Governor Spitzer, We Hardly Knew You

My first reaction to the news of Eliot Spitzer's demise was that I felt bad for his three daughters, for reasons discussed here. My second reaction was that I felt bad for his wife for having to stand there and face the public glare as well. I presume that she did that for her daughters if not for her husband. It is the adultery embedded in the transaction, particularly by a father of teenage daughters in the public eye, that most disturbs me.

But that's a personal judgment and a matter that may be relevant in a divorce proceeding. It doesn't necessarily have to guide public policy. What of the transaction itself, if it did not involve adultery? For a public official, the big danger is that Spitzer's desire to keep the activity secret would subject him to blackmail by those in on the secret. With the secret out in the open, there's no longer any danger in that happening, even if he hadn't resigned. Perhaps we need a disclosure policy for elected officials?

What of the transaction itself, if it did not involve adultery or a public official? Now we get to find out whether I'm a libertarian or not, I suppose. Here is a libertarian's case in defense of legalized prostitution. Here's another defense of legalized prostitution based on strengthening the legal status of women who currently engage in illegal prostitution.

What does the economist in me say? Despite the rather high price paid by Governor Spitzer ($4300 per hour), prostitution--particularly if legalized--lowers the cost to the man of obtaining more and more varied sexual activity from women. Who is made better off by this change in price?

• Men who partake of prostitutes (buyers).
• Women who engage voluntarily in prostitution but not other types of sex (sellers).
• Men who do not partake of prostitutes but who face less competition in finding sexual partners from the men who are now content with prostitutes (buyers of substitutes).

Who is made worse off?

• Women who do not engage in prostitution (sellers of substitutes)

The last one is a pecuniary externality. Though not a threat to economic efficiency, I'm not enough of a libertarian to ignore it.

No LUV, or Maybe Too Much, from the FAA

As a longtime flyer of Southwest Airlines, this was not welcome news:

WASHINGTON – The Federal Aviation Administration said Thursday it would fine Southwest Airlines Co. $10.2 million for safety violations that included knowingly flying more than three dozen jets without mandatory inspections for structural damage.

Southwest, which found cracks in the bodies of six of its jets during belated inspections, said safety was never jeopardized.

The fine would be the largest ever levied against an airline, the FAA said.

When Southwest belatedly conducted the inspections, it found cracks in the bodies of six Boeing 737-300s, with the largest measuring 4 inches. Serious fractures can depressurize an aircraft and in 1988 caused an Aloha Airlines jet to rip apart, killing a flight attendant.

The FAA announced the fine a week before congressional investigators were to disclose findings from their own inquiry into Southwest's failure to meet airworthiness directives. That investigation was prompted by information provided by Dallas-based FAA inspectors who said their supervisors allowed the planes to keep flying even after Southwest reported its failure to make the scheduled inspections.

The FAA doesn't come out looking too good, either. Regulatory capture, anyone?

Bogus Art

The Los Angeles Times has a story this morning about the revenue loss to the Treasury from overvalued donations of works of art:

An alleged tax-fraud scheme involving donations of overvalued art to four local museums is part of a larger, unchecked problem with inflated art appraisals that has cost the federal government untold millions, a Times analysis has found.

Each year, the Internal Revenue Service audits donations claimed on only a handful of the 100,000 or more tax returns that allow art donors to reap nearly $1 billion in tax write-offs. Half of the donations checked over the last 20 years had been appraised at nearly double their actual value.

The crux of the public policy problem is the infrequency with which appraisals are checked. It makes all other remedies less effective:

A 2006 law tightened standards and increased penalties on bad appraisals. For donors, it lowered the threshold on what the law considers a bloated appraisal, from 200% overvalue to 150%. It also increased oversight of and fines for appraisers. But because the IRS checks so few appraisals, some believe that overvaluations will continue.

This is not a hard problem to solve. Every significant donation should have its appraisal checked by the IRS, and the donor should bear the cost of that process, not the government. There would be fewer small donations of art, but for major pieces, this cost of checking the appraisal would be small relative to the value of the tax deduction.

What Capitalism Doesn't Need

Adjectives like "creative" to modify it.

From the Wall Street Journal today:

In a speech at the World Economic Forum in Davos, Switzerland, the software tycoon plans to call for a "creative capitalism" that uses market forces to address poor-country needs that he feels are being ignored.

"We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal.

Capitalism is by its nature creative. Ask a capitalist.

If Bill wants to put an adjective in front of "capitalism," then perhaps he should consider "universal" and challenge the attendees at Davos to help establish the institutions in poor countries that will make that adjective redundant as well. That way, the billions of people living in poverty in these areas will have access to the one economic system that can meaningfully improve their plight.

Econophysics

Picking up on the theme of the post on neuroeconomics, another field attempting to build bridges to economics is physics, in the form of Econophysics. Quoting from its Wikipedia page, econophysics applies ...

theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic elements and nonlinear dynamics. Its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics.

For more background, see this site or this blog. The payoff would be similar to the case of neuroeconomics--if you can link the economic problem to an analogous problem in the natural sciences that has been more thoroughly investigated, then the results of those investigations can be brought to bear in the economic problem as well. It may not be the most promising avenue of research, but academia thrives on experimentation and risk-taking in the realm of ideas.

The January 2008 issue of the Journal of Economic Dynamics and Control is a special issue on "Applications of Statistical Physics in Economics and Finance." In their introduction, J. Doyne Farmer and Thomas Lux discuss some of the reasons why the field has been slow to catch on among "mainstream" economists:

The contact between econophysics and economics has, however, been hampered by several factors. The very different culture of scientific publishing in physics and economics has generally prevented publications from econophysics in economics journals. This is partly a matter of style of presentation, but it also reflects fundamental differences in the epistemology of the two fields, in particular different views about the objectives of science. Physicists have a very different view about how work should be presented, and in particular about mathematical rigor (which they generally disdain). In addition, physics has a laissez-faire attitude about publication, believing that it is better to err on the side of letting as many new ideas in as possible, and to let the market eventually decide what is good and what is bad through a Darwinian process that selects what is useful and forgets what is not. As a result there are many econophysics papers of poor quality, which shocks economists. When combined with the fact that the best econophysics papers are published in journals that most economists never read, this body of work remains almost unknown outside the sphere of econophysics.

Communication between physicists and economists has been poor. Physicists are perhaps the only group of scientific professionals who are even more arrogant than economists, and in many cases the arrogance and emotions of both sides have been strongly on display. Many physicists have given the impression that they think that economists know little or nothing about their business, at the same time that they are asking for admission into their club. Many economists have reacted with apprehension to what they view as an attempted invasion by aliens, and have scornfully rejected any work by physicists out of hand, without bothering to have even a passing familiarity with it.

There seems to be a lot of truth in that assessment, and perhaps some of it is also applicable to the field of neuroeconomics as well. If you are interested in the links between economics and the sciences, the first article in that special issue, "Classical Thermodynamics and Economic General Equilibrium Theory," by Eric Smith and Duncan K. Foley, seems to make progress on establishing the parallels across economics and the relevant natural science. (See this working paper if you cannot access the journal directly.)

Tasty Clones

Speaking of unnecessary stimulus, cloning in the food supply was brought back to the fore this week, as the F.D.A. made a pronouncement on the safety of meat and milk from cloned animals. From Wednesday's New York Times:

After years of debate, the Food and Drug Administration on Tuesday declared that food from cloned animals and their progeny is safe to eat, clearing the way for milk and meat derived from genetic copies of prized dairy cows, steers and hogs to be sold at the grocery store.

There was a predictable response from consumer watchdogs:

Consumer groups immediately lambasted the F.D.A.’s report, saying that the science remains inadequate and that many consumers oppose cloning for religious or ethical reasons. Some members of Congress had sought to delay a decision until further studies were completed.

“It flies in the face of Congress’s wishes. It flies in the face of consumer wishes,” said Michael Hansen, a senior scientist at Consumers Union, the advocacy group that publishes Consumer Reports.

I don't share the same apprehensions about safety in genetic cloning as I do in genetic modification or doping. With cloning, it seems that the breeders obtain an animal that has desirable characteristics and then simply make more copies of it without modifying it. The principal advantage of cloning is summed up by this expert, who must have fun giving out his business card:

“When you buy a box of Cheerios in New York and one in Champaign, Illinois, you know they are going to be the same,” said Jon Fisher, president and owner of Prairie State Semen in Illinois. “By shortening the genetic pool using clones, you can do a similar thing.”

“It could improve the quality of meat in the supermarket,” Mr. Fisher added. “It depends if customers allow it.”

It will likely do that in areas where the quality of meat is poor. But I'm not in one of those areas, and so if I should decide that I don't want to eat meat or drink milk from cloned animals, I should have that option, too. From the article again:

The F.D.A.’s approval extends to cloned cows, pigs and goats but not other farm animals like sheep; the agency cited insufficient data on cloned sheep. The F.D.A. said meat and milk from cloned animals and their offspring would not be labeled because it was the same as conventional food and did not pose a safety risk.

However, Representative Rosa DeLauro, Democrat of Connecticut, has introduced legislation to require labels on cloned products, and consumer groups suggested that labeling would be a battleground in the near future.

As with other food production processes, I am in favor of allowing producers who do not use a particular technology to label their products as such, regardless of whether the F.D.A. requires those who do use the technology to label their products as such.

In Defense of (Some) Neuroeconomics

Earlier this week, Alex Tabarrok was not too impressed by a recent neuroeconomics paper that examined the neural responses to typical marketing actions for consumed goods. In this case, the authors showed that telling subjects that a wine was expensive changed the way the brain processed the experience. (Here's a popular press article on the paper. Alex provides a link to the published paper.)


I saw one of the paper's authors, Antonio Rangel, present the paper at Econopalooza this month. I had a similar reaction to Alex--this is probably not the most critical use of fMRI technology to enhance our understanding of economic behavior. However, I should also point out that there are hundreds of sessions to attend at the ASSA meetings, and two of the ones I chose to attend were the ones on neuroeconomics that featured Antonio and David Laibson. They are two of the most creative and insightful researchers in our profession, and I would make similar choices about which sessions to attend given the same menu next year.

Seeing a number of papers presented, I think David's work on hyperbolic discounting provides a better illustration of how the new technology can enhance the field of economics. In several theoretical and empirical papers over the last decade, David and his co-authors have investigated the tendency of people to act as if they have very high discount rates for choices in the near future, such as a preference for $1 today versus $1.20 tomorrow, but fairly low discount rates for choices in the more distant future, such as a preference for $1.05 in 11 years versus $1 in 10 years. This introduces a time-inconsistency problem, since what I will actually do in year 10 changes when it arrives. This is a departure from the classical model of consumer behavior. (I think the most important consequence is that it makes illiquidity a feature, not a bug, of a long-term savings account like a 401(k)). David has argued his case very persuasively, and his research is having a large impact on the way academics and policy makers think about saving.


Can neuroeconomics help him make the case? In this article in Science, he and his co-authors show:

When humans are offered the choice between rewards available at different points in time, the relative values of the options are discounted according to their expected delays until delivery. Using functional magnetic resonance imaging, we examined the neural correlates of time discounting while subjects made a series of choices between monetary reward options that varied by delay to delivery. We demonstrate that two separate systems are involved in such decisions. Parts of the limbic system associated with the midbrain dopamine system, including paralimbic cortex, are preferentially activated by decisions involving immediately available rewards. In contrast, regions of the lateral prefrontal cortex and posterior parietal cortex are engaged uniformly by intertemporal choices irrespective of delay. Furthermore, the relative engagement of the two systems is directly associated with subjects’ choices, with greater relative fronto-parietal activity when subjects choose longer term options.

The research shows that two different neural systems, which evolved for very different purposes in the human brain, deal with the two decisions. When a part of the brain is activated during a particular decision, we can infer that the decision is similar to other choices or behaviors that activate that part of the brain. The more primitive part of the brain is activated with the near-term choice. This is what gives Laibson's argument credibility. We have already learned from observation of individual choices that behavior departed from the classical model. Without the brain imaging, there could have been a number of competing theories for why this is so, many of which would not cause us to dramatically rethink the underlying model. With the brain imaging, we give substantially greater weight to the theories like Laibson's that are predicated on different decision frameworks for different types of intertemporal choices.

Econopalooza Blogging

I am in New Orleans for the ASSA meetings, or what my wife calls "Econopalooza." I am not on Dartmouth's recruiting committee, so I am soaking up as much as I can from the sessions on neuroeconomics and matching theory, two interesting fields where I've got a lot to learn.

This is my first trip to post-Katrina New Orleans. Compared to the last time I was here, it feels quite empty.

Harvard's Financial Aid Reforms

Much has been made in the last three weeks about Harvard's decision to reduce the financial cost of attending for students from families with incomes up to $180,000 per year. Consider this article in yesterday's New York Times and a typical reaction in a Dartmouth-focused blog. I think most of the hype is overblown, particularly if it is just Harvard making this switch.


Suppose that Harvard's changes to its financial aid policies don't change the pool of applicants it receives. Then the policy simply amounts to a transfer from Harvard to some upper middle class families who send their children there, and there is no reason for any other college to change its behavior. So the impact of the policy is in the change it induces in the applicant pool to Harvard and the improvements that allows Harvard to make in its incoming class.


Who are these additional applicants? Upper middle class students who previously didn't apply to Harvard because, even if they got in, they lacked the financial resources (or the desire to spend them) to attend but who would attend under the new financial aid policies.


I'll conjecture that very few of these students are now applying to, say, Dartmouth. Compared to Harvard, Dartmouth has about the same cost, a financial aid policy that is no more generous than the Harvard's old policy, and an academic reputation that is no better than Harvard's. If financial costs were a barrier at Harvard, then they were a barrier at Dartmouth as well. So if Dartmouth chose not to match Harvard's new policy, I don't see why it would lose students out of its current applicant pool. And what's true of Dartmouth is true of colleges that are presently even less competitive with Harvard, making the opening to the New York Times article about Dickinson College a bit far-fetched. The article does identify the colleges that will see their applicant pools change:

In the competitive scramble for prestige and rankings, numerous colleges already try to lure some top students away from the Ivy League by showering them with “merit aid” even if they are well off and can afford full tuition.

The price of buying a better class just went up, so these colleges will have to modify their behavior if they still want to compete in this way. Let's assume that the higher prices discourage some (even if not all) of this behavior, generating a better applicant pool at Harvard. The better applicant pool, in turn, means a better set of applicants who do not get into Harvard. Some of the students induced to apply will get the spots that would have otherwise gone to other applicants, presumably of all financial backgrounds given Harvard's need-blind admissions policy.


And where will these newly denied applicants go? To their second-choice schools, which will include Dartmouth in some cases. So one impact of Harvard's change in financial aid on colleges like Dartmouth is that it allows them to also be more selective, even without changing their own financial aid policies.


This impact is offset to the extent that there are students admitted to both Harvard and Dartmouth that would choose Dartmouth if both cost the same but Harvard under its new financial aid policies. If it's just Harvard, then I'll conjecture again that this is a small number of students. If other colleges, very few of whom are more competitive with Harvard than is Dartmouth, follow Harvard's lead, then the set of admitted students who might be lost to their second-choice colleges will go up to the point that it would be difficult to maintain a higher price and the same quality of matriculating student.

So it is not Harvard's behavior that is important--it is the behavior of the large number of colleges that consider themselves competitors to Harvard.

Score One for Monsanto

I thought I was reading The Onion when I happened upon this AP story, which was also carried by my local paper today:

HARRISBURG, Pa. (AP) — Pennsylvania is stopping dairies from stamping milk containers with hormone-free labels in a precedent-setting decision being closely watched by the industry.

Synthetic hormones have been used to improve milk production in cows for more than a decade. The chemical has not been detected in milk, so there is no way to test for its use, but a growing number of retailers have been selling and promoting hormone-free products in response to consumer demand.

State Agriculture Secretary Dennis C. Wolff said advertising one brand of milk as free from artificial hormones implies that competitors' milk is not safe, and it often comes with what he said is an unjustified higher price.

"It's kind of like a nuclear arms race," Wolff said. "One dairy does it and the next tries to outdo them. It's absolutely crazy."

I think I am well within my rights to declare Mr. Wolff's office a "Microeconomics Free Zone." I wouldn't use the word "crazy" to describe producers' desire to compete with each other to offer the consumers a product they might like better. Whether the hormone has been shown to affect the milk is irrelevant here. If the statement is true about the production process, the producers should be allowed to label their product as such.

A New Way to Regulate Local Monopolies

Neely Tucker of The Washington Post brings us the story of Mona Shaw. The plot summary:

Fear not, fellow Americans! In these dark days of war, pestilence and Paris Hilton, a new hero has arisen. She is none other than 75-year-old Mona "The Hammer" Shaw, who took the aforementioned implement to her local Comcast office in Manassas to settle a score, and boy, did she!

Enjoy!

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2007

Shorter version: Leo Hurwicz, Eric Maskin, and Roger Myerson share the Nobel Prize in Economics this year for "having laid the foundations of mechanism design." Here's more:

Adam Smith's classical metaphor of the invisible hand refers to how the market, under ideal conditions, ensures an efficient allocation of scarce resources. But in practice conditions are usually not ideal; for example, competition is not completely free, consumers are not perfectly informed and privately desirable production and consumption may generate social costs and benefits. Furthermore, many transactions do not take place in open markets but within firms, in bargaining between individuals or interest groups and under a host of other institutional arrangements. How well do different such institutions, or allocation mechanisms, perform? What is the optimal mechanism to reach a certain goal, such as social welfare or private profit? Is government regulation called for, and if so, how is it best designed?

These questions are difficult, particularly since information about individual preferences and available production technologies is usually dispersed among many actors who may use their private information to further their own interests. Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of the properties of optimal allocation mechanisms in such situations, accounting for individuals' incentives and private information. The theory allows us to distinguish situations in which markets work well from those in which they do not. It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures. Today, mechanism design theory plays a central role in many areas of economics and parts of political science.

Congratulations to all three. Here's the official word.

TimesSelect, We Hardly Knew You

I remember the day I subscribed to TimesSelect. I couldn't critique the opinions I wanted to without forking over the money. And it was also my prophecy this spring that, "Eventually, we all blog for Google." The two have collided, and the former has died. Felix Salmon lays out the details.

I thought TimesSelect was a wonderful thing. It imposed a $50 per year tax on a readership whose opinions were almost certain to be opposite of mine. I'm going to miss it.

Packaging Matters

A student directed me to a post earlier this week on the Freakonomics blog, in which Steve Levitt asks, "Should Apple Burn Its Economic Textbooks?" The post considers whether a more profitable strategy might have been to not charge such a high price for the iPhone initially, to avoid irritating the early adopters with such a quick price decrease and ultimately offering to rebate them half of the decline.

Leaving aside that the appropriate disposal is to sell the books, if disposal is what's required, the answer to the question is "no." Apple's economics textbooks are not necessarily wrong, but they certainly seem to be lonely. Give them some company, maybe a marketing textbook or two.

Products don't always sell themselves. Advertising works. Marketing works. Packaging matters. An ironic lesson for Apple to learn--we thought they had it mastered. Perhaps it has been digitally remastered. We'll know when the iWhatever is released.

More Sensible Cross-Border Flows

This is probably not the best timing, given the very weak August employment report, but I regard the developments in this article in Wednesday's New York Times as a good sign. Five months ago, I asked the question in the context of the immigration debate, "Is Labor Now the Mobile Factor?" I wrote:

In the current environment, I would expect to see capital going south across the border with Mexico, drawn by the high returns available due to the large amount of low-wage labor. But that's not what we are seeing. We are seeing the labor cross the border--at considerable personal cost--to take the low-wage jobs and then send remittances back to Mexico. (Even in agriculture, where the land is obviously not mobile, I would be surprised if much of the agriculture in the Southwestern U.S. couldn't also be produced in Mexico. But there is nothing in the argument that requires the unskilled labor to work in agriculture or any particular industry.)

The article notes that there are American farmers who are moving their businesses south of the border:

Steve Scaroni, a farmer from California, looked across a luxuriant field of lettuce here in central Mexico and liked what he saw: full-strength crews of Mexican farm workers with no immigration problems.

About 500 people work for Steve Scaroni’s farming operation in Mexico. Farming since he was a teenager, Mr. Scaroni, 50, built a $50 million business growing lettuce and broccoli in the fields of California, relying on the hands of immigrant workers, most of them Mexican and many probably in the United States illegally.

But early last year he began shifting part of his operation to rented fields here. Now some 500 Mexicans tend his crops in Mexico, where they run no risk of deportation.

“I’m as American red-blood as it gets,” Mr. Scaroni said, “but I’m tired of fighting the fight on the immigration issue.”

That's good to know. I consider our "blood" to be the same color for the same reason, and I am also tired of fighting the fight on the immigration issue. I'm tired of hearing people treat American citizenship as if it is incidental to an economic transaction. Stepping up to that task in this article (filling in for the President, I guess) is Senator Dianne Feinstein of California:

She predicted that more American farmers would move to Mexico for the ready work force and lower wages. Ms. Feinstein favored a measure in the failed immigration bill that would have created a new guest worker program for agriculture and a special legal status for illegal immigrant farm workers.

There is nothing so sacred about cheap lettuce that we should create a population of second-class citizens to pick it in California rather than Mexico. So I'm glad Mr. Scaroni has moved his operations to Mexico if he feels that is what is essential for his business if he is to abide by our immigration laws. I am particularly glad that the legal and economic infrastructure has developed in Mexico to the point where he can do it.


I wish him the very best in his endeavor, and I'll reward him like I do all other businessmen--I'll buy his product if it's the best one on the market for the price. The article gives a good accounting of the various business challenges involved, and it's worth a read.

More CO2 Emission Comparisons

It seems like I'm not the only one making comparisons of greenhouse gas emissions from alternative processes. From our friends at the AFP, via TerraDaily in the aptly named "Eat a Steak, Warm the Planet:"

A kilogram (2.2 pounds) of beef causes more greenhouse-gas and other pollution than driving for three hours while leaving all the lights on back home, according to a Japanese study. A team led by Akifumi Ogino of the National Institute of Livestock and Grassland Science in Tsukuba, calculated the environmental cost of raising cattle through conventional farming, slaughtering the animal and distributing the meat, New Scientist reports in next Saturday's issue.

Producing a kilo (2.2 pounds) of beef causes the equivalent of 36.4 kilos (80.08 pounds) in carbon dioxide (CO2), the principal greenhouse gas, Ogino found.

Most of these greenhouse-gas emissions take the form of methane, released from the cow's digestive system.

That one kilo (2.2 pounds) of beef also requires energy equivalent to lighting a 100-watt bulb for nearly 20 days. The energy is needed to produce and transport the animals' feed.

A Swedish study in 2003 suggested that organic beef emits 40 percent less greenhouse gases and consumes 85 percent less energy because the animal is raised on grass rather than concentrated feed.

The study appears in full in a specialist publication, Animal Science Journal.

The full paper is here, if your library subscribes.

Comparing this to other sources of CO2 emissions, the 80 pounds of CO2 emitted is equivalent to that emitted by 4 gallons of motor fuel. It seems like we need to expand our systems of tradable permits to include enteric methane, or cut back on the product.

Trade and Child Labor

Via Mark Thoma, I learn of a very clear summary at VoxEU of the evidence on the relationship between international trade and child labor in developing countries. It is written by my colleagues Eric Edmonds and Nina Pavcnik. They write:

Our recent research shows that children are less likely to work in countries with more international trade. The negative association between trade and child labour holds even when considering only poor countries’ trade with high-income countries. It also holds up for trade in unskilled-labour intensive products. Quite simply, child labour is less prevalent in countries that trade more because countries that trade more are richer, and children work less in richer countries.

Income effects seem to outweigh the substitution effects when prices rise due to international trade. Their conclusions are worth keeping in mind:

Where does this research leave the concerned consumer? Stories of children engaged in export industries should be met with concern about why children hold those jobs. Before one boycotts a product with child labour content or supports punitive trade sanctions, one should ask whether these measures will make the child better off. Will boycotts or sanctions eliminate the reasons why children work? Thus far, most of the existing evidence suggests that eliminating sources of income will not make poor families better off. It will not change the circumstances that cause children to work.

Read the whole article.

Retroblogging Hawaii

The Voxfamily just returned from a week in Hawaii. I leave the blogging at home on family vacations, so I'll share some of the experience this week.

We spent the whole week on Oahu, which contains about 80 percent of the state's population. We stayed at the biggest resort in Waikiki, which was a wonderful place. Since we live in Hanover, we have no need to "get away from it all" on vacation. We actually like to be among people and on this trip deliberately tried to avoid an isolated feeling. Even so, I found each place we visited to be not quite unspoiled, but far less crowded than I expected for the first week of summer.

It seems like I am not alone in my assessment. This story from last week's USA Today reports that convention bookings at the new Hawaii Convention Center (shown below) are down.

According to the story:

Even paradise, it seems, can have a down year.

Only 16 out-of-state conventions are booked in 2008 for the $350 million Hawaii Convention Center, which was built by the state on the edge of Waikiki nine years ago to attract more business conferences.

The number is less than half the 35 conventions that are booked for 2007. In 2006, there were 37.

The culprits? The story continues:

Waikiki's hotel prices, second in the country only to New York City's, are a contributing factor, says Paul Brewbaker, Bank of Hawaii's chief economist.

Through May, the average room rate in Hawaii was more than $198 a night, according to consultants Hospitality Advisors, based in Hawaii.

The high prices seem to be having an impact on quantity:

Hawaiian tourism has been virtually flat the past several years. The state welcomed about 7.5 million visitors in both 2005 and 2006, according to the state Department of Business Economic Development & Tourism. This year, it forecasts 7.6 million visitors.

However, the University of Hawaii Economic Research Organization predicts that overall tourism numbers will actually drop by 0.2% this year.

Meanwhile, overall tourism to the United States has steadily grown since 2003. Last year, the USA received 51.1 million tourists, and officials expect a 3% increase this year. Kathryn Goldstein, spokeswoman for Meeting Professionals International, a Dallas-based trade group, said concerns over Hawaii as a convention location might depend on the issues facing a specific group.

So look for prices of trips to the Aloha State to fall over time.

Original Dumping

With this story, we have the within-country extension of the infamous Summers Memo of 1991.

Innovations in Distance Grandparenting

Jennifer 8. Lee reports in today's New York Times on "The Incredible Flying Granny Nanny," with examples of grandmothers who commute by airplane on a weekly basis to look after their grandchildren while both parents are at work. Here's one example:

Terri P. Tepper of Barrington, Ill., made a similar trek every week for a year to help care for her granddaughter so that her daughter could pursue her career. Beginning in 2001, Ms. Tepper flew to New York on Sundays and returned to Chicago on Thursdays.

“It was cheaper than getting a nanny,” said Ms. Tepper, 64. The round-trip tickets, which her daughter paid for, cost between $190 and $230. “I actually saved them a lot of money,” Ms. Tepper said. Her daughter later made partner in her consulting firm.

It's fascinating to see how relative prices can drive behavior here. The article has the economics right, but I think it gets the sociology and history wrong, in the following passages (with my emphasis):

Even at a time when grandparents are more involved than ever in the lives of their children and grandchildren, the efforts of Mrs. Kim and Ms. Tepper are extraordinary. But many grandparents these days are making extreme efforts to help their children bridge the work-life divide.

[...]

Intercity commuting is just one way they provide that help. Grandparents are also taking time off from work, retiring early, moving to the United States from overseas or selling their home to be near grandchildren.

The greater involvement results from a confluence of factors, including the financial burdens of child care and anxiety over the quality of care. But most notably it is influenced by a generation of grandparents who have the time and the financial wherewithal to pitch in.

“This is the first generation where we have so many older people living long enough, being healthy enough and being affluent enough to provide these services on a large scale” since women entered the workplace in large numbers, Dr. Cherlin said.

While it is true that more grandparents are living to old ages and are more affluent than earlier generations of grandparents, it is also true that parents are having their first children later in life and are having fewer children than in earlier generations. (The latter effect is compounded, since it is true of both the parents' generation and the grandchildren's generation.) That generates less opportunity for interactions between grandparents and grandchildren. In addition, the children and grandchildren are often living further away from the grandparents than in prior generations. The article is motivated by the unusual expenses that some families are incurring to recreate what used to occur for free.

In prior generations, the grandparents were needed to help the non-working parent take care of a larger number of young kids. Now, the grandparents are stepping in to take care of one young kid while both parents work. It is not the least bit clear to me that longevity and affluence trump fertility and proximity in this comparison, but I'd be curious to know what others think.

The Cystic Fibrosis pledge drive is still on. If Great Strides is not your thing, how about donations in honor of Mother's Day?