How to Stop Urban Crime Without Jail Time

by Franklin E. Zimring

Wall Street Journal
January 28, 2012

Recently, Mayor Michael Bloomberg announced the latest crime statistics for New York City, numbers that capped what he called the "safest decade in recorded city history."

The dramatic drop in New York's crime rate has become a phenomenon that its citizens take for granted. Between 1990 and 2011, the homicide rate in the city dropped 80%, the robbery rate fell 83% and the burglary rate was down by 86%. Auto theft has been banished to the endangered-species list, with a current rate of about 6% of the 1990 level. Nor is this profound change just the wishful thinking of police statisticians; it has been confirmed by independent measures such as auto-insurance claims and data from other levels of government.

The rest of the country also experienced a decline in crime over the 1990s, but New York's was twice as large and has lasted twice as long. So what has the city done differently? Rather than focus on imprisonment, New York has hired more police officers and changed its policing strategy.

The results of this experiment contradict four decades of crime-control orthodoxy. Since 1971, the U.S. prison population has grown from just over 200,000 to 1.5 million. When adjusted for population growth, the rate of imprisonment has increased 400%.

This dependence on incarceration was linked to the belief that street crime is committed by persistent "high-rate" offenders who will continue to offend if they are not locked up. As the thinking goes, the police cannot prevent much crime because they can't be everywhere at all times. Persistent offenders will always find a place and a time to rob and assault.

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Fuzzy Facts Can Make Crime Rankings Suspect

by Carl Bialik

Wall Street Journal
January 28, 2012

Homicide might be the most concrete of crimes. In most cases, if there was a homicide, there's a body. That makes it the preferred benchmark for experts delving into the fuzzy world of crime statistics to compare cities or track trends.

But, as two recent rankings demonstrate, even homicide figures are subject to interpretation and uncertainty.

This month, a Mexican advocacy group released a ranking of the 50 cities around the world with the highest homicide rates. Forty of the cities on the list were in Latin America, but some of the most violent hot spots in Africa and Middle East were left off for lack of data. And critics say many of the underlying numbers originate with local police, which have varying levels of commitment to accurate reporting.

The underlying numbers are more solid, criminologists say, for the news that homicide has fallen out of the 15 leading causes of death in the U.S., according to a federal report, also out this month. But they question how much this slight shift in the rankings reflects a drop in society's level of violence, as opposed to demographic trends. Also, the homicide counts are preliminary and might be revised slightly for several reasons.

If interpreting homicide rates is this tricky, what does that say about overall crime rates, which experts say are more vulnerable to underreporting and subjectivity? Those issues are part of the reason the Federal Bureau of Investigation warns efforts to use its U.S. crime statistics to rank cities or states.

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Corporate Citizens Can Do Well by Doing Good

by Richard H. Thaler

Bloomberg
January 26, 2012

Although the phrase is now somewhat out of fashion, the issue of corporate responsibility is at the heart of many of the debates on economic policies around the world. Should corporations simply maximize profits and let the invisible hand do its wonders, or do they have some obligation to be good corporate citizens as well?

As with many politicized debates, this one has been captured by two extreme positions, neither of which are, to my mind, particularly sensible.

At one extreme are “pro-responsibility” advocates. This camp is often pro-free-lunch, too. They think that companies have a responsibility to pay their workers higher wages, offer better benefits, yet still keep prices down. Good luck with that.

At the other extreme, is the “pro-profit” gang. These folks think that a company’s only responsibilities are to their shareholders. The pro-profit group worships at the shrine of Milton Friedman, the both deified and vilified former professor at the University of Chicago. Friedman called the concept of corporate responsibility a “fundamentally subversive doctrine.”

“In a free society,” he said, “there is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

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Meet the Marriage Killer

by Elizabeth Bernstein

Wall Street Journal
January 25, 2012

Ken Mac Dougall bit into the sandwich his wife had packed him for lunch and noticed something odd—a Post-it note tucked between the ham and the cheese. He pulled it out of his mouth, smoothed the crinkles and read what his wife had written: "Be in aisle 10 of Home Depot tonight at 6 p.m."

Mr. Mac Dougall was renovating the couple's Oak Ridge, N.J., kitchen, and his wife had been urging him to pick out the floor tiles. He felt he had plenty of time to do this task. She felt unheard.

"I thought the note was an ingenious and hysterical way to get his attention," says his wife, Janet Pfeiffer (whose occupation, interestingly enough, is a motivational speaker), recalling the incident which occurred several years ago. Her husband, a technician at a company that modifies vehicles for handicapped drivers, didn't really see it that way. "I don't need a reminder in the middle of my sandwich," he says.

Nagging—the interaction in which one person repeatedly makes a request, the other person repeatedly ignores it and both become increasingly annoyed—is an issue every couple will grapple with at some point. While the word itself can provoke chuckles and eye-rolling, the dynamic can potentially be as dangerous to a marriage as adultery or bad finances. Experts say it is exactly the type of toxic communication that can eventually sink a relationship.

Why do we nag? "We have a perception that we won't get what we want from the other person, so we feel we need to keep asking in order to get it," says Scott Wetzler, a psychologist and vice chairman of the Department of Psychiatry and Behavioral Sciences at Montefiore Medical Center in New York. It is a vicious circle: The naggee tires of the badgering and starts to withhold, which makes the nagger nag more.

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Why Singapore Has the Cleanest Government Money Can Buy

Bloomberg
Editorial
January 25, 2012

Singapore’s prime minister, Lee Hsien Loong, isn’t often taken publicly to task. But when you make S$3.1 million ($2.4 million) annually to run a country, people tend to expect results. When they don’t get them, the aggrieved masses turn to that lowest-of-common-denominator gripes: Hey, how much are we paying this guy?

Lots compared with, say, Barack Obama, who as U.S. president gets $400,000 a year. Lee’s compensation will fall 36 percent, and that of Singapore’s president will drop 51 percent, to S$1.54 million. The cuts were based on the recommendations of an advisory committee formed three weeks after last May’s elections, when opposition party candidates made hay with the pay issue -- and the ruling People’s Action Party won with the narrowest margin since independence in 1965.

Such still-fat paychecks may give pause. Yet let’s applaud Singapore for what it’s trying to achieve by paying top salaries to leaders and ministers: attracting the best and brightest to public service and reducing the temptation to engage in graft. Done properly, such initiatives can make government more efficient and economies more vibrant. Transparency International has ranked Singapore among the world’s top five least-corrupt governments since 2001, and according to Worldwide Governance Indicators, an index supported by the World Bank, it has also been among the best governed.

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Watchdog to protect ‘irrational’ investors

Financial Times
January 24, 2012

Investors cannot be counted on to make rational choices so regulators need to “step into their footprints” and limit or ban the sale of potentially harmful products, the head of the UK’s new consumer protection watchdog said on Tuesday.

In his first big interview since starting work last autumn, Martin Wheatley told the Financial Times that the 2008 financial crisis had fundamentally reshaped regulators’ assumptions about the people they protected.

“You have to assume that you don’t have rational consumers. Faced with complex decisions or too much information, they default ... They hide behind credit rating agencies or behind the promises that are given to them by the salesperson,” said Mr Wheatley, a key figure in the government’s effort to revamp financial regulation.

Under the government’s plan to break up the Financial Services Authority, the FCA, headed by Mr Wheatley, will spin out as an independent agency early next year and be granted enhanced powers to police markets and protect investors. It intends to be far more interventionist in an effort to head off the mis-selling scandals that have dogged the financial sector in recent years.

The new approach rests on research in behavioural economics that shows investors often make decisions contrary to their own interests because of their aversion to losses or unwillingness to ditch a losing strategy. It represents a profound shift in regulatory stance.

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What's One of the Leading Marriage Breakers?

Wall Street Journal
January 24, 2012

Marriage counselors warn that nagging is one of the leading causes for discord and divorce, Elizabeth Bernstein reports on Lunch Break.

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Keep It Simple

by Joe Nocera

New York Times
January 16, 2012

What if Jamie Dimon is right?

What if the chief executive of JPMorgan Chase is not just blowing smoke when he complains that the country — and, indeed, the world — has imposed so many new rules on the banking industry, some of them overlapping, others seeming to contradict each other, yet others whose sole purpose seems to be to weigh down the industry, that they threaten to do as much harm as good? Last summer, you’ll recall, Dimon confronted Ben Bernanke, the Federal Reserve chairman, at a conference and asked him: “Has anyone bothered to study the cumulative effect of these things?” Just last week, during JPMorgan’s earnings call with analysts, Dimon complained that Europe’s “regulatory policy, government policy, central bank policy — it’s not coordinated. It’s making the situation worse, not better.”

Like most nonbankers, I’ve tended to roll my eyes at Dimon’s continuous lamentations. Surely, given all the harm the banks did to the country, regulations aimed at preventing a repeat of the financial crisis struck me as being worth whatever cost they imposed on the industry. And, yes, I admit to a little schadenfreude as well. (To be fair to Dimon, he is not completely opposed to all the new regulations. He just comes across that way when he’s in rant mode.)

What has caught me up short recently is the emergence of a new critic of the banking regulations that have been pouring forth from Washington and Europe. Her name is Karen Petrou, and she is the managing partner of Federal Financial Analytics, a consulting firm that, among other things, analyzes bank regulations for clients.

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Religion matters, in life and death

by Sascha O. Becker and Ludger Woessmann

Vox
January 15, 2012

Does religion affect suicide? This column presents new evidence from 19th century Prussia showing that suicide rates are much higher in Protestant than in Catholic areas, and that this reflects a causal effect of Protestantism. It also suggests that economic modelling can help understand why this is so.

As early as 1897, French sociologist Émile Durkheim (1897) in his classic Le suicide presented aggregate indicators suggesting that Protestantism was a leading correlate of suicide incidence. The proposition that Protestants have higher suicide rates than Catholics has been “accepted widely enough for nomination as sociology’s one law” (Pope and Danigelis 1981).

And even today, Protestant countries tend to have substantially higher suicide rates, suggesting that the relation of religion and suicide remains a vital topic – not least because about one million people commit suicide worldwide every year, making suicide a leading cause of death in particular among young adults (World Health Organisation 2008). Clearly, the large prevalence of suicide creates far-reaching emotional, social, and economic ramifications and invokes major policy efforts to prevent them.

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Mind over Market

by Michael Spence

Project Syndicate
January 13, 2012

In the 66 years since World War II ended, virtually all centrally planned economies have disappeared, largely as a result of inefficiency and low growth. Nowadays, markets, price signals, decentralization, incentives, and return-driven investment characterize resource allocation almost everywhere.

This is not because markets are morally superior, though they do require freedom of choice to function effectively. Markets are tools that, relative to the alternatives, happen to have great strengths with respect to incentives, efficiency, and innovation. But they are not perfect; they underperform in the presence of externalities (the un-priced consequences – for example, air pollution – of individual actions), informational gaps and asymmetries, and coordination problems when there are multiple equilibria, some superior to others.

But markets have more fundamental weaknesses. Or, rather, most societies have important economic and social objectives that markets and competition are not designed to achieve. In today’s rapidly globalizing world, the most important of these objectives – expressed in various ways through the political and policymaking process in a wide range of countries – are stability, distributional equity, and sustainability.

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What kind of capitalist is Romney?

by Michael Lind

CNN
January 13, 2012

In a presidential primary season distinguished so far by the absence of substantive debates, the controversy over whether Mitt Romney and his partners at Bain Capital should be considered job creators or job destroyers raises a profoundly important issue.

Beyond the concerns about the loss of American jobs to off-shoring or automation and the food-fight tactics of Romney's rivals is a legitimate question about what kind of capitalism 21st century Americans should want.

The choice is between "stakeholder capitalism" and "shareholder capitalism." According to the theory of stakeholder capitalism, corporations are and should be quasi-public entities with responsibilities to the nation-state and to the communities in which they are embedded. The corporation should make a profit and provide a fair return to investors. At the same time, workers who contribute their labor to the company have a legitimate interest in it as well as investors who provide capital. Managers serve the company and the country, not merely the investors.

In the theory of "shareholder capitalism," the corporation exists solely for the purpose of the investors, whom the managers serve as agents. In shareholder capitalism, short-term profits are the only goal, and if that means laying off workers instead of retraining them or reassigning them, breaking up the company and selling the assets to enrich private equity partners and shareholders, so be it.

The stakeholder conception of the firm is still the norm in Europe and East Asia, as it was in mid-20th century America. But beginning in the 1970s, the shareholder conception of capitalism prevailed in the United States.

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The Random Horror of the Death Penalty

by Lincoln Caplan

New York Times
January 7, 2012

The Supreme Court has not banned capital punishment, as it should, but it has long held that the death penalty is unconstitutional if randomly imposed on a handful of people. An important new study based on capital cases in Connecticut provides powerful evidence that death sentences are haphazardly meted out, with virtually no connection to the heinousness of the crime.

A number of studies in the last three decades have shown that black defendants are more likely to be sentenced to death if their victim is white rather than black. But defenders of capital punishment often respond to those studies by arguing that the “worst of the worst” are sentenced to death because their crimes are the most egregious.

The Connecticut study, conducted by John Donohue, a Stanford law professor, completely dispels this erroneous reasoning. It analyzed all murder cases in Connecticut over a 34-year period and found that inmates on death row are indistinguishable from equally violent offenders who escape that penalty. It shows that the process in Connecticut — similar to those in other death-penalty states — is utterly arbitrary and discriminatory.

From 1973, when Connecticut passed a death penalty law, to 2007, 4,686 murders were committed in the state. Of those, 205 were death-eligible cases (capital murders that include the killing of a police officer, murder for hire, murder-rape and murder committed during a kidnapping) that resulted in some kind of conviction, either through a plea bargain or conviction at trial. The arbitrariness started at the charging level: nearly a third of these death-eligible cases were not charged as capital offenses as they could have been, but as lesser crimes. Sixty-six defendants were convicted of capital murder, 29 went to a hearing for a death sentence, nine death sentences were sustained and one person was executed.

Why was this small group of defendants singled out for death? Did their crimes make them more deserving of execution than all the others?

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Read the Paper

Four Economists Come Together to Say ‘We Agree’

by Claudia Goldin, William Nordhaus, Richard Schmalensee and Anil Kashyap

Bloomberg
January 5, 2012

“If you laid all the economists in the world end to end, they still wouldn’t reach a conclusion.” This old joke still works because it reflects a common belief that economists can’t agree on anything important. Yet the four of us are part of a project that we believe will demonstrate that this proposition is wrong.

Each week since late September, along with 37 other economists at top universities, we have been answering questions on major public policy issues. These include the predictability of the stock market, the best design for health insurance and the effect of China’s managed exchange rate. You can find our answers (and sign up to be notified of future poll results) here.

Why are we taking the time to do this? Although we can’t speak for the other distinguished panelists, the four of us are tired of seeing our profession’s views misrepresented in policy discussions.

We think there are two main reasons for the distortions. The first is the conventions of journalism itself: Although there are notable exceptions, most journalists have limited training in economics, and those who edit the articles often have even less. Hence, out of an understandable but misguided sense of fair play, there is a bias toward wanting to show both sides of an issue. When, for example, an economist tells a journalist the equivalent of 1+1=2, the writer, in an effort to provide “balance,” will often include a quote from someone who says that 1+1=3.

Second, editorial boards don’t want wishy-washy, hedged opinions. As a result, op-ed pages are more likely to publish someone advocating an unequivocal position than someone who offers a more nuanced argument. This favors fringe views. A position that sounds new, yet is completely untested, is all the more enticing to editors, so long as it appears to challenge mainstream views.

We don’t claim that there is research-based consensus among economists on all important policy questions. But even when there is broad agreement (say, 1+1=2), the news media rarely makes it clear that such a consensus exists.

To overcome this problem, we rely on a phenomenon that is often called the “wisdom of crowds” effect. It is based on the observation that the collective judgment of a diverse group of people about a question is almost always better than the answer of any single person from the group. (Think of the accuracy of the “Ask the Audience” lifeline in the game show “Who Wants to Be a Millionaire.”)

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A Crisis of Leadership, Not a Crisis of Capitalism

by Clive Crook

Bloomberg
January 4, 2012

With the world’s rich economies struggling and the leaders of the European Union intent on making things worse, the gravity of the economic crisis still confronting the West is hard to exaggerate. Nonetheless, it can be done.

According to what I read, we face not just the worst recession since the 1930s, but a challenge to the West’s entire economic order. The Great Recession exposes the poverty of orthodox economics. It constitutes an ideological crisis. It shows that capitalism itself is “fundamentally” flawed. If all this were true, I’d be a lot more worried about the coming year than I am -- which is saying something.

A new year’s corrective is in order. Reports of the death of capitalism are greatly exaggerated.

What’s surprising is just how wrong those reports have been. Perhaps, as I write, the revolutionaries are organizing in secret, but I see no signs of a popular uprising. Please don’t say Occupy Wall Street, that risible stirring of the perpetually discontented whose principal goal seems to be “a general assembly in every backyard, on every street corner” (not all at once, I assume). It is a movement, if you can call it that, without an agenda, and as soon as it tries to get one, if not before, it will sputter out.

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Capitalism is dead; long live capitalism

Financial Times
Editorial
December 27, 2011

The market economy is the most successful mechanism for creating prosperity humanity knows. Allied to modern science, it has done more than transform the world economy; it has transformed the world. For the first time in history, the world’s principal states rely on the market economy to develop their economies. Almost as important, they rely on a global market economy. Contemporary states are destined to co-operate with one another if they are to prosper.

Yet the market economy is not as unchangeable as the laws of the Medes and the Persians in the book of Daniel. It is successful not because it stays the same, but because it does not. The driving force is the desire of all human beings to work for the betterment of themselves and their families. The mechanism is the equally natural search for a better deal. But institutional settings and relationships with political institutions have always been open to change. This very adaptability has ensured the survival of market economies.

Two centuries ago there was no limited liability, no personal bankruptcy, little central banking, no environmental regulation and no unemployment insurance. All these changes occurred in response to economic or political pressures. All brought with them new solutions and new challenges. At a time of ongoing financial shocks, this need for adaptation has not ended. On the contrary, it is as important as ever.

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Larry Ribstein (1946-2011)

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Italy Tries Raising the Social Stigma on Tax Evaders

New York Times
December 24, 2011

On a recent morning, Maurizio Compagnone, an employee of Italy’s internal revenue service, stood before a classroom of middle school students in a leafy neighborhood here, preaching the virtues of paying taxes.

“You may think, ‘I’m 13, why should I care about taxes?’ ” he said with earnest enthusiasm as the students looked on, slightly bored. “But you can take a step in the right direction. You can change the behavior of the people around you, your parents and friends.”

Mr. Compagnone is one soldier in a battle — often uphill — to persuade Italy’s famously tax-evading citizens to pay up. Such efforts, along with a new blitz of public service announcements trying to raise the social stigma on tax evasion, have become crucial as Italy struggles to reduce its $2.5 trillion public debt and fend off speculative attacks.

The tax authorities say Italy loses an estimated $150 billion a year in undeclared revenues, while the national statistics authority places the underground economy to be about 17.5 percent of gross domestic product — the third highest in Western Europe after Malta and Greece but before Spain. Other experts place the percentage much higher.

To tackle the issue, Prime Minister Mario Monti’s new $40 billion austerity package, which received final approval on Thursday in the Senate, includes tougher measures that will allow tax officials to peer into Italians’ bank accounts to check declared income against bank deposits — not to mention yacht, car and home ownership — under a new cross-referencing initiative.

The measures also prohibit cash transactions above $1,300 — common in Italy, where low credit-card use keeps private debt low but evasion high — and lower the threshold for which tax evasion becomes a criminal offense. The government has also set an additional 1.5 percent tax on assets repatriated under an earlier tax amnesty, raising the levy for those requesting anonymity.

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12 Μύθοι για την Αγορά

του Αριστείδη Χατζή

Παραπολιτική
24 Δεκεμβρίου 2011

Στο δημόσιο διάλογο ακούει και διαβάζει κανείς πολλές ανοησίες. Μερικές από τις χειρότερες όμως αφορούν τις διαβόητες «Αγορές». Στο συλλογικό φαντασιακό έχουν αναλάβει τον ρόλο του μπαμπούλα που τρομοκρατεί τους πολίτες, τις κυβερνήσεις ακόμα και τους διεθνείς οργανισμούς. Η εικόνα που κυριαρχεί είναι ότι οι Αγορές είναι σαν τα Τρολς, τα μυθικά τέρατα της σκανδιναβικής μυθολογίας: πανίσχυρες, ανορθολογικές, ασύδοτες, κινούνται ανεξέλεγκτα και απρόβλεπτα με ένα μόνο σκοπό, να καταστρέψουν τα πάντα στο πέρασμά τους. Για τους λίγο πιο εύπιστους είναι απαραίτητο και ένα ανθρωπομορφικό στοιχείο - πίσω από τις Αγορές υπάρχουν συγκεκριμένοι άνθρωποι και οργανώσεις που κινούν τα νήματα: η λέσχη Bilderberg, η Τριμερής, οι τραπεζίτες, οι Εβραίοι, οι Αμερικάνοι - τώρα και οι Γερμανοί.

Πάντα οι άνθρωποι προσπαθούσαν να εξηγήσουν φαινόμενα που αδυνατούσαν να κατανοήσουν καταφεύγοντας στη μεταφυσική. Η πολυπλοκότητα ενός κοινωνικού φαινομένου όπως η Αγορά, η άγνοια βασικών οικονομικών εννοιών, η δυσκολία αποδοχής του τυχαίου και η ευκολία αποδοχής απλοϊκών μύθων, η τάση για συνωμοσιολογία και, γιατί να το κρύψουμε άλλωστε, η ευήθεια, οδηγούν αναπόφευκτα σε μεταφυσικού τύπου κατασκευές με κυρίαρχο το ανθρωπομορφικό στοιχείο. Όσο δύσκολο είναι να κατανοήσει ο απλός άνθρωπος το μηχανισμό της Εξέλιξης άλλο τόσο είναι δύσκολο να κατανοήσει τους μηχανισμούς της Αγοράς.

Στο υπόλοιπο αυτού του κειμένου θα προσπαθήσουμε να καταρρίψουμε εν συντομία 12 μύθους για την Αγορά και να απαξιώσουμε τις αντίστοιχες λανθασμένες κυρίαρχες αντιλήψεις.

Μύθος 1: Η Αγορά είναι ένα μυθικό τέρας που μπορεί και να σας φάει ζωντανούς.

Ναι, μη σας φαίνεται υπερβολικό. Για πολλούς ανθρώπους η Αγορά είναι ένα από τα πολλά τέρατα που δεν τους αφήνουν να κοιμηθούν. Φαντάζομαι ότι αν ποτέ κατανοήσουν τι πραγματικά είναι η Αγορά, θα σοκαριστούν: η Αγορά είμαστε εμείς. Εσείς, εγώ, οι φίλοι σας, οι γονείς σας, τα αδέλφια σας, οι συνάδελφοί σας, το αφεντικό σας, ακόμα και οι εχθροί σας. Άτομα, νοικοκυριά, επιχειρήσεις μικρές, μεσαίες και μεγάλες. Οι τράπεζες, οι πολυεθνικές επιχειρήσεις, ο Bill Gates, ο George Soros, ο Νίκος Αλέφαντος, ο Αρχιεπίσκοπος Ιερώνυμος, η Έλενα Παπαρίζου, η κομμώτριά σας, ο μανάβης σας αλλά και ο μπατζανάκης σας. Oι αγορές και οι πωλήσεις, η παραγωγή προϊόντων, η παροχή υπηρεσιών, η κατανάλωση, η ζήτηση και η προσφορά, οι επιθυμίες και οι προτιμήσεις, οι προσδοκίες μας, το ρίσκο, η αβεβαιότητα, οι ζημιές, τα κέρδη, οι ευκαιρίες, οι ιδέες, τα λάθη. Όλες οι αποφάσεις μας, όλες μας οι συνήθειες, το σύνολο σχεδόν της δραστηριότητάς μας αποτελεί μέρος αυτής της Αγοράς.

Περισσότερα

Snakes and Ladders

by Amartya Sen

Financial Times
December 23, 2011

Like all good boys and girls, the readers of beyondbrics deserve their Christmas presents. So here for our loyal followers – and for those dipping into the site for the first time - is a seasonal gift from Nobel prize-winning economist Amartya Sen.

For those taking a break, it is something to savour over the holidays. For those tied to their desks, it is something for a quiet moment. Best wishes from all at beyondbrics.

Like many board games that were developed in India, of which chess is perhaps the most important and famous, the game of “snakes and ladders” too emerged in this country a long time ago. With its balancing of snakes that pull you down and ladders that take you up, this game has been used again and again as a metaphor for life, telling us about our fortunes and misfortunes, and going further, about the consequences of good deeds and bad actions. Good decisions yield handsome rewards – taking us rapidly up a ladder – and bad moves yield severe penalties – making us suffer a precipitate decline through the mouth of a long snake, all the way down to its distant tail.

Britain too found in this board game from their colony a good way of expressing their traditional ethical tales, illustrating, for example, the simple moralistic world of what was called “Virtue Rewarded and Vice Punished” – a game that became very popular in early 19th century. The English version used the graphic illustrations of the snakes and ladders to depict traditional English moral tales that made this old Indian game popular first in England and then in the British-dominated global world of the nineteenth century. The Indian names – from Sanskrit, Hindi, Urdu and other subcontinental languages – for the qualities that respectively yielded rewards and punishment were replaced in the English version into the names of classical English virtues such as penitence, pity, obedience and self-denial yielding ascent up the ladders, while time-honoured vices of depravity, cruelty, dandyness made one slip rapidly down through the body of a snake.

The diagnosis of virtues and vices is, of course, adaptable, and the richness of the analogy of snakes and ladders can be put to use today in discussing modern problems as well – even the contemporary challenges of economic and social policies. We can well ask: what are the nasty snakes we face today in thinking about economic policies in our troubled world, and what helpful ladders we should try to climb up in moving an economy and society forward – in a world full of opportunities as well as serious dangers. The distinctions are quite important for the emerging economies which are trying to decide where to emerge. We do not want to emanate from the bottom end of snakes, and would rather emerge at the top of elevating ladders. How can we do this?

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Socioeconomic differences in the impact of smoking tobacco and alcohol prices on smoking in India

by Frank J Chaloupka, Emmanuel Guindon, Prabhat Jha and Arindam Nandi

Vox
December 23, 2011

In India, 1 in 5 of all adult male deaths and 1 in 20 of all adult female deaths at ages 30-69 are due to smoking. This column estimates that raising the price of cigarettes by 1% would decrease smoking by about 1.1% and even more so for poorer households.

“Sugar, rum, and tobacco, are commodities which are no where necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation”

—Adam Smith, The Wealth of Nations, 1776

Tobacco smoking and chewing are both common in India (Government of India 2010, Rani et al 2003), but the individual risks from smoking are markedly greater (Gajalakshmi et al 2003, Jha et al 2008). A large, nationally-representative study of mortality in over 1.1 million homes indicates that already 1 in 5 of all adult male deaths and 1 in 20 of all adult female deaths at ages 30-69 are due to smoking and India will soon have a million smoking deaths a year (Jha et al 2008). The study also suggests that the relative risk of death from any medical cause does not depend on educational level, but does depend on whether bidis or cigarettes were smoked, and the amount smoked (Figure 1). The risk ratio for a given number of bidis or cigarettes smoked was greater for cigarettes than for bidis. For example, compared to non-smokers, the risk of dying as a result of smoking 1-7 bidis per day was 30% higher compared to an increase in risk of 80% from smoking the same number of cigarettes per day.

Figure 1. Relative risk of death by amount and type of smoking, men aged 30-69

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The Darwin economy

Robert H. Frank interviewed by Romesh Vaitilingam

Vox
December 23, 2011

Robert Frank of Cornell University talks to Romesh Vaitilingam about his book, "The Darwin Economy: Liberty, Competition and the Common Good." He argues that Charles Darwin's understanding of competition – in which individual and group interests often diverge sharply – describes economic reality far more accurately than Adam Smith's. They discuss the implications of this view for current debates about inequality, taxation, and policies to get out of economic stagnation. The interview was recorded in London in November 2011.

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Europe's Single Market Isn't a Free Market

by Philip Booth

Wall Street Journal
December 23, 2011

Twenty-five years ago, the Conservative establishment in Britain welcomed proposals for the European Union's single market as a step forward for free enterprise in Europe. The single market had many Tory opponents, but most in the party used the terms "free market" and "single market" interchangeably. Former Prime Minister Ted Heath pointed out this error in a parliamentary debate 20 years ago, suggesting, perhaps with a note of triumphalism, that the single market was not a free market.

Heath's prediction seems to have borne out. In many sectors of the economy, the single market has undoubtedly promoted free trade and, at the very least, made markets freer in those countries that were the most dirigiste. The guiding principle in these industries has been "mutual recognition," or regulatory competition. EU directives required some minimal harmonization of EU law but also banned restrictive regulation in some countries. This meant, for example, that a U.K. insurance company could do business anywhere in the EU while still regulated by the U.K. insurance regulator. The U.K. had to regulate a little more, but other countries had to deregulate hugely. This was how the British Tory establishment envisaged the single market developing.

But more recently, advancing the single market has taken the form of imposing uniform regulation across member states. In insurance, a huge superstructure of regulation is being created through the Solvency II program, which replicates, to a large degree, the failures of the Basel banking accords. For example, Solvency II will require very similar regulation across all member states and determine very precisely how much capital insurance companies should hold to deal with known risks. In other areas of financial regulation, the EU is now using the powers it gained under the Single European Act to increase regulation. This compounds the errors of the various financial-markets directives such as MiFID and the Prospectus Directive.

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Reframing the Debate Over Using Phones Behind the Wheel

New York Times
December 17, 2011

For years, policy makers trying to curb distracted driving have compared the problem to drunken driving. The analogy seemed fitting, with drivers weaving down roads and rationalizing behavior that they knew could be deadly.

But on Tuesday, in an emotional call for states to ban all phone use by drivers, the head of a federal agency introduced a new comparison: distracted driving is like smoking.

The shift in language, in comments by Deborah Hersman, the chairwoman of the National Transportation Safety Board, opened a new front in a continuing national conversation about a deadly habit that safety advocates are trying desperately, and with a growing sense of futility, to stop.

Her new tack also echoes a growing consensus among scientists that using phones and computers can be compulsive, both emotionally and physically, which helps explain why drivers may have trouble turning off their devices even if they want to. In effect, they are saying that the running joke about BlackBerrys as “CrackBerrys” is more serious than people think.

“Addiction to these devices is a very good way to think about it,” Ms. Hersman said in an interview. “It’s not unlike smoking. We have to get to a place where it’s not in vogue anymore, where people recognize it’s harmful and there’s a risk and it’s not worth it.”

She added: “If you can’t control your impulses, you need to lock your phone in the trunk.”

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