Kevin Drum

Movie Theater Communism

| Thu Oct. 8, 2009 12:31 PM EDT

Nicholas Tabarrok (brother of Alex) is a producer of small indie films.  But he's frustrated because there's no way for him to increase his audience by lowering the price to see his pictures:

When I make, say, an $8M film it has to compete at the same price level as the studios' $80M or $100M film.  It costs the consumer the same $12 at the multiplex.

....A few years ago Edgar Bronfman Jr, during the time his family briefly owned the Universal film studio, suggested that theaters actually charge different admission prices for different pictures so those films that cost less to make had correspondingly lower ticket prices than the mega-budget studio pictures.  He was roundly ridiculed by the industry.  But truth be told I actually think the less-the-warm reception his proposal received had more to do with the fact he was an 'outsider' who had bought his way into Hollywood than on the actual merit of the idea itself.  Sound like good economic practice to me.

This same thought has occurred to me frequently.  Why don't big, blockbuster films try to squeeze a few more dollars out of each ticketgoer?  I mean, who wouldn't pay an extra couple of bucks to see Transformers 2?

Anyway, I've always assumed that theater owners are the roadblock here.  Right now, no one has any incentive to cheat: if I want to see Transformers 2, I just buy a ticket for it.  It doesn't cost me any more than the ticket to District 9.  But if it did cost more, then I'd be highly motivated to buy a ticket to the cheaper movie and then sneak into the more expensive one.  That would require a bunch of extra ushers to make sure no one cheated, and the whole thing would be a gigantic pain in the ass and probably revenue neutral in the long run.  So why bother?

Then again, maybe there's some other, far more interesting and sophisticated reason for this practice.  Anyone happen to know?

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Quote of the Day

| Thu Oct. 8, 2009 11:57 AM EDT

From Antonin Scalia, explaining why a cross at Mojave National Preserve isn't really a specifically Christian symbol:

The cross is the most common symbol of the resting place of the dead.

For the record, I think court cases objecting to religious symbols on public property have gone way beyond the point of diminishing returns.  Basically, I don't care anymore, and if it were up to me I'd leave the cross alone.

But it's not up to me, and once these cases go to court they don't deserve this kind of sophistry.  As Jonathan Kulick asks, "Does Justice Scalia actually not understand that the cross is, in the United States, the most common symbol of the resting place of the dead because most of those dead were Christians?"  Apparently not.

Laboratories of Healthcare

| Thu Oct. 8, 2009 11:17 AM EDT

In the seemingly endless healthcare reform debate, it seems like every day brings yet another proposal for a compromise on a public option.  Today brings word of one that might actually be a workable idea: a national plan, created by Congress and standardized for the entire country, but that allows states to opt out if they don't want to participate.  Ezra Klein:

That's a real improvement over Tom Carper's proposal allowing individual states to create their own public options, which would would be quite a bit weaker than a national program. It also creates a neat policy experiment: We can see, over time, what happens to state insurance markets that include the national public option and compare them with those that don't. We can see whether the worst fears of conservatives are realized and private insurers are driven out and providers are forced out of business due to low payment rates, and we can see whether the hopes of liberals are right and costs come down and private insurers become leaner and more efficient. Or both, or neither. It's an opportunity to pit liberal and conservative policies against each other, rather than just pitting liberal and conservative congressmen against each other.

Not bad.  Let's put those laboratories of democracy to work!  I'd add that this would also be an interesting political experiment.  The states that would benefit most from access to a public option are those in which there are the fewest private insurers.  However, those are also the states in which the insurers have the most political power and can lobby the most effectively to keep the public option out.  So which of these is the more powerful force?  I, for one, would be interested to find out.

Healthcare Reform Inches Forward

| Wed Oct. 7, 2009 5:42 PM EDT

Attention nerds: the Congressional Budget Office has released its preliminary assessment of the healthcare bill passed out of the Senate Finance Committee last week.  Basically, the news is good: it pays for itself over ten years, it pays for itself over 20 years, it covers 94% of the population, and it reduces Medicare spending by over $400 billion:

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period....CBO expects that the proposal, if enacted, would reduce federal budget deficits over the ensuing decade relative to those projected under current law — with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP.

....By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million....Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent.

....Other components of the proposal would alter spending under Medicare, Medicaid, CHIP, and other federal health programs....In total, CBO estimates that enacting those provisions would reduce direct spending by $404 billion over the 2010–2019 period.

There are still plenty of battles to be fought, including those over subsidy levels and the public option, but we basically have on the table a plan that's budget neutral (or better), covers most of the population, saves a considerable amount of money, and ought to be roughly acceptable even to the most timorous of the centrists.  That's more than anyone's ever managed to do before.  And remember: it took most European countries decades before they had more than 94% of their population covered, but they all got there eventually once they had a starting place.  There's plenty left to do, but as a starting place this isn't too bad.

Time to Cut the Payroll Tax?

| Wed Oct. 7, 2009 4:42 PM EDT

Alex Tabarrok on a proposal for further economic stimulus:

Support appears to be growing (finally!) for a payroll tax cut.  Here's Edmund Phelps....[snip]....I argued in favor of a payroll tax cut (and other supply side stimulus ideas) earlier this year so I am in agreement that this is late but still warranted.  Other economists in favor of a payroll tax cut include Keynes, Tyler (in his usual manner), Arnold Kling, Greg Mankiw, Russ Roberts, Robert Reich and Dani Rodrik.  The list could easily be extended and it easily crosses political boundaries.

I don't know what to think about this idea.  I guess I've just gotten too cynical.  On a substantive basis, I'm pretty sure I could be talked into it pretty easily.  It's fast, it gets a lot of money into the economy, and it benefits the poor and middle class.  Sounds like a good idea.

But....I can't help wondering: is this just another political trap?  If we cut the payroll tax, then obviously the Social Security trust fund will be in slightly worse shape, and that in turn means that projections of doom and gloom will be pulled forward.  A couple of years from now Republicans will be screaming not that Social Security will be bankrupt in 2040, but that it will be bankrupt in 2035.  Or 2030.  Or whatever.  Something must be done!

I suppose it's a good idea anyway.  But considering the screeching reaction we've gotten lately from Republicans over proposals to rein in Medicare costs — something they were actively in favor of until about two minutes ago — it's a little hard not to be suspicious these days.

The GOP Speaks

| Wed Oct. 7, 2009 3:12 PM EDT

Conor Friedersdorf recently sent out an email questionnaire to Republican Party county chairmen throughout the country.  Sounds dull.  But it turns out to be surprisingly entertaining!  Here's a sampling of opinion from local GOP leaders about Barack Obama and whatever else is on their minds:

....He wants to totally change it to a socialistic nation....His swift moves towards socialism....We should point out that the Blank Panthers, KKK, and ACORN are the shock troops of the Dem Party....Obama's socalist tendencies....Stop kissing up to the RINOs, the left, and the socialists!....Is he for America or against us? Hard to tell with some of his far right [sic], socialistic policies or legislation he wants to enact.

....Dems can have an openly queer sitting as chair and nothing is held against the party or the individual....We are rushing into Sosialism and that is where we need focus our energies in poing this out not on how many hail marys did you say....Obama is all about race [...] He wants payback....We feel we are marching toward the end of our liberties without having a chance to catch our breath....Despite what he said, this is not a Muslim Country, we do not need a Muslim majority ruling America. This is one decision that was made under the cloak of darkness.

....I seem to remember a similar charismatic socialist somewhere in middle Europe about a third of the way through the last century.... I think the most worrisome part of the Obama presidency is the blatant adherence to the socialist doctrine....The most worrisome part is that the Obama administration my put us on an irreversible course toward socialism....We should stop all measurements of race and actively fight the race-pimps who live off of division.

This is obviously totally unfair.  I'm just cherry picking the most bizarro stuff I could find.  Still, it didn't exactly take much effort, and frankly, a lot of this stuff is actually more bizarre in context.  But here's my favorite line of all:

Einstein did not arrive at his theories of general and special relativity on the mandate of a government bureaucrat.

Yes!  In fact, by making him spend all his time at the patent office, the bureaucrats in Bern did everything they could to stop him.  Luckily, Einstein's entrepreneurial spirit was too strong for the jackboot of the Swiss government.

I'm pretty sure that Conor's goal was not to provide mockworthy material for smartass liberals like me.  But when life serves you lemons.....

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The Long, Hard Slog Revisited

| Wed Oct. 7, 2009 1:15 PM EDT

Yesterday I suggested that Barack Obama hadn't done as much as he could over the past couple of years to move public opinion in specific liberal directions that would help his legislative agenda.  Jonathan Bernstein, after noting correctly that Obama's strategy on healthcare reform has basically been to coopt and bribe all the major players, says this is not just a legislative strategy, but also a strategy for moving public opinion among centrists and independents:

John Zaller tells us [...] that public opinion is led by elites, and that people basically are ready and willing to adopt the opinions of those they like and respect, while they are pretty good at ignoring and rejecting what they hear from those they don't like and don't respect.

Loose partisans and true independents aren't ideologues and are unlikely to become ideologues. What you probably can do — what Reagan probably did — is to teach them, if they like you, to say that they're "conservative" or "liberal" and to adopt a handful of public policy positions that you advocate....But you don't do that by reasoning with them, or with inspiring them with great speeches. You mostly do that, as crude as it sounds, by winning. You do it by creating winning coalitions that put Establishment People on your side.

....The convincing doesn't happen, either in the short term or the long term, from presidential eloquence. The convincing comes when, for example, you've been a Republican main street AMA member all your professional life, and you suddenly find that the AMA is supporting health care reform while the Republicans are attacking the AMA. Even then, you may still be resistant to Obama...until you start hearing him saying the things that you're reading in the AMA newsletter (or however the AMA communicates with doctors. I don't know).

Now, there's no question that Obama and the Democrats in Congress are doing this.  They've basically coopted the insurance companies, the AMA, big pharma, AARP, and corporate interests by giving away goodies to all of them.  This isn't exactly the Schoolhouse Rock version of how a bill becomes law, but it's certainly the real-world way.  And it works pretty well as long as you can get the coalitions to stick together and keep the bribery from stinking up the joint too badly.

But does this actually move public opinion at the same time?  Maybe!  The mechanism here is certainly plausible, and not one that I've paid a lot of attention to in the past.  I'll put it in the back of my mind and give it some thought.

There's no question, though, that winning is indeed a powerful aphrodisiac.  Healthcare reform might be controversial right now, but if Obama gets a bill onto his desk and signs it, it will become a huge triumph almost overnight.  Support for both the bill and for Obama will rise steadily, and Democrats of all kinds will reap the benefit of being seen as tough enough and savvy enough to get it passed.  This is the fundamental reason that I'm optimistic about healthcare reform.  Every Democrat in Congress knows that if reform fails, they'll be viewed as losers and they'll pay the price at the polls in November.  They have to pass something if they want to remain in power.  That's a prospect that concentrates the mind powerfully.

No Exit

| Wed Oct. 7, 2009 12:48 PM EDT

Betsy McCaughey's mendacious article "No Exit," which ran in the New Republic in 1994, has long been given a share of the credit for killing the Clinton healthcare plan.  Andrew Sullivan, who was TNR's editor at the time, says he's addressed all this before, he's sorry he published the piece, he ran plenty of rebuttals, and anyway Clinton's bill had plenty of other problems too.  Fine.  But he also tells us today that he tried to correct some of McCaughey's worst excesses but failed:

One key paragraph — critical to framing the piece so it was not a declaration of fact but an assertion of what might happen if worst came to worst — became a battlefield with her for days; and all I can say is, I lost. I guess I could have quit. Maybe I should have. I decided I would run the piece but follow it with as much dissent and criticism as possible. I did discover that she was completely resistant to rational give-and-take. It was her way or the highway.

He lost?  He was the magazine's editor.  So who forced him to run the piece?  Andrew says he doesn't think it's professional to "air the specifics of internal battles after the fact," but you can hardly go this far without doing exactly that.  He's basically implying pretty strongly that he didn't want to run the piece but had to anyway, and had to run it precisely to McCaughey's specifications.  That's pretty extraordinary.  Having said that much, surely he owes us the rest of the story?

Restarting the Credit Markets

| Wed Oct. 7, 2009 12:26 PM EDT

The New York Times reports that bank lending is still frozen because the debt securitization market, which collapsed last year, is still dead.  And if banks can't bundle up their loans, securitize them, and sell them off, they just won't make any loans.  "As long as the market remains closed," says the piece, "banks will be reluctant to make loans for commercial real estate, since they would have to hold on to them, rather than package them into securities."  Paul Krugman is curious about this:

But here’s my question: why does it have to be a return to shadow banking? The banks don’t need to sell securitized debt to make loans — they could start lending out of all those excess reserves they currently hold. Or to put it differently, by the numbers there’s no obvious reason we shouldn’t be seeking a return to traditional banking, with banks making and holding loans, as the way to restart credit markets. Yet the assumption at the Fed seems to be that this isn’t an option — that the only way to go is back to the securitized debt market of the years just before the crisis.

Why? Are we still convinced that securitization is a far superior system to conventional banking, and if so why?

Good question.  Does it have to do with still weak bank capitalization?  After all, if banks are still deleveraging, there's no way for them to expand their loan books unless they can sell off the new loans they make.  So it's either securitization or nothing.

Alternatively, it could be that banks simply aren't willing to take on the risk of new loans and are only willing to extend credit if they can sell off the risk to someone else.  But that doesn't seem like much of an explanation.  Back in the boom years, there were plenty of eager buyers for loan bundles who didn't care much about the quality of the underlying loans, but those days are long gone.  If the loans aren't top notch, nobody will take them.  So there's not much point in trying to move the risk around just for its own sake.

In any case, I wonder if this is really a worthwhile concern?  Securitization has been around for decades and isn't necessarily a bad thing.  It only becomes bad when the securities themselves, which are relatively simple, get bundled into ever more complex bundles of CDOs, CLOs, synthetic CDOs, etc. etc., all with implicit leverage of 30:1.  It's the second and third level bundling and the outrageous leverage that helped fuel the recent credit bubble, not plain jane securitization.

Anybody have some alternative explanations?

Chart of the Day

| Tue Oct. 6, 2009 8:26 PM EDT

Good news for haters of the nanny state: New York City's new law requiring calorie counts on chain restaurant menu boards doesn't appear to be making any difference.  In fact, it might be causing people to eat more.

The full study is here.  Results are below.  The researchers chose 14 fast-food outlets in low-income NYC neighborhoods (Newark was a control group) and interviewed a few hundred people both before and after the calorie labeling law went into effect, asking them if they'd noticed the calorie counts and if they'd changed their selection because of it.  Then they got receipts from each respondent so they could find out what they'd actually purchased.

The results were pretty dismal: only about half the respondents even noticed the calorie counts and only 15% said they influenced their choice.  But the receipts told an even more dismal story: overall, people actually purchased more calories after the law went into effect.  The results aren't statistically significant, though, so basically all the researchers can really say is that the law (so far) hasn't had any effect.  The only glimmer of good news is that among people under 35, respondents who noticed the labeling did seem to cut back a bit.  No other subgroup showed any effect.  So who knows?  Young people probably respond to this kind of thing more quickly than older people, so maybe it's just going to take some more time before all this stuff sinks in.