Archive for the 'Reforms' Category

How To Auction Vaccines

Published
by
Steve Landsburg
on December 10, 2020
in Current Events, Economics, Policy and Reforms
. 20 Comments

I hold this truth to be self-evident: It is downright crazy to try to distribute vaccines without using prices. I said as much last week.

The question then becomes: How should those prices be implemented?

Method I: Distribute vaccine rights randomly and let people trade them. This suffers from the fact that you can’t know how much the vaccine is really worth to the people you’re bargaining with, which is a barrier to efficient bargaining.

My immediate instinct (which I still think is a pretty good one) is (after pre-vaccinating certain key groups like first responders and health care workers) to give everyone a choice: You can have your vaccine now, or you can have a check for (say) $500 and your vaccine in six months. This suffers from the need to get the price right (presumably involving some trial and error) but I stand by it as far far better than the Soviet-style central planning we’re about to actually get.

But now Romans Pancs has done far better than I have, by actually thinking about the details of the optimal auction design and getting them right. His paper is here. (You’ll need to sign up for a free account before downloading.) Anyone who actually cares about getting vaccines distributed efficiently should start by reading this paper.

Click here to comment or read others’ comments.

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High Frequency Rentseeking

Published
by
Steve Landsburg
on April 21, 2014
in Back of the Envelope, Bad Reasoning, Current Events, Economics and Reforms
. 239 Comments

Spread Networks recently spent $300 million to build a fiberoptic cable that will let Wall Street traders shave .003 seconds off their execution times.

What’s the social value of that cable? If you can shave .003 seconds off the time it takes to execute a trade, how much good have you done the world?

Clearly, the full value of the cable resides in its ability to get things done faster. So start with a vast overestimate: Suppose the entire economy is on hold waiting for that trade to be completed. Then, thanks to the cable, we can all get on with our lives .003 seconds sooner and produce an extra .003 seconds worth of output.

In a $15-trillion-a-year economy, that comes to about $1500.

If we assume, more realistically, that just 1/1000 of the economy is hanging fire waiting for this one trade, the social contribution of a .003-second speedup is roughly $1.50. I’m confident it’s even more realistic to replace that 1/1000 with 1/1,000,000 . That gets us down to about an eighth of a cent.

But chances are you’d be willing to pay a hell of a lot more than an eighth of a cent for that extra speed, which is why Spread Networks is willing to pour $300 million into this thing, and why, quite generally, we should expect there to be more invested in such projects than they return in social value.

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Hope and Change

Published
by
Steve Landsburg
on November 5, 2010
in Current Events, Politics and Reforms
. 34 Comments

I well remember the last time the Republicans rode into town to get our fiscal house in order and curb the growth of government. That was in 1994. Twelve years later, when our Republican heroes were themselves ridden out of town, they still hadn’t managed to eliminate the goddamned National Endowment for the Arts.

They did, however, cut its budget for a while — from $170 million to under $100 million, though it’s crept back up since then. The moral: If you want a lasting impact, don’t cut budgets. Cut agencies.

The NEA is, of course, small potatoes, but my point is that these guys never made a permanent debt in the small stuff, let alone the big stuff. This time around, maybe — just maybe — things will be different, especially if the Tea Party continues to hold some feet to the fire. With that in mind, here are a few bits of advice for the freshman class:

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Fixing Elections

Published
by
Steve Landsburg
on March 9, 2010
in Politics and Reforms
. 24 Comments

boothIn a curiously unmotivated piece at the Washington Post, Anne Lowrey asks: “What if senators represented people by income or race, not by state?”.

I can’t figure out her point. I am all for identifying problems and brainstorming about radical solutions, but I have no idea what problem Lowrey thinks she’s addressing.

The primary problem with representative democracy is that our representatives are captured by special interests. My senators plot to steal from you and your senators plot to steal from me, with a lot of collateral damage along the way. (And yes, you and your neighbors do constitute a special interest, as do I and mine.) The problem is exacerbated by the fact that my neighbors and I have a lot of interests in common, making it easier to steal on all our behalves at the same time. The solution is to make each senator’s constituency more diverse, not, as Lowrey proposes, less.

Continue reading ‘Fixing Elections’

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