Should fossils be treated like shipwrecks?

In a new article published in the journal Contemporary Economic Policy (ungated earlier version here), Paul Hallwood and Thomas Miceli (both University of Connecticut) discuss the law and economics of paleontological discovery - that is, fossil hunting. Hallwood and Miceli note that there are three groups of fossil collectors that have different incentives, in terms of the search for fossils and/or the recovery of scientific knowledge (the public value) from those fossils:

...professional paleontologists, commercial collectors who look to sell finds for a profit, and amateur collectors who do it out of interest rather than profit.

One important point is that recovering fossils leads to both public and private value:

Private good value is realized when the pecuniary value of a fossil is realized, or if it enters directly into a private collection; public good values are created when a fossil-type and the information associated with it are added to the stock of scientific knowledge in the field of paleontology.

In other words, there are positive externalities associated with recovering some (but not all) fossils. The problem with goods that have positive externalities is that, because the social benefit (what Hallwood and Miceli term the public good value) of recovery exceeds the private benefit (private value), private fossil hunters would engage in too little fossil hunting relative to the socially efficient (welfare maximising) amount of search. So, too few fossils would be discovered. On top of that, commercial collectors have little incentive to care about the scientific value of their finds, and so would not protect them in a way that preserves knowledge.

As a policy-maker, it may be tempting to try and capture the maximum public benefit by mandating that fossils must be given to museums or public academic institutions. However, that approach actually makes the problem of under-discovery worse, because then there is no chance of a private reward for recovery. On the other hand, having no restrictions on what happens to fossils after they are found would lead to more search and more fossils being found and excavated, but an inefficiently small amount of scientific knowledge being generated (because uncareful and low-cost excavation of fossils destroys much of the scientific value, which comes from their careful preservation in context). An example of this that I use in my ECONS102 class is when early palentologists paid Chinese peasants for each fragment of fossil they found. Unsurprisingly, the peasants found large fossils and then broke them up into smaller fragments, in order to earn a greater reward.

The article works through the various incentives mathematically and graphically, then looks at the current state of the law in the U.S., which could do with some improvement. Hallwood and Miceli conclude that:

Our analysis has shown that laws protecting scientific value are warranted based on the public good nature of fossil values, but this factor potentially creates an offsetting disincentive for profit-motivated collectors to engage in search, which is an essential prerequisite to recovery. Thus, if the scientific community needs to rely at least to some extent on private collectors to locate important fossils, there must be some recognition of the incentives that those searchers face. Federal legislation in fact pays little regard to this factor.

Their solution is interesting, but fairly intuitive:

...we believe there are lessons to be learned from the common law and state legislation pertaining to recovery of historic shipwrecks, which present many of the same economic issues.

As they note in one of the footnotes to the paper, in relation to the recovery of shipwrecks:

...the admiralty courts aim to balance the recovery of private (treasure) values and public (scientific archaeological) values from sunken wrecks. Neither is prioritized over the other. Second, property rights to work over sunken wrecks are granted to private companies working on federal (submerged) lands. Third, the admiralty courts promote the collection of sound archaeological knowledge from a historic shipwreck through two devices: (1) there is variation in the percentage of treasure value retained by a salvage company depending on the quality of work performed; and, (2) in cases of poor or nonexistent archeological work, applications for permits in the future can be denied.

So, it seems that, in theory at least, we possibly should treat fossils like shipwrecks, if we want both the optimal amount of search for fossils and the recovery of the optimal amount of scientific knowledge. 

In the battle between theories of sex, the red queen hypothesis dominates

I recently read this 2017 article by Motty Perry (University of Warwick), Philip Reny (University of Chicago), and Arthur Robson (Simon Fraser University), which seemed like a fairly random addition to an issue of The Economic Journal (open access). I say random because the title is "Why sex? And why only in pairs?", and the paper details a mostly theory-driven explanation (along with some simulation results) of why reproductive sex occurs between couples, and not between three or more parents. Given that there is a Journal of Mathematical Biology, The Economic Journal seemed like an odd fit to me.

Nevertheless, this was an interesting paper to read. Perry et al. outline attempt to unravel the following puzzle:

The breadth and variety of methods by which different species reproduce through sex is nothing short of remarkable. Nonetheless, sexual reproduction displays a stunning regularity. We can state that:

Each sexually produced offspring of any known species is produced from the genetic material of precisely two individuals. That is, sex is always biparental.

The obvious, but overlooked, question is, why? In particular, why are there no triparental species in which an offspring is composed of the genetic material of three individuals?

They first note that:

...a complete theory of sex must strike a delicate balance. On the one hand – as is well known – it must explain why genetic mixing is sufficiently beneficial so that biparental sex overcomes the twofold cost of males it suffers because an equally sized asexual population would grow twice as fast (Maynard Smith, 1978). On the other hand – and this point is central here – genetic mixing must not be so beneficial that a further increase in fitness would be obtained from even more of it through triparental sex.

They then outline the two main competing theories: (1) the mutational hypothesis; and (2) the 'red queen' hypothesis. The mutational hypothesis contends that sex is advantageous (compared with asexual reproduction) because "it halts the otherwise steady accumulation of harmful mutations". In contrast, the 'red queen' hypothesis contends that each species is in a constant battle with parasites (or other dangerous organisms), and asexual reproduction, where each offspring is genetically identical to the parent, is highly vulnerable to extinction at the hands (or tentacles, or whatever) of a new parasite evolved to attack the specific genetic makeup of the species.

The problem with sexual reproduction (when compared with asexual reproduction) is the so-called 'two-fold cost of sex':

...that a sexual population with a one to one ratio of (unproductive) males to females produces half as many offspring as an equally sized asexual population... The simple reason for this is that every individual in the asexual population can reproduce whereas only half of the individuals in the sexual population – the females – can do so.

Now, a successful theory of sexual reproduction must explain why biparental sex is advantageous over asexual reproduction. However, it must also explain why triparental sex is not even more advantageous.

Using a fairly simple narrative approach, supported by a minimum of necessary mathematical detail. Perry et al. go on to show that:

Under the mutational hypothesis, triparental sex always dominates biparental sex and high genomic mutation rates only serve to increase this advantage. With all three options available, either asexuality would be best or triparental sex would be best. Accordingly, biparental sex should not be observed.

In contrast, there is a ray of hope with the red queen hypothesis. Using a deliberately simplified red queen model, we have shown that biparental sex can have even an overwhelming advantage over asexuality, yet there is no further gain from more than two parents.

So, there you have it. The (coolly-named) red queen hypothesis seems to be the winner.

Sports, large gatherings, and the coronavirus pandemic

Watching the NFL this season has been a bit eerie. The piped-in artificial crowd noise is weird, and the shots of the empty (or near-empty, depending on the location) stadiums really brings home just how far from the norm we are this year.

Large gatherings, including sports events, were one of the first targets of public health authorities trying to contain the coronavirus pandemic. How effective was that approach? A recent working paper by Coady Wing, Daniel Simon, and Patrick Carlin (all Indiana University) provides an initial answer. They study the differences between counties (and metropolitan statistical areas [MSAs]) that hosted more, or fewer, NHL and NBA games between 1 January and 12 March (when both leagues were shut down), in terms of the number of COVID-19 cases and deaths. They also look at the relationship with the number of NCAA Division 1 basketball games.

They find that:

...hosting one additional NBA or NHL game results in an additional 428 COVID-19 cases and 45 COVID-19 deaths in the county where the game was played. This amounts to 783 COVID-19 cases and 52 COVID-19 deaths for the MSA as a whole. There were about 22 NHL and NBA games played in the average MSA. In total, then, these 22 games between January and mid-March resulted in more than 17,000 cases and nearly 1160 deaths per MSA. In contrast, we find that men's college basketball games only resulted in an additional 31 cases and 2.4 deaths per MSA. On average there were about 16 college games in an MSA, resulting in about 496 additional cases and 38 additional deaths per MSA.

Needless to say, those effects are quite substantial. Also:

Using a more conservative (age-adjusted) VSL of $2 million implies that each NLH/NBA game costs about $104 million in fatalities, and each NCAA game costs about $5 million in fatalities... Using this more conservative VSL, our results indicate that the roughly 22 NHL and NBA games played in January-mid March created about $2.3 billion worth of fatalities per MSA, while the roughly 16 NCAA games created about $80 million worth of fatalities per MSA...

...fatality costs per game ($104 million) are nearly 40 times greater than spending per game. Even assuming that total consumption benefits are four times greater than spending (i.e., $3 of consumer surplus for every dollar of spending), the fatality costs are nearly ten times greater.

These latter results are not fully explained in the working paper version, but the calculations seem relatively straightforward. A reasonable question is whether these results are simply correlations, or whether the sports games caused the increase in coronavirus cases and deaths. Wing et al. argue that their results are plausibly causal estimates:

Because NHL, NBA, and NCAA schedules were created prior to the outbreak, we can be condent that variation in home games due to scheduling was not influenced by local expectations about the state of the epidemic.

Since they limit their analysis to comparing counties (or MSAs) that have existing professional sports teams, and tend to be larger and more urban than counties without professional sports teams, their claim about causality is fair, although I would have liked to have seen some more robustness checks. For instance, they could have run a placebo test, using the number of scheduled home games for the 2019 or 2018 season within the same period. If the results are the same or similar, then the relationship between home sports games and coronavirus is either spurious, or driven by some other factor that their analysis fails to control for.

I'd expect some pushback from reviewers when this paper gets sent to peer review prior to journal publication, especially on the claims about causality. In terms of telling us about current sports events and their effects on coronavirus cases, the paper might be little help. As the authors note in their conclusion:

...our estimates are based on data generated from games played before social distancing policies and other adaptive behaviors were implemented. It is possible that sporting events would lead to less transmission if people were wearing masks and were seated in a socially distanced manner.

To the extent that social distancing is observed, the effects of more recent sporting events can be expected to be much lower.

[HT: Marginal Revolution]

Book review: The Winner-Take-All Society

As I mentioned earlier in the week, I've been reading The Winner-Take-All Society by Robert Frank and Philip Cook. The book focuses on what Frank and Cook refer to as 'positional arms races' - the tendency for winner-take-all markets to lead to a prisoners' dilemma, where people engage in costly, but ultimately fruitless, investment in order to win the arms race. These winner-take-all markets (and the positional arms races they incentivise) have led to a number of negative consequences, as they summarise in the introduction:

Winner-take-all markets have increased the disparity between rich and poor. They have lured some of our most talented citizens into socially unproductive, sometimes even destructive, tasks. In an economy that already invests too little for the future, they have fostered wasteful patterns of investment and consumption. They have led indirectly to greater concentration of our most talented college students in a small set of elite institutions. They have made it more difficult for "late bloomers" to find a productive niche in life. And winner-take-all markets have molded our culture and discourse in ways many of us find deeply troubling.

That paragraph neatly summarises several chapters of the book, which look at the effects of winner-take-all markets in all of those areas. And far from simply looking at the 'superstar and tournament effects' that exist at the very top of the income distribution, Frank and Cook devote an entire chapter to 'minor-league superstars' such as doctors, administrators, and accountants (no mention of economists, though!).

For someone like myself, who has read a lot of Robert Frank books, there is little that is new. That isn't surprising, because this book was published in 1995, and I have read a lot of more recent work by Frank. The examples, while dated, still do a good job of illustrating the points that are being made (although I wonder how many younger readers would know about the Lorena Bobbitt story, without looking it up. The book has some very quotable bits, such as this:

Social critics have long identified advertising as perhaps the largest and most conspicuous example of pure social waste in a market economy.

And this critique of the free market:

...although Adam Smith's invisible hand assures that markets do a speedy and efficient job of delivering the goods and services people desire, it tells us nothing about where people's desires come from in the first place. If tastes were fixed at birth, this would pose no problem. But if culture shapes tastes, and if market forces shape culture, then the invisible hand is untethered. Free marketeers have little to cheer about if all they can claim is that the market is efficient at filling desires that the market itself creates.

The latter sections of the book discuss ways that society has adapted to curtail positional arms races, including through rules, social norms, contracts, and public policy. However, clearly those attempts have not been entirely successful, or there would be no need for the book!

The most disappointing aspect of the book may be the proposed solutions to the problems, where Frank and Cook focus on progressive consumption taxes. To me, they ignore the obvious problems of such a tax. It isn't as simple as taking a person's (or household's income) and subtracting savings in order to work out their consumption, because people (or households) could consume from past accumulated savings (in which case, the tax authority has to be able to determine how much savings the person (or household) had at the start and the end of the year), or from capital gains (in which case, the tax authority needs to be able to assess all realised capital gains). While they make their proposal seem very simple in theory, it would turn out to be anything but simple in practice.

Nevertheless, this is a good book that covers one of the sources of higher inequality over the last couple of decades, and is important source material for understanding more recent books by Robert Frank, such as the excellent Falling Behind: How Rising Inequality Harms the Middle Class.