On budget woes and value systems

Since taking over as Governor of Virginia earlier this year, Bob McDonnell has mostly avoided major controversy. But one of the more contentious issues this year has been his proposal to privatize liquor sales, moving away from the ABC-store monopoly that has existed since the repeal of prohibition.

According to projections from the governor’s policy team, privatizing liquor sales would generate $229 million annually, and it would create $458 million in a one-time windfall that would be devoted to sorely underfunded state transportation projects.  

To generate that $229 million revenue stream, the proposal stipulates fees for wholesalers: a $17.50-per-gallon excise tax and a 1 percent tax on gross receipts. It also contains a 2.5 percent “convenience fee” on restaurants and bars that buy liquor directly from wholesalers instead of retailers... 

To boot, the state would auction 1,000 retail liquor licenses to the highest bidding stores, and the licenses would be divided into three unequal categories based on size and location.

The $229 million annual revenue projection (which has been heavily disputed in some corners) marks a slight decrease from the $248 million in profits and taxes generated in fiscal 2009 under the ABC-store model. So the real benefit of the plan is the one-time windfall to benefit transportation projects that otherwise cannot be funded--especially after the incredible drain on resources caused by the snowiest winter in Virginia history. 

The main source of the controversy is not so much the debate over the governor's projections, but the broader value-based message that would be sent throughout Virginia. 

A weak spot within McDonnell’s privatization pitch has been addressing social implications. Critics have asked: Wouldn’t upping the state liquor store tally from 332 to 1,000 increase alcohol consumption, burden local law enforcement and open a Pandora’s box of social ills, such as increased underage access?

The Virginia Interfaith Center is circulating a petition urging Virginians not to “trade your values for a few pieces of silver.”  According to the petition, privatization “will give our state a short-term financial high with a big long-term hangover.”

Ultimately, the question becomes whether Virginia can afford not to make that trade. The state is in better financial condition right now than many, but coffers are still bare, and deferred maintenance on infrastructure is a very real problem with few viable solutions.

The proliferation of debates like this one (and the ongoing marijuana debate in California) throws into question just how tightly held some of our values really are. I wonder if some "values" are in fact more like luxury goods--nice to have, but fungible and expendable under the right (or wrong) circumstances.

With budget gaps at local and state levels widening by the day, I think it is inevitable that some of our moral lines will begin to blur. Legalizing and taxing vices (like gambling) might end up being many municipalities' only way out of budgetary purgatory.

[C-Ville]
[Washington Post]

Clip of the Week (a couple days early)

I usually post the Clip of the Week on Thursdays, but this is too good to hold back. Quite simply, one of the best things I've seen in a long time. The internet at its absolute best.

Interesting sports-related posts

I'm a sucker for scientific studies that focus on sports and performance, and for some reason this weekend was a big weekend for these kinds of studies. The first one I came across was in this morning's New York Times.

Two economists at the Wharton School of the University of Pennsylvania, while investigating how round numbers influence goals, examined the behavior of major league hitters from 1975 to 2008 who entered what became their final plate appearance of the season with a batting average of .299 or .300 (in at least 200 at-bats).

They found that the 127 hitters at .299 or .300 batted a whopping .463 in that final at-bat, demonstrating a motivation to succeed well beyond normal (and in what was usually an otherwise meaningless game).

Most deliciously, not one of the 61 hitters who entered at .299 drew a walk — which would have fired those ugly 9s into permanence because batting average considers bases on balls neither hit nor at-bat.

I think this sort of finding has some interesting implications for how we design compensation and other structured incentives. The Times didn't mention how many of the 127 batters had incentives in their contracts for hitting .300 or above, but it's clear that the threshold altered the way the players approached their work. That none of the .299 batters drew a walk certainly shows that their behavior was different--whether for better or for worse. Simply, people respond strongly to incentives, and we need to recognize what this will mean when we design incentive-laden systems.

The second report was featured on Time's NewsFeed, and focused on tennis rather than baseball.

A study, which appeared in the Public Library of Science ONE journal, has shown that the loud grunts of some tennis players can give them a real advantage over opponents. The researchers from Canada and America showed that making “extraneous sound” could interfere with your opponent's performance, making their responses both slower and less accurate. 

The report suggested that the grunt could also hamper a receiver who was trying to judge the spin and speed of a ball from the sound made off the racket.

I sincerely hope this one isn't true, lest we witness more tennis matches like this one:

[New York Times]
[Time NewsFeed]

Every policy has unintended consequences

I've already written about the unintended consequences of government and business policy here once before, on the topic of globalization. It ended up turning into a several post rant, which I think shows just how widespread unintended consequences can be, and how difficult they can become to undo.

Almost any policy has the potential to create these types of issues; it's a bit like introducing a predator into an environment for the purposes of pest control, only to see that predator create more problems than the original pest (yes, this example is something that's had some relevance here in Charlottesville recently). It also reminds me of this Simpsons clip below, but I digress...



The reason I raise the issue is that this weekend, I came across an NPR news item that I think shows a particularly intriguing instance of a government policy with unintended consequences. Citing a report from the U.S. Census Bureau, NPR reported that:

In the U.S., fewer and fewer young people are getting married... Among 25-to-34 year olds, 45 percent are married. (By comparison, in 2000, 55 percent of Americans in that age group were married; in the 1960s, more than 80 percent were.)

In an interview with NPR's Melissa Block, Andrew J. Cherlin... said that, "for college-educated young adults, this is a story of postponing marriage."

They want to finish graduate school, maybe have a couple of years as a law firm associate, and then get married. So, they're waiting longer and longer until they have the rest of their lives in order before they get married.

For people without a college degree, some of them are postponing too, but some of them will never make it to the altar. We really will see probably a decline in the lifetime percentages of ever marrying for them.

According to Cherlin, increasingly, many Americans get married when it makes sense financially.

Essentially, debt-ridden college graduates rarely feel like they are financially prepared to enter into a marriage and start a family, buy a house, etc. This explosion of debt comes largely as a result of government initiatives aimed at encouraging higher education, which in many ways worked. More and more Americans have college degrees, which seems like a policy success. But in the process, it increased a debt load on those graduates (which I've written about before), and also increased the necessity of a graduate degree...and more debt.

The end result is more college graduates, but fewer married couples, and most troubling of all, more children born out of wedlock--41% of all U.S. births in 2008 were to unwed mothers. I'm fairly certain that "slash marriage rates among 25-34 year-olds in half" and "increase percentage of children born out of wedlock" weren't among the stated purposes of Lyndon Johnson's Higher Education Act back in 1965, but they're clearly among the results, at least indirectly.

I just hope that our inevitable policy response to those problems doesn't create more problems than it solves. Either way, we need to recognize that when making policy decisions, the unintended consequences are just as important and formative as the intended consequences. More of our debate needs to focus not on the initial impact of policy, but on trying to determine what the actual long-term responses of the society might be to those policies. It's tough stuff to predict, but it's what our government can and must be doing.

[NPR]

Interesting...

Well, I told you I'd be keeping my eye on California...

California Governor Arnold Schwarzenegger signed a bill Friday morning that decriminalizes possession of marijuana in the state.

Those caught with less than an ounce of marijuana will still receive a maximum penalty of $100. However, Senate Bill 1449 reduces the legal categorization of marijuana possession from a misdemeanor to a civil infraction. This means that those caught will not have to appear in court, pay court fees or receive a criminal record.

Basically, possession of a small amount of marijuana will now draw a penalty akin to a traffic ticket. Schwarzenegger opposes Proposition 19, a referendum that would essentially legalize marijuana production and garner taxes from its sale, but this bill is obviously a step in that direction. 

Independent of Prop 19, this bill will save California some money in court costs as it no longer arrests and arraigns people on marijuana possession (estimated around 60,000 people annually). At a time when California's budget can use the help, it's fairly clear to see why the decriminalization movement is gaining traction. Vermont, you're up next.

[Examiner.com]

On animal communication

It's a slow Friday and there's not much going on, but I found this article over at the BBC to be interesting.

When two dolphin species come together, they attempt to find a common language, preliminary research suggests.

Bottlenose and Guyana dolphins, two distantly related species, often come together to socialise in waters off the coast of Costa Rica. Both species make unique sounds, but when they gather, they change the way they communicate, and begin using an intermediate language.

That raises the possibility the two species are communicating in some way.

It is not yet clear exactly what is taking place between the two dolphin species, but it is the first evidence that the animals modify their communications in the presence of other species, not just other dolphins of their own kind.

I've always been intrigued by the concept of communication in non-human species--what they say, how they say it--and dolphins are often considered among the more intelligent non-primates. Furthermore, if dolphins of different species are able to communicate with each other, what might that indicate about our ability to communicate with other species?

Just don't blame me if the dolphins come out of the water to take over the world, Simpsons-style. You've been warned.

[BBC]

U...S...A! U...S...A!

Yeah, the Ryder Cup is underway across the pond (or, it was, until the rains came through and suspended play), and our limey friends are at it already. When asked about the weather, European captain Colin Montgomerie had this to say (emphasis mine):

"It's not fun for anyone, agreed," Monty said shortly after the opening shot. "But it's probably less fun for the Americans. In America, when it rains it usually thunders, too, and you can't play. I just hope it doesn't get so bad, the course gets so water-logged, that we can't play."

Thank you, Meteorologist Monty, for that information; I didn't realize that every storm in America was a thunderstorm. With your impressively thorough knowledge and understanding of North American weather patterns, it's an absolute shocker that you never won a tournament on U.S. soil.

Monty's an easy target, so this weekend should be fun. I'll never forget being in the crowd for the Sunday singles of the 1999 Ryder Cup, following Monty's match with Payne Stewart, and heckling him along with the rest of the crowd. After that Cup, Monty threatened to never play in the United States again. It would've been a shame if he'd followed through on that--we would've never gotten to witness his choke at Winged Foot in the 2006 U.S. Open.

Hopefully our guys can recapture some of that 1999 magic this weekend. That is, if their rain gear doesn't get in the way first.

[ESPN.com]