Doing my part to distribute Steven Horwitz's Open Letter to the Left. If only there were a presidential candidate who would take this sort of stance.

I obviously can understand a Nevada that permits gambling, subject to some light regulation for consumer-protection purposes. My kind of government, let people choose for themselves.

I can understand the view of most states fifty years ago, outlawing all gambling. I don't agree with it, as I don't agree with most nanny-state measures, but it is a conscious and internally consistent public-policy choice, and a community can have some say over the local morality.

I'm even willing to give some slack to hypocritical states like Virginia today that outlaw all gambling, but hold a state-owned monopoly through lotteries that have far worse odds than any slot machine. Yeah, it's a tax on the stupid, but we frankly don't tax stupidity enough or we wouldn't have so much of it.

What I don't understand is the reasoning of a state that outlaws nearly all gambling--but permits pull-tab shops. Pull-tabs are indistinguishable from slot machines, except they're manual sheets of paper, sold out of bowls in dismal storefronts in strip malls. What could the legislature be thinking? "We're okay with the social costs of gambling addiction, but we don't want anybody to actually have fun while doing it"?

A beautiful example of the free market working: Johnny's Pizza, a hole-in-the-wall family business in Brooklyn, threw a fit when they learned a Papa John's would be opening next door. Political organizing didn't stop the chain from opening. So, Johnny's reacted: they added Internet ordering to compete better. And business is up! Thanks to free-market competition, everyone is better off: Johnny's was woken up from complacency to better serve its customers, the customers get advantages from convenience that they wouldn't get if Johnny's had succeeded in scaring away the competition, and there's even a Papa John's franchise to serve the local brain-damaged citizenry who mysteriously prefer a chain pizza.

So what is the reaction of the commenters? Bemoaning the presence of chains, and demanding additional regulation to keep them out. Unreal. I couldn't imagine eating from a Papa John's if there's a convenient NY pizza alternative (I gave Carina C. a what-for on Facebook when I saw that the U-Chi-Fed-Soc had purchased Pizza Hut for an event), but I wouldn't think of legislating my personal preferences to require others to comply with my sense of taste.

A 1414-sq-foot 2-bedroom condo in my building is on sale for $599,000, reduced from $667,000. In May, a 1105-sq-ft unit in my building sold for $580,000, and a 919-sq-ft unit sold for $543,000. An 1113-sq-ft unit in the building rents for $2600-2700/month, so one would think this could rent for $3200-$3400. I almost want to buy this myself and flip it.

An avalanche wiped out Juneau's supply of cheap power for a few months; rates will rise from 11 cents/kwh to 53 cents/kwh while the city uses more expensive diesel power.

What the NY Times story doesn't mention: as Juneau residents suffer greatly and make many sacrifices to cut their electric bills, they have shown that their short-term elasticity for a 382% price increase in power costs, dropped their usage by less than 40%.

Even if this could be duplicated across the nation—and it couldn't, not least because I suspect Juneau doesn't have much in the way of electricity-intensive manufacturing—it would do nothing to prevent or forestall global warming, while imposing thousands of dollars in direct costs and even more in indirect costs to every American family. If something were done to minimize the impact on the poor, we'd lose even more conservation efforts.

Joel Waldfogel notes a Jennifer Brown study showing that golfers do worse in tournaments where Tiger Woods participates than in tournaments where he doesn't, and concludes that the ferocity of Tiger's competition causes players to "quit." I haven't seen the study, so I don't know if it controls for possible ceteris paribus problems (such as the fact that Tiger these days tends to skip the easier tournaments and plays a higher percentage of his tournaments in "major" courses that are "Tiger-proofed" and hurt everyone's score), but, assuming that it does, there is another possible explanation.

Recall the movie "Tin Cup," where Kevin Costner's character insisted on trying to overshoot the water hazard in one stroke rather than laying up and avoiding the hazard with a safer second stroke. Golfers facing Tiger may take similar riskier shots that hurt one's expected score, but increase the variance and the likelihood of an abnormally exceptional score that can beat Tiger. (Poker players are certainly familiar with the phenomenon of the player who is in a hole and starts playing much looser, a strategy that has a lower expected mean performance, but a higher chance of taking down a big pot.) Golfers who are doing this will have mean scores indistinguishable from golfers who lose a stroke or two because they are "quitting," but they are clearly doing the very opposite of quitting.

Update: Ok, now that I've looked at the study, Brown claims to have tested for riskiness, and did control for golf-course difficulty. If Brown's result that superstar presence in a tournament decreases performance by non-superstars is generalizable to other fields, that has interesting implications: for example, it suggests that gigantic signing bonuses for Supreme Court clerks are a bad idea.

From the Economist, a longer-term view.

Far too often I have to walk out of a supermarket because I don't feel like waiting a half hour in line because they haven't adequately staffed their registers and have decided to impose the costs on their customers instead. (The Giant across from Ron Paul HQ is especially appalling in this regard. I'm ready to just simply never shop there again.) We're only a couple of years away from all local markets having something like this that will reduce labor and grocery and waiting costs. Which will almost make up for the ludicrous increase in food costs caused by the taxpayer boondoggle of ethanol support. If only the Dems demonized Big Corn the way they do Big Pharma, but that would entail actually doing good for someone other than trial lawyers.

The New York Michelin ratings are out (and the Times steals their thunder by printing them all) and Slim and I were discussing the economics of Michelin stars. The restaurant where we had our best meal, Taillevent, dropped from three stars to two shortly after we were there. The third star adds demand and creates a premium in the pricing. But there are restaurants nearly as good that don't get the premium because they just miss the additional star. Quality is continuous, but rankings are discrete: surely there are one-star restaurants nearly as good as two-star restaurants, and zero-star restaurants nearly as good as one-star restaurants. Too, restaurants whose business model depends on the Michelin accolade would try to step things up a notch in response to a downgrade (assuming their chef doesn't commit suicide from despair).

If one buys into this theory, the quality restaurants that are the best bargains in New York are Craft (recently mysteriously lost its star), Lever House (recently lost its star), Sushi Yasuda (zero stars that should be one), Union Square Cafe (ditto), 11 Madison (ditto), Tamarind (ditto), Aquavit (ditto), Cafe Boulud (one star that should be two), Robuchon (arguably worth a second star), Gramercy Tavern (at the high end of the one-star range), and Masa (two stars that should be three). Except that the theory depends on Michelin having market-moving power. That's true in France, where each additional star adds 25-60% in tourist business (depending on which news story you read about the subject), but it's not clear to me that Michelin has that much influence in New York City relative to Frank Bruni or even Zagat's.

I'm surprised Mr. Zywicki did not mention the simple solution to the "two-income tax trap," which many couples, both young and old, have discovered: Don't get married.

Donald J. Libert
Lancaster, Ohio

Via Mike, Bill Harbaugh of the University of Oregon takes the position that paying taxes feels good.

I disagree. I hate paying taxes.

But, as an economist, I recognize that Harbaugh and I have room for a deal.

I propose that Harbaugh give me $30,000 for a 100-word essay I will write him on taxes and feeling good that will look remarkably similar to this post. I promise to declare this money on my Schedule C, raising my tax burden about $9,000, give or take. I also promise to tithe $3,000 of this money to good charitable causes.

Harbaugh will feel good, because his economic transaction has resulted in more taxes being paid, as well as a donation to charity.

I will feel good, because Harbaugh will have effectively paid most of my taxes for me, relieving me of something I dislike.

We're both better off!

I look forward to hearing from Harbaugh so we can complete this mutually-beneficial deal.

File under urban legend.