Saturday, August 19, 2017

"Fact-Checking" Is Often Just Editorializing

Many of the "fact-checking" pieces I read are actually editorials trying to take up the mantle of immutable truth. This new trend annoys me.

Fact-checking as such should be very narrow in scope. A false claim about some material fact should be corrected. A number or statistic or historical claim that is easily evaluated to an unambiguous answer is corrected, with some minimal commentary on how the claimant's conclusion changes. If I say there are 200 million people in the United States, such that each person on average owes $100,000 of the $20 trillion federal debt, it is the proper place of a fact-checker to say that the true figure is 323 million people and that the per-person average is closer to $60,000. On the other hand, if I want to argue that the true figure is not $20 trillion (unpaid bills that we have covered through borrowing) but more like $200 trillion (total unfunded liabilities for Social Security, Medicare, Medicaid, and other entitlements), that is not a piece of fact-checking. That is editorializing. It moves beyond the narrow scope of correcting a singular piece of information to telling an entirely new narrative. "The debt" is a fairly well-defined concept. "Total unfunded future liabilities" is another concept. It is arguably more relevant and less arbitrarily defined than "the debt." But changing the subject is very different from fact-checking. Media personalities need to be much more aware of when they are writing an opinion piece.

Editorializing is important, and I'm not knocking it. Some narratives really are better than others. We need journalists and academics to write opinion pieces sorting this out. But an entire narrative cannot be "fact-checked". A narrative can be wrong even though each material piece of data mustered in its defense proves correct. A narrative can be right even though transparent falsehoods are used to support it. Some things can be known with near certainty through sheer logic and introspection. It is impossible to fact-check a statement such as "demand curves slope downward." Getting at the truth requires more than assembling facts, because facts don't speak for themselves. Some assembly is required. Facts must be arranged into coherent stories, and this always requires a hefty dose of theory. There is a strong desire to have "the facts" on one's side. But facts themselves are neutral. They are often consistent with any of several competing, mutually exclusive hypotheses. We should stop pretending that if we simply collect enough of these crystallized nuggets of unassailable truth, we win the argument.

I should probably list a few example of bad fact-checking.

See this Slate story about motorists in China killing accident victims and this Snopes piece "debunking" the Slate piece, plus this China Insider story arguing that the original Slate piece is probably true.

See this story, in which the Washington Post "fact checks" a claim about declining union membership and union support by the labor force; Mark Hemingway of the Weekly Standard calls them out on their shenanigans. This is a great example of what I'm talking about. It is perfectly legitimate to discuss various pieces of evidence and argue about the implications of various historical facts and statistics, but that is emphatically not fact-checking. That is editorializing.

See this Marginal Revolutions piece about fact-checkers disagreeing with each other at an unacceptably high rate (with a link to the academic paper). And this Weekly Standard piece discussing it (also by Mark Hemingway).

Read a few of these posts from the WUWT blog about Wikipedia expelling contrary viewpoints on climate science. Wikipedia is often cited as the ultimate arbiter of truth. Plainly it's not if a few zealots are systematically deleting everything that casts doubt on their worldview. In a certain online forum that I frequent, people routinely fact-check by citing Wikipedia. That's often a good start, but it's never quite safe.

Econlog has some good pieces on political bias in fact-checking. See this one by Bryan Caplan and this one by David Henderson. I like the point Henderson makes in his piece. Sometimes fact-checking is not the journalist's job. For example "correcting" one of the candidates during a presidential debate, while hypocritically getting the facts wrong.

A correspondent on NPR's Morning Edition does this kind of thing all the time. He will instant-fact-check his conservative guests: "Hold on, I'm gonna have to fact-check you there..." And then he interjects with his opinion. His left-leaning guests don't get a similar treatment, even though they are just as likely to spew falsehoods. I want to say, "Buddy, it's not your job to fact-check based on your own fuzzy memory of what the 'facts' are." 

Tuesday, August 15, 2017

Hypocrisy Denounced. Now Tell Us Which Thing They Were Right About.

There are plenty of accusations of hypocrisy floating around. They often take the form of: You took the position X in a previous case, but now you're taking the position "not X". Supposedly someone's opinion changes just when it's politically convenient, or someone evokes a principle when it favors them but repudiates the principle when it doesn't. I think most of these accusations miss the mark. The two things being contrasted aren't actually in conflict. A simple conversation with one of the "hypocrites" would reveal that there is no internal contradiction. The person accusing you of hypocrisy is imagining himself to have more insight than you do into your own mind. Arnold Kling calls this "asymmetric insight," and we should all be extremely careful about doing this. Adherents of an ideology usually understand that ideology better than its critics.

Still, I want to take some of these accusations of hypocrisy at face value. I want to note that the claims of hypocrisy are usually perfectly symmetrical. Usually if "the Right" believes "X" in one situation and "not X" in another, "the Left" believes "not X" in the first situation and "X" in the latter. If you're making a charge of hypocrisy, it might be useful to specify in which instance the hypocrite is correct.

Consider a few examples that I have seen.
  • Conservatives were once for the individual mandate to purchase health insurance, now they are against it.
  • Conservatives side with the police when young black males are shot, but are either silent or side with the agitators when they are white (like Cliven Bundy and his followers).
  • Conservatives are all in favor of the rights of the unborn, but don't seem to care about children once they are born.
For the first bullet point, you can turn this around and point out that liberals once opposed the individual mandate, until it became a feature of the ACA and they decided they liked it. In the case of the second bullet point, I wish people would state clearly whether police confrontations are an appropriate or inappropriate response to rowdy protesters. When Cliven Bundy's people were occupying government buildings, I remember seeing some left-wing chatter on Facebook wishing that American soldiers would descend on them and "split open their skulls." (citation needed) It's fine to say that different protests take on a different character and thus invite different kinds of police responses. But if anyone is going to insist on some kind of absolute consistency, let's first have them tell us which kind of response is appropriate.

For the third bullet point, this is once again reversible. If we're collapsing these issues down to, "Well, do you care about children or don't you?" then conservatives could turn this one around on their accusers. You could defend this by saying something like, "No, the question of whether an unborn fetus is a person is different from the question of how the welfare state protects living people from misfortune." But this concedes the point that we're talking about two very different policy questions, and we can't collapse it to a one-dimensional question like "How much do you care about children?" You can believe that an unborn fetus is a person with all the associated rights and legal protections, but that a government-run welfare state creates perverse incentives that causes more misery than it solves. You can likewise believe that an unborn fetus is definitely not a person, and that a welfare state definitely ameliorates poverty and saves lives of people who are materially underprivileged. Or you can mix and match. No combinations of these viewpoints is self-contradicting or internally inconsistent. But if you do insist on some foolish consistency, you commit yourself to that consistency, too.

My preferred approach to these alleged hypocrisies is to say there probably is none. You are probably just failing to understand someone's viewpoint. But beware the symmetry of these accusations, which usually ensnare the accuser along with the accused.

___________________________________________________________

There is a very different kind of hypocrisy, where someone does something in their own life that is inconsistent with their stated moral beliefs. ("Al Gore uses a lot of fossil fuels while decrying the use of fossil fuels." "Bill Bennett preaches the dangers of addiction while indulging a gambling habit and a chain-smoking habit.")  I won't say much about this other kind. I will point out that sometimes the hypocrite has the right professed morals, even if they lack the character to live up to them. It would be unfair to do an ad hominem against, say, arguments in favor of temperance.

Sunday, August 13, 2017

Old Crank Yankers Episode: An @$$ Slapping Contest

There was a show on Comedy Central in the early 2000s called Crank Yankers. The theme was that comedians would prank-call someone, usually a local business, and the phone call would later be enacted by puppets.

In one episode, an effete, high-society gentleman named Niles calls a professional calligrapher and asks her to draft up invitations to an "ass slapping contest." Of course, the intention is to be as obnoxious as possible and make the calligrapher feel as uncomfortable as possible. That's the point of a crank call. The calligrapher declines, saying that she's "just a southern house-wife." That's her way of saying that an ass-slapping contest offends her delicate, conservative sensibilities. (Using "conservative" in an apolitical, cultural sense here.) I have a serious question.

Should we find this house-wife and prosecute her? Suppose she'd instead been asked to bake a cake for an "ass slapping contest"?

I hope you see what I'm getting at. The calligrapher's conservative sensibilities meant the project was extremely uncomfortable for her, so she declined. I think that's perfectly reasonable, and nobody should be able to compel you to serve them if they don't feel comfortable doing so. But apparently some people don't agree with me on this point. Apparently it's not sufficient to say, "Sorry, I'm not feeling it. Ask someone else to do it." Instead, you have to give a reason for declining. If the reason given doesn't pass muster, you're the fair target of a lawsuit.

I think it's possible to stake out a territory between "you have to bake a cake for a gay wedding" and "you don't have to do calligraphy for invitations to an 'ass slapping contest.'" But what's difficult is to make this kind of carve-up conform to a principle that any sane person recognizes. To do this without making it sound incredibly ad hoc requires some serious rhetorical gymnastics.

Wednesday, August 9, 2017

Hitch 22 - A Memoir

I thought I'd collect a list of some of my favorite passages from Christopher Hitchens' autobiography Hitch 22: A Memoir. I've read this book probably a dozen times. Actually I have it on audiobook, and it's The Hitch himself narrating. Very enjoyable. You will experience the full range of human emotions from this book. Hitchens sounds like "The Most Interesting Man In the World."

He coins many reusable phrases. "The sheer balls-aching tedium." I don't even remember the context for this one. "Hammer-blow heart attack", describing the very sudden death of his father who had "never spent a day in bed in his life." Referring to adolescent self-discovery, so to speak, at an English boarding school he says, "Most boys decided quite early on that, since their penises would evidently give them no rest at all, they would repay the favor by giving their penises no respite in return."

Describing his disenchantment with conventional politics: "I began, along with many, many of my contemporaries, to experience a furious disillusionment with 'conventional' politics. A bit young to be so cynical and so superior, you may think. My reply is that you should fucking well have been there and felt it for yourself...I hope never to lose the access to the outrage that I felt then." Maybe this falls flat on the page, but hearing his voice rise in pitch as he says, "you should fucking well have been there" makes me almost feel like I had "been there."

Referring to Kennedy and the Cuban Missile Crisis: "I shall never forget where I was standing and what I was doing on the day he nearly killed me."

He recounts a hilarious story where his friend Martin Amis ropes him into going to a "massage parlor" with him. Martin Amis, himself a successful author, is doing research for a book (titled Money) and apparently clears his research with his wife. "I was later startled, not to say impressed, when I learned that he had "cleared" all this "research" with his then-wife, the fragrant and lofty Antonia. He telephoned her in London and, rather than temporize, informed her right away that: "I'm going to a hand-job parlor with the Hitch." Hitch didn't want anything to do with this expedition, but was unable to say "no":
He even had one all picked out: its front-name was the "Tahitia," a dire Polynesian-themed massage parlor, on lower Lexington Avenue. "And you," he informed me, "are fucking well coming with me." I wanted to say something girlish like, "Have I ever refused you anything?" but instead settled for something more masculine like "Do we know the form at this joint?" I could not possibly have felt less like any such expedition: I had a paint-stripping hangover and a sour-mouth, but he had that look of set purpose on his face that I well knew, and also knew could not be gainsaid. How bad could it be?...Pretty damn bad as it turned out.
I bust up laughing at "and you are fucking well coming with me" every time I get to this part. Every time. And "paint-stripping hangover" is one of those reusable phrases strewn throughout the book. (Apparently in the print edition he writes "paint-bubbling"; if "paint-stripping" is an improvisation for the audiobook it is absolutely brilliant.) I know exactly the feeling. He goes on:
Some of the working "hostesses" may have to simulate delight or even interest - itself a pretty cock-shriveling thought-but when these same ladies do the negotiating, they can shrug off the fake charm as a snake discards an unwanted skin.
The story is anti-climactic, by which I mean he doesn't have to go through with the sex (for all we know). He describes the bargaining process, in which "I wearily started to count out the ever-steepening fee, which was the only thing in the room that showed any sign of enlarging itself." It is the cash question that saves him, as he puts it.

With respect to "identity politics":
People began to intone the words "The Personal Is Political". At the instant I first heard this deadly expression, I knew as one does from the utterance of any sinister bullshit that it was -cliche is arguably forgiven here-very bad news. From now on, it would be enough to be a member of a sex or gender, or epidermal subdivision, or even erotic "preference," to qualify as a revolutionary. In order to begin a speech or to ask a question from the floor, all that would be necessary by way of preface would be the words: "Speaking as a..." Then could follow any self-loving description.
He is describing 1969 in the above passage, but he could be talking about today.

"The one thing that the racist cannot manage is discrimination. He is indiscriminate by definition."

From Martin Amis: "He once rebuked some pedantic antagonist by saying the man lacked any sense of humor, but added that by this accusation he really intended to impugn his want of seriousness."

Quoting another literary friend, who apparently had a gift for hyperbole, describing someone's halitosis: "At this point his breath was undoing my tie."

A poem from Robert Conquest, author of The Great Terror:
The history of Soviet Russia in five verses. 
There was an old bastard named Lenin,
Who did two or three million men in,
That's a lot to have done in,
But where he did one in,
That old bastard Stalin did ten in.
There is a long and sad section on the fatwa against Salman Rushdie for his book The Satanic Verses. Rushdie was forced into hiding as credible threats were made against his life.
It was about this time that he took the "Proust Questionnaire" for Vanity Fair. One of the regular questions is: "What do you most dislike about your appearance?" His response: "Its infrequency."
Rushdie is the one who supplies The Hitch with his book title while listing off book titles that never were meant to be: The Big Gatsby, A Farewell to Weapons, Hitch-22. Hitchens, who was looking for a title to his autobiography, says, "Aha, got it!"

He describes "hoofing it" through Belfast at night in the era of IRA activity and being thrown against the wall by British soldiers with blackened faces. "Getting my breath back and managing a brief statement in my cut-glass Oxford tones, I was abruptly recognized as nonthreatening, brusquely advised to fuck off, and off I duly and promptly fucked." I love the split infinitive on "fuck off."

Correcting a Churchillism that goes "Nothing in life is so exhilarating as to be shot at without result." The Hitch had been to several war zones himself and had a few near misses. He corrects, "Catching the plane out with the whole skin is the best part by far." Perhaps you need to hear him read it in his own voice with his emphasis on "by far."

The book is a wonderful mix of humor, sadness, outrage, pride, and gratitude. Pick up a copy.

Tuesday, July 25, 2017

False Positives, False Negatives, and Prescription Opioids

There is a fundamental trade-off between making fewer false positives and making fewer false negatives. Always be aware that both kinds of errors exist, that you can't decrease one without increasing the other, and be clear about which one you are favoring and why.

I am often annoyed by the way the media and politicians talk about social problems. Usually a social problem is discussed as if the solution were obvious and as if the only question was how hard to crank on the “Solve Problem” lever. Any discussion of trade-offs goes out the window, as do any problems with data quality, and questions about the flawed administration of the proposed solution.

Take prescription opioids. (Please.) News reports and demagoguing politicians often start with scary statistics about the number of overdose deaths. Or perhaps they completely dispense with the statistics, assuming that somebody else has already done the math and other boring stuff, and jump straight into their narrative. The problem here is supposedly that doctors are prescribing too many opioids, leading to too many overdose deaths and causing unwitting patients to become hopelessly addicted.

There are two kinds of errors relevant to this discussion. Prescribing someone opioids that they don’t actually need is one kind of error. Perhaps the person has an addictive personality, or has had a previous addiction to opioids or other drugs. Perhaps the person is a heavy drinker, or is on benzodiazepines or something else that could interact fatally with prescription opioids. Perhaps the person suffers sleep apnea, such that the respiratory suppression caused by high-dose opioids could be dangerous. Such people probably shouldn’t be prescribed opioids lightly, or should only get them with special counseling about the dangers, or should only get them if their pain is above a certain threshold. Giving such a person opioids that are unnecessary or potentially dangerous is an “error”, but it’s only one kind of error. This is a false positive: you think the person needs the medicine, but they really don’t.

The other kind of error is a “false negative”: the person needs the medicine but doesn’t get it. I hope we can all agree this is a very costly error. Some people have chronic pain that doesn't respond to anything else, so it would be unbelievably costly (I would even say cruel) to deny such a person their prescription. There is a fundamental trade-off here. If you set the threshold for treatment higher, you will get fewer false positives but more false negatives. There will always be errors of both kinds. An intelligent discussion acknowledges this at the outset and tries to optimize based on the relative costs of those kinds of errors.

“Make fewer mistakes” isn’t always an option. It would be glib to say, “We just need to do a better job of separating the patients who truly need prescription painkillers from those who don’t.” Sometimes we’re already doing the best we can do, and all the relevant information is already being collected. It won’t do much good to throw more resources at the problem. What, should we get multiple doctors to sign off on every prescription? Should we try to collect more information about the patient? The doctors usually already have the patient’s medical history. Should they be conducting in-depth interviews with the patient's family members about potential risk factors? We could try to go down these roads, but it quickly becomes very costly to acquire information of no more than dubious value.

This is not one of my “I’m just articulating the trade-off, not venturing an opinion” posts, although it probably could be if I stopped here. I have a very strong opinion on this topic. I think that a false positive is not very expensive, but a false negative is incredibly costly. I think that people who are in pain and think they would benefit from opioids should get them. I think they shouldn’t require permission. Even if some of them are misinformed, even if most of them are misinformed, to place restrictions on them runs the risk of cutting off a true pain sufferer from their only source of relief.

I also think that if people want to consume drugs recreationally, they should be able to do so. This will come to no surprise to anyone who has read a sampling of my blog posts.  From this perspective a “false positive” isn’t even a mistake, or not a costly mistake at any rate. Someone “mistakenly” acquires the drug that they enjoy using. So what? You can start bringing in the scary overdose statistics here, but this is a risk that the recreational opioid user takes on voluntarily. Certainly there are things that we might do to mitigate this risk: informing users of overdose risk factors, insisting that someone be present in the event of an overdose, etc. But at the end of the day adults need to be able to make those kinds of decisions for themselves.  You might not agree with my civil libertarian idea that adults should be able to make decisions for themselves. Perhaps you are a leftist paternalist who thinks that corporations foist products on unwary consumers who don’t actually want them, or perhaps you are a right wing paternalist who thinks that (certain) recreational drug use represents the abandonment of civilization. You don’t have to buy my drug libertarianism to recognize that there is a cost here. You have to acknowledge that restricting opioid prescriptions will mean that some people who really need them won’t get them. The net you build to catch recreational opioid users will ensnare a few chronic pain sufferers. It is worth reflecting on the relative costs of false positives and false negatives. Suppose you tighten the net on opioid prescriptions and wrongly snare one real chronic pain sufferer, whose only escape from hell-on-earth was his legal supply of opioid pain relievers. How many recreational opioid abusers would you have to deter to make this worth it? I say there is no number that will justify cutting off even a single chronic pain patient. (Am I jettisoning the concept of trade-offs I tried to instill above? Not really. It's just that I see a "false positive" as having almost zero cost, and a false negative as being unbelievably costly. Perhaps this makes me a demagogue, but anyway there you have it.) But whatever number you have in mind, you’d damn sure better be willing to justify it. There is no escaping the trade-off, but you can at least argue that some point on the false positive/false negative curve is optimal. 

Monday, July 24, 2017

In Defense of the Chotchkie's Manager From Office Space

Sometimes I find myself sympathizing with contemptible movie characters. At least, the intent is for the viewer to find them contemptible. But I find myself saying, "You know, this guy has a point."

In the movie Office Space, Jennifer Aniston's character Joanna works for Chotchkie's, a "fun" family restaurant. The servers at Chotchkie's are required to wear at least 15 pieces of "flair," crazy buttons and other crap that they can pin to their waiter uniforms. The manager is trying to lecture Joanna about how she's doing the "bare minimum", and Joanna attempts to secure the approval that she's in the clear.
Stan, Chotchkie's Manager: We need to talk about your flair.
Joanna: Really? I... I have fifteen pieces on. I, also...
Stan, Chotchkie's Manager: Well, okay. Fifteen is the minimum, okay?
Joanna: Okay.
Stan, Chotchkie's Manager: Now, you know it's up to you whether or not you want to just do the bare minimum. Or... well, like Brian, for example, has thirty seven pieces of flair, okay. And a terrific smile.
Joanna: Okay. So you... you want me to wear more?
Stan, Chotchkie's Manager: Look. Joanna.
Joanna: Yeah.
Stan, Chotchkie's Manager: People can get a cheeseburger anywhere, okay? They come to Chotchkie's for the atmosphere and the attitude. Okay? That's what the flair's about. It's about fun.
Joanna: Yeah. Okay. So more then, yeah?
Stan, Chotchkie's Manager: Look, we want you to express yourself, okay? Now if you feel that the bare minimum is enough, then okay. But some people choose to wear more and we encourage that, okay? You do want to express yourself, don't you?
Joanna: Yeah, yeah.
Stan, Chotchkie's Manager: Okay. Great. Great. That's all I ask.
Mike Judge gives a classic Judge-esque performance as the Chotchkie's manager, including a truly obnoxious eye-roll when Joanna apparently isn't getting his point. I'm pretty sure the intent of this scene was to build sympathy for Joanna, who has to work for an arbitrary, lecturing boss. That interpretation would fit in with the rest of the movie, which is more broadly about the banalities of working life. But I find myself siding with Judge.

Sometimes employees really are looking to do the bare minimum, and they seek a kind of safe harbor to be defined by their bosses. This is the behavior of a low-value employee: Just tell me exactly what I need to do and I'll do that. Careerist corporate drones might want to have the rules clearly laid out so they can game those rules to maximum advantage. The extreme example of this is public sector employees whose pay and retirement benefits are literally set by a formula, and they work (or "work") to maximize the payout of that formula. What's actually expected is that you go a little bit beyond what the letter of the law demands (or what the employment contract or job description demands). Or perhaps what's expected is that you mildly skirt the letter of the law. Some rules are meant to be routinely flouted but need to be written down to prevent excessive violations. Good managers need to be a little bit vague about what the true expectations are, such that they don't get gamed by clever-but-lazy employees. Not to be too "self-help"-y here, but it's good to have an entrepreneurial attitude toward work rather than a bureaucratic formula-maximizer mindset.

That's why I take a sympathetic view of Mike Judge's character Stan. He wasn't trying to be obnoxious or confusing. He was just trying to lecture Joanna on what it means to have a good work ethic. Perhaps he saw unfulfilled potential in her, and he wanted to bring it out. And Joanna just totally misses the point.

While I'm at it...I think the Nicelanders in Wreck It Ralph were right to exclude him from their anniversary party. The formula from Fight Club is perfectly appropriate. ("AxBxC equals X. If X is less than the cost of a recall, we don't do one.") And Magneto had some great ideas.

Friday, July 21, 2017

Economic Lessons: Shopping for Eyeglasses

Out of Pocket vs. Third Party Payments

I recently had to buy new glasses, because the hinge on my old pair broke. I was paying out of pocket. The initial quoted price was just above $400. I kind of balked because that was way more expensive than what I expected. Then the sales person said that the “anti-reflective coating” made up about $150 of that figure. I said “No thanks” to a feature of dubious value.

I think this is the kind of shopping people would do if they paid more out-of-pocket for routine, predictable healthcare expenses. Some people think that if patients have to pay in cash instead of paying though a third party, they will skimp on important medicine and injure their health. I think this is nonsense. A healthcare market of first-party payments doesn’t imply skimping on vaccines and routine screenings. It just means we say "No" to the anti-glare coating. Maybe it means we double up in our hospital rooms instead of getting our own suite (at least whenever someone isn’t contagious or ultra-sensitive to disturbances). Or maybe it means we shop around for the best MRI price (David Goldhill describes doing exactly this in his book Catastrophic Care).

“Affordability” is a red herring. If you can’t afford the glasses with the anti-glare coating, then you also can’t afford the insurance premiums that will pay in full for the glasses with the anti-glare coating. Likewise, if you can’t afford routine check-ups or monthly birth control, then you can’t afford an insurance policy that will pay for those things. Obviously, your insurance premiums are calculated to cover such expenses, so mandating that insurance cover more things doesn't make those things more affordable. If anything it does the opposite. You get gold-plated hospital stays instead of austere-yet-functional hospital visits. Making healthcare more affordable to people with low incomes requires explicit transfers (government programs and/or private charity), not insurance coverage mandates. 

What follows is a completely unrelated point, so don't stop here just because something about the above section put you off. The next piece could be a completely separate blog post.

Price Discrimination

"Price discrimination" simply means charging different prices for the same product because some customers are willing to pay more. Alternatively, you can think of it as meaning sellers offering discounts to capture some of the potential customers who won't pay the listed price. These are economically equivalent descriptions, but for some reason people balk at the first one. They always imagine that they are the ones paying more, and the seller is trying to squeeze them. But half they time you are the person being offered a discount because you wouldn't pay full price.

Price discrimination exists because some sellers have very high fixed costs. An optometrist's office has to operate a building. They need to maintain an inventory of glasses and frames, many of which will  never be sold because they are the display model. They need to buy equipment for performing eye exams, pay someone to man the front desk, etc. These costs will exist even on a bad day or bad week, when they have few customers. The average price of the eyeglasses must cover these costs. (Or the average price of eyeglasses + eye exam, or whatever bundle is being sold, must cover these costs.) Say I divide my total monthly expenses (including machinery, utilities, labor, rent, return on capital to the business owner) by the number of customer's serviced for a given year and it comes to $400 per customer. I'd better be collecting at least that much from each customer, or I'll be going out of business. 

But wait. Maybe it's very cheap to service one additional customer. Maybe the frames and lenses only really cost $20 or so, and perhaps nobody's busy right now so servicing an extra customer is practically free from a "cost of labor" standpoint. Maybe if you add up the costs of servicing one additional customer, it only comes to $50 or so. If you could offer a random passer-by "Eye exam plus glasses for $100?" you should do so. Your business would profit to the tune of $50 from such a deal. Unless everyone else gets wise to this special deal and starts asking for it, in which case your revenue will only be $100 per customer when you really need $400. (Perhaps you can't drum up enough additional volume to make this deal worth extending to everyone. The community serviced by an optometrist's office is limited, and people only need new prescriptions every few years or so.) 

So you have to be clever about it. You have to say things like, "Well, the price for the frames, plus lenses, is $425." (customer winces) "Of course, that includes the anti-reflective coating, which is $150 of that total." (recalculates price, customer accedes.) This is precisely the negotiation I had with the salesperson. I strongly suspected that the anti-reflective coating is a low production-cost add-on, but a useful bargaining chip if one wants to price-discriminate. They can still nab the marginal customer (like me) who might balk at the full $425 and go buy my glasses elsewhere. I have my prescription, anyway, so I can simply buy glasses online if I need to. 

My suspicion that this was some kind of price discrimination was confirmed later when I went to pick up my glasses. I had said "No" to the anti-glare coating, but they added it free of charge because it would  have taken them longer to fill my order without the coating! So for whoever manufactured my lenses, adding the coating is actually their default. They have to special-order the lenses without the coating. It's probably cheaper to produce lenses with the coating. But it is a very useful way to price discriminate. If the true cost of production were and additional $150 for the coating, they would have probably found some way to get the money out of me, or asked me if waiting was acceptable. 

This reminded me of a story about a Hewlett Packard high-speed laser printer, which was more expensive than the "normal speed" model. The normal-speed model was actually identical to the high-speed printer, except that it had an extra chip that slowed it down. It was cheaper to just build the high-speed printer. The low-speed version was created simply to be able to offer a lower price to more price-sensitive customers and to keep up the facade that there was a difference in quality. This story is told in one of Tim Harford's books (The Logic of Life or The Undercover Economist, though I can't remember which one). 

A favorite write/economist of mine, David Friedman, also once used the example of selling eyeglasses as an illustration of price discrimination. It was from one of his class lecture recordings, several of which I've listened to. They are available at his website. It began: "I'm selling you a pair of eyeglasses. I say, 'That'll be $40.' You don't wince. 'For each lens.' Still no wincing. 'Plus $80 for the frame.' What have I just done?" What follows is a discussion of price discrimination. Sellers who have very high fixed costs have an incentive to figure out how price sensitive their customers are, so they can offer discounts to customers who they would otherwise lose.

Customer Service

Eight years ago, when I last bought eyeglasses, I learned an important lesson about customer service. I bought a pair of eyeglasses from the optometrist who did my eye exam, and I bought another pair from 39dollarglasses.com. Interestingly, in both cases there was a mistake in the prescription. The optometrist immediately recognized the error, and re-ordered me a pair of glasses. Of course I didn't have to pay a second time for their error. In the case of 39dollarglasses.com, the glasses I got were obviously the wrong prescription. I don't know if I had entered it incorrectly on their website or if the error was theirs, but they were completely unwilling to own any portion of the mistake. In order to correct my prescription, they asked that I send back the pair they had sent me, which I did. Then they asked for a $16 fee. Then, later, they said they wouldn't process the re-order until I sent an additional $26. I just rolled my eyes and paid it, but vowed never to buy anything from them ever again.

The pair I had purchased from the optometrist was more expensive in sheer dollar terms than the pair I had purchased from 39dollarglasses.com. But the optometrist was selling me more than just the glasses. They were selling a promise to make good on the order. 39dollarglasses.com offers a stripped-down, bare-bones product with minimal customer service and (apparently) no promise to actually make good on an order. The optometrist's office, having sunk a lot of expenses into building and maintaining a brick-and-mortar business, knows that it needs to keep its customers happy or lose a future revenue stream. All things considered, the pair of glasses I bought on line was probably slightly cheaper than the pair I bought from the optometrist, but it certainly left a bad taste in my mouth. There's no deep economic lesson here, other than "you get what you pay for." It was a pain to navigate 39dollarglasses's almost non-existent customer service, and it gave me the feeling of having been robbed. It was probably worth the extra cash to have the optometrist settle the deal and smooth out any mistakes in the order, having that built into the price of the glasses.