships) found two effects.

1. the Internet facilitates price comparisons which leads to "intensified price competition and through it to lower variation, or “dispersion”, in prices."  
2. In all three cases the growth of internet traffic and online shopping affected the structure of the industry, not just prices. In general larger firms grew at the expense of smaller ones.

Does stimulus merely steal sales from the future?

Before the home-buyer subsidy disappeared, there was an increase in mortgage applications to take advantage of it.  This policy mainly served to "steal" home sales from the future.

Critics of Keynesian stimulus would say that this shows that stimulus doesn't work, or merely shifts future consumption to the present, with no long run effect.  

Projecting Marijuana Prices Post-Legalization

The RAND Corporation has completed a study of the projected effects should California legalize marijuana

Legalizing the production and distribution of marijuana in California could cut the price of the drug by as much as 80 percent and increase consumption, according to a new study by the nonprofit RAND Corporation that examines many issues raised by proposals to legalize marijuana in the state. . . .

RAND researchers say one effect of legalizing marijuana would be to dramatically drop the price as growers move from clandestine operations to legal production. Based on an analysis of known production costs and surveys of the current price of marijuana, researchers suggest the untaxed retail price of high-quality marijuana could drop to as low as $38 per ounce compared to about $375 per ounce today.

Incentives Matter - Preacher Edition

Slate magazine discusses a study by Chris Parsons, Jay Hartzell and David Yermack on the incentives of Methodist preachers, which is forthcoming in the Journal of Labor Economics (full copy of paper available at Parsons' site). One of the more interesting parts of the study concerns the strong financial incentives of the preachers.

A few highlights:

• Preachers receive about 3% of the incremental revenue from membership increases. They receive a pay increase of about $15 on average for each new member added and a decrease of about $7 for each lost member.


• The payoff from "stealing" members from other congregations was about double the payoff from converting non-Methodists and adding them to the congregation.

Austerity debate

Paul Krugman

I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. ... This conventional wisdom isn’t based on either evidence or careful analysis.

vs. Alberto Allesina, whose research shows that "large, credible, and decisive" spending cuts to reduce budget deficits have frequently been followed by economic growth.

... austerity can stimulate economic growth by calming bond markets, which lowers interest rates and promotes investment. In addition, he says, deficit-cutting reassures taxpayers that more wrenching fiscal adjustments won't be needed later. That revives their animal spirits and their spending. Alesina says that as a way to shrink deficits, spending cuts are better for growth than raising taxes. The Madrid paper, a summary of his views, was influential enough to be cited in the official communiqué of the EU finance ministers' meeting.

The intellectual debate mirrors the political one between Germany and the US:

Germany has Europes largest austerity package, with up to 80 billion Euro worth of spending cuts being imposed under a strict government savings programme agreed by Ms Merkel’s coalition government. Both Spain and the UK have also recently unveiled large government savings programmes, the largest since the end of WWII.

Chancellor Merkel ... constantly reminded anyone interested in listening that according to her ‘savings programmes speed up private consumption because they give people a sense of security’.

Her policies are sure to clash with those of the US after Ms Merkel openly rejected advice from US President Obama that a European idea ‘to save its way out of the debt crisis’ is naive and could aversly affect the fragile global economic growth presently taking place.