January 2008

Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    

Recent Posts

« June 2007 | Main | August 2007 »

July 30, 2007

Consumer Protection Laws

My family and I experienced some pretty serious price gouging this past weekend. While shopping for clothes we really gouged the hell out of some stores. Why just a few weeks ago these stores were able to buy many dollars with only a few shirts, but this weekend they had to give us far more shirts for the same amount of money. I almost felt bad charging them so many shirts for my dollars, and was even concerned that the government would step in and charge my wife and me with gouging.

Skip Oliva offers an excellent analysis of this conundrum.

It’s difficult to reconcile the American concept of “equal justice under law” with the Federal Trade Commission’s motto, “Protecting America’s Consumers.” The implication is that there is one set of laws for consumers and another set—affording lesser protection—for producers and sellers. This conflict presents itself in all “consumer protection” laws, and it stems from an awkward premise: That in any given economic exchange, the party trading cash holds the legal and moral high ground over the party trading a good or service.

Put another way, try to fashion a consumer protection or antitrust law in a purely barter economy. If A trades two pounds of flour to B in exchange for a bushel of apples, which party is the “consumer” entitled to government protection? It’s easy to apply common law principles regarding fraud to such a transaction, but virtually impossible to employ contemporary consumer protection standards, which require a presumption that one trader is good and the other is bad.

Antitrust regulators obsess over short-term prices. They deem a price “anticompetitive” when they think it should have been lower. The seller is liable for trading a good at anticompetitive prices. But why isn’t the buyer equally liable? If the government sets the competitive price of a good at x and a seller trades that good at x+1, both the buyer and seller undermine the competitive price level.

The rejoinder to this is that the buyer is “forced” to pay the anticompetitive price because the seller controls the supply of an item desired by the buyer. But the reverse is also true. The buyer controls a supply of an item desired by the seller—cash. The seller lacks the ability to obtain cash from anyone except those cash-holders willing to trade for the seller’s item.

July 29, 2007

Detroit's Decline (Part II)

Kevin Boyle offers his explanation for the decline of Detroit.

In retrospect, Americans should have seen the riot coming. Since the 1920s, not just Detroit but all of the nation's major cities had restricted blacks to the oldest, most decrepit neighborhoods available. Segregation inevitably spawned discrimination: Schools in African American areas were overcrowded and underfunded; city services were delivered sporadically; policing was frighteningly oppressive.

Then, in the 1950s and 1960s, the urban black economy tumbled into crisis, as decent-paying factory work started to disappear. From 1947 to 1967, Detroit alone lost 120,000 manufacturing jobs. In the city's ghetto, unemployment skyrocketed. Poverty intensified. And under the strain of it all, life on the streets became more dangerous. There were 112 murders in Detroit in 1946. In 1966, there were twice as many, a sure sign of a horribly strained social fabric.

As if that weren't bad enough, the crisis of the inner cities struck as much of the nation's economy boomed, creating a dazzling world of color TVs, backyard barbecues and cars the size of luxury liners. Poor blacks could see it all on display in the new suburbs that necklaced central cities. But suburbia was white man's territory, and it was fiercely defended. Just a month before the Detroit riot, white thugs killed a young black man, a Vietnam veteran who had the audacity to linger in a suburban park after dark. So African Americans had no choice but to stay on the far side of the urban color line, struggling to make do while white America made good.

No wonder Clairmount Street exploded in the summer of '67. And no wonder the riot's signature act wasn't battling police -- though that's how it started -- but looting and burning stores.

Wait! What? Everything was going fine; Boyle was explaining well the discrimination blacks faced in Detroit and elsewhere. (BTW - Isn't it interesting that the north destroyed the south over slavery, yet when blacks began migrating to the heavily unionized north for better employment opportunities, all of a sudden they weren't welcome. "Blacks should certainly be free, just not here in the north.") But then he has to throw in that "looting and burning stores." Is that a cause or an effect of the plight of blacks in Detroit?

Okay, well what's Boyle's remedy?

Policymakers didn't understand -- not at first. "What happened?" a shaken President Lyndon B. Johnson asked on the day he appointed the Kerner Commission to investigate the riots. It would have been easy for his appointees to equivocate, to blame the violence on black hoodlums or radical agitators. Instead, they gave the president a searingly honest answer. "Our nation is moving toward two societies, one black, one white -- separate and unequal," they reported in March 1968, a month before Washington's inner city burned. "Discrimination and segregation have long permeated much of American life; they now threaten the future of every American."

But Johnson's appointees also believed, in classic American fashion, that the nation could right itself. "The movement apart can be reversed," they insisted, though doing so would be extraordinarily difficult. The federal government had to shatter the institutions that fostered neighborhood segregation. City schools had to be integrated and dramatically improved. Inner-city housing had to be rehabilitated. Welfare programs had to be made less bureaucratic and far more generous. And together, the public and private sectors had to create millions of entry-level jobs in poor neighborhoods.

For a few years, policymakers tried -- imperfectly, half-heartedly, sometimes stupidly -- to break down the ghettos' walls. Congress passed legislation that banned discrimination in housing. The Supreme Court ordered city school systems to desegregate, even if that meant busing kids from one end of town to another. And the Nixon White House took a small, innovative program called affirmative action and extended it nationwide. It wasn't enough, not close to enough, to pull the urban poor into the mainstream of American society. But it was a start. The percentage of Americans living below the poverty line declined in the early 1970s. And partly because of affirmative action, the black middle class began to expand, a transformation of profound importance.

Then, in the late 1970s and '80s, the national commitment to the urban poor unraveled, destroyed by a furious white backlash and a resurgent conservatism that vilified big government and sanctified the free market. With that shift in American politics, hope gave way to neglect. It has been 30 years since the federal government really invested in America's inner cities. The only time anyone talks about segregation is when the Supreme Court prohibits another school district from employing the mildest of racial remedies. The welfare state has been eviscerated, not expanded. Even progressives prefer to focus more on the needs of the middle class than on the burdens of the poor.

Oh, so Detroit's economic problems are caused by an abundance of free market activity. Even more problematic with Boyle's comment is that Detroit is what Glaeser and Shleiffer refer to as "the first major Third World city in the United States" and has languished in poverty while nearly every other major city in this country has gone through extensive redevelopment and experienced economic growth and revival. Why is Detroit so special? Why has it not happened there?

I've discussed this before already, and Bob Subrick at Stationary Bandit has this excellent post. Bottom line: Why didn't Boyle bring up the travesty known as former Mayor Coleman Young? Boyle attributes the white flight to the riots of 1968, but the facts tell a different story, one implicating Young as the cause of Detroit's population decline.

Detroit's population growth (decline):

  • 1940 - 1950 = +13.9%
  • 1950 - 1960 = -9.7%
  • 1960 - 1970 = -9.3%
  • 1970 - 1980 = -20.5% (Young's stint as mayor began in 1973.)
  • 1980 - 1990 = -14.6%
  • 1990 - 2000 = -7.5% (Young's stint as mayor ends in 1994.)

Detroit's population declined nearly 800 thousand between 1950 and today.  As Glaeser and Shleiffer conclude:

Did Young hurt Detroit? Did he hurt the black residents of Detroit? There is no question that Detroit was in much worse shape when Young left office than when he first entered it. Its population fell from 1.51 million in 1970 to 1.03 million in 1990, a 32 percent decline. The unemployment rate as a percentage of civilian labor force rose from 10.3% in 1969 to 20.6% in 1990. The percentage of households living below the poverty line rose from 18.6% to 29.8%. Nearly all the victims of this unemployment and povertywere Young’s black supporters. Over Young’s twenty years, surely in part due to hispolicies, Detroit became an overwhelmingly black city mired in poverty and socialproblems. While some of black Detroit was worse off before Young, it is hard to believethat a less confrontational mayor would not have helped his constituency more.

Why didn't Boyle mention Detroit's political leaders beginning with Coleman Young as at least contributors to Detroit's economic and social problems?

July 28, 2007

Overzealous Prosecution

Let's say that A steals a car and is consequently being pursued by the police. A few miles away from the chase B and C exit a mall, get into separate cars, and, both being distracted by accounts of the chase while listening to a news channel proceed to crash into each other, killing all occupants of both cars. Is A responsible for the deaths of B and C and the occupants of their cars?

What if the shopping mall was along the route of the pursuit such that B and C became distracted by watching the chase in front of them and consequently crash into each other? Is A responsible for their deaths?

What if B and C were closely following the chase in their respective cars (perhaps they're thrill seekers) and, distracted by the events, they crash into each other, killing the occupants of both cars. Again, is A responsible?

Lastly, what if instead B and C were news reporters closely following the chase and, being distracted, crash into one another, killing all occupants in both vehicles? Is A now responsible? Put B and C in helicopters: Is A now responsible for their deaths? If so, at what point in the scenarios listed above did A become responsible for the deaths of B and C who chose to pursue the chase and whose negligent behavior led to their own deaths? (There were no fewer than four helicopters following this chase.)

Rick Gotchie, a Phoenix air-conditioning contractor working at a nearby building, was watching the helicopters circling the scene and noticed they were getting closer to each other, The Associated Press reported.

Why were they getting closer and closer to each other? Does it pay to be the one closest to the scene? Is this the fault of the idiot car thief?

What transpired was a tragic event, but the car thief is not culpable in their deaths, any more than he would be for the death of a man who suffers a heart attack while watching the story unfold on television.

This is why this is yet another overreaching by prosecutors.

Phoenix Police Chief Jack Harris has said the suspect will likely also face criminal charges for the deaths of the four people on board the two helicopters.

Story here. Here's the video of the tragic crash.

Addendum: Edited for clarity and to add the link above.

July 26, 2007

Chrysler Offers Lifetime Warranty on Powertrain

Uncertainty is one of the - if not the - greatest obstacles to market exchange. Entrepreneurs have an incentive to discover ways of easing consumer concerns about their products, including warranties and guarantees, etc. Of course, those warranties and guarantees are only as good as the company making them, and most expire in the not-too-distant future.

Chrysler is making the bold move of offering a lifetime warranty on the powertrain (engine, transmission,  rear axle, etc., on EVERY vehicle it sells, beginning now.

This adds a lot of value to an otherwise suspect good and gives Chrysler a greater incentive to put out a better product.

A few years back I was asked to participate in a focus group study contracted by a company representing an "unknown" manufacturer of minivans. (We immediately discovered that it was Honda doing the marketing research.) Prior to the start of the focus group when the participants were sitting around eating deli sandwiches provided by the research company, two women participants revealed that they both owned Chrysler produced minivans (one a Plymouth Voyager and the other a Chrysler) that experienced  recurring major problems. One was on her tenth transmission in seven years and the other on her fifth engine in (I believe it was) eight years. I found it odd that both women owned Chrysler products (no one else did) and both experienced recurring major problems.

I, too, have experienced problems with Chrysler products in the past, and the Chrysler rental cars that I  have driven were grossly inferior to my Toyotas in terms of ride, comfort, styling, and general makeup. I have never been tempted to purchase a Chrysler product since the mistake I once made. (A used '84 van that I was grateful to have towed for being illegally parked and subsequently auctioned off for nothing.) This warranty does not change things for me, but I'm certain that it will make it more attractive for others to purchase a Chrysler product.

Auctioning Seats On an Airline's Inaugural Flight

Apparently airline "geeks" compete for seats on an airline's inaugural flight to a specific destination.

Gibbons is part of a subspecies of frequent fliers who chase inaugural flights because they adore airlines, airplanes, even airports. They seek to be part of airline milestones. Among their ranks are those who like the prestige of being the first passengers on the world's longest flight, or the first or last travelers aboard a specific type of airplane. Some want to be the first passengers to take a short hop on new routes offered by low-cost, low-frills carriers.

In response, Singapore Airlines will auction seats on their inaugural Airbus A380 jet service from Singapore to Sydney, the first commercial A380 flight in the world.

July 25, 2007

How Times Have Changed

The Disney Studio has pledged to remove smoking from its family-oriented films.

Story here.

Here's an old Winston cigarette commercial starring Fred Flintstone and Barney Rubble.

What a change from the days of Jodie Foster smoking cigarettes in Freaky Friday.

July 24, 2007

Oops! Did a car dealership make a very costly mistake?

In Cobaugh v. Klick-Lewis, Inc., a man is awarded a Chevy Beretta Cobalt for golfing a hole-in-one. Cobaugh went golfing with friends on a Monday. There was a charity golf tournament at the course the weekend before and Klick-Lewis Buick Chevy Pontiac offered the car to any tournament participant who hit a hole-in-one on the ninth hole.

Forgetting to remove the car and the attending sign, Cobaugh proceeded to hit a hole-in-one on the ninth hole, albeit on Monday after the tournament was over, and then demanded the free car from Klick-Lewis. The dealership refused to honor its offer, arguing that it was valid only during the tournament. Cobaugh sued and won.

Writing for the majority the judge noted that the sign was an offer to reward anyone who accepted by performing the challenge. Consideration for the dealership was that it received publicity from the sign.

Comes now a Honda dealership in Roswell, New Mexico that is facing a similar problem. Unfortunately for any potential plaintiffs, they'll have a difficult time collecting the $30,000,000.

Since this was a unilateral mistake and there is little reason to believe that the 30,000 recipients saw this as an unreal offer, it's likely to be ruled a valid contract if it ever makes it to court.

July 20, 2007

Difference in Earnings by College Degree

The students who made out the best were chemical engineering majors. They earned an average 5.4 percent more than last year, bringing their average to $59,361, according to the survey.

Computer engineering majors were offered $56,201, up 4.8 percent.

Mechanical engineering grads offers' rose 4.6 percent to $54,128. Electrical engineering grads' offers increased by 3.2 percent to $55,292. Civil engineers earned $48,509, up 5.4 percent.

Computer science majors saw salaries rise 4.1 percent to $53,396, while information sciences grads received a 4.6 percent increase to $50,852. (Most expensive colleges.)

The average offer for economics graduates (business/managerial) was $48,483, while finance grads received a mean of $47,239. There is no prior data for these majors because they were grouped together in earlier studies.

Management of information systems majors posted a 4.2 percent increase to $47,648. Marketing graduates averaged $40,161, up 6.1 percent.

Accounting grads' average rose 2.3 percent to $46,718, while business administration and management graduates saw their average rise 3.9 percent to $43,701.

And of course, at the bottom were liberal arts majors.

Political science majors' offers averaged 5.9 percent more at $34,590. English majors' averages rose 5.3 percent to $32,553.

Psychology majors averaged $31,631, up 4.7 percent, while sociology majors earned 3.5 percent more at $32,033.

History majors were offered an average of $33,768, up 3.3 percent.

Story here. Thanks to Carol for the link.

Causation in Tort Law

Standard tort law requires the plaintiff to prove a defendant or defendants acted negligently, were the proximate cause of the injury, and that there actually was injury. Failing to do all three is grounds for dismissal.

So, for example, I go speeding by your house at three times the speed limit (negligence), which causes you to exit your front door to yell at me and proceed to stumble down your steps, breaking many bones and causing internal injuries (damages). The question is: Did I cause your injury. A legitimate court would answer no.
If I drove directly into your house, and the force of my car, either directly or from flying debris, caused these same damages to you, then yes, I caused your injury. But the fact that you chose to exit your door to yell at me does not constitute causation of your damages by me.

Similarly, let's say that after a class I delay a student's departure from my classroom to discuss his performance at a recent baseball game. After ten minutes he leaves my classroom and, while walking to his next class, is struck by lightning, which causes serious injury to him. My action (delaying him) did not cause his injuries. Consider the counter factual: What if my delaying the student caused him to miss the thunderstorm that killed two of his classmates who left right after class. Does this student owe me for saving his life?

Although this is a criminal case rather than a tort, the same reasoning should apply.

KSDK - If it hadn't been for Massigh Stallman, Missouri Highway Patrol Trooper Ralph Tatoian would still be alive, and Stallman is responsible for his death, a jury has ruled.

In April of 2005, Trooper Tatoian was driving on Interstate 44 to the scene were police were looking for Stallman, a wooded area in Gasconade County. As he drove with his lights and siren on, he came over a hill near Pacific, and slammed into a tractor trailer. Trooper Tatoian was killed.

What if instead of having been killed in an accident while racing to the scene of the manhunt, Trooper Tatoian avoided being part of a fatal shootout where he would have been had he not received the call to proceed to the manhunt. Would Stallman have received a lighter sentence for saving the trooper's life?

July 17, 2007

Republicans: The Stupid Party

“IN AMERICA, WE have a two-party system," a Republican congressional staffer is supposed to have told a visiting group of Russian legislators some years ago.

"There is the stupid party. And there is the evil party. I am proud to be a member of the stupid party."

He added: "Periodically, the two parties get together and do something that is both stupid and evil. This is called—bipartisanship."

Virginia Republicans demonstrate once again why Republicans are the stupid party.