Sam Peltzman

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pages: 309 words: 95,495

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Boeing 747, book value, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, Eyjafjallajökull, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, junk bonds, Kenneth Rogoff, lateral thinking, Lewis Mumford, London Whale, Long Term Capital Management, market bubble, Michael Milken, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, proprietary trading, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, scientific management, subprime mortgage crisis, tail risk, technology bubble, TED Talk, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game

Bishop, eds. (1993). 9 Peltzman grew up in the Bensonhurst: For Sam Peltzman’s life and his work I relied principally on interviews and follow-up correspondence. 10 In a controversial 1973 paper: Sam Peltzman, “An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments,” Journal of Political Economy 81, no. 5 (1973): 1049–1091. 11 Peltzman felt his results were: Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy 83, no. 4 (1975): 677–726. 12 Peltzman didn’t stop with autos: “The Health Effects of Mandatory Prescriptions,” Sam Peltzman, University of Chicago Center for the Study of the Economy and the State, Working Paper #38, April 1986. 13 Wilde illustrated his point: Gerald Wilde, “Does Risk Homeostasis Theory Have Implications for Road Safety?

Scholars, many working out of the University of Chicago, argued that government management of the economy was backfiring by failing to consider how people would adapt. Though federal regulation had continued to expand, George Stigler argued that regulators often ended up serving the regulated, not consumers. Stigler’s student Sam Peltzman made an even more audacious claim: regulations aimed at making consumers safer might be doing the opposite. In 1975 he published a provocative study that claimed that seat belts were causing drivers to drive more recklessly, resulting in more pedestrian deaths. Scholars were soon finding similar behavior in fields as diverse as shipping and football, and labeling the phenomena “risk compensation,” “risk homeostasis,” and “human factors.”

Among the first standards passed were rules requiring seat belts for all occupants, energy-absorbing steering columns, a padded instrument panel, and dual braking systems. But just as government control of the economy and the environment had by this point come under fire, so did safety regulation. Leading the backlash was Sam Peltzman, the University of Chicago economist we met in Chapter 1. I visited Peltzman one afternoon at his office at the university’s business school on the city’s South Side. Seventy-three years old, he had retired some time ago from active teaching but was still writing and speaking. Peltzman dresses like a hippie.


Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

Alistair Cooke, American ideology, business cycle, clean water, collective bargaining, creative destruction, credit crunch, declining real wages, endowment effect, fiat currency, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, Jones Act, Joseph Schumpeter, laissez-faire capitalism, land bank, manufacturing employment, means of production, military-industrial complex, minimum wage unemployment, plutocrats, post-industrial society, power law, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

As Mancur Olson has observed, governmental redistributions typically "have arbitrary rather than egalitarian impacts on the The Sources of Big Government 13 distribution of income-more than a few redistribute income from lower to higher income people." Many governmental activities are "of no special help to the poor" and many others "actually harm them."24 Sam Peltzman's version of the Political Redistribution Hypothesis holds that "governments grow where groups which share a common interest in that growth and can perceive and articulate that interest become more numerous." Here governmental growth is seen as driven exclusively by citizen demands, governmental response being taken for granted.

Hence the more rapid growth of governmental employment at the lower levels than at the federal level since World War II is neither surprising nor especially significant. 21 Despite the many defects of the quantitative measures presented in Table 2.1, economists and political scientists, with few. exceptions, continue to focus their studies of the growth of government on that kind of evidence. Some are aware of the problems inherent in a reliance on such ambiguous data. Sam Peltzman, for example, begins his study by observing that "to equate government's role in economic life with the size of its budget ... is obviously wrong since many government activities (for example, statutes and administrative rules) redirect resources just as surely as taxation and spend- 32 Framework ing."

Given the multitude of indirect as well as direct ways 278 Notes that governmental policies effect redistributions, the measure is not operational and hence the hypothesis cannot be tested empirically. A subsequent paper by Meltzer and Richard fails to recognize the problem and its test of the authors' hypothesis is therefore unpersuasive. "Tests of a Rational Theory of the Size of Government," Public Choice 41 (1983): 403-418. 24. Olson, Rise and Decline, p. 174. 25. Sam Peltzman, "The Growth of Government," Journal of Law and Economics 23 (Oct. 1980): 285, emphasis in original. 26. Ibid., pp. 221-223, 233-234. Political scientist Morris P. Fiorina has aptly remarked that "most economists receive a tolerably good training in statistical method, so they are capable of producing analyses which have the appearance of thoroughness and sophistication, but ... their lack of contextual knowledge leads them to rely on naive model specification.


pages: 306 words: 85,836

When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants by Steven D. Levitt, Stephen J. Dubner

Affordable Care Act / Obamacare, Airbus A320, airport security, augmented reality, barriers to entry, Bear Stearns, behavioural economics, Bernie Madoff, Black Swan, Broken windows theory, Captain Sullenberger Hudson, carbon tax, creative destruction, Daniel Kahneman / Amos Tversky, deliberate practice, feminist movement, food miles, George Akerlof, global pandemic, information asymmetry, invisible hand, loss aversion, mental accounting, Netflix Prize, obamacare, oil shale / tar sands, Pareto efficiency, peak oil, pre–internet, price anchoring, price discrimination, principal–agent problem, profit maximization, Richard Thaler, Sam Peltzman, security theater, sugar pill, Ted Kaczynski, the built environment, The Chicago School, the High Line, Thorstein Veblen, transaction costs, Tyler Cowen, US Airways Flight 1549

CHAPTER 7: BUT IS IT GOOD FOR THE PLANET? 165 “IS THE ENDANGERED SPECIES ACT . . .”: “He’s got a new working paper”: See John A. List, Michael Margolis, and Daniel E. Osgood, “Is the Endangered Species Act Endangering Species?,” NBER working paper 12777, December 2006. / 166 “Sam Peltzman’s observation that only 39 of the 1,3000 species list have ever been removed”: See Sam Peltzman, “Regulation and the Natural Progress of Opulence,” American Enterprise Institute monograph, May 23, 2005. 166 “BE GREEN: Drive”: “via John Tierney’s blog”: John Tierney, “How Virtuous Is Ed Begley Jr.?,” The New York Times (TierneyLab), February 25, 2008. / 167 “Goodall is no right-wing nut”: See Chris Goodall, How to Live a Low-Carbon Life (Earthscan, 2007). 168 “DO WE REALLY NEED A FEW BILLION LOCAVORES?”

So in the short run, destruction of habitat is likely to actually increase. Based on this theory, List et al. analyze the data for the cactus ferruginous pygmy owl near Tucson, Arizona. Indeed, they find that land development speeds up substantially in the areas that are going to be designated critical habitats. This result, combined with the economist Sam Peltzman’s observation that only 39 of the 1,300 species put on the endangered species list have ever been removed, do not paint a very optimistic picture of the efficacy of the Endangered Species Act. Be Green: Drive (SDL) When it comes to saving the environment, things are often not as simple as they seem at first blush.


pages: 596 words: 163,682

The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, airline deregulation, Albert Einstein, Andrei Shleifer, banking crisis, barriers to entry, basic income, battle of ideas, Bernie Sanders, blockchain, borderless world, Bretton Woods, British Empire, Build a better mousetrap, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, central bank independence, computer vision, conceptual framework, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, data acquisition, David Brooks, Deng Xiaoping, desegregation, deskilling, disinformation, disruptive innovation, Donald Trump, driverless car, Edward Glaeser, facts on the ground, financial innovation, financial repression, full employment, future of work, Glass-Steagall Act, global supply chain, Great Leap Forward, high net worth, household responsibility system, housing crisis, Ida Tarbell, illegal immigration, income inequality, industrial cluster, intangible asset, invention of the steam engine, invisible hand, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, labor-force participation, Les Trente Glorieuses, low interest rates, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, means of production, Money creation, moral hazard, Network effects, new economy, Nicholas Carr, obamacare, opioid epidemic / opioid crisis, Productivity paradox, profit maximization, race to the bottom, Richard Thaler, Robert Bork, Robert Gordon, Ronald Reagan, Sam Peltzman, shareholder value, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, SoftBank, South China Sea, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, superstar cities, The Future of Employment, The Wealth of Nations by Adam Smith, trade liberalization, trade route, transaction costs, transfer pricing, Travis Kalanick, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, Upton Sinclair, Walter Mischel, War on Poverty, women in the workforce, working-age population, World Values Survey, Yom Kippur War, zero-sum game

August 31, 2017, available at https://pdfs.semanticscholar.org/138f/249c43bfec315227a242b305b9764d57a0af.pdf. Of course, average size would also increase if small firms no longer enter. 48. See Sam Peltzman, “Industrial Concentration under the Rule of Reason,” The Journal of Law and Economics 57, no. S3 (August 2014): S101–20. 49. “Too Much of a Good Thing,” The Economist, March 26, 2016, https://www.economist.com/briefing/2016/03/26/too-much-of-a-good-thing. 50. Sam Peltzman, “Industrial Concentration.” 51. Robert Bork, The Antitrust Paradox: A Policy at War With Itself (New York: Basic Books, 1978). 52. “AT&T and Time Warner Are Cleared to Merge,” The Economist, June 16, 2018, https://www.economist.com/news/leaders/21744068-more-consolidation-will-follow-consumers-ought-worry-att-and-time-warner-are-cleared?

The average US public firm today is three times larger, even after correcting for inflation, than it was two decades ago.47As a number of studies have shown, US industries are becoming more dominated by a few large firms today—they are becoming more concentrated, in econ-speak.48 For example, between 1982 and 2012, retail trade saw the share of the top four firms double from 15 percent to 30 percent. In the critical sector of information technology, media, and communications, the Economist magazine found the top four firms now accounted for nearly 50 percent of the revenue.49 Concentration has been made easier by a more lax antitrust environment, as argued by my colleague Sam Peltzman.50 Right until the early 1980s, antitrust authorities were quite active in preventing mergers that increased industry concentration substantially. The legal scholar Robert Bork (yes, he of the failed Supreme Court nomination) argued in his book The Antitrust Paradox in 1978 that it is possible that rising concentration in an industry may reflect gains in market share for more efficient players rather than growing monopolization.51 He urged antitrust regulators to focus on whether the consumer was better off rather than whether industry was dominated by a few firms.

Both were very generous with their comments on an earlier draft. I have also benefited from discussions with, and comments from, Marianne Bertrand, Steve Davis, Douglas Diamond, Eugene Fama, Rob Gertner, Chang-Tai Hsieh, Erik Hurst, Steven Kaplan, Anil Kashyap, Yueran Ma, Bhanu Pratap Mehta Lubos Pastor, Sam Peltzman, Eswar Prasad, Ram Shivakumar, Amir Sufi, Chad Syverson, Richard Thaler, Rob Vishny, and Eric Zwick. Rohit Lamba and Prateek Raj were especially kind in going through the early chapters and giving me detailed useful comments. Krishna Kamepalli and Adarsh Kumar provided very helpful research assistance.


The Armchair Economist: Economics and Everyday Life by Steven E. Landsburg

Albert Einstein, Arthur Eddington, business cycle, diversified portfolio, Dutch auction, first-price auction, German hyperinflation, Golden Gate Park, information asymmetry, invisible hand, junk bonds, Kenneth Arrow, low interest rates, means of production, price discrimination, profit maximization, Ralph Nader, random walk, Ronald Coase, Sam Peltzman, Savings and loan crisis, sealed-bid auction, second-price auction, second-price sealed-bid, statistical model, the scientific method, Unsafe at Any Speed

At the same time, the regulations tend to increase the number of driver deaths by encouraging reckless behavior. Which effect is the greater? Is the net effect of the regulations to decrease or to increase the number of driver deaths? This question cannot be answered by pure logic. One must look at actual numbers. In the middle 1970s, Sam Peltzman of the University of Chicago did just that. He found that the two effects were of approximately equal size and therefore cancelled each other out. There were more accidents and fewer driver deaths per accident, but the total number of driver deaths remained essentially unchanged. An interesting side effect appears to have been an increase in the number of pedestrian deaths; pedestrians, after all, gain no benefit from padded dashboards.

I tell my daughter to be wary of such people—even when they are preschool teachers who have otherwise earned a lot of love. Sincerely, Steven Landsburg APPENDIX Notes on Sources This book contains many ideas and arguments mat I lifted from other people. My memory is not good enough to accurately acknowledge them all. In this appendix I will do the best I can.* The Power of Incentives: Sam Peltzman's work on auto safety was published in the Journal of Political Economy in 1975. Isaac Ehrlich's work on capital punishment was published in the American Economic Review, also in 1975. Ed Learner's article on taking the "con" out of econometrics was published in the American Economic Review in 1983.


pages: 325 words: 90,659

Narconomics: How to Run a Drug Cartel by Tom Wainwright

"World Economic Forum" Davos, Airbnb, barriers to entry, bitcoin, business process, call centre, carbon credits, collateralized debt obligation, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, failed state, financial innovation, illegal immigration, Mark Zuckerberg, microcredit, price elasticity of demand, price mechanism, RAND corporation, Ronald Reagan, Sam Peltzman, Skype, TED Talk, vertical integration

Dudley, “Drug Trafficking Organizations in Central America: Transportistas, Mexican Cartels and Maras,” Wilson Center, 2010, at http://www.wilsoncenter.org/sites/default/files/Chapter%202-%20Drug%20Trafficking%20Organizations%20in%20Central%20America%20Transportistas,%20Mexican%20Cartels%20and%20Maras.pdf. 4. US Securities and Exchange Commission, see p. 15 at http://www.sec.gov/Archives/edgar/data/1467858/000146785812000014/gm201110k.htm#s8EF7834BE4E777188CAF1031CB30C168. 5. Gianluca Fiorentini and Sam Peltzman, eds., The Economics of Organised Crime (Cambridge: Cambridge University Press, 1997). 6. Christina Villacorte, “Tattoo Removal in Prison Gives Inmates a Second Chance,” Huffington Post, September 4, 2013, at http://www.huffingtonpost.com/2013/09/04/tattoo-removal-prison_n_3864222.html. CHAPTER 3 THE PEOPLE PROBLEMS OF A DRUG CARTEL: WHEN JAMES BOND MEETS MR.

Alison Smith, “Fortune 500 Companies Spend More Than $500bn on Corporate Responsibility,” Financial Times, October 12, 2012, at http://www.ft.com/cms/s/0/95239a6e-4fe0-11e4-a0a4-00144feab7de.html#axzz3lqtuDTmC. 8. As quoted in La Jornada, September 20, 2005 (in Spanish), at http://www.jornada.unam.mx/2005/09/20/index.php?section=politica&article=022n1pol. 9. Herschel I. Grossman, “Rival Kleptocrats: The Mafia Versus the State,” in Gianluca Fiorentini and Sam Peltzman, The Economics of Organised Crime (Cambridge University Press, 1997). 10. Leopoldo Franchetti, Political and Administrative Conditions in Sicily (1876). 11. Diego Gambetta and Peter Reuter, “Conspiracy Among the Many: The Mafia in Legitimate Industries,” in Fiorentini and Peltzman, The Economics of Organised Crime. 12.


pages: 512 words: 165,704

Traffic: Why We Drive the Way We Do (And What It Says About Us) by Tom Vanderbilt

Albert Einstein, autonomous vehicles, availability heuristic, Berlin Wall, Boeing 747, call centre, cellular automata, Cesare Marchetti: Marchetti’s constant, cognitive dissonance, computer vision, congestion charging, congestion pricing, Daniel Kahneman / Amos Tversky, DARPA: Urban Challenge, Donald Shoup, endowment effect, extreme commuting, fundamental attribution error, Garrett Hardin, Google Earth, hedonic treadmill, Herman Kahn, hindsight bias, hive mind, human-factors engineering, if you build it, they will come, impulse control, income inequality, Induced demand, invisible hand, Isaac Newton, Jane Jacobs, John Nash: game theory, Kenneth Arrow, lake wobegon effect, loss aversion, megacity, Milgram experiment, Nash equilibrium, PalmPilot, power law, Sam Peltzman, Silicon Valley, SimCity, statistical model, the built environment, The Death and Life of Great American Cities, Timothy McVeigh, traffic fines, Tragedy of the Commons, traumatic brain injury, ultimatum game, urban planning, urban sprawl, women in the workforce, working poor

The most troublesome possible answer, one that has been haunting traffic safety for decades, suggests that, as with the roads in Chapter 7, the safer cars get, the more risks drivers choose to take. While this idea has been around in one form or another since the early days of the automobile—indeed, it was used to argue against railroad safety improvements—it was most famously, and controversially, raised in a 1976 article by Sam Peltzman, an economist at the University of Chicago. Describing what has since become known as the “Peltzman effect,” he argued that despite the fact that a host of new safety technologies—most notably, the seat belt—had become legally required in new cars, the roads were no safer. “Auto safety regulation,” he concluded, “has not affected the highway death rate.”

This is peculiarly true of accidents at highway grade crossings. These commonly occur when the conditions are such as to cause the highway travelers to suppose that, if any danger existed, they could not but be aware of it.” From Charles Francis Adams, Notes on Railroad Accidents (New York: G. P. Putnam’s Sons, 1879). “the highway death rate”: Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy, vol. 83, no. 4 (August 1976), pp. 677–726. reason to feel less safe: Decades later, people are still sifting through the data, trying to refute or defend Peltzman’s hypothesis. He has been questioned for, among other things, including motorcyclists in his count of nonoccupant fatalities—that is, along with pedestrians and cyclists—as if they were a similar beast.

Moore, and D. A. Simpson, “Prevention of Head Injuries to Car Occupants: An Investigation of Interior Padding Options,” Federal Office of Road Safety, Report CR 160, NHMRC Road Accident Research Unit, University of Adelaide and Monash University Accident Research Centre. seat belts and air bags: Sam Peltzman, “Regulation and the Natural Progress of Opulence,” lecture presented at the American Enterprise Institute, September 8, 2004, AEI-Brookings Joint Center for Regulatory Studies, Washington, D.C. Simpson has suggested: Joe Simpson, writing about “super-share ice screws” and other technological innovations, notes that “one would have thought these welcome developments would have made the sport considerably safer.


pages: 614 words: 174,226

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum

90 percent rule, airline deregulation, Alan Greenspan, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, Dr. Strangelove, ending welfare as we know it, financial deregulation, financial engineering, financial innovation, fixed income, flag carrier, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, It's morning again in America, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Les Trente Glorieuses, long and variable lags, Long Term Capital Management, low cost airline, low interest rates, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, plutocrats, precautionary principle, price stability, profit motive, public intellectual, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Silicon Valley, Simon Kuznets, starchitect, Steve Bannon, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus, We are all Keynesians now

Prices were quite different in regulated and unregulated states, and the paper’s conclusion — that this could be explained by factors other than regulation — rested on some odd assumptions. Price changes during the first three years after regulation began, for example, were not attributed to regulation. Two decades later, a Chicago graduate student asked Friedland for the data and found a basic math error.13 Stigler’s most important disciple, Sam Peltzman — whom Stigler feted as “the best purchase the Walgreen foundation has yet made” — later described Stigler’s work on regulation as propaganda.14 “He was very much the kind of a person who would say, ‘I’ll state this result as strongly as I possibly can, even if it’s not completely justified by the evidence,’ ” Peltzman said of Stigler.

“There is no reason,” said the 1982 Economic Report of the President, “to think that commands from the government can do a better job of increasing an individual’s economic welfare than the individual can by making choices himself.” Indeed, a growing literature suggested that regulation often had unanticipated adverse consequences. An early classic in this genre was a 1975 paper by Sam Peltzman, George Stigler’s protégé, arguing that seat belt laws killed pedestrians because drivers felt safer and therefore took larger risks. In February 1981, the White House summoned representatives of regulatory agencies to a meeting in the old office building that sits on the west flank of the White House, an odd Second Empire confection in a city of neoclassical temples.

.: Cambridge University Press, 2011), 148. 15. Freedman, In Search of the Two-Handed Economist, 386. 16. James Allen Smith, Brookings at 75 (Washington, D.C.: Brookings Institution, 2010), 89. 17. Martha Derthick and Paul J. Quirk, The Politics of Deregulation (Washington, D.C.: Brookings Institution, 1985), 34, 56. 18. Sam Peltzman, “Entry in Commercial Banking,” Journal of Law and Economics 8 (October 1965): 11–50. The paper is a condensed version of Peltzman’s dissertation. Peltzman later recounted Stigler told him he didn’t like the results, but couldn’t find any errors. See Freedman, In Search of the Two-Handed Economist, 380.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

"Friedman doctrine" OR "shareholder theory", Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, Alan Greenspan, bank run, barriers to entry, Berlin Wall, Bernie Sanders, Big Tech, big-box store, Bob Noyce, Boston Dynamics, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, compensation consultant, computer age, Cornelius Vanderbilt, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Dunbar number, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fairchild Semiconductor, Fall of the Berlin Wall, family office, financial innovation, full employment, gentrification, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, Herbert Marcuse, income inequality, independent contractor, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, Jeremy Corbyn, Jevons paradox, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, Maslow's hierarchy, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, passive investing, patent troll, Peter Thiel, plutocrats, prediction markets, prisoner's dilemma, proprietary trading, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, SoftBank, Steve Jobs, stock buybacks, tech billionaire, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, vertical integration, very high income, wikimedia commons, William Shockley: the traitorous eight, you are the product, zero-sum game

When antitrust laws have been vigorously enforced, income inequality has been lower (Figure 10.7). Figure 10.7 Income Inequality in the United States versus Antitrust Enforcement SOURCE: Einer Elhauge, “Horizontal Shareholding,” Harvard Law Review 129, no. 5 (March 2016). The increase in inequality started after the antitrust revolution under President Ronald Reagan. Sam Peltzman, an economist at the University of Chicago, found that that concentration, which had been unchanged over the previous decades, began rising at the same time that merger policy changed. Concentration has increased steadily over the entire period after antitrust policy changed. He noted that the increase has been especially pronounced in consumer goods industries.13 The role of high industrial concentration on inequality is now becoming clear from dozens recent academic studies.

alias=/olivers-insights/august-2017/inequality-is-it-increasing. 10. http://www.epi.org/publication/ceo-pay-continues-to-rise/. 11. http://work.chron.com/ceo-compensation-vs-world-15509.html. 12. Gustavo Grullon, Yelena Larkin, and Roni Michaely, “Are U.S. Industries Becoming More Concentrated?” (August 31, 2017). Available at SSRN: https://ssrn.com/abstract=2612047. 13. Sam Peltzman, “Industrial Concentration under the Rule of Reason,” The Journal of Law and Economics 57, no. S3 (August 2014): S101–S120, https://doi.org/10.1086/675719. 14. Jonathan Baker and Steven Salop, “Antitrust, Competition Policy, and Inequality,” American University Washington School of Law Working Papers, February 25, 2015, http://digitalcommons.wcl.american.edu/fac_works_papers/41/. 15.


pages: 116 words: 32,712

Making a Killing: The Deadly Implications of the Counterfeit Drug Trade by Roger Bate

global supply chain, interchangeable parts, RFID, Sam Peltzman, supply-chain management

Glenn Hubbard Dean and Russell L. Carson Professor of Finance and Economics Columbia Business School Samuel P. Huntington Albert J. Weatherhead III University Professor of Government Harvard University William M. Landes Clifton R. Musser Professor of Law and Economics University of Chicago Law School Sam Peltzman Ralph and Dorothy Keller Distinguished Service Professor of Economics Graduate School of Business University of Chicago George L. Priest John M. Olin Professor of Law and Economics Yale Law School Jeremy Rabkin Professor of Law George Mason University School of Law Murray L. Weidenbaum Mallinckrodt Distinguished University Professor Washington University Richard J.


pages: 484 words: 104,873

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic management, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, bond market vigilante , business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Charles Babbage, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, data science, debt deflation, deep learning, deskilling, digital divide, disruptive innovation, diversified portfolio, driverless car, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Ford Model T, Fractional reserve banking, Freestyle chess, full employment, general purpose technology, Geoffrey Hinton, Goldman Sachs: Vampire Squid, Gunnar Myrdal, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kenneth Arrow, Khan Academy, Kiva Systems, knowledge worker, labor-force participation, large language model, liquidity trap, low interest rates, low skilled workers, low-wage service sector, Lyft, machine readable, machine translation, manufacturing employment, Marc Andreessen, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, Paul Samuelson, performance metric, Peter Thiel, plutocrats, post scarcity, precision agriculture, price mechanism, public intellectual, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Robert Solow, Rodney Brooks, Salesforce, Sam Peltzman, secular stagnation, self-driving car, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, The Future of Employment, the long tail, Thomas L Friedman, too big to fail, Tragedy of the Commons, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, union organizing, Vernor Vinge, very high income, warehouse automation, warehouse robotics, Watson beat the top human players on Jeopardy!, women in the workforce

A term often used in place of “guaranteed income” is “citizen’s dividend,” which I think effectively captures the argument that everyone should have at least a minimal claim on a nation’s overall economic prosperity. The Peltzman Effect and Economic Risk Taking In 1975, the University of Chicago economist Sam Peltzman published a study showing that regulations designed to improve automobile safety had failed to result in a significant reduction in highway fatalities. The reason, he argued, was that drivers simply compensated for the perceived increase in safety by taking more risks.14 This “Peltzman effect” has since been demonstrated in a wide range of areas.

John Schmitt, Kris Warner, and Sarika Gupta, “The High Budgetary Cost of Incarceration,” Center for Economic and Policy Research, June 2010, http://www.cepr.net/documents/publications/incarceration-2010–06.pdf. 13. John G. Fernald and Charles I. Jones, “The Future of US Economic Growth,” American Economic Review: Papers & Proceedings 104, no. 5 (2014): 44–49, http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.5.44. 14. Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy 83, no. 4 (August 1975), http://www.jstor.org/discover/10.2307/1830396?uid=3739560&uid=2&uid=4&uid=3739256&sid=21103816422091. 15. Hanna Rosin, “The Overprotected Kid,” The Atlantic, March 19, 2014, http://www.theatlantic.com/features/archive/2014/03/hey-parents-leave-those-kids-alone/358631/. 16.


pages: 456 words: 185,658

More Guns, Less Crime: Understanding Crime and Gun-Control Laws by John R. Lott

affirmative action, Columbine, crack epidemic, Donald Trump, Edward Glaeser, G4S, gun show loophole, income per capita, More Guns, Less Crime, Sam Peltzman, selection bias, statistical model, the medium is the message, transaction costs

The only real effect from making concealed handguns legal could arise from people being more willing to use them to defend themselves, though this might also imply that they would be more likely to make mistakes in using them. It is also possible that concealed-firearm laws both make individuals safer and increase crime rates at the same time. As Sam Peltzman has pointed out in the context of automobile safety regulations, increasing safety may lead drivers to offset these gains by taking more risks as they drive.23 Indeed, recent studies indicate that drivers in cars equipped with air bags drive more recklessly and get into accidents at sufficiently higher rates to offset the life-saving effect of air bags for the driver and actually increase the total risk of death for others.24 The same thing is possible with regard to crime.

The results of a recent Oklahoma poll showed that up to 6 percent of Oklahoma residents already carry concealed handguns either on their persons or in their cars; see Michael Smith, “Many Permits to Go to Lawbreakers,” Tulsa World, May 5, 1996, p. A15. The margin of error in the poll was 3.5 percent, which is substantial, given the small value with which this error is compared. 23. Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy 83 (Aug. 1975): 677–725. 24. Steven Peterson, George Hoffer, and Edward Millner, “Are Drivers of Air-BagEquipped Cars More Aggressive? A Test of the Offsetting-Behavior Hypothesis,” Journal of Law and Economics 38 (Oct. 1995): 251–64. 25.

In contrast, if we had instead inquired what difference it would make in crime rates if either all states or no states adopted right-to-carry concealed-handgun laws, the case of all states adopting concealed-handgun laws would have produced 2,000 fewer murders; 5,700 fewer rapes; 79,000 fewer aggravated assaults; and 14,900 fewer robberies. In contrast, property crimes would have risen by 336,410. 10. Ted R. Miller, Mark A. Cohen, and Brian Wiersema, Victim Costs and Consequences: A New Look (Washington, DC: National Institute of Justice, Feb. 1996). 11. See Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy 83 (Aug. 1975): 677–725. 12. To be more precise, a one-standard-deviation change in the probability of arrest accounts for 3 to 11 percent of a one-standard-deviation change in the various crime rates. 13. Translating this into statistical terms, a one-standard-deviation change in the percentage of the population that is black, male, and between 10 and 19 years of age explains 22 percent of the ups and downs in the crime rate.


pages: 376 words: 118,542

Free to Choose: A Personal Statement by Milton Friedman, Rose D. Friedman

affirmative action, agricultural Revolution, air freight, back-to-the-land, bank run, banking crisis, business cycle, Corn Laws, foreign exchange controls, Fractional reserve banking, full employment, German hyperinflation, invisible hand, means of production, minimum wage unemployment, oil shale / tar sands, oil shock, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, Sam Peltzman, school vouchers, Simon Kuznets, The Wealth of Nations by Adam Smith, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration

Now that's fine if what you are trying to do is minimize drug toxicity for the whole population, but if you happen to be one of those "not enough patients," and you have a disease that is of high severity or a disease that's very rare, then that's just tough luck for you. Granted all this, may these costs not be justified by the advantage of keeping dangerous drugs off the market, of preventing a series of thalidomide disasters? The most careful empirical study of this question that has been made, by Sam Peltzman, concludes that the evidence is unambiguous: that the harm done has greatly outweighed the good. He explains his conclusion partly by noting that "the penalties imposed by the marketplace on sellers of ineffective drugs before 1962 seems to have been sufficient to have left little room for improvement by a regulatory agency." 12 After all, the manufacturers of thalidomide ended up paying many tens of millions of dollars in damages—surely a strong incentive to avoid any similar episodes.

Gabriel Kolko, The Triumph of Conservatism (The Free Press of Glencoe, 1963), quotation from p. 99. 8. Richard Harris, The Real Voice (New York: Macmillan, 1964), p. 183. 9. William M. Wardell and Louis Lasagna, Regulation and Drug Development (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1975), p. 8. 10. Sam Peltzman, Regulation of Pharmaceutical Innovation (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1974), p. 9. 11. Estimates for 1950s and early 1960s from Wardell and Lasagna, Regulation and Drug Development, p. 46; for 1978, from Louis Lasagna, "The Uncertain Future of Drug Development," Drug Intelligence and Clinical Pharmacy, vol. 13 (April 1979), p. 193. 12.


pages: 386 words: 113,709

Why We Drive: Toward a Philosophy of the Open Road by Matthew B. Crawford

1960s counterculture, Airbus A320, airport security, augmented reality, autonomous vehicles, behavioural economics, Bernie Sanders, Big Tech, Boeing 737 MAX, British Empire, Burning Man, business logic, call centre, classic study, collective bargaining, confounding variable, congestion pricing, crony capitalism, data science, David Sedaris, deskilling, digital map, don't be evil, Donald Trump, driverless car, Elon Musk, emotional labour, en.wikipedia.org, Fellow of the Royal Society, Ford Model T, gamification, gentrification, gig economy, Google Earth, Great Leap Forward, Herbert Marcuse, hive mind, Ian Bogost, income inequality, informal economy, Internet of things, Jane Jacobs, labour mobility, Lyft, mirror neurons, Network effects, New Journalism, New Urbanism, Nicholas Carr, planned obsolescence, Ponzi scheme, precautionary principle, Ralph Nader, ride hailing / ride sharing, Ronald Reagan, Sam Peltzman, security theater, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, smart cities, social graph, social intelligence, Stephen Hawking, surveillance capitalism, tacit knowledge, tech worker, technoutopianism, the built environment, The Death and Life of Great American Cities, the High Line, time dilation, too big to fail, traffic fines, Travis Kalanick, trolley problem, Uber and Lyft, Uber for X, uber lyft, Unsafe at Any Speed, urban planning, Wall-E, Works Progress Administration

One gets the sense that these are no longer separate elites; that they have merged into a super-elite bent on controlling the narrative of progress, even if at the cost of the public interest. WE HAVE A RISK BUDGET At a conceptual level, the difficulties of disentangling the causal factors in traffic accidents, and the toll of such accidents when they occur, remain much as they were in 1975 when Sam Peltzman published his influential study Regulation of Automobile Safety. The car operates in a larger risk ecology that is affected by traffic density, speed limits, rates of traffic-rule enforcement, the design and condition of roads, the quality of driver education, the availability and quality of hospital trauma care, the percentage of drivers who are young and inexperienced, rates of drunk driving, and so on.

As a consequence, the overall 40 percent reduction in the crash rates reported by NHTSA following the installation of Autosteer is an artifact of the Agency’s treatment of mileage information that is actually missing in the underlying dataset” (“NHTSA’s Implausible Safety Claim”). 7.Timothy B. Lee, “In 2017, the Feds Said Tesla Autopilot Cut Crashes 40%—That Was Bogus,” Ars Technica, February 13, 2019. See also Timothy B. Lee, “Sorry Elon Musk, There’s No Clear Evidence Autopilot Saves Lives,” Ars Technica, May 4, 2018. 8.Sam Peltzman, Regulation of Automobile Safety (Washington, DC: American Enterprise Institute for Public Policy Research, 1975), p. 4. 9.According to the Fatal Analysis Reporting System of the National Highway Traffic Safety Administration, in the year 2000 seat belts alone were estimated to have a 48 percent effectiveness in preventing fatalities (to people over twelve years old) in crashes that otherwise would have been fatal.


pages: 582 words: 160,693

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, William Rees-Mogg

affirmative action, agricultural Revolution, Alan Greenspan, Alvin Toffler, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, classic study, clean water, colonial rule, Columbine, compound rate of return, creative destruction, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, independent contractor, informal economy, information retrieval, Isaac Newton, John Perry Barlow, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, Norman Macrae, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, Sam Peltzman, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income, Vilfredo Pareto

According to a former interior minister, General Viktor Yerin, "The bulk were contract killings, because of conflicts in the sphere of commercial and financial activity." In most cases, authorities turned "a blind eye." Criminal organizations "through their control over coercion and corruption," as economists Gianluca Fiorentini and Sam Peltzman write in The Economics of Organized Crime, play a key role in the economy.'7 In theory, this influence can sometimes be beneficial because it constrains regulation and may encourage governments to improve their delivery of public goods. The presence of a powerful mafia "constrains the monopolistic role of government authorities." 8 Governments in territories with powerful organized crime groups can only with great difficulty entertain policies that the mafias oppose.

Krugman, "The Tax-Reform Obsession," New York Times Magazine, April 7, 1996, p.37. 34. Foldvary, op. cit., pp. 66f. Chapter II. Morality and Crime in the "Natural Economy" of the Information Age 1. Vito Tanzi, "Corruption: Arm's-length Relationships and Markets," in Gianluca Fiorentini and Sam Peltzman, eds., The Economics of Organized Crime (Cambridge: Cambridge University Press, 1995), pp.167, 170. 2. Hirshleifer, op. cit., p.176. 3. Ibid., p.169. 4. Michelle R. Garfinkel and Stergios Skaperdas, eds., The Political Economy of Conflict and Appropriation (Cambridge: Cambridge University Press, 1996), p.1. 5.


pages: 472 words: 80,835

Life as a Passenger: How Driverless Cars Will Change the World by David Kerrigan

3D printing, Airbnb, airport security, Albert Einstein, autonomous vehicles, big-box store, Boeing 747, butterfly effect, call centre, car-free, Cesare Marchetti: Marchetti’s constant, Chris Urmson, commoditize, computer vision, congestion charging, connected car, DARPA: Urban Challenge, data science, deep learning, DeepMind, deskilling, disruptive innovation, Donald Shoup, driverless car, edge city, Elon Musk, en.wikipedia.org, fake news, Ford Model T, future of work, General Motors Futurama, hype cycle, invention of the wheel, Just-in-time delivery, Lewis Mumford, loss aversion, Lyft, Marchetti’s constant, Mars Rover, megacity, Menlo Park, Metcalfe’s law, Minecraft, Nash equilibrium, New Urbanism, QWERTY keyboard, Ralph Nader, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Rodney Brooks, Sam Peltzman, self-driving car, sensor fusion, Silicon Valley, Simon Kuznets, smart cities, Snapchat, Stanford marshmallow experiment, Steve Jobs, technological determinism, technoutopianism, TED Talk, the built environment, Thorstein Veblen, traffic fines, transit-oriented development, Travis Kalanick, trolley problem, Uber and Lyft, Uber for X, uber lyft, Unsafe at Any Speed, urban planning, urban sprawl, warehouse robotics, Yogi Berra, young professional, zero-sum game, Zipcar

Although usually having a small impact in comparison to the fundamental benefits of safety interventions, risk compensation may result in a lower net benefit than expected from new initiatives. The reduction of predicted benefit from regulations that intend to increase safety is sometimes referred to as the Peltzman effect in recognition of Sam Peltzman, a professor of economics at the University of Chicago Booth School of Business, who published "The Effects of Automobile Safety Regulation" in the Journal of Political Economy in 1975.[159] Cars Don’t Crash It’s important to point out that currently in almost all cases of car crashes, the car itself is not at fault - a tiny percentage of car crashes are the result of mechanical failure, yet these are more tightly regulated and enforced than the humans that cause over 90% (see table below).


pages: 338 words: 85,566

Restarting the Future: How to Fix the Intangible Economy by Jonathan Haskel, Stian Westlake

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Andrei Shleifer, Big Tech, Black Lives Matter, book value, Boris Johnson, Brexit referendum, business cycle, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, Charles Lindbergh, charter city, cloud computing, cognitive bias, cognitive load, congestion charging, coronavirus, corporate governance, COVID-19, creative destruction, cryptocurrency, David Graeber, decarbonisation, Diane Coyle, Dominic Cummings, Donald Shoup, Donald Trump, Douglas Engelbart, Douglas Engelbart, driverless car, Edward Glaeser, equity risk premium, Erik Brynjolfsson, Estimating the Reproducibility of Psychological Science, facts on the ground, financial innovation, Francis Fukuyama: the end of history, future of work, general purpose technology, gentrification, Goodhart's law, green new deal, housing crisis, income inequality, index fund, indoor plumbing, industrial cluster, inflation targeting, intangible asset, interchangeable parts, invisible hand, job-hopping, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, knowledge worker, lockdown, low interest rates, low skilled workers, Marc Andreessen, market design, Martin Wolf, megacity, mittelstand, new economy, Occupy movement, oil shock, patent troll, Peter Thiel, Phillips curve, postindustrial economy, pre–internet, price discrimination, quantitative easing, QWERTY keyboard, remote working, rent-seeking, replication crisis, risk/return, Robert Gordon, Robert Metcalfe, Robert Shiller, Ronald Coase, Sam Peltzman, Second Machine Age, secular stagnation, shareholder value, Silicon Valley, six sigma, skeuomorphism, social distancing, superstar cities, the built environment, The Rise and Fall of American Growth, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber for X, urban planning, We wanted flying cars, instead we got 140 characters, work culture , X Prize, Y2K

As we saw in figure 2.4, Carol Corrado and colleagues find evidence consistent with this suggestion.10 Controlling for a large number of other factors, industries that are more intangibles intensive have a growing productivity dispersion, which suggests that intangibles are the main driver of productivity dispersion, an argument consistent with that made by Sam Peltzman.11 The implication of all these findings is that intangibles help make sense of the crisis of interfirm competition in three ways. First, including intangibles in some measures of market power (such as markups) reduces or eliminates the apparent increases in market power we would otherwise see in the data.


pages: 298 words: 95,668

Milton Friedman: A Biography by Lanny Ebenstein

Abraham Wald, affirmative action, Alan Greenspan, banking crisis, Berlin Wall, Bretton Woods, business cycle, classic study, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Modern Monetary Theory, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, price stability, public intellectual, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thorstein Veblen, zero-sum game

I also had the opportunity to meet David’s wife, Elizabeth, and to have a telephone conversation with Milton’s nephew Alan Porter. Friedman’s longtime secretary, Gloria Valentine, was encouraging and helpful. Others who gave interviews include Gary Becker, Anna Jacobson Schwartz, Lester Telser, Larry Sjaastad, Thomas Sowell, Sam Peltzman, Stephen Stigler, Larry Wimmer, John Turner, and the late D. Gale Johnson. Paul Samuelson sent a useful letter with reactions to some questions. For my biography of Hayek, I had the opportunity to interview W. Allen Wallis, Edwin Meese, and Ronald Coase, among others, and to talk briefly on the phone with Aaron Director.


pages: 332 words: 89,668

Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein

Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, basic income, Bernie Sanders, big-box store, Black Lives Matter, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, Glass-Steagall Act, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, mass incarceration, minimum wage unemployment, moral hazard, moral panic, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Sam Peltzman, scientific management, Scientific racism, Simon Kuznets, single-payer health, Strategic Defense Initiative, strikebreaker, the long tail, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, vertical integration, W. E. B. Du Bois, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration

Annals of the American Academy of Political and Social Science vol. 663 (2016) 8–29; Joel Mokyr, Chris Vickers, and Nicholas L. Ziebarth, “The History of Technological Anxiety and the Future of Economic Growth: Is This Time Different?” Journal of Economic Perspectives vol. 29 np. 3 (Summer 2015): 31–50. 73. Sam Peltzman, “Mortality Inequality,” Journal of Economic Perspectives vol. 23 no. 4 (Fall 2009): 175–190. 74. David K. Jones, Katharine W. V. Bradley, and Jonathan Oberlander, “Pascal’s Wager: Health Insurance Exchanges, Obamacare, and the Republican Dilemma,” Journal of Health Politics, Policy and Law vol. 39, no. 1 (2014): 97–137. 75.


pages: 322 words: 87,181

Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, behavioural economics, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, export processing zone, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, general purpose technology, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low interest rates, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, open immigration, Pareto efficiency, postindustrial economy, precautionary principle, price stability, public intellectual, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, Solyndra, special economic zone, spectrum auction, Steven Pinker, tacit knowledge, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, Tyler Cowen, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

Isaiah Berlin, The Hedgehog and the Fox: An Essay on Tolstoy’s View of History, Weidenfeld & Nicolson, London, 1953. 21. Daniel Drezner, The Ideas Industry, Oxford University Press, New York, 2017. CHAPTER 7: Economists, Politics, and Ideas 1. George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science, vol. 2(1), Spring 1971: 3–21; Sam Peltzman, “Toward a More General Theory of Regulation,” Journal of Law and Economics, vol. 19(2), 1976: 211–240; Jean-Jacques Laffont and Jean Tirole “The Politics of Government Decision Making: A Theory of Regulatory Capture,” Quarterly Journal of Economics, vol. 106, 1991: 1089–1127. 2. Anne O. Krueger, “The Political Economy of the Rent-Seeking Society,” American Economic Review, vol. 64(3), June 1974: 291–303; Gene Grossman and Elhanan Helpman, “Protection for Sale,” American Economic Review, vol. 84(4), 1994: 833; Dani Rodrik, “The Political Economy of Trade Policy,” in Handbook of International Economics, G.


The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities by Mancur Olson

barriers to entry, British Empire, business cycle, California gold rush, collective bargaining, correlation coefficient, David Ricardo: comparative advantage, full employment, income per capita, Kenneth Arrow, market clearing, Norman Macrae, Pareto efficiency, Phillips curve, price discrimination, profit maximization, rent-seeking, Robert Solow, Sam Peltzman, search costs, selection bias, Simon Kuznets, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, urban decay, working poor

Bochum), Harvey Leibenstein (Harvard U.), Edward J. Lincoln (Johns Hopkins U.), Edmond Malinvaud (Inst. National de la Statistique, Paris), R. C. O. Matthews (Clare, Cambridge), Christian Morrisson (Ecole Normale Superieure), Daniel H. Newlon (National Science Foundation), Yusuke Onitsuka (Osaka U.), Sam Peltzman (U. of Chicago), Richard Portes (Birkbeck, London), Frederic L. Pryor (Swarthmore College), Walter Salant (Brookings Institution), Hans Soderstrom (U. of Stockholm), Ingemar Stahl (U. of Lund), Carl Christian von Weizsacker (U. of Bonn), Hans Willgerodt (U. of Cologne), Wolfgang Zapf (U. of Mannheim).


pages: 426 words: 118,913

Green Philosophy: How to Think Seriously About the Planet by Roger Scruton

An Inconvenient Truth, barriers to entry, carbon credits, carbon footprint, carbon tax, Cass Sunstein, Climategate, Climatic Research Unit, corporate social responsibility, demand response, Easter island, edge city, endowment effect, energy security, Exxon Valdez, failed state, food miles, garden city movement, Garrett Hardin, ghettoisation, happiness index / gross national happiness, Herbert Marcuse, hobby farmer, Howard Zinn, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, joint-stock company, joint-stock limited liability company, Kenneth Arrow, knowledge economy, Lewis Mumford, market friction, Martin Wolf, moral hazard, Naomi Klein, New Urbanism, Peter Singer: altruism, phenotype, precautionary principle, rent-seeking, Robert Solow, Ronald Coase, Sam Peltzman, Silicon Valley, Simon Kuznets, tacit knowledge, the built environment, The Death and Life of Great American Cities, the market place, Thomas Malthus, Tragedy of the Commons, transaction costs, University of East Anglia, urban planning, urban sprawl, Vilfredo Pareto, women in the workforce, zero-sum game

., The Philosophy of Need, Cambridge, 2004. 141 See David Wiggins, ‘Solidarity and the Root of the Ethical’, Tijdschrift voor filosofie, 2009. 142 Hans Jonas, The Imperative of Responsibility, 1984, English translation, Chicago, 1985. 143 Ulrich Beck, Risk Society: Towards a New Modernity, London, 1992. 144 Aaron Wildavsky, op. cit. The contrast between resilience and interception was made central to ecology by C. S. Holling, ‘Resilience and Stability of Ecological Systems’, Annual Review of Ecology and Systematics, 4, 1973, pp. 1–23. 145 Sam Peltzman, ‘An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments’, Journal of Political Economy, 1973; ‘Toward a More General Theory of Regulation’, Journal of Law and Economics, 1976. A pertinent, and damning, examination of the effect of regulation on drug trials in the UK is given by Denis Mitchison, ‘The Regulation of Clinical Trials’, openDemocracy www.opendemocracy.net/author/denismitchison, 30 November 2009. 146 See, for example, the study of the EPA’s continuing regulatory regime to control air quality: Joel M.


pages: 538 words: 121,670

Republic, Lost: How Money Corrupts Congress--And a Plan to Stop It by Lawrence Lessig

air traffic controllers' union, Alan Greenspan, asset-backed security, banking crisis, carbon tax, carried interest, circulation of elites, cognitive dissonance, corporate personhood, correlation does not imply causation, crony capitalism, David Brooks, Edward Glaeser, Filter Bubble, financial deregulation, financial innovation, financial intermediation, Glass-Steagall Act, Greenspan put, invisible hand, jimmy wales, low interest rates, Martin Wolf, meta-analysis, Mikhail Gorbachev, moral hazard, Pareto efficiency, place-making, profit maximization, public intellectual, Ralph Nader, regulatory arbitrage, rent-seeking, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Silicon Valley, single-payer health, The Wealth of Nations by Adam Smith, too big to fail, TSMC, Tyler Cowen, upwardly mobile, WikiLeaks, Yochai Benkler, Zipcar

The foundational work is George Stigler’s, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2 (1971): 3, and Richard Posner’s, “Taxation by Regulation,” Bell Journal of Economics and Management Science 2 (1971): 22. See also Richard A. Posner, “Theories of Economic Regulation,” Bell Journal of Economics and Management Science 5 (1974): 335; Sam Peltzman, “Toward a More General Theory of Regulation,” Journal of Law and Economics 19 (1976): 211; Burton Abrams and R. Settle, “The Economic Theory of Regulation and Public Financing of Presidential Elections,” Journalof Political Economy 86 (1978): 245; James Q. Wilson, The Politics of Regulation (1980).


pages: 386 words: 122,595

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

affirmative action, Alan Greenspan, Albert Einstein, Andrei Shleifer, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Boeing 747, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Cass Sunstein, central bank independence, classic study, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, Great Leap Forward, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, libertarian paternalism, low interest rates, low skilled workers, Malacca Straits, managed futures, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, seminal paper, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, tech worker, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

I’ve made the case that economics is often poorly taught. That is true. But it’s also true that the discipline can come alive in the hands of the right person, and I was fortunate to work and study with many of them: Gary Becker, Bob Willis, Ken Rogoff, Robert Willig, Christina Paxson, Duncan Snidal, Alan Krueger, Paul Portney, Sam Peltzman, Don Coursey, Paul Volcker. My hope is that this book will help to transmit their knowledge and enthusiasm to many new readers and students. naked economics CHAPTER 1 The Power of Markets: Who feeds Paris? In 1989, as the Berlin Wall was toppling, Douglas Ivester, head of Coca-Cola Europe (and later CEO), made a snap decision.


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

In the 1960s, automobile safety became an important social issue in the United States. We passed laws mandating that cars have seatbelts, padded dashboards, safer steering columns, and safer windshields to cut down on the number of deaths caused by fatal head and chest injuries. But when the University of Chicago economist Sam Peltzman looked at the data in 1975, he came to the controversial conclusion that any increases in safety were offset by a worsening of driver behavior.15 The increase in pedestrian deaths offset the decrease in driver deaths that followed the new safety features. A number of researchers disagreed with Peltzman’s conclusions, arguing that his study didn’t take into account a number of confounding factors like the skills of the drivers, the mechanical conditions of the cars, whether the accidents occurred on highways or local streets, whether the drivers were commuting or on vacation, and so on.


pages: 701 words: 199,010

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

affirmative action, Alan Greenspan, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black-Scholes formula, Bob Litterman, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, Glass-Steagall Act, global macro, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low skilled workers, managed futures, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, National best bid and offer, negative equity, Northern Rock, Occupy movement, oil shock, price stability, proprietary trading, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, tail risk, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

The Basel rules are discussed in detail in Chapter 13. 19. This concept of the danger of creating new policy without considering individual reactions is called the Lucas Critique, commonly credited to Robert Lucas of the University of Chicago. Some people call the human behavior Merton discussed the Peltzman Effect, named after economist Sam Peltzman, who first showed that regulatory changes do not always lead to the intended consequences. The No Child Left Behind Act is another example. This seemingly good rule had led to undesirable changes in behavior. On July 13, 2011, the Atlanta school system found widespread cheating among teachers and administrators, who wanted an easier way to keep up with educational standards (Timothy 2011). 20.