Think Economically


Maximum understanding, minimum average total cost.

This week I have read: Patent Trolling, Cloudpaging, Santorum’s Polls, Obama’s Polls, Taco trucks, Gas and Crude Oil Prices, LEGO Monthly Mini Builds

Patents are broken

Economists, for the most part, have not yet developed the tools to think about information goods. Undergraduate econ still revolves mostly around agriculture. So what do we do about software patents? Or the sharing economy?

I got nothin’. Maybe I’ll devote some focused thought to it some time soon. By then, of course, the entire industry will have changed.

For and insider’s view on the patent wars, check out Andy Biao on his work on patents for Yahoo that have been weaponized and fired at Facebook.

Polls are broken

Political polls have been turned into the analogue to baseball statistics by Nate Silver. As someone who teaches and uses statistics, and watches politics and baseball, this has been delightful. And yet.

Nate Silver points out that Santorum has significantly outperformed his poll numbers. What to make of that? Are people disinclined to admit they’ll vote for Santorum?

That would be odd enough, but no one can figure out whether Obama is universally reviled or climbing back into the catbird seat. On net, InTrade seems to think there has been little change in Obama’s likelihood of reelection in the last six days, and so I read all that news for nothing.

Tacos are yummier from trucks?

For some reason Felix Salmon wants to know why tacos taste better from taco trucks. For some other reason, Matt Yglesias responds. My guess? Because you’re at SXSW and it’s a slow news morning? Also something about more competition, lower average total cost, etc. It doesn’t actually seem that mysterious.

The President can’t affect gas prices

In the CBS/NYTimes poll linked to above, 56% of people thought that the President could affect gas prices. He can’t. Peter Van Doren and Jerry Taylor over at Cato point this out, but if you don’t like reading words and stuff, the White House has just released a very involved, but stylish, infographic. Personally, I think they protest a little too much, with a dash of preaching to the choir.

Ultimately, James Hamilton argues it shouldn’t matter for the recovery, and IMHO, he would know. Matt Yglesias concurs.

Everything else

It was a good week for us. Personal spending is low; personal income is steady. David Brooks is apparently a Mets fan. I bought some silicone-based glue to repair a mug. Also, LEGO Monthly Mini Builds are awesome and brickset has instructions from mid-2010 onward.


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Read up: Tax expenditures cost $1 trillion a year, or almost the entire deficit.

Tax expenditures are huge. What are they? Government spending disguised in tax language. They make government look smaller than it is.

Income tax expenditures added up to about 75% of the tax actually collected (Burman et al 2007), but have gone up to about 94%. I’m just doing this math in my head, but that means income tax rates are almost twice as high as they would have to be without these loopholes. Not only that, but these deductions cause a regressive shift in the tax structure.

The politics governing them are pretty straightforward: provide a tax loophole to a favored constituency and from below, your profile looks like that of a small-government conservative, axe in hand, taking apart the beast blow by blow. Meanwhile, from above, lobbyists and special interests get the bird’s-eye-view of someone well aware of who, precisely, is circling overhead, waiting to pluck that axe from the hand right before pecking out the liver.

So what to do? There’s been some political chatter, but bilateral disarmament here…well, I’m skeptical.

Read up and then write somebody, maybe:

Wikipedia has a surprisingly terse overview–someone should maybe get on this–here:, with a little more here:

The tax policy center has a briefing book here:

Burman, Geissler, and Toder have a 2007 paper in the AER proceedings that does the accounting and analysis:

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Ezra Klein: Romneycare is working. The jury is still out on Obamacare, but the outlook is good.

Ezra Klein has an excellent summary of economists’ analyses of Obamacare and Romneycare. Healthcare coverage certainly seems like a natural monopoly, and it looks like costs are declining with increases in scale.

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