Thursday, May 29, 2003

Castrating Prosperity

I don’t entirely agree with this article by John Bolt -- indeed, I’m not sure I entirely understand it -- but I appreciate his coining of a new term in political economy: “the gelded worldview,” meaning “a worldview that is incapable of conceiving the very idea of being fruitful and multiplying.”

Economists usually call this the “fixed-pie fallacy” -- an inability or unwillingness to recognize that trade and free markets are not zero-sum games, but games in which it’s possible for the size of the pie to grow. But invoking the notion of sterility is so much more… evocative.

My complaint with the article (aside from my confusion about the more oblique religious references) is that Bolt ties the idea of fruitfulness too closely to the Laffer Curve, although he doesn’t call it that. The Laffer Curve is a graphical representation of the notion that, since both a zero-percent and one-hundred-percent tax rate would produce no government revenue (the former for obvious reasons, the latter because no one would be willing to work), there must be a tipping point beyond which increases in tax rates actually lead to decreases in government revenue. While this is certainly true, there’s really no great evidence that the U.S. currently resides on the right (decreasing revenues) portion of the Laffer Curve; and in any case, I wouldn’t rest the case for low taxes on a reed that weak. Even on the left side of the Laffer Curve (where higher tax rates lead to higher revenues), it’s still the case that taxes create dead-weight losses and inefficiency. This is true first because taxes distort incentives to be work and be productive, and second because the tax dollars are highly unlikely to be used on projects that actually satisfy the real needs and wants of the taxpayers they are taken from. (As an aside, I should also point out that tax cuts aren’t really tax cuts if they’re not accompanied by reductions in spending, because the resulting debts must eventually be paid off by future taxpayers. Alex Tabarrok has a nice article on this point.)

Still, Bolt makes some good points, and “the gelded worldview” has now entered my personal lexicon.

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Wednesday, May 28, 2003

Excretory Econ 102

As promised, I will now make the economic case against unisex restrooms. Mary Anne Case, creator of the toilet survey, “advocates ‘a model akin to the typical airline toilet,’ providing ultimate privacy without segregation (though she’s learned that many women prefer a same-sex environment).” From an egalitarian perspective, she may be onto something: unisex toilets assure equal waiting time for both men and women. And there could also be an efficiency advantage, because it’s pretty pointless for women to be waiting in line when the men’s room is empty. So why haven’t unisex restrooms become the standard instead of the exception?

My favorite theory (though perhaps not the best) is that separate restrooms constitute a form of zoning. Although zoning regulations have taken heat from some economists -- and many libertarians -- for abridging property rights, there is actually a decent economic argument for them: they help to internalize externalities. When industry and residential areas are located too close together, pollution from the former is more likely to adversely affect the latter. Since polluters are generally less sensitive to (or less easily harmed by) pollution than outside parties, zoning can reduce conflicts by grouping polluters together.

I’m not actually defending zoning regulations here, because a combination of traditional legal and market mechanisms can achieve the same or similar result. If placing your factory near residential areas leads to greater liability payments than placing your factory near other factories, you’ll be inclined to locate in established industrial areas. Zoning regulations, on the other hand, are much more likely to be affected by bureaucratic rent-seeking and political nonsense. (For instance, Giuliani’s famous anti-sex-shop zoning laws, passed in New York City several years ago, defy any kind of economic logic by prohibiting a sex shop from locating within [something like] 100 yards of any other sex shop. Far from concentrating the alleged externalities created by sex-oriented businesses, this regulation actually forces such businesses to spread out into areas dominated by other activities. The goal, of course, was not to control externalities, but to stamp out sex-oriented businesses altogether.)

The point is that zoning, whether accomplished by market or government, can reduce costs by concentrating external effects in a single area. And that, I think, is the primary function of separate men’s and women’s restrooms. You see, men have an unfortunate tendency to -- how shall I put this? -- whiz all over the place. This creates an externality for anyone else, male or female, using the toilets in question. But the magnitude of the harm is greater for women, because they actually have to sit on the toilet seat every time, whereas men have to do so less than half the time. Segregating the men and women concentrates splash-externalities on the group most likely to create them and least likely to be harmed by them.

In addition, I suspect it’s less time-consuming to clean one toilet with twice as much filth than two toilets with a normal amount of filth. If you had two toilets in a single unisex restroom, both would get used by men, and hence both would require cleaning on a regular basis. Having two separate toilets, one for each gender, means that one of the toilets (the one in the women’s room) can be cleaned substantially less often, while the other (the one in the men’s room) will only need to be cleaned slightly more often. The overall cleaning burden will fall as a result.

The economic perspective presented here also provides a ready answer to an age-old conundrum: should male transvestites use the women’s room? Answer: only if they squat to pee.

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Excretory Econ 101

Mary Anne Case’s “toilet survey” (brought to my attention by Gene) got me thinking about the economics of restrooms. Case’s primary research question is why lines for women’s restrooms are so much longer than they are for men’s restrooms – her hypothesis being that it’s *not* because women take longer to go, but because there are more “excreting opportunities” in men’s rooms. But somehow she has missed what jumps out to me as the most obvious question: why are there lines for restrooms at all? In general, queuing is the tell-tale sign of an under-priced product or service, the paradigmatic example being the queues for rent-controlled housing units. And indeed, with the rare exception of pay toilets in certain locations like airports, restrooms are generally free to the user. But why? After all, there is (to my knowledge) no law requiring a price of zero on restroom use. Free toilets seem to be a product of the free market. Naturally, I have some theories.

First theory: timing issues. Since the lines only appear at certain times (e.g., between halves at a football game or during prime-time at a nightclub), there is no need to price them all the time. Eventually, everyone gets to use the restroom, because the waiting time pushes some customers into the more open times (say, when the second half has begun). While this is true, the usual solution for this sort of situation is peak-load pricing: setting different prices at different times of day, such as when a toll road only charges a toll during rush hour. Peak-load restroom pricing would reduce the demand for restroom use during prime hours while increasing revenue for the owner. Such a pricing scheme would also have the salutary effect of allocating precious restroom time to those who value it most. Those who consider the price worth it because they really have to go now would pay; those who can hold it would do so to avoid paying.

Second theory: high transaction costs. Restrooms are generally bundled with other goods and services, such as meals, cocktails, and sporting events. Now, that fact in itself doesn’t explain why they aren’t priced; a restaurant could, in principle, put “toilet use” on its menu like everything else. But there are numerous other items that establishments choose to place in the public domain as well, even though they could in principle charge for them. Restaurants allow customers to use salt and ketchup freely, for instance. Setting a price of zero does lead to some overuse – as customers consume these products until the marginal benefit is zero – but the mild inefficiency from overuse is presumably swamped by the expense of monitoring and charging for each shake of the ketchup bottle. Similarly, the cost of charging for restroom use might be greater than the efficiency gain from superior rationing of toilet time. On the other hand, pay toilet technology is well established and cheap: just put a coin-operated lock on the stall doors.

Third theory: customer annoyance. People regard restroom use as something they *ought* to get for free if they’re paying customers (or for that matter even if they’re not). Any establishment that started charging for restroom use would lose customers who resent having to pay, so it’s more profitable to just charge more for the establishment’s primary products or simply to absorb the cost. This theory strikes me as plausible, if a bit ad hoc, but it relies on a specific factual assumption: that people are more annoyed by having to pay than by having to wait in line when they really have to go. (Some evidence this might be the case: if women really disliked waiting enough that they’d be willing to patronize other establishments, there would be a strong market incentive for expanding the size of women’s restrooms, which does not seem to have occurred.)

I suspect the reality is a combination of all three theories. The gains from toilet pricing only accrue at times when there are significant queues, because only then is it important to make sure those who value the restroom time most get it. Charging during other times would annoy customers without any compensating effect from reduced waiting time for those who need the restroom most. But peak-load pricing involves higher monitoring and enforcement costs, because a simple lock on the stall door can’t discriminate based on time. Plus, for every person gratified by the opportunity to use the restroom faster because she paid, there’s another person annoyed at having to wait because she didn’t pay.

Next: the economic case against unisex restrooms.

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