Tyler Cowen, a highly regarded economics professor (whose specialty is economics of the arts — but whose interests are wide and varied) has a series of posts over at the Volokh Conspiracy outlining the basic ideas of economics in a short, accessible way that non-specialists can understand. So far he has posted:

• Money and Monetary Policy

• Money and Monetary Policy: Responses to Questions from Readers

• Business Cycles

• Fiscal Policy

More parts are apparently coming this week. Much worth reading.

Via Instapundit comes this news:

A federal air marshal was fired and faces a felony assault charge after a June 8 incident in which police say he pulled his service weapon on two civilians during a parking space dispute at JFK International Airport in New York. The incident comes amid reports that more than 100 marshals have either left their jobs or been pulled from flight status and placed on paid administrative leave due to problems with the background investigations needed for their top secret security clearances.

And yet the TSA laughably responded,

“every air marshal understands how important it is that the traveling public have absolute confidence in their ability to defend the skies in a split second at 30,000 feet without backup. That is why marshals are held to the highest possible standard of performance and conduct both on and off duty.”

Given our nation’s catastrophic intelligence failures of the past few years such as the failure to detect and stop the 9/11 hijackers and our false beliefs about Iraqi weapons of mass destruction, I was excited to learn that there was a new federal program that might do a bit better at predicting threats to the U.S.

Unfortunately I learned about the program in an article about its cancellation amidst loud denunciation by both Democratic and Republican politicians.

“Defies common sense.”

“Absurd.”

“I think you ought to end the careers of whoever it was thought that up.”

“A sick idea.”

When that many politicians gather so quickly to condemn something, I start to think there might be something good in it.

And it turns out, maybe there is.

DARPA, the Defense Research Projects Agency (the folks who started experimenting with the Internet in the 60s), set up a betting market to identity vulnerabilities. In other words, they were going to calculate the odds of another terrorist attack with real bets just as we use bets to calculate football odds.

The program is called the Policy Analysis Market. DARPA said it was part of a research effort “to investigate the broadest possible set of new ways to prevent terrorist attacks.”



Traders would have bought and sold futures contracts — just like energy traders do now in betting on the future price of oil. But the contracts in this case would have been based on what might happen in the Middle East in terms of economics, civil and military affairs or specific events, such as terrorist attacks.



Holders of a futures contract that came true would have collected the proceeds of traders who put money into the market but predicted wrong.

If you’re interested in how the idea works and why it turns out to work exceedingly well, you can check out this web page about idea futures. Oh, and it turns out that much of the underlying methodology is based on work by Vernon Smith, who won the Nobel Prize in economics this past October.

It turns out that when people place bets, their collective knowledge is brought together in ways that surveys and other forms of analysis simply can’t aggregate. And since real money is behind it, people internalize the cost of hunches — they discount sketchy information appropriately and place a premium on real likelihoods. And bureaucracy gets stripped away. And there’s no meely-mouthing and covering for potential mistakes. Betting markets have a tremendously accurate predictive value.

But it offends the sensibilities of Hillary Clinton, John Warner, Byron Dorgan, and Ron Wyden — so we’ll just stick to our CIA, thank you very much. (Thanks to Tyler Cowen of the Volokh Conspiracy for the pointer.)

Update: Tyler has more on this idea. For instance,

Think of it as a substitute for government intelligence. If you want to know who will win the Super Bowl, check the Las Vegas odds (you wouldn’t ask the CIA, even if it were assigned to that task). Why should the best device for aggregating information be any different for terrorism or for that matter anything else?



Here are some criticisms from some prominent Senators.



Which criticisms make sense?



1. Would terrorists bet on attacks and then carry them out?



Maybe, but they can already do this with current stock markets, if they are at all clever.



2. Are we allowing some people to profit from the death of others?



Yes, but how does this differ from life insurance?



3. Would price/betting odds accurately reflect information?



Probably, provided you had a fair number of bettors. Return to the Super Bowl analogy. And the stock market figured out within minutes which contracting firm was responsible for the Challenger crash.

Update again: Brad DeLong is blogging about this too.

USAirways, which recently emerged from bankruptcy, posted a “profit” last quarter. It’s $13 million in the black included $214 million from the federal government, so this news doesn’t say too much about the airline’s business effectiveness. So call me skeptical when the company’s president says

“We have made great strides in executing the key elements of our restructuring plan related to increasing revenue, reducing costs and improving liquidity, all against the backdrop of a challenging industry environment”

Continental, Northwest, and Delta are all in the same boat.

In order to differentiate themselves and win more business, the three largest online travel booking sites are introducing new features and offering more information.

While no one site is uniformly best, and travelers often check more than one sites before booking, each is trying in their own way to offer products that consumers most want.

In my own experience, Orbitz consistently finds the best fares on complex and last minute itineraries. That isn’t because Orbitz has the best agreements with the airlines that founded it, either. It’s because Orbitz has the “best math” — the best search functions that are able to piece together flights that the other sites don’t think of. I’ve often found cheap flights on Orbitz that other engines couldn’t find, and then picked my flights one by one on Expedia only to find the same price (or even a few dollars lower). So Orbitz is a very useful tool.

Of course, consumers have already figured out that it’s best to check more than one distribution site. Since the sites have access to different inventory at different times (in part because they’re hooked up to different reservation systems), it’s sometimes possible to get a fare on one site that appears sold out on another.

I recently needed to book two Delta tickets for a couple of colleagues. I could get one at a cheap price on Orbitz but not two. So I booked one on Orbitz and the other on Expedia which still had available inventory when Orbitz told me the fare was no longer available.

Of course, your mileage may vary, and that’s why you need to check around.

Remember Rick Rockwell from Who Wants to Marry a Multi-Millionaire? A previous girlfriend had obtained a restraining order against him for roughing her up and threatening to kill her. And he wasn’t as wealthy as advertised, either.

Now we have Jeffrey W. Chodorow?

Viewers of NBC’s “The Restaurant” know him as the investor behind Rocco DiSpirito’s television efforts to launch an Italian dining experience in New York.

Aviation enthusiasts remember him as the investor who bought Braniff, revived from bankruptcy by Chicago billionaire Jay Pritzker in 1983, out of its second bankruptcy in 1988. Chodorow’s Braniff was back in bankruptcy in 1989.

In 1990, Chodorow and fellow investor Arthur Cohen sought to revive Braniff for a third go-round. They formed a holding company called BNAir, Inc. and purchased the Braniff name from the bankruptcy estate.

The Department of Transportation, however, wouldn’t grant BNAir the certificate necessary to offer passenger service because of objections they had regarding BNAir President Scot Spencer’s criminal history. As a result, BNAir purchased Emerald Air which already had such a certificate.

The Department of Transportation still objected, and demanded sworn affadavits from Chodorow, Cohen, and Spencer that Spencer would have no involvement in Braniff. The affadavits were submitted and Braniff commenced passenger service in July 1991. The next month Braniff was in bankruptcy.

Chodorow formally became President of Braniff in September 1991. The airline ceased all operations in 1992.

Despite the affadavits that Scot Spencer would have no involvement with the airline, he was intimately and flagrantly involved through a series of complex shell transactions and as a result Chodorow and Spencer were indicted in July 1994.

Chodorow pled guilty to obstructing the DOT’s role in the issuance and review of certificates issued to airlines in violation of 18 U.S.C.

As expected, with Delta forming a partnership with Continental and Northwest, and with United in partnership with USAirways, the partnership between United and Delta is being terminated.

Members of Delta’s SkyMiles frequent flyer program may continue to earn SkyMiles and book award travel on United through Oct. 15, 2003. Members of United’s frequent flyer program may continue to earn Mileage Plus

The Chicago Tribune carried a piece today speculating about equity investors for United’s exit from bankruptcy. Will they go for just a government loan? Will they get outside financing? Will it come from Lufthansa? Will any new investors demand a new management team? The piece is long on speculation but offers little prediction.

One curious thing is the last line of the article, considering a Lufthansa equity stake in United:

having another airline as a shareholder would be a first for United, although one that might be a lot less wrenching than other alternatives.

Alaska Airlines lays out its plans for first class on an employee website. It sounds like they get it.

• They’re going to keep first class. While only 10% of first class seats are occupied by paid first class travelers, upgrades for their elite flyers drive alot of ticket purchases.

• They need to differentiate themselves from lower cost one-class carriers like Southwest.

• They’re looking to generate an extra $25-30 per first class seat.

• They might allow upgrades only on higher fares (bad idea), charge a small premium for upgrades (better idea), or reduce the price difference between coach and first to encourage more first class ticket sales (best idea).

Read the whole thing.

See why I’m “angling for Secretary of Transportation” in a Glenn Reynolds administration! Let me suggest that you take a look at the ‘Greatest Hits’ list on the column to the right.

In particular, consider checking out:

• Discounted travel
  

• Rental car discounts
  

• Four star hotels on the cheap
  

• Free upgrade certificates
  

• Concentrate all your flying on one airline
  

• Instant Starwood Gold
  

• Spend miles or money?

And, of course, bookmark this page and visit frequently!

If you have any questions you’d like answered about travel or miles and points, drop me a line.

Northwest is offering double miles in the Worldperks Mall in August and September. Be sure to register.

If the blogosphere is increasingly important, then a Glenn Reynolds administration can only make sense.. but the position of Secretary of Transportation is apparently vacant. Seems like I’d be a perfect fit! That would be even better than impeaching Norm Mineta!

This week’s newsletter from David Rowell is uniquely good, so I’m going to reproduce some interesting snippets:

VS also enjoy having provocative slogans on the side of their planes. Not long ago, they had the slogan ‘Ours is Longer’ painted on their new A340 planes – presumably referring to the fact that the A340-600 is longer than a 747-400. And now they are painting the slogan “BA Can’t Keep It Up” on the side of its aircraft, – presumably referring to BA’s refusal to sell the Concordes to Virgin. VS will keep the slogan until the Concorde ceases flying in October.


…


Delta..has announced that it will eliminate its quarterly dividend, while forecasting a loss of $200 – $250 million in the upcoming third quarter.


…


Russia’s Aeroflot announced a net profit for 2002 of $89.3 million, compared to $20.1 million in 2001.


…


This Week’s Security Horror Story : Airport security killed 629 people last year? It has become conventional wisdom to accept that the hassles associated with airport security are discouraging people from flying, and forcing increased people onto the roads. With airfares lower than they have been for several years, the inconvenience of air travel has to be one of the factors that has brought about fewer people traveling by air, but more people driving the roads.


This week the National Highway Traffic Safety Administration advised that road fatalities increased by 629 last year. The number of fatalities per mile driven has remained constant at a historically low level, but the total traffic increased, and so too did the number of road deaths. Draw your own conclusions.

Hopefully the faculty that I work with are smart enough not to do this.

Amazon.com has VirusScan 7.0 and Norton Internet Security free after rebate.

Use code TENBUCKS4NIS for an additioanl $10 off when buying both. You get two free software titles and $10.

Gat a free sample of Carnation Instant Breakfast. Supposedly the stuff tastes good. Guess I’ll find out.

TAPPED, the American Prospect’s blog, complains about Orrin Hatch changing the rules for judicial nomination hearings.

I don’t have a strong judgment one way or the other on the specifics of these Senate rules, but TAPPED’s complaint hardly seems a principled one.

A Senator from a nominee’s home state had once been able to indefinitely block a nominee by placing a so-called “blue slip” on the nomination. Then the requirement changed, under Hatch as judiciary committee chairman, to both home state senators placing a “blue slip” on a nominee to block a hearing. Now Hatch is scheduling hearings on Bush judicial nominees over Democratic blue slips from Michigan.

TAPPED complains that this is

breaking with a Senate tradition

But as Robert Kuttner explained in the American Prospect a couple years back,

[I]t was Hatch, in 1995, who hardened the blue-slip policy to allow a single senator to block a nomination indefinitely.

Some Senate tradition; eight years old. And it’s a tradition that the Prospect has complained about in the past

“It’s irresponsible,” Leahy complained of the blocked nominations to The Washington Post. “If you don’t like a president’s nominee, then vote against him.”

So Hatch changes the rules and TAPPED cries foul. Even though making the most of judiciary committee rules to halt nominees is something that American Prospect authors have advocated in the past. But there isn’t a principled objection here, as the closing line of this TAPPED post makes clear:

Republican senators routinely placed blue slips on Clinton nominees without articulating any specific objections. Turnabout seems like fair play to Tapped.

Which is it? Are blue slips an important tool, or an abomination? Should all of a President’s nominees get hearings, or should Senate rules allow individual members to stymie the process? I believe there are reasonable arguments on both sides of this debate. The American Prospect seems to make whichever argument is convenient at the time, so it is of little help to me in sorting out the correct conclusion.

Now that Netbank has gotten into the mileage game by offering United and Delta miles, I decided to take a look at an online checking account.

I actually didn’t sign up with Netbank, though. Instead, I signed up with BankDirect.

Both give miles for checking accounts and other financial products. The (2) drawbacks to NetBank are:

• They don’t give very many miles (I was only going to earn 4500) and mileage is a one-shot deal — there’s no continued earning.

• They don’t reimburse ATM fees. So while they don’t CHARGE you to use an ATM, in most cases the machine you use will.

BankDirect solved both of those things. Now, BankDirect has two disadvantages:

• A $15/month fee on checking accounts with balances under $2500.
• A lower interest rate than NetBank.

So I studied hard and ran some numbers for myself. I’m going to earn about 11,000 American Airlines miles in the first year, and there’ll be a couple thousand more in each future year. The interest wasn’t significant, and the fee savings on ATM costs made BankDirect a better deal for me.

So I’ve decided to open an Internet checking account. Big step for me!

If you decide to go with BankDirect as well, drop me a line. If I refer you, we both get an extra 1,000 miles.

The Tacoma, Washington News Tribune is reporting that Alaska Airlines plans to keep first class seating on its aircraft.

Rumor has it that Alaska plans to revise the first class upgrade benefit that currently allows MVP Gold (top tier) members to upgrade any fare at the time of booking, subject to availability. This is likely to change to apply only to higher fares. Elites on discount fares will probably have to wait until closer to flight time to confirm a first class seat.

Sign up for Aloha Airlines email updates for 2500 AlohaPass Miles.