Division of Labour: March 2005 Archives
March 31, 2005
The end of the world as we know it?
According to the good folks at Life After the Oil Crash, we are at the end of the oil age and the end of suburbia. Wasn't there a bet like this in the past?
The site has some insightful graphs like this one:
Graph: The Energy Curve of History?
Source: Community Solution
What a joke.
Indian cricket facts of the day
On Saturday, April 2, India and Pakistan begin a series of 6 one-day cricket matches. One-day matches are much more lively than the notoriously slow "test" cricket matches. A one-day match takes only about 8 hours including the lunch break (one team bats before lunch, the other after); a test match typically run five days (each team bats twice through its lineup). By limiting each batting team to a fixed number of deliveries to swing at (normally 300), one-day cricket radically reduces the incentive to bat defensively. In test cricket, where deliveries are unlimited and where -- unlike baseball -- the batsman needn't run once he strikes the ball if he doesn't think it safe to do so, I once saw England's captain Nasser Hussain bat so defensively that he made only one run off his first thirty deliveries.
It is difficult for Americans to fathom how popular is India-Pakistan cricket. But Ramchandra Guha's superb book A Corner of a Foreign Field (previously mentioned here) gives a useful statistic (p. xiii):
When [Indian star Sachin] Tendulkar is batting against the Pakistani swing-bowler Wasim Akram, the television audience exceeds the entire population of Europe.
It's so popular among NRIs (non-resident Indians) that an Indian restaurant here in St. Louis (where I picked up takeout tonight) is showing all six matches live on a big-screen projection tv at $7 per head per match -- even though the matches start at 10:25pm local time!
IRS might tax sales on E-bay
For big ticket items, this might make sense. However, the Business Week article shares the following:
The IRS can apply a list of nine indicators that might prove whether someone's online auctions amount to a business. These indicators include evidence that the taxpayer depends on the income, acts in a businesslike manner, or puts enough time and effort into the activity to suggest a profit motive.Who sells on e-bay without a profit motive? Good sellers on e-bay get reputational benefits and therefore are likely to act businesslike. The "depends on income" requirement might not hold even for those who sell big ticket items on e-bay.
Perhaps I've just missed it, but here's a feature of the recent bankruptcy reform legislation that seems to have passed unremarked. My bankruptcy attorney neighbor tells me that the most significant feature of the legislation is a new requirement that attorneys certify financial statements that their clients make. For example, at the risk of penalty to themselves, attorneys would have to attest that their clients have no hidden assets. My neighbor predicts this will have a chilling effect on bankruptcy attorneys' willingness to take on clients. Indeed, he plans to switch his field of practice.
Makes Me Want to Scream
Howard Dean is back in the news; here's his take on Rick Santorum:
Dean joked that Santorum should "stay in Virginia," although he added that the senator was "too much of a right-winger for Virginia. How about Venezuela?"
What a moron--Venezuela is run by the LEFTIST Hugo Chavez. From The Economist:
Mr Chávez, a former army officer, recently declared himself to be a Fidelista, a follower, that is, of Cuba's communist president, Fidel Castro, his closest ally.
More color photos from WWI
Another look at the price of oil
Here's an open directory full of oil graphs.
Another picture from InflationData.com.
Jets get to build stadium on Manhattan Island
According to Reuters:
The New York Metropolitan Transportation Authority on Thursday awarded the National Football League's Jets the right to build a stadium on property the transportation agency owns on Manhattan's West Side.
If the Jets were going to build the stadium themselves, then I wouldn't have a problem. However, that is not the case - the city of New York and the state of New York will kick in $300 million each.
Total predicted cost of the stadium? Drum roll....$1.9 billion (I almost typed million) "instead" of the paltry $1.4 billion initial estimate. I would tack on at least 15% to the $1.9 billion estimate to get the final cost.
All of this to help NYC get the 2012 Olympics. AAAARRRRGGGGHHHH
Somethings are better left unknown
Such as scientists debating whether there is enough dandruff in the atmosphere to change weather patterns. From this story:
Could dandruff be altering the world?s climate? Along with fur, algae, pollen, fungi, bacteria, viruses and various other ?bio-aerosols? wafting around in the atmosphere, it may well be.
Your tax dollars at work
Over at the NSF The History of the Universe in 60 Seconds.
Better than some other expenditures.
I imagine there will be light blogging from the DoL crew this weekend and early next week as several of us will be attending the Association of Private Enterprise Education meeting in Orlando from Sunday-Tuesday. This includes myself (I'm the APEE President this year), Frank, Josh and Larry. The hotel does have wi-fi so I may get out a post or two.
This begs the question: What the heck are Mike, Ralph and Craig doing not going to the APEE meeting? I say next year we ALL go. Mark your calendars: April 2-4, 2006 in Las Vegas.
Everybody will have heard by now that Terri Schiavo has died. I sure hope her husband was right and she didn't feel a thing, because dying of dehydration/starvation can not be the best way to go.
I haven't blogged on this because this is a very hard case. My knee doesn't jerk one way or the other on this one, and frankly I'm suspect of anyone who thinks this is an easy call. (Initially I leaned toward the husband's side of the argument but have been swayed by the family's side in the end. Still I don't know how I would decide if I were in charge.)
One thing really has bugged me though about the debate. I've heard many people who are statists (leftists, modern liberals or whatever you want to call them) criticize Congressional efforts to save her from this fate. On what basis can modern statists possibly say that Congress should not be involved in deciding whether this woman lives or dies? This is the same Congress that they applaud when it regulates every aspect of our freakin' lives. If they don't mind Congress deciding how much water we can use in our toilets, then jeez do they really have anything to complain about here?
It is probably not surprising
that academe is predominantly left of center if not downright statist. However, being in the business school and in a department with only one person who might even try to argue non-libertarian positions, my department evidently flies in the face of the norm.
A study by Stanley Rothman, S. Robert Lichter, and Neil Nevitte, in the BEPress suggests that the academy is predominantly Democrat/Liberal [I like the term statist] and that ideological discrimination might result. I wonder what the hallway discussions are like in the other buildings on campus. I know on our floor, we love talking economics but we definitely do not default to claims like "the government ought to."
I haven't had a chance to read the paper, but here is the abstract:
This article first examines the ideological composition of American university faculty and then tests whether ideological homogeneity has become self-reinforcing. A randomly based national survey of 1643 faculty members from 183 four-year colleges and universities finds that liberals and Democrats outnumber conservatives and Republicans by large margins, and the differences are not limited to elite universities or to the social sciences and humanities. A multivariate analysis finds that, even after taking into account the effects of professional accomplishment, along with many other individual characteristics, conservatives and Republicans teach at lower quality schools than do liberals and Democrats. This suggests that complaints of ideologically-based discrimination in academic advancement deserve serious consideration and further study. The analysis finds similar effects based on gender and religiosity, i.e., women and practicing Christians teach at lower quality schools than their professional accomplishments would predict.
Are college coaches paid so much because college athletes are paid so little? I don’t believe in the wages fund, but I do think even a neoclassical model can hypothesize a link.
When the NCAA attempted to restrict assistant coach’s salaries, the courts determined that this violated the Sherman Act. (I don’t think the NCAA ever attempted to restrict the salaries of head coaches.) However, the same court finds no problem with restricting college athletes to a hot meal and a room. Nevertheless, colleges compete for exceptional athletes with offers of hidden perks and a discounted product, a college education that many players don’t want. A true amateur sport would have amateur coaches instead of million dollar managers who profit from players who are paid less than their marginal worth to the university. Underpaid athletes support a hierarchy of wealthy beneficiaries that shamelessly espouse the benefits of amateur sports. This hypocrisy promotes fraud and cheating in the college recruitment of athletes and detracts from the university’s educational mission.
Why doesn't the NCAA restrict coaches to room, board and tuition?
March 30, 2005
Who is Lou Dobbs?
Lou Dobbs hosts Moneyline each night on CNN. He may be the most dangerous man on TV. Single handedly he is trying to undo the work of all mainstream economists since Adam Smith. He is a mercantilist who launches a nightly tirade against free trade, multinational firms and outsourcing.
His biography at CNN lists numerous awards and prominent positions in financial news operations. It also indicates he has an economics degree from Harvard. Something just don’t seem right here. Is it possible that this protectionist Neanderthal is really a product of Harvard? If so, Larry Summers is doing God’s work.
An interesting article examining Lou Dobbs can be found at the Columbia Journalism Review.
More commencement speakers announced
Also from today's Chronicle, more commencement speakers:
Case Western Reserve University: Chris Matthews, host of MSNBC's Hardball With Chris Matthews
I wonder what Chris Mathews will have to say - he lost me years ago. Janet Reno can discuss when court orders should be obeyed (Teri Schiavo) and when court orders should not be obeyed (Elian Gonzales) by the executive branch. Hillary can try to explain how the left is grounded in an actual philsophy that is not zero-sum in nature.
It might be interesting to hear the grandson of Gandhi, but I wonder if we are getting too far removed from the original fountainhead. So far, the most interesting speaker might be Steve Jobs, but I wonder how many Stanford kids will be wearing I-Pods during his speach.
Si Tanka University to shut down?
From today's Chronicle of Higher Education (reg req'd) comes a story that the professors at Si Tanka University in South Dakota are threatening to walk off the job because they haven't been paid since February. The school failed to qualify for federal funds and evidently faces severe fiscal constraints.
However, the interesting tidbit was at the very end of the story:
Mr. Fryberger said faculty members had agreed to issue grades for the semester by the end of this week, so that students could have complete transcripts if they chose to move on.
Wait a second. Students will have "complete transcripts" for classes they did not complete? Would that we could all do this. Are the students buying into this? Probably, if they are myopic. However, the administration/professors at Si Tanka are doing their students a disservice.
Johnnie L. Cochran Jr., RIP
Cochran's famous phrase as OJ Simpson's attorney was, of course, his comment on the bloody glove: "If it doesn't fit, you must acquit.'' Regarding the phrase, he later commented, "I'd like to have an epitaph other than that." To help Cochran out, here's my suggestion for an alternative epitaph:
He spoke in rhyme; Juice did no time.
Have a better one? I've enabled comments.
Addendum: My previous suggestion was "If the body's calm, you must embalm," but that doesn't really speak to the man's accomplishments the way an epitaph should.
Who is more right or less wrong?
This article describes how firms should price their product. In the introduction is this gem:
How much should you charge customers for your product or service? This, of course, depends on the nature of your business. There are no specific formulas. You must do some research to find an appropriate price for your specific product.
Yet, we teach price theory assuming that there are specific formulas, specifically Marginal Revenue should equal Marginal Cost. Always. The trick is accurately measuring marginal revenue and marginal cost.
The article goes on to offer a few other ideas:
"Make a list of similar products or services and how much other companies charge for them."
This sounds like "know your demand," which is one component of determining profit maximizing price and quantity. However, simply knowing what other firms are charging, i.e., market price, does not necessarily tell the firm owner what marginal revenue will be, unless the firm's demand is perfectly elastic.
The next step in determining price:
"Review Your Costs...the cost of goods or raw materials, the amount of staff time (including your time) it will take to produce the product, as well as the amount of administrative time to invoice your customers and collect payments. You also need to include general operating expenses and administrative costs (or G&A) -- when calculating the cost of your product or service."
Hmmm...the first set of costs are part of marginal cost, which we teach should be considered in profit maximizing output and pricing decisions. However, general operating expenses and administrative costs sound like fixed cost. Economists claim that fixed cost have no impact on the profit maximizing quantity-price decisions, and to consider fixed costs will guarantee that the firm owner will not maximize profit.
Finally, the article suggests a rather ad hoc markup over cost:
"Mark up for Profit...The amount of the markup varies by industry, service, potential liability and general overhead. Generally, you should at least double your fixed costs to get a selling price. In retail, this is known as "keystone" pricing. When retailers apply a discount of 10-40 percent for a sale on their products, they still make a profit because they used keystone pricing."
The optimal markup does vary by industry, according to the Lerner condition, but the "doubling of fixed costs" doesn't sound like what we teach in firm theory. Once again, the general overhead (fixed cost) is being used to determine price, which is incorrect. The so-called "keystone" pricing may yield positive profit, but would not pass muster in my price theory course.
I wonder who is "more right" and who is "less wrong" - the article's author or us economists? I will, of course, go with the economic theory, but perhaps the difficulties in accurately measuring demand (and hence marginal revenue) and cost (and hence marginal cost) are so insurmountable that firm owners resort to rules-of-thumb. I fight my brother (who is a small business owner) in this area all the time.
I wonder if the article provides a net positive or not.
Allow Organ Sales!
Orin Kerr at The Volokh Conspiracy encourages readers to become organ donors. While I am an organ donor and would like to encourage you to become one as well, the economist in me knows altruism is not going to solve the organ shortage problem - financial incentives will.
Markets in Everything
A mother of five put her name up for bid on eBay and got an offer. Terri Iligan, 33, sold her name to Internet site Golden Palace Casino, and she will officially be named goldenpalace.com once the legal work is complete.
The casino paid $15,199 for the name.
[Nod to Marginal Revolution for the post title.]
March 29, 2005
The miracle that is e-bay
brings us a Space Mountain car from Disneyland.
Hurry!! Time left: 1 day 16 hours, 7-day listing, Ends Mar-31-05 11:02:43 PST
Then and now...
pictures from the movie Taxi Driver are available here.
And the 100 hoaxes of all time...some I actually remember!!
In London, UK, McDonald's restaurants are now offering a "curry chicken sandwich". Only 99p! I didn't try it.
But I did go to hear the Indian percussionist Trilok Gurtu at the Royal Albert Hall on Saturday night. The program was called Gujarat -- A Celebration. (Gujarat is a western Indian state; the most common surname among Gujarati-Americans is Patel. So many motels in America are owned by Gujaratis that people speak jokingly about the "Patel motel cartel".) Disappointingly, Gurtu's band played only two songs! But the rest of the program, folk songs and dancing, was entertaining enough. And to see the interior of the Albert Hall was alone worth the price of admission.
We're from the Government and We're Here to Help
A new NBER working paper finds:
"Segregation in schools might have declined had it not been for the actions of federal courts."
Landsburg on Shiavo
This is the first post on this blog concerning the Schiavo story. The reason may be that we have conflicting feelings on how this should be managed or that we see very little in the current situation that has to do with economics. Steven Landsburg, however, can find economic principles everywhere. Read his take on the Schiavo story in Imagine Terri Were a Toaster … and Tyler Cowen’s response at Marginal Revolution
Hat tip to Trent McBride at Catallarchy
Pam Reed Runs 300 miles!
60 Mintutes ran a story about Dean Karnazes and Pam Reed on Sunday. They are among the leading "ultra marathoners" in the world. 60 Minutes made a big deal of the fact that women are competitive with men at the elite level in this sport--a point I made some time ago in this post.
Dean Karnazes won last year's Badlands Ultramarathon (135 miles) and Pam has won it twice before. Dean had been known for having run longer than anyone else ever--262 miles. But it just broke today that Pam Reed ran 300 miles !
[Update: It took her about 80 hours.]
Economic Idiot Award Entry
We may have a frontrunner for the next Economic Idiot Award (it's depressing to think there's at least one deserving recipient daily). Daniel Sneider of the San Jose Mercury News writes (registration required):
"This is unprecedented territory, C. Fred Bergsten, the director of the Institute for International Economics, told the Council on Foreign Relations. He takes a decidely darker view of the future.
The U.S. external deficit is ``a reflection of the fact that we save virtually nothing in this economy,'' Bergsten argued. Household savings are literally at zero. The federal government is borrowing heavily, and the proposed Social Security privatization will pile up even more debt, he said.
To keep going, the United States borrows about $5 billion every working day from the rest of the world. ``If we didn't get it, we'd have no investment, we'd have no growth, we'd have no productivity, we'd have no nothing,'' Bergsten said."
Assuming Bergsten is quoted correctly, he should head an Institute for Flat Earth Economics. It's just silly to think that if we didn't have the $5B inflow from the rest of the world that we'd have no investment, growth, or productivity. Static-thinking Bergsten apparently cannot fathom the possibility that, absent access to cheap foreign capital, Americans just might save more on their own.
NOTE: It isn't even clear that the premise of Bergsten's statement--that Americans "save virtually nothing"--is correct. For example, David Malpass argues otherwise in yesterday's WSJ (subscription required). A longer discussion will have to wait for a future post ...
I've been an admirer of (and small donor to) FIRE; I think it does good work combatting silliness such as campus speech codes. Thus, I was quite surprised to find that the current issue of FIRE Quarterly contains an article advocating external pressure by the NYCLU on Hamilton College for disinviting Ward "Little Eichmanns" Churchill to its campus. (Link here; scroll down to page 9.) The article is by FIRE board member Michael Myers; here's the salient part:
Initially, Hamilton College officials stood
Hamilton College is a private institution; it can invite and disinvite anyone it pleases to speak on its campus. Other than rebuking NY politicians for hectoring Hamilton, the NYCLU should have no say in Hamilton's affairs. There are, after all, civil liberties other than freedom of speech (which only applies to government in any case); among the others is Hamilton College's freedom to associate with whomever it chooses.
March 28, 2005
For those with empty doors
Largest # of Nobel Prize Winners on Diss Committee
Writing the last post on John Snow reminded me of Doug Adie, one of my professors at Ohio University. His dissertation committee was comprised of three eventual winners of the Nobel Prize in Economics - Friedman, Stigler, and Mundell.
From what I understand Stigler didn't appear on many dissertation committees, so this might be extremely rare, even for Chicago graduates from this period.
Anyone know of any other economists with at least three Nobel Prize winners on their committees? Comments are open.
Two Things I Didn't Know About John Snow
Like me, he was born in Toledo.
He earned his Ph.D. in economics at UVA where he "studied under two Nobel Prize Winners." Don't know if he just took classes from Buchanan and Coase or had both on his dissertation committee.
Full bio here.
Posted by Joshua Hall at 03:41 PM
Spring commencement speakers
Today's Chronicle of Higher Education (sorry, reg req'd) lists the first set of announced commencement speakers for this spring. I report them below, at least for the first 25 schools the Chronicle reports. Interesting enough, there doesn't seem to be anyone terribly controversial (at least from one point of view) except for Jocelyn Elders. I bet John Ashcroft will make a splash with the kids - walkouts, boos, and the such are already being planned, I'm sure. Moreover, I bet the big guys will have a few crackpots.
David S. Broder, Clark University, May 22, 2005
Buzzword of the Day
From Buzzwhack :
SEP: Someone Else's Problem. "Let's outsource production and make it SEP."
Sounds like Congress's answer to social security reform and everything else that requires a backbone.
A pro-union Cleveland pol (is there any other kind in Cleveland?) is in hot water for building her house with non-union labor. Worse yet, the workers are apparently Amish--those notorious individualists renown for violating the labor standards near and dear to the hearts of unions everywhere.
The husband justifies the use of non-union labor by claiming the builder is black. Now I've heard of Black Irish, but Black Amish?
[Btw, the second picture in the article is of Scott Maag--the son of Capital University's Librarian, Al. Scott has become a regular freelancer for TIME.]
March 27, 2005
They never sleep at MIT
I think this says something about preferences, but I am not exactly sure what.
"In the foggy logic of our drowsiness, we disable the very device that is meant to wake us up"
Economic Idiot Award
Tim Worstall has announced the Economic Idiot Award. It sounds like a lot of fun. His first award goes to a reporter who has committed an obvious post hoc fallacy in his report on the oil industry.
More on real vs. nominal
Following up on Michael's post on gas prices, I have been arguing that the price of gasoline could increase in real terms and we would still have relatively little grounds for complaining. The utlity gained from driving today's cars is arguably greater than that obtained thirty years ago - what with greater safety, DVD players, GPS and MP3 players. Most of us get better mileage that thirty years ago, and therefore we are paying less per mile driven while obtaining higher utility per mile driven.
Michael brings up a good point about the media carping about the "highest prices ever." In the same vein, the other day, the NYT ran a headline to the effect of "Trade defiict reaches all time high" or some such nonsense. The upshot was that the trade deficit was the largest dollar amount of all time. Because the trade deficit as a percentage of GDP is relatively stable, every quarter GDP increases, the NYT and others have a ready-made story.
I have just about given up on trying to correct this. All of my letters to the editor of our local fishwrap have gone unprinted. I suppose it doesn't sell papers to claim that in real terms things are better than they have ever been - period, end of paragraph.
After all, I am typing this blog on my Fujitsu Lifebook S6000 on a wireless home network while I watch the Kentucky - Michigan State game on digital cable in a 2300 square foot home I paid $130k for, with two (paid for) german automobiles in the garage. Yeah, I think I can handle $2.25 a gallon for fuel.
Here is a great picture from today's Wall Street Journal Sunday:
The MSM repeatedly explains the support for President Bush in terms of his standing with the Christian Right. I don’t know exactly who this group is supposed to include. I know a lot of people that support George Bush, but only about one or two to whom I would apply that label. I suspect that this term is meant to include groups that support a conservative political agenda because of their faith and not because of any rational or logical examination of the facts. The MSM and their fellow travelers in the academic community consider themselves the arbiters of intellectual thought. Therefore, anyone who does not agree with them must base their position on faith and not rational reasoning.
Consequently, I see the Left’s continual blathering about the Christian Right not so much as an attack on religion but rather as a defensive mechanism. There is no longer any cohesive philosophy holding the left together. Marxism is dead and no one seems to recognize what socialism is. Many others have come to the conclusion that the left is simply a grab bag of special interests groups that want to further their accumulations through takings from others. The Left depends on an illogical and irrational faith in big government. There is no Hayek on the left who can build a supporting logical lattice. The attack on the Christian Right becomes a diverting strategy that turns the public's attention away from the non-existing philosophy of the Left. It creates a fog that prevents a logical attack on the issues of the Left.
The underlying message of the MSM is, “Look at these silly people. They really don’t know what they're doing. They're doing what they're doing because the Good Book told them so. If you don’t want to be a hayseed or holy roller, or if you are a person of the mind, then you better distinguish yourself from this group.”
By labeling conservatives the Christian Right, the MSM is also able to avoid analyzing their arguments. If conservatives are against Roe v. Wade because of religious reasons rather than because of a federal encroachment on state’s rights, then there are no logical issues to be examined. This and other issues, like the ban on stem cell research, can be similarly explained and summarily dismissed as backward faith based beliefs that will eventually give way to an age of enlightenment.
Gas Prices Set Record
Okay, so now I sound like Andy Rooney.
But, YA KNOW WHAT REALLY MAKES ME MAD ABOUT DISCUSSIONS OF GAS PRICES?
It's when "records" in nominal prices are discussed without reference to purchasing power. Why not talk about record high wages, or record high social security benefits? Those are the same kinds of records.
The good Easterbrook, one of the more sensible people at TNewRep, puts it this way:
Financial numbers of all kinds annually reach "record" levels until inflation and buying power are taken into account. At the end of Bill Clinton's second term, the defense budget was at a "record" level, but adjusted for inflation was nearly 50 percent lower than the peak Ronald Reagan budget. If Social Security payments were not indexed for inflation, they would still set a "record" every year while annually declining in real value. Etc. It's an embarrassment to journalism when big news organizations act as if they don't know about real-dollar valuation. ATSRTWT (Note that this was a year ago; as my dad used to say: palooka change)
Easterbrook does make one mistake, however: If these people were capable of embarrassment, they wouldn't be journalists.
Check this graph (which does leave out the recent price spike, but...)
UPDATE: Some props to my colleague here at the Div of Lab, reflecting our credo of "division of labour": he whines that prices are higher (which they are), and I whine the media shouldn't talk about records in nominal terms (which they shouldn't). But here is his post.
And, let's not forget my guy Ralph Frasca, doing the Lord's work. Gas prices are high in part because of high taxes and foolish regulations.
My old UCLA classmate Tom Hazlett has an interesting column in the Financial Times about the competition that Microsoft faces on various fronts. The lesson I draw: consumers only need free entry; antitrust is a sideshow that has done them no real good.
Tweedledee vs. Tweedledum, UK style
If you're looking for an example to illustrate the idea that political parties gravitate toward the center to capture the median voter, look no further than the current UK election contest. Tony Blair's Labour party is projecting 3% real growth in government over the next six years; Michael Howard's Conservatives are (gasp) promising only 2% real growth. The difference, for 2011, amounts to £35 billion. Labour accuses the Conservatives of planning a £35b "cut" in vital social services. The Conservatives promise that they won't cut a thing, only eliminate "waste, fraud, and abuse". Yawn.
Anyway, the big news here (I'm blogging from London this morning) this weekend was that a Conservative MP, Howard Flight, has been booted out of the Party by Michael Howard. Flight's crime: he hinted in a speech that further savings in public expenditure might be found once the Tories are in office, contradicting Howard's centrist line that the Tories have no secret agenda for cutting back on the growth of government. If Margaret Thatcher weren't still alive, she'd be spinning in her grave.
News story here.
March 26, 2005
Well, at least I used quotes...
The term "good" in conjunction with light beers is admittedly a stretch. I too homebrew - red ales, wheat beers, a kicker porter and a hell of a stout. Here was last year's brew, of which there are still a few bottles left for special occasions. Then we had a kid and that put the kibosh on brewing.
I started brewing in graduate school for three reasons. First, I didn't have a lot of money and my neighbors pitched in. Second, homebrew is good. Third, I gathered up some five gallon coca-cola kegs, found a good CO2 bottle with dual regulators, and hosted three keg (fifteen gallon) parties. We used forced carbination, which reduces the true flavor of a good beer, but the scale economies were worth the tradeoff. It was interesting/fun to see which kegs were emptied first - porters, pale ales, and stouts - and my buddy's pumpkin and onion beers taking a back seat.
During the microbrew heyday of the early to mid 1990s I even entertained the idea of a microbrewery, for about 5 minutes. The fixed cost of approximately $1 million was enough to disuade me.
As for light beers, $0.50 per beer for a daily drinker is a sufficient lowering of transactions costs for me. Are light beers good? I'm with Frank, not really.
Good Light Beer? An Oxymoron
My co-bloggers' posts on light beer are particularly timely--I've just bottled my first batch of homebrew in 16 months. It's a batch of California lager--a la Anchor Steam. Their posts are also cringe-inducing--I find most light beers (especially the swill sold by Miller) to be awful. Who knows--if this turns out to be a good batch of house-brau maybe I'll rescue them from their drinking misery.
By viruses, or hackers?
Other "good" light beers
The daily drinker in casa Depken is Milwaukee's Best Light. The Beast Light is cheap, if the can gets warm you don't wince pouring it out, and it is less than 100 calories. But the best, cheap, light beer around here is Pearl Light, which rolls in at 68 calories. It doesn't taste too bad, and I would make it a daily drinker but I have to go out of my way to the liquor store to purchase it ($5.00 a twelve pack), the grocery and convenience stores won't/don't carry it.
Lone Star Light is also pretty good.
How low? How low can you go?
The new Beck's Premier Light weighs in at just 64 calories!
Ok, it may taste like crap but as my granddaddy used to say, "no one likes a fat drunk."
I've been drinking Rolling Rock's 83 calorie Rock Green Light beer and find it pretty good for a light beer. I'll have to try this new Beck's beer.
March 25, 2005
We went with little bit to see Robots this afternoon. If you haven't seen it and were thinking about it, then don't bother. We hardly laughed at all, and the all-too-typical anti-greedy businessman theme was -- well you can imagine what I thought about that.
What the $%^& were the critics who liked this crappy movie thinking?
Property Rights to the Letter 'Q'?
Who owns it? Nissan or Audi? Neither?
Evidently some judge will determine the answer.
I wonder why Nissan didn't sue the folks who wrote Star Trek: Voyager?
Headline is backwards?
From Amusement Business comes this headline:
Red Sox remain committed to Fenway Park
Okay, so now we know that the Red Sox are not committed to Fenway Park.
In other sports news, New York City unions evidently made history by pledging not to strike during the 2012 Olympics, if the Olympics are held in New York City - gee, don't do us any favors. There was no indication whether the unions might go on strike during the Olympics if they are not held in New York City:
The biggest committment by organized labor was to promise to do their friggin' job? The IOC should deny NYC's bid for the Olympics on the grounds that it cow-tows to unions.
The Jets have been promised the 2010 Super Bowl if they build a new stadium on Manhattan Island? Arlington has been promised the 2011 Super Bowl. So, when does Houston get back into the mix? Jacksonville? The Super Bowl has become the one-and-done promise of the NFL. Next year the SB is in Detroit!? Even people who live in Detroit don't want to be in Detroit in February. My prediction, however, is that the Detroit SuperBowl will have the largest economic impact of any SuperBowl in the past thirty years - almost all of the tourist money will be new spending and not substitute spending.
Friday Gas Price Update...
Here in Arlington, today's gas prices at the QuikTrip are $0.05 higher than yesterday for all grades. This morning, the BoB (Bucket of Bolts) gathered 16.2 gallons of high test for $1.24 per gallon. The BoB, which is a 1988 MB 560SL roadster - lots of fun, completely impractical - gets a reasonable 20 miles per gallon or so around town (thankfully Arlington is flat).
I fill up my tank about once a month, which is one of the benefits of the five mile commute to school. The long time between fillups gives price a lot of time to fluctuate. My records indicate that on Feb. 22, the last time I filled the BoB, premium was running $1.94 per gallon here in Arlington.
Ouch. Thirty cents in a month? Yesterday's spike (added to others in the recent weeks) is ostensibly because of the non-terrorist related BP-Amoco refinery that suddenly went missing the other day in Texas City. I wonder if the rest of the country has felt the same spike. I know we can look at formal data, but why not do our own gas-price survey - especially through the summer months.
I volunteer to receive gas-price updates from around the country from DOL contributors and regular readers, collate them and keep them in a handy spreadsheet. Each week, I will post a time-series graph of the major cities - or of all the series if I can. I figure the regular contributors range from St. Louis, to Dallas, to the Atlanta "area" - okay, Rome, GA is not really Atlanta - North Carolina, and up to Ohio. That's a pretty good swath, although we need some help from the West.
To make the information somewhat more useful, send e-mails to depken at gmail.com every Thursday and Friday with the following information: City, State, Gas Price, Gas Grade (Regular, Premium, etc), Brand (Exxon, QuikTrip, etc).
A Japanese economist found guilty of peeking up a schoolgirl's skirt with a mirror was ordered to forfeit it and pay a fine of 500,000 yen ($4,740). Kazuhide Uekusa, a former professor at Tokyo's Waseda University, was arrested in April 2004 for using the mirror to look up the skirt of the high school girl as they went up an escalator at a train station.
Novel Use for Gun Locks
John Lott links to a story about farmers using federally provided gun locks to fasten their gates. Another great nanny state scheme for taxpayer dollars ...
After a few hours of family time and a few highballs on Easter Sunday, I always look forward to the traditional family Peep jousting tournament.
Congress shall make no law...
A Columbus-area high school principal has banned students from wearing t-shirts in support of gay marriage. [Story.]
[Principal] Best told the supporters of same-sex marriage that he was concerned that other students might respond with shirts of their own and the debate would escalate.
Oooooooooh, we wouldn't want the debate to escalate would we?
Btw, this is from the Ohio Constitution: no law shall be passed to restrain or abridge the liberty of speech, or of the press.
George Leef of The Locker Room links to this story about a New Yorker who paid a homeless person $2 to take, and pass, a teacher certification exam for him. The scheme was discovered because the homeless man scored so much better than the would-be teacher had on a previous attempt. To laugh or to cry or both?
More kids in need of vouchers ...
On Social Security and Savings
In a recent post I suggested that Prof. Robert Frank ought to call for less government intervention rather than more to alleviate Americans' ostensible lack of savings. I specifically suggested that the current structure of Social Security might be part of the disincentive for saving. (Note this is hardly an original idea--Marty Feldstein of Harvard raised it at least 20 years ago.) Well, as if on cue, there's a new NBER working paper by Ehrlich and Kim that finds evidence for just such an effect. Here's the abstract:
The worldwide problem with pay-as-you-go (PAYG) social security systems isn't just financial. This study indicates that these systems may have exerted adverse effects on key demographic factors, private savings, and long-term growth rates. Through a comprehensive endogenous-growth model where human capital is the engine of growth, family choices affect human capital formation, and family formation itself is a choice variable, we show that social security taxes and benefits can create adverse incentive effects on family formation and subsequent household choices, and that these effects cannot be fully neutralized by counteracting intergenerational transfers within families. We implement the model using calibrated simulations as well as panel data from 57 countries over 32 years (1960-92). We find that PAYG tax measures account for a sizeable part of the downward trends in family formation and fertility worldwide, and for a slowdown in the rates of savings and economic growth, especially in OECD countries.
Anglophile sports history factoid of the day
Nineteenth-century England gave the world the railroad, electricity and the theory of evolution, but also football, rugby and hockey. The major team sports were all invented in one island, as were the popular racket games of badminton, table tennis, and tennis. Men have raced and punched one another since the invention of fire, but it was Englishmen who gave athletics and boxing their modern forms. Only two of the great games of humankind are not of English origin: basketball, which was patented in New England in the 1890s, and golf, the contribution of the Scots across the border.
That's the opening paragraph of a history of Indian cricket that I picked up this morning for a mere £2 in paperback, remaindered (it was £20 in hardcover last year -- glad I waited), Ramchandra Guha's A Corner of a Foreign Field: The Indian History of a British Sport (London: Picador, 2002). Okay, you can quibble about the exclusion of baseball, ice hockey, and beach volleyball from Guha's list of "the great games of humankind", but the contribution of 19th century England to sports is still pretty impressive.
And don't forget that 19th century England also gave us the theory of comparative advantage.
March 24, 2005
The Hopes and Dreams of Soviet Russia?
A fascinating collection of Russian buildings never built. As usual, the Soviets were going to build everything massive.
Towing moral hazard
In Phoenix, tow trucks push cars into no-parking zones and then tow them? According to this story on Boing Boing, it's true.
Social Security Event
Yesterday I attended an event on Social Security reform in Atlanta. The event was largely intended to generate media publicity (apparently it got some newspaper coverage but no tv) and included both GA senators, HHS Secretary Leavitt, and Social Security guru Andrew Biggs. My main reason for attending is that my student Ted Crouse was invited to participate and got to pose a question to the panelists.
Although the event (and similar events across the country) are supposed to build support for Social Security reform, I am now more pessimistic about private accounts than I was 24 hours ago. The panelists did an ok job describing the mechanics of the private accounts plan and argued that the scheme would make the program solvent and earn better returns for people who choose private accounts.
To my mind, however, they did not adequately sell the most appealing part of the private accounts approach--it gives people property rights to their savings and allows them to transfer the funds or leave them for heirs. For example, what happens if I die when I'm age 60? Under the current scheme I'll have paid in years and years of taxes and have essentially nothing (except, perhaps, a small boost in my surviving wife's benefit). Under private accounts, I could pass the accumulated funds to my wife and son. This to me is a much more promising strategy than a green eyeshade discussion of making the program solvent or allowing people to earn a one or two percentage point higher rate of return than they would under the current system.
The Global Oligopoly of Money
In this story Peter Druker suggests
He then goes on to discuss the role of the multinational enterprise in today's (and tomorow's) world economy.
Thanks to the pointer provided by Marginal Revolution, Division of Labour now has its very own favicon--a favicon is the little image that appears on your web address bar.
Mozilla Firefox should show it right away, but if you use IE you'll probably need to drag the old favicon (the standard IE image) a couple of times to make the new one show up.
Skate Around the Truth
In a previous post I listed the risky activities that my generation engaged in. We did not have skateboard parks. In fact, we didn’t even have skateboards. What we did was take an old strap-on skate and nail it to the bottom of an orange crate. We then pedaled this contraption in the middle of traffic on New York streets.
The current generation uses skateboards and practices their art in skate parks. Unfortunately, this mildly risky behavior is also likely to disappear. A New Jersey appeals court in Hojnowski v. Vans Skate Park has decided that parents cannot waive in advance their children's right to sue for injuries at skate parks.
Fuel Cost Calculator
You might want to calculate the marginal cost of that next trip to Auntie Bea's. With the rising cost of gas, it will cost you more. You can found out just how much more by using the AAA fuel cost calculator. It uses the daily cost of gas and the EPA mileage rate to estimate the cost of your trip.
On the Economics of Baseball Stadia
I heard Jim Bouton (of Ball Four fame) on the radio today. He was talking up his 2003 book, Foul Ball: My Life and Hard Times Trying to Save an Old Ballpark.
The book is about his attempt to save an old wooden ballpark and attract an independent league baseball club to Pittsfield, MA--all with private dollars. But he runs afoul of the locals who want to build a new stadium with (you guessed it) taxpayer dollars. In the radio interview he called taxpayer funded stadia a "national disgrace." Ah, another book for the summer reading list.
On the Economics of Buskers
A friend of mine wrote me:
I am commenting about the demand/supply curves of buskers and of donation box activities. So, what does the supply and demand curve look like for a guitar-toting busker who lays his cap out on the ground?
The busker is basically trying to produce a "public good."
There is no problem on the supply side as the willingess of the busker to play is surely a function of the expected amount of money he can get. (I notice that they're not there at 5 in the morning when nobody's around!) If he expects more money, I expect he'll play longer. The basis for his supply curve would be the marginal opportunity cost of the busker's time. (Playing on the street means less time in the bar drinking after all so he does have an opportunity cost for the use of his scarce time.)
The problem is on the demand side. Because listeners can listen even if they don't pay, they have an incentive to "free ride"; i.e., enjoy the service without paying for it. I'm sure you've seen people (done it yourself?) listen and then walk away without contributing. Normally in markets, non-paying customers are denied the good, but in this case the public nature of the good makes that difficult. Once the busker starts playing for a paying listener, then non-paying listeners can listen too and basically free-ride on the payments of the payers. Obviously, if everyone tries to free-ride on everyone else, then the busker is out of business as no one would be paying him for his services.
Economists can construct "demand curves" for public goods, but they are quite different from regular demand curves in their construction. And we have no a priori reason to expect an equilibrium where demand intersects supply.
To me, the really interesting thing is that buskers are in business at all. Despite producing a public good and giving people an incentive to free-ride, there are enough people willing to contribute freely that the buskers stay in business anyway. Since the existence of public goods is a main argument for government action, such examples are useful to show that the private sector can sometimes produce adequate amounts of public goods. (Technically however it is doubtful that we'd get the so-called "efficient" amount produced.)
March 23, 2005
OU President acting "like a 3-year-old"
For those of you who don't live in university settings this story will sound so strange. Consider the following events:
(1) Ohio University's Faculty Senate considers a policy change about some minor issue (something about the rules under which faculty can take courses at the university).
(2) A black professor who runs something called the Caucus of Educators and Staff of African Descent (COESAD) objects to the new policy on grounds few people can understand.
(3) The Faculty Senate considers the objection but nevertheless passes the new policy.
(4) OU President Roderick McDavis throws out the race card and walks out of the meeting. [NB: McDavis is black himself and has spent his whole career in the "diversity" biz.]
(5) Charges of institutional racism ensue....
Alas, for those of us working in universities, this is "dog bites man" stuff.
[Thanks to Dave for the pointer.]
My former student John Coleman has earned an honorable mention (scroll down) in the Felix Morley Jounalism Competition. Keep up the good work!
Competition Helps Consumers
From Friday's WSJ: Hit by iPod and Satellite, Radio Tries New Tune: Play More Songs
UPDATE: Barry Ritholtz has a July 2004 post pointing out the same trend away from traditional radio to satellite, internet, and ipod music. Thanks for the heads up.
Incentives Matter--Public Housing Edition
The first paragraph of an article in yesterday's WSJ (p. A2; sub required):
"Public-housing residents are more likely to seek higher-paying jobs if they don't think they will be penalized by higher rents that lower their income, according to a study due out today."
We geeks refer to such rent increases as implicit marginal tax rates; they arise in the "phase out" range of any means tested program. Other examples include the phase out of the Earned Income Tax Credit (incorrectly viewed as being only an incentive to work more) and the phase out of the personal exemption and itemized deductions in the federal income tax.
March 22, 2005
Good day for hiking
Played hooky today and went hiking in the Hocking Hills with little bit (she's on spring break this week). 7 miles and only a little whining on her part!
I tend to poo-poo most worries about the erosion of privacy. I certainly don't care much about private databases such as credit agencies keeping track of me. And I really like it when I call Delta Airlines and they already know what flights I want because I'm looking at them on their website at the same time.
When it comes to government invasions of privacy I naturally get a bit more concerned. But even here modern technology seems to be more useful in helping us keep tabs on them (remember Rodney King) than in helping them watch us. When it comes to video surveilance in public places, I tend to think that if it would be ok for a cop to stand there and watch us, then it should be ok for a video camera to stand there and watch us. Similarly if a cop could issue a ticket, why not a camera?
Still, this kind of stuff just creeps me out. I suppose I'll get used to it though.
On a related note, when I was in South Africa, they have these video cameras all over. They send out tons of automated tickets for speeding and red-light violations. But hardly anybody pays them apparently! One worry I have is that these video camera gizmos may erode our respect for the rule of law even more.
[Thanks to Dave for the pointer!]
French End 35-Hour Workweek
A two-party bidding war.
The New York Jets have upped the ante in their bid for a stadium site on the island of Manhattan. Current bid, $700m. Now it is Cablevision's turn.
At long last – decades behind the rest of Europe – the government of the Republic of Ireland appears to be going forward with plans to privatize its international air carrier, namely Aer Lingus.
Even more interesting, a coalition consisting of the Progressive Democrats and the bargain airline Ryanair are proposing that a new terminal to be built at Dublin Airport should be privately built and operated.
the PDs want the second terminal to be in private hands so it can compete with the existing facility at the airport.
It's remarkable that airport privatization is on the table in Dublin but not (far as I know) anywhere in the USA. Note: Britain privatized its airports authority, the folks that run Heathrow and Gatwick, in 1979. Maastricht airport in the Netherlands was privatized last year. Australia has privatized a number of its airports. For more details see Robert Poole’s white paper on airport privatization here.
Levitt and Dubner now have a blog as a companion for their book. Not much is posted there yet, but I'll be checking back regularly.
Thanks to Southern Appeal's Mike DeBow for the heads up.
March 21, 2005
John DeLorean, RIP(-off)
Front-page news in Belfast today: automaker John DeLorean dead at age 80. It’s big news around here because DeLorean was the fast-talking American who convinced the UK government to blow £77m subsidizing his attempt to build sports cars in Belfast 25 years ago. You remember the cars: stainless steel, gull-wing doors, featured in the movie Back to the Future. (Photo here.) Great idea, except that the car cost more than a Corvette, while accelerating and handling like an AMC Marlin.
About 2000 were employed making DeLoreans for about three years before the scheme collapsed. (You do the math on the taxpayer cost per job-year. Don’t forget to adjust for inflation.) My daughter is a fan of the BBC show What Not to Wear. The DeLorean caper was an object lesson in What Not to Do to Promote Economic Prosperity.
The Belfast Telegraph today says that the affair
should act as a reminder to Ministers and civil servants of the need for utmost vigilance when it comes to the disbursement of public funds.
I'd put it even more strongly. I'd say it should act as a reminder of the utter folly of entrusting any taxpayer funds to Ministers or civil servants for the sake of trying to pick winning investments.
Wake me when it's over
Amusement Business reports that all those 'great' bands from the 1980s are going to blow the dust of the amps and try to relive the glory days.
As previously reported, the eighth annual Rock Never Stops tour, scheduled to hit 2,500- to 5,000-seat theaters in at least 40 cities starting in June, will feature Cinderella, Ratt, Quiet Riot and Firehouse.
Quiet Riot, the band of my rebellious 13th and 14th years. I've seen the lead singer on some of VH1's programs, and I am not sure if the makeup and hair are gonna do it for me - although for today's 13 and 14 year olds it might actually work.
Another pairing this summer:
Also in June, Def Leppard and Bryan Adams are launching a 26-date co-headlining tour of minor league ballparks.
I don't remember, but weren't Bryan Adams and Def Leppard fans mutually exclusive back then?
My friend JC of Sabernomics has a favorable review of Steve Levitt's new book Freakonomics. JC's review confirms my priors--the book will be at the top of my summer reading list.
March 20, 2005
You mean those free I-Pods aren't free?
The San Francisco Chronicle has an article describing that, alas, Virginia, there is no free lunch.
If there are enough people out there are still convinced that they can get something for nothing, then perhaps private SS accounts aren't such a good idea after all.
March 19, 2005
Which one is faster?
I'll give you one guess.
No sense of irony in Florida?
As Terri Schiavo starves to death (technically I suppose she will die of dehydration long before she starves), a Florida rancher has been arrested for starving 120 cows.
What if he claims that the cows, in a private moment, indicated the didn't want to live anymore?
These are bizarre times.
The nanny state, Irish edition
I'm blogging from Queen's University Belfast (Northern Ireland) where I'm spending my spring break giving a week of lectures.
Co-blogger Frank's reference below to the "nanny state" reminded me of a priceless quote I read in this morning's Irish Times (sorry, the article isn't freely available online). In a piece on the obesity epidemic among Irish children, one advocate for the government taking a more active role said: "This isn't the nanny state. This is the state taking responsibility." Excuse me, but the difference is ...?
In a related story that is available online, the Irish Times reports on an obesity taskforce:
The Government should examine how the tax system could encourage healthy eating, the report of the taskforce on obesity will recommend.
If they intend to tax all fattening foods sold in Ireland, that would basically be a tax on ALL foods sold in Ireland. (Try getting vegetables other than potatoes in a restaurant in either part of Ireland. Belfast is the only city I know where Chinese restaurants ask whether you'd like french fries with your order.) But I notice that the quote singles out only "high-fat and sugary" foods, not starches. So I guess baked potatoes will be exempt -- only the butter and sour cream on them will be taxed.
Actually, to be fair, Belfast nowadays has a goodly number of decent bistros. But given current weakness of the dollar against the pound, the decent food comes at a high price.
To pledge or not to pledge?
A new study is out about the possible effects of abstinence education and virginity pledges.
Money Plans says this about the new study:
Young adults taking "virginity pledges" in schools and community meetings have been found to have (sic) same or even higher chances of sexually transmitted diseases as their peers. [Emphasis added.]
Meanwhile, the WaPo says this:
Teenagers who take virginity pledges -- public declarations to abstain from sex -- are almost as likely to be infected with a sexually transmitted disease as those who never made the pledge, an eight-year study released yesterday found. [Emphasis added.]
Call me a stickler for details, but there's a big difference in my book between "same or even higher" and "almost as likely". The first says kids taking the virginity pledge are perhaps more likely to develop STDs and the second says kids taking the virginity pledge are perhaps less likely to develop STDs. In either case, the impact is apparently small given the qualifications "same or even higher" and "almost as", but you'd think the reporters could at least the the sign right.
So which is it? The researchers are saying the "same or even higher" if you read their press release. Btw, I am saying nothing here about their results or the quality of their methods. I'm merely pointing out the discrepancy in the reporting.
March 18, 2005
Confusing Solution with Problem?
Writing in today's NYT, Robert Frank bemoans Americans low savings rate and blames it on (1) "Lack of self-discipline" and (2) the "arms race" of people spending more on expensive housing so that their children have access to good schools.
Not surprisingly, Prof. Frank calls for more government not less as a solution to the problem. For example, Prof. Frank calls for mandatory savings of income increases; he doesn't even acknowledge the possibility that existing public policy (a certain Ponzi scheme and a tax code that punishes saving come to mind) might cause people to save less. (The increasing prevalence of merit scholarships--with Lake Wobegon definitions of merit--such as Georgia's HOPE program lessen the need to save for college. David Mustard of UGA has found that HOPE is linked to increased car sales--how's that for public policy stimulating consumption?) More generally, the nanny state has probably weakened the need for the self-discipline that Prof. Frank finds so lacking.
Why, Why, Why?
From Yahoo News:
Wolfowitz Discusses World Bank Mission with Bono
Not one phone call, but evidently two lengthy phone calls. My take is that Bono is good at hawking I-Pods, but is he really qualified to discuss what the World Bank(!) ought to be doing? Perhaps talking to Mick Jager (Masters from the LSE) would make a little more sense.
From the article:
Wolfowitz adviser Kevin Kellems told Reuters the deputy U.S. defense secretary initiated the lengthy conversations with the lead singer of the rock group U2, whose name had been bandied about for the World Bank presidency.
Granted, I don't spend a lot of my time following the day-to-day operations of the World Bank, and I suspect the organization might do a bit better if more of us did, but I don't remember ever hearing Bono's name suggested to be the WB president. Perhaps I missed that issue of Parade Magazine.
THE PRICE IS NOT RIGHT
The New York City Department of Consumer Affairs produced a report on gender based price discrimination in 1999 entitled THE PRICE IS NOT RIGHT.
Here are the results concerning haircuts.
When the haircutters who charged women more than men for a basic haircut were asked why a price disparity existed between men's and women's identical services, the following responses were given
25% stated that a combination of hair length, extra time, and hairstyles were the reasons
22% attributed the length of a woman's hair as the main reason why women were charged
11 % stated that the extra time spent on women's hair was the main reason why women
9% said that women's hairstyles and the complexity of some of them were the reasons whythey charged women more than men for a basic haircut
15% replied that that's the way the prices are set or that the owners sets the prices
12% said that they did not know why women were charged more than men
the remaining 6% either hung up, said it depended on which hairdresser cut the hair, didn't want to speak about it, said that the price was a special, or said that the prices were set ". . .because a man is a man and a woman is a woman. "
These responses suggest that many haircutting establishments rely on gender-based stereotyping in setting prices for basic and comparable services. Despite the fact that Council staff informed the haircutters that both the caller and her, his boy/girlfiiend had the same length hair, these haircutters did not appear to factor this into consideration when quoting a price.
Notice how the interviewer personalizes the results. This is a good example of researchers who knew their conclusions before they undertook the study. They knew they would find price disparities, and this in itself would be sufficient proof of discrimination. They really weren’t interested in some of the rational reasons that were given by the proprietors. Moreover, they never inquired as to whether government licensing might be responsible for some of the price disparities. What’s the relative cost of a beautician’s license?
Of course, there is always the obvious question that is avoided. If it is so damn profitable to cut women’s hair, why does anyone bother cutting men’s hair?
Russ Roberts on Gender Pricing Laws
Russ Roberts reports on a Canadian attempt to impose pricing parity for dry cleaning, haircuts, and the like. I wonder if the folks behind such parity laws would also like to impose them on catalog retailers. It seems as though the "Overstocks" section the Lands End catalog that lands in our mailbox every so often is disproportionately loaded with discounted women's items. Men's discounts, by contrast, are confined to shirts in odd size/color combos. Sauce for the goose, sauce for the gander.*
Of course, I would oppose such a law even if it included catalog discounts; my point is simply that sometimes these things seem to favor men and other times they seem to favor women. (I say seem b/c as Roberts points out the typical men's haircut is not the same as the typical women's haircut.) Such is the nature of the marketplace.
*We could have the same discussion about registering for the draft. Registration should be abolished, but if it isn't then why shouldn't women register?
For better or worse, we're in the era of school accountability. Not surprisingly, school accountability incentives can lead to unintended consequences.* For example, Steve Levitt's paper found evidence of teachers cheating on standardized tests. Now David Figlio of the University of Florida finds evidence that "schools apparent [sic] act on the incentive to re-shape the testing pool through selective discipline in response to accountability pressures."
Vouchers or tuition tax credits anyone?
*I dislike (but use) the term "unintended consequences" because it seems to suggest that responses on multiple margins are not predictable in advance. A better term might be "ancillary effects."
1. The Bush administration has announced a cap-and-trade program for mercury. Although I'm familiar with the virtues of cap-and-trade schemes relative to across-the-board regulations, I'm uneasy calliing such programs "free market environmentalism." After all, the government establishes the number of permits that can be traded.
2. Wondering what ever happened to the "Baywatch" actresses? Alexandra Paul was arrested earlier this week for attempting to block GM's destruction of 70 unmarketable electric cars. Maybe she should switch her cause from environmentalism to tort reform--the article states GM turned down an offer of $1.9 million for the cars because it feared lawsuits that might be caused by a lack of spare parts.
3. My perspective on opening ANWR for drilling: My understanding is that the portion to be opened is about 2,000 acres--less than 10% the size of my college's campus, much less the 1.5 million acre area under consideration in Alaska. Even if the entire 2,000 acres or twice that much is trashed--and supposedly it won't be--I think it would be a small cost to bear in exchange for the billions of barrels of oil that are supposedly there. As Thomas Sowell says in "The Vision of the Anointed" there aren't solutions, just tradeoffs--this one appears reasonable to me.
On a related matter, Roy Cordato has a nice riff on "energy independence."
Manhole Cover Theft
"The theft of manhole covers and meter covers is an ongoing crime that affects Johannesburg Water and the residents of the city. It leads to increased personal injury and damage to property," Chand said.
Thieves remove the iron covers to sell them to scrap metal merchants. The new covers will be made of a polymer mixture consisting mainly of concrete and will have no resale or scrap value.
Is there any concept in economics as meaningless as the Import Surplus (a.k.a. the trade deficit)?
Today's Columbus Dispatch has a caption that reads, "Rep. Rob Portman, left, of Cincinnati, is President Bush’s choice to tackle the U.S. trade deficit."
GRRRRR. We economists still got some splainin to do.
Here's what the Great One had to say,
Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses, and the other gains in proportion to its declension from the exact equilibrium. Both suppositions are false. A trade which is forced by means of bounties and monopolies, may be, and commonly is disadvantageous to the country in whose favor it is meant to be established...But that trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both.
Art Imitates Life Imitates Mungowitz
In my book, ANALYZING POLICY, I have a chapter on politics and voting.
In it, there is an example of municipal pool. 5 citizens, 3 want a pool and 2 don't. Now, the 3 citizens could form a private club (Good on ya, James B!), and build their own club (pools are excludable, no need for them to be "public" in any sense).
But the 3 citizens can force their will on the other 2, and make the pool collective. Not public (pools are excludable, at low cost. Have to have a fence, anyway, to keep little kids and goats out) but collective. That way, the 3 citizens who want a pool can steal the "support" (meaning money, taken against their will and at gunpoint) from the other 2 citizens. As usual, democracy is 3 wolves and 2 sheep deciding what's for lunch (feeling sheepish?)
Anyway....the Onion has this excellent satire. Excerpt:
MANKATO, MN—The Mankato City Council voted 6-3 against the issuance of a $500,000 municipal bond Tuesday, marking the end of one man's tireless, 10-year-long crusade to ensure that a proposed community pool not be built.
"Victory!" said Irv Draper, founder of Taxpayers For Wise Choices, who announced the bond's defeat from the steps of City Hall. "Today, the city council stood up in favor of the long-term interests of tax-paying Mankatoans. After 10 long years of ceaseless toil, I can finally say that a swimming pool will not be built!"
Compare that with this excerpt from my chapter 6:
Suppose that five citizens of tiny Ruttenton have met for their annual town meeting. This body is empowered to make decisions for the entire town, and all citizens have agreed in advance to abide by the collective decision. Notice that this doesn’t mean that the citizens expect to agree on all policies. Instead, the citizens (Mr. One, Ms. Two, Ms. Three, Mr. Four, and of course the mayor, Mr. Fish) all have pledged in advance to accept the collective decision.
The point? Irv Draper is a libertarian hero. The Onion has many layers.
(Nod to RL, who would admit he is really a libertarian if he had any juevos.)
Ft. Worth police get AR15s
John Lott probably has something to say about this idea. The Ft. Worth police force is going to have more than 200 cops on the street with AR15s by the end of the summer (for those unfamiliar, the AR15 is the semi-automatic civilian version of the military's M16 caribine.) The reason to give cops the guns? Because some of the bad guys have semi-automatic rifles and therefore the cops are outgunned.
Recent shootouts here in Texas have typically involved one or two bad guys and a bunch of cops. Each cop is armed with a nine millimeter or a .38 and so there is usually a lot of guns pointing in one direction and relatively few guns pointing in the other direction.
On the other hand, having a bunch of AR15s on the street will likely increase the number of bulllets flying in Cowtown.
The empirical question: will the good folks who live, work and visit in Ft. Worth be safer?
March 17, 2005
It was in the newspaper, it must be true.
This headline from Canada Press:
A billion air travelers in U.S. in 2015: Will there be enough room for them all?(article here).
By definition, if there are a billion passengers in the air then there will be room for them all. Perhaps to the media types, that is a real question. I was more intrigued by the claim itself, what with ever greater hassle in flying, fluctuating prices, and some serious doubts about the viability of more than one carrier.
Evidently the claim comes from the Federal Aviation Administration, which seems to be setting the stage for demanding more tax payer dollars for public airports, six figure salaries, and the sort. I surfed the FAA site (don't go to faa.org) and found the "source" of the forecast - U.S. Commercial Air Carriers Total Scheduled U.S. Passenger Traffic. There it is in black and white. Domestic travel in 2015 will entail 908 million enplanements and international travel will add an additional 100 million enplanements.
The projection to 2015 is based upon a straightline projected 3.2% annual growth in passengers per year. If one took the projection to 2030, we would have 1.456 billion passengers per year. The old ten-year forecast again.
Evidently there is no concern about fuel prices or geopolitics, nor about how many carriers will be around at the time. If we have a monopoly, near monopoly, or nationalized airlines, I am confident the 1 billion passenger mark is safe.
Wasn't there a famous prediction in the late 1970s that no one would ever need a personal computer. The FAA prediction seems to be the exact opposite. If the FAA claims are taken seriously, then we spend a lot of money on new airports - probably like the monstrosity outside of Denver - and if the traffic isn't nearly 1 billion people, well then at least we were prepared. The computer prediction was wrong, but you'd be hard pressed to find someone who thinks the private sector did a bad job in responding. I'll take my chances that the private sector could respond to a massive increase in airline traffic. I do not trust the federal government to build airports in an efficient manner. Exhibit A: Denver International Airport. Exhibit B: DFW airport is getting ready to open a $1 billion terminal just weeks after Delta pulled out leaving almost an entire terminal empty.
The pity is that there is no cost to the FAA for making heroic projections and seeding for future allocations of our tax dollars.
My final comment. From the first paragraph of the Canada Press story:
More than one billion people a year will be boarding planes in the United States within a decade, nearly double the number now using an aviation system showing signs of being overburdened. (emphasis added)From the FAA data - total passengers in 2003: 642 million. Forecasted passengers in 2015: 1,014.7 million. Let's do some math.
1,014.7 million / 642 million = 1.58. Perhaps 1.58 is nearly double in Canada, after factoring in the exchange rate, but from where I sit in Texas that's only closer to double than triple.
Update: From the first paragraph of an Associated Press article on the same FAA report:
More than 1 billion people a year will be boarding planes in the United States within a decade, nearly half again as many as those now using an aviation system showing signs of being overburdened. (emphasis added)At least the AP reporter can use a calculator. Is it odd that the two stories have exactly the same first paragraph? Did the FAA write this story? If so, should we be more worried that someone at the FAA can't use a calculator?
Does there have to be a limit?
To the number of blogs, that is. I suspect there is, if only because not everyone wants to blog. But that assumes that the computers don't start making their own blogs, and this is evidently becoming a bigger issue. Technorati is supposedly tracking 7.8 million blogs which would be one for every 100 or so people on the net worldwide. The growth in blogs has been amazing, as this graph shows:
Some other interesting tidbits from the article linked above:
If the last point is true, does it really matter? If only the search engines bear the costs of fake blogs, then my leg hasn't been broken and my pocket hasn't been picked, so I don't care. If the users of the search engines bear the costs of fake blogs, then there seems to be a strong incentive for the search engine folks to figure something out. I am not technologically savvy enough to figure out how to deal with the fake blog, but I trust the good folks at Google and MSN can.
I do wonder: If the search engines start ignoring blogs, what incentive is there to blog? If blogs really had to rely upon other blogs for spreading content (even moreso than they do today), the number of blogs might decrease significantly.
My take on the blogosphere is that many of the 7.8 million blogs will dry up and blow away. Hell, my nine month old had a blog the week she was born - for pictures and such - but it hasn't been updated for a few weeks because Google Picasa doesn't work very well. Most blogs are likely a fad.
Of course, DOL is not a fad...
Killing Him Twice?
"US troops shoot dead Iraqi general: police"
If he's already dead, what's the point of shooting him?
Taxed to Death
Supreme Court Asked to Bury Oklahoma Casket Law
Consumers need protection, but they need it from the state and not the seller. If you want to sell a casket in Oklahoma the state “requires two years of college coursework and graduation from an accredited mortuary science program, two exams, and a one-year apprenticeship in a funeral home, during which the apprentice embalms at least 25 bodies.”
Yes, I said sell. We are not taking about becoming a mortician. We are talking about the requirements to sell a box. No doubt, vested interests had a major part in erecting these ridiculous barriers to entry. As stated in the linked article, “funeral directors regularly mark up a $1,000 wholesale casket to $6,000.”
Let's hope the SC puts this law to rest.
March 16, 2005
It’s hard to find any defenders of Harvard faculty in the blogoshere. Are the liberals hiding or is it that they can’t write a cogent argument in their defense? There is a lot of heavy venting going on in favor of Summers. Most is repetitious and emotional. The best part is usually the headline. Here is a list of some of the better ones.
Elmer Fudd goes to Cambridge
Harvard PCU - Girls Gone Wild! I nominate Ward Churchill for the soon-to-be-vacant job.
Now is the Summers of our discontent
Smart People Acting Dumb
Larry, Larry, Quite Contrary
TWEEDY LYNCH MOB
Liberal Academics Destroy one of their own
HARVARD: THE ORAL ROBERTS UNIVERSITY OF THE NORTH
It's A Mandate (or is that Womandate?)
Amid Summers' Nightmare
One More Reason To Be Proud of Being a Villanova Alum
Thought Police Lynch Larry Summers
Got any other good ones?
Man With 'TIPSY' Plate Faces DUI Charges
To quote Dean Wormer*: "Fat, drunk, and stupid is no way to go through life, son."
*Although the story gives no indication of the driver's girth, the drunk and stupid parts certainly fit.
Hat tip: "Best of the Web Today"
It's almost lunchtime; if you're feeling hungry you might want to try a 7-pound hamburger. You won't be asking "where's the beef?" after this baby. If you're feeling a bit less hungry you can try the 2-pound "Hercules" or the 3-pound "Atlas."
Walter Williams on Summers Kerfuffle
Today's Walter Williams column contains his usual subtlety:
"If there's a legitimate criticism that can be made about Dr. Summers' NBER comments, it's that he didn't exercise discretion. There are certain things best left unsaid in front of children. Children have little understanding and can be easily offended by unvarnished truths."
Mike Lester on Justice Kennedy
The Rome News-Tribune's Mike Lester has another excellent offering today.
March 15, 2005
No Confidence in Summers
From a Drudge post. Harvard faculty no confidence vote in Summers passes. I told you Summers would be gone before Weird Churchill. What a sorry state academe is in.
GWYDION GWYDION has posted a letter from a Harvard faculty member who was at the meeting. Apparently, a number of economists spoke in Summers' defense.
The Weekly Standard is right; economists are a shunned group that share a common social disease.
Ruth Wisse further alienated the faculty by quoting that far right-winger John Stuart Mill. I wonder if she threw this one at them.
Truth gains more even by the errors of one who, with due study and preparation, thinks for himself, than by the true opinions of those who only hold them because they do not suffer themselves to think.
My favorite Larry Summers' quote is
Is it any suprise they hate him?
Coming Home to Roost
Posted by at 04:16 PM
Georgia School Finance Lawsuit
Georgia, like most other states, is experiencing the great joy of having a bunch (51 of 180) of school systems sue the state for insufficiently funding government schools. The plaintiffs have a website here.
The bone of contention is that these school systems are too poor to adequately fund education on their own and that the big meanie state isn't stepping in to remedy the situation. I decided to take a look, using data from the website linked above.
The plaintiffs are right about one thing--they are poorer jurisdictions. Taxable wealth (i.e., the value of property subject to ad valorem taxation) is lower in the lawsuit jurisdictions--about one third or $35,000 per full time equivalent student lower.
Now for the kicker--if these jurisdictions are so constrained by the lower tax bases and miserly state funding then one would expect them to have higher millage rates. Guess what? THEY DON'T! Millage rates are nearly a mill lower on average in the lawsuit counties than in the non-lawsuit counties; this difference is statistically significant at the 5% level. Moreover, one might expect to find many of these poor counties at or near the state limit of 20 mills of property tax for education funding. Guess what? THEY AREN'T. Only 1 of the 51 lawsuit school systems has a millage rate above 17 mills (Lanier county at 17.09 mills). Hence, the premise that state funding and meager tax bases cause the lawsuit counties to have higher millage rates just isn't true. And, to the extent that schools are inadequately funded in the lawsuit counties, the citizens of those jurisdictions and their elected leaders bear at least as much responsibility as the state legislature. If schools in the 51 lawsuit systems are poorly funded, it's a political decision of those jurisdictions.
A FOOTNOTE: The notion of "inadequate funding" is pretty dicey. For example, the simple correlation between per pupil spending and a measure of student performance on Georgia's standardized test is -0.25. (The data are obtained from the same website linked above.) Yup, more money is correlated with lower scores--higher spending districts don't seem to give taxpayers and students much return on their tax dollars.
Of course, the ultimate way to equalize spending is to provide a flat per pupil voucher ...
I'm sure I'm the last person to notice this, but I think this is so cool.
Last week, Craig Newmark posted something about Subaru getting high marks from Consumer Reports. (I posted a comment myself as I'm a rabid fan of my Subaru.)
On Bankruptcy and Medical Costs
In Larry's recent post on bankruptcy reform and time inconsistency, he linked to Todd Zywicki's and HedgeFundGuy's posts on the dubious statistic that 50% of bankruptcies are caused by medical expenses.
Both Zywicki and HedgeFundGuy raise solid objections to the 50% notion. However, I think they both miss the most obvious reason to be skeptical of the statistic--the tremendous variation in bankruptcy filing rates across states. According to a WSJ article on March 10 (subscription required), UT, TN, and GA have rates of one bankruptcy per 36.5, 38.7, and 42.4 households, respectively. By contrast, AK, VT, and MA had one filing per 171.2, 156.2, and 144.3 households. I think it implausible that there could be such a wide variation in bankruptcy rates if 50% of filings were caused by medical expenses. While medical expenses may vary across states for many reasons, I think it unlikely that the variation in medical expenses could lead some states to have bankruptcy rates 3-5 times greater than some other states.
But what about lack of health insurance? The uninsured rates for the six states are UT 14.3%, TN 12%, GA 17.6%, AK 20%, VT 12.2%, and MA 11.3%. (Source here.) Neither the pattern of uninsurance rates nor the range is consistent with the notion that uninsured medical expenses cause half of bankruptcies. A caveat--statistics on insurance coverage don't say anything about the generosity of the benefits; it's possible (though I'm skeptical) that policies in UT, TN, and GA are sufficiently stingy relative to policies in AK, VT, and MA to explain the difference in bankruptcy rates.
What Price Lucky?
Lucky was a sheepdog. The vet that operated on Lucky is now being sued for malpractice. The lawyer for Lucky’s survivors – his human family- wants to sue for Lucky’s subjective value to the previous owners. I assume this would include pain and suffering and lost society and companionship. The defense, of course, wants Lucky valued at replacement cost. And like a car, Lucky’s market value should be depreciated for wear and tear.
What do you think? Subjective value or replacement cost?
The Economics of AIDS Prevention
Sex columnist Dan Savage writes:
When extremely promiscuous gay men assess the risks and benefits of unprotected sex, most assume that if they get infected, or if they infect someone, that an AIDS organization or state health agency will pay for the AIDS meds they or their sex partners are going to need to keep themselves alive. It seems to me that one sure-fire way to curb unsafe sex would be to put the cost of AIDS meds into the equation. I'm not suggesting that people who can't afford AIDS meds be denied them--God forbid. No, my radical plan to curb unsafe sex among gay men is modeled on a successful program that encourages sexual responsibility among straight men: child-support payments. A straight man knows that if he knocks a woman up, he's on the hook for child-support payments for 18 years. He's free to have as much sex as he likes and as many children as he cares to, but he knows in the back of his mind that his quality of life will suffer if he's irresponsible.
So why not drug-support payments? If the state can go after deadbeat dads and make them pay child support why can't it go after deadbeat infectors and make them pay drug support? Now that would be radical. Infect someone with HIV out of malice or negligence and the state will come after you for half the cost of the meds the person you infected is going to need. (The man you infected is 50 percent responsible for his own infection.) Once a few dozen men in New York City, San Francisco, Toronto, Los Angeles, Chicago, Miami, and Vancouver are having their wages docked for drug-support payments, other gay men will be a lot more careful about not spreading HIV. Trojan won't be able to make condoms fast enough.
Go here for his readers' responses.
March 14, 2005
Kritocracy Expands Its Rule
The kritocracy has again attempted to extend its rule by declaring that a ban on gay marriage is unconstitutional under California law. The failure to constitutionally ban a right now makes any unstated right a positive right. Under this interpretation how can governments ban most things? This is actually a libertarians dream come true.
What strikes me as strange is that I don’t think any of these state governments have recently banned gay marriage. What they have done is prohibit non-traditional civil marriages? Civil marriages define a civil contract and define the obligations of the contracting parties. They have nothing to do with sanctifying a marriage. That is done in a church and it is not the business of government. The joyous celebration of marriage has historically occurred in a religious context. To see couples celebrating on Caesar’s steps because their names may be joined on the tax roll seems odd to me.
This whole topic is blurred in the press where civil marriage is presented as a moral question. The appropriateness of a church marriage is a question that should be answered by one’s religion. That’s the moral question. The legal question is whether or not the rights and obligations of the civil marriage contract should be extended to gay partners, or for that matter any two or more individuals. After all, we can’t ask same sex couples to prove they are gay before they marry.
The question should be, what are the benefits and cost of permitting same sex marriage? Assuming that the law has no impact on church marriage, potential same sex civil marriage couples must perceive that the benefits of a state approved marriage outweigh the costs. What are those benefits? They must believe that they will be receiving additional state mandated benefits if they are civilly joined. These might include access to fringe benefits, social security benefits or other federally or state funded programs. In other words, the rest of us are going to pay to support same sex marriage.
A fool and his money
$647.59 for a time machine? The option value might even be higher than that.
The miracle that is e-bay.
Canada - Lake Woebegone?
Another tidbit in the email box (again unverified):
"Assistant manager" is the most common job title in Canada.
If true is it because the little people want a job title or is it that the actual managers want more chances to delegate?
The value of property rights
This showed up in my email this morning, so I don't know the veracity of the statement (although it sounds probable):
The man who recorded the widely recognized AOL greeting, "you've got mail" was a friend of an AOL executive and was never financially compensated for his recording.
Caplan on time preference
Bryan Caplan at EconLog last week criticized what he called the “myth” of Misesian “time preference” theory.
Problem #1 with Bryan’s critique: there are at least two senses of “time preference”. Bryan starts out with a quote from Mises that expresses what we might call the idea of “absence of categorical time indifference”: the idea that, if we see you consuming now, you must not be indifferent at every margin between consuming now and consuming indefinitely later. Bryan rightly observes that diminishing marginal utility over dated consumption is sufficient to explain why all consumption is not indefinitely postponed. What Bryan doesn’t see is that DMU is consistent with Mises’s view, not a contradiction of it. (Mises was, in fact, a pioneer in explaining diminishing marginal utility in ordinalist terms.)
Problem #2: Bryan seems to think that the scarcity of present goods, relative to future goods (in a world of positive growth, obviously) is a sufficient explanation for the premium on present goods. He offers an analogy:
Gold has (almost?) always been more expensive than silver, but we don't need to postulate "gold preference" to explain this pattern. The greater scarcity of gold is all the explanation we need.
If we were to take this line seriously, we would eliminate the subjectivist revolution in economics: any relative price can be explained by scarcity (read: real cost) without reference to preferences!
It can be imagined (although I doubt that it’s true) that people have the same preferences for gold as for silver, only the world happens to be more abundantly endowed with silver. The problem with considering this case analogous to present and future goods is that the greater abundance of future goods isn’t a happenstance. It’s endogenous, the result of our saving and investment practices. Future goods are not manna from heaven. But a world where future income is exogenous seems to be exactly the world Bryan imagines:
Suppose we knew the price of food would double next year. Then a pound of food now trades for half a pound of food one year from now. Translation: a negative 50% interest rate! If this seems crazy to you, suppose food were the only commodity, and you expect a famine next year. Wouldn't you happily trade 2 pounds of current food in exchange for a promissory note good for 1 pound of food next year?
Bryan rightly points out that growing income “gives even perfectly patient people a reason to increase their demand for current consumption.” That is, even a person who is indifferent between an extra dollar today and an extra dollar tomorrow, when today and tomorrow are equally provisioned, will prefer the extra dollar today when tomorrow is already better provisioned.
Of course, none of this means that time preference does not exist. It does. But you don't need it to explain the existence of interest. Diminishing marginal utility does that job.
No, DMU doesn’t do that job at all. DMU doesn’t explain why, even when today and tomorrow are equally provisioned, the market characteristically values a dollar today higher than a dollar tomorrow. That’s a fact that we need time preference to explain.
Congressional Steroids Circus
George Will rightly tears into the looming Congressional steriod hearings.
"The one witness eager to testify is Canseco, who is flogging a book in which he accuses many players of using steroids. Jeff Merron of ESPN.com read the book -- has Canseco done that? -- and found:
Canseco says that during spring training 2001, when playing for the Angels against the Mariners and their second baseman Bret Boone, ``I hit a double, and when I got out there to second base I got a good look at Boone. I couldn't believe my eyes. He was enormous. `Oh my God,' I said to him. `What have you been doing?' `Shhh,' he said. `Don't tell anybody.''' But in five Angels-Mariners games that spring, Canseco never reached second base.
He recounts game six of the 2000 World Series -- which ended with game five. He recalls baseball in 1982 being ``closed'' to Latinos -- although there were 62 major leaguers from Puerto Rico and the Dominican Republic and more from other Latin countries."
Oh, The Poor Things
A headline in yesterday's Atlanta fishwrapper: "New SAT taxes kids"
I worry about the new SAT also--I fear it might be less taxing than the old SAT. Then there's the possibility that the new essay portion will be vulnerable to political correctness in the choice of topics and in the grading.
March 13, 2005
Best line in tonight's Simpsons?
Homer, referring to China:
You guys are Commies? Why do I see rudimentary free markets?
Jim Morrison video found
Florida State University has dug up the earliest known video of Jim Morrison of The Doors. While he was a very young student at FSU (he later transferred to UCLA) he had a role in a university public relations film. I'd have never recognized him myself.
Alas the film was directed more to the state legislature than to prospective students. In it, Morrison is denied admittance to the university because they don't have enough space or professors. Boo hoo. Scarcity does suck.
[Hat tip: Jody]
March 12, 2005
Newsflash: Dog Bites Man.
"US Textile Makers Want Chinese Imports Limited." Sorry story here.
Tax Squeeze on Charmin
I previously mentioned the Roman Pee Tax. Democrats must be reading this blog, because a Florida state senator has recently proposed a 2 cent tax on each roll of toilet paper. Supposedly, the tax would be earmarked to pay for the sewer system. Thus, it may be viewed as a user tax.
Now, the fun question is, how will markets minimize the impact of the tax? I have two suggestions:
1. Sell larger rolls of toilet paper.
2. Use each sheet more intensively.
March 11, 2005
Funeral Home Housed Prostitution Ring
"It seems an Athens funeral home was, in reality, the life of the neighborhood.
Story here; supply your own joke.
Slow Down in Class or You'll Be Sued
Story here; a couple of excerpts:
"A former UNLV student is suing the university after losing an appeal over a low grade."
"According to the complaint, he received the grade because of Moehring's fast-paced lectures that prevented him from taking complete notes. He said Moehring criticized his conservative bent in papers and gave him a grade that damaged his grade-point average and made him ineligible for student loans."
The Greedy Hand of Government--Red Light Camera Edition
In a recent article in The New Republic (subscription required) Gregg Easterbrook writes on local governments' use of red light cameras as a funding source. Here's an excerpt cribbed from the Market Center Blog:
"Many states and local governments are installing ticket-issuing cameras, ostensibly for safety but more likely as a clandestine tax on driving. Take the District of Columbia as an example. It's been mounting automated-ticket cameras since 1999, and soon will have 49 that issue tickets for running red lights, plus 15 photo-radar devices that issue speeding tickets. In 2004, the District realized $54 million in revenue from roughly half a million tickets assessed by these devices. ...automated tickets are a minor matter. But can it be wise to establish a principle that when a machine says you did something illegal, you are presumed guilty? This is an extremely dangerous idea that may someday be applied to circumstances that are not minor. ...The next worry about ticket-issuing cameras is that they are pretty obviously intended to reach into citizens' pockets. From a practical standpoint, the District government knows that no one can afford to take a day off from work to contest a $75 automated fine, the most common levy. It's a fabulous money-making scheme for government. Nearby Maryland and Virginia have noticed the District's income windfall from automated ticketing and are installing the cameras like crazy. Other local governments around the country are doing the same. If the District, Maryland, Virginia, or any other government entity wants more money from motorists, it should impose higher vehicle-registration taxes and take the political heat for doing so. Issuing people automated fines for using the roads their taxes built in the first place is not only politically devious, it is government raising its middle finger to average citizens. ...the company that operates the District's automated ticket devices gets a bonus when tickets issued exceed a target level. If the real goal were to reduce speeding and red-light running, the District would be happy when the number of tickets declined, because that would mean fewer violations. Instead the program is structured to increase the number of tickets issued, because the real goal is seizing money. ...three years ago a red-light camera was installed at the intersection of two streets called Old Georgetown Road and Edson Lane. The yellow lamp was re-timed to last only two seconds, meaning a steady stream of drivers expecting the standard four-second yellow ended up running the light."
This all hits close to home because Rome installed a camera about a year ago at its busiest intersection. The results--lots of cash for the government and more fender benders caused by people slamming on brakes to avoid the lights. There are also suspicions that the yellow light phase at that intersection has been shortened. Of course, the whole safety rationale for installing cameras is specious--if the Rome had been so concerned about accidents caused by people running the light it could have stationed an officer at the intersection to issue tickets the good old fashioned way.
In case you're wondering--no neither my wife nor I have gotten a ticket from the camera.
Dinner with Doug
Douglas Holtz-Eakin, director of the Congressional Budget Office, was the guest speaker for a Berry event last night. He gave a fine talk on the enormous budget challenges facing the federal government--primarily Medicare and Medicaid. Although he did not make an explicit prediction about tax hikes, his talk makes me even more convinced that higher taxes are inevitable and even more convinced that fully funding a Roth IRA (fund with after tax dollars but earnings are tax exempt) is a good hedge against those higher future taxes.
Thanks to Holtz-Eakin for generously coming to Berry and to Berry's Gary Waters who made it happen.
Posted by E. Frank Stephenson at 09:02 AM
March 10, 2005
Weekly Standard Exhibits Bias
In a recent article on Larry Summers, “Fear and Intimidation at Harvard” the Weekly Standard exhibits its personal bias against economists. Rather than indicating that Summers strange behavior could be a malfunctioning psychotic zeitgeist, it attributes it all to him being an economist.
With the same tawdry brush Harvey Mansfield paints us all as awkward antisocial malcontents. It is simply unfair. The Weekly Standard and Mr. Mansfield should apologize for creating this degrading stereotypal image of the economist. Must all economists be labeled barbarians, because a few dismal scientists offend polite society?
Income Distribution Data
I've been working on a paper that among other things examines distribution of income data for a lot of countries around the world. Generally the data are quite a mess because such studies are done country by country using many different methodologies: personal versus household data?, gross versus net (after tax) data?, national sample or urban (or rural)?, income or consumption? And these things matter a lot. The distribution of income in the United States for example is quite different depending on whether you use before tax, after tax, or after tax/transfer data.
These researchers at the World Bank took a look at literally thousands of country income distribution studies and summarized and characterized them by type in a nifty spreadsheet. Their work doesn't go beyond the mid-90s literature, but this is a great source for anyone interested in the distribution of income within countries around the world.
Bankruptcy reform and the time-inconsistency problem
Last year Kydland and Prescott won the Nobel Memorial Prize in Economic Science largely for their article on the problem of “time-inconsistency”. Centuries ago Homer had already illustrated the idea: Ulysses gained by having his crew bind him to the mast, so that he could hear the Sirens without giving into the temptation to steer the boat in their direction (and thereby crash on the rocks).
The basic idea in a two-player setting: where Smith rationally fears that Jones will act opportunistically after the fact, potential mutually beneficial deals between Smith and Jones will be lost unless Jones can credibly commit to playing nice.
Now read Paul Krugman on the new bankruptcy reform bill. It never crosses Krugman’s mind that easy resort to bankruptcy impedes a borrower’s ability to credibly commit to repaying, and therefore makes it harder for the Joneses of the world to borrow in the first place. (We all gain, for the same reason, from a constitutional ban against governments relieving debtors of their debts.) For Krugman, as Arnold Kling notes, bankruptcy reform is a zero-sum game: if it’s good for the credit-card companies, it must be bad for consumers. Writes Krugman:
The bankruptcy bill was written by and for credit card companies, and the industry's political muscle is the reason it seems unstoppable. [...] And any senator who votes for the bill should be ashamed.
Todd Zywicki at the Volokh Conspiracy, and HedgeFundGuy at mahalanobis, meanwhile provide good reasons not to believe the recent “study” that Krugman cites purporting to show that “more than half of bankruptcies are the result of medical emergencies.”
The Krugman fans at The Mahalblog comment on Krugman's column:
Krugman says we're heading in the direction of a debt-peonage society, in which debtors are forced to work for their creditors. Libertarians? Are you paying attention?
Actually, some libertarians have been thinking about bankruptcy law for a long time. One college student I used to know, long ago, analyzed bankruptcy law from a libertarian perspective here (pdf file). His conclusions, restated: debt dissolution should be contractual, not unilateral. It’s a natural default to dissolve the debt of failed limited-liability firms, but not the debt of individuals. We shouldn’t compel individuals to bear the burden of having option to dissolve their contractual debts, which is what bankruptcy law does, and not let them contract around it. We shouldn’t prevent people from making the better deals available to those who can credibly commit to not declaring bankruptcy.
Correlation or causation?
Earlier this week I pointed to an interesting graph of information technology investment over the past twenty years. Today's USA Today has the 10 reasons the NASDAQ won't "recover" any time soon. Number six on the list is "The "hot money" has moved on," i.e., the venture capitalists are pouring billions down the drain of IT but are now pouring the money down the drain of some other industry.
In the USA Today article is a graph of the NASDAQ
which looks a lot like the original graph I linked to from the Dallas Fed (although obviously not to the same scale):
Both peaks in 2000 provide a great example of the question of causation (unidirectional or bidrectional) vs. correlation (i.e., caused by some third factor)? I am sure finance dissertations are already being written on this topic.
Summers is Sick!!
The article referenced by Craig below is a hoot. Summers is definitely sick and so were all those dissidents in Soviet psychiatric hospitals. Then again, this could describe the typical economist.
"People with Asperger's may be unnervingly smart in specific modes of thinking but have trouble functioning in rudimentary social situations. They have difficulty handling change and transition. They don't work well on teams. One on one, they won't make eye contact, instead staring at a wall or into space. While they may have excellent vocabularies, they can also be linguistically tone-deaf and use words that convey a different meaning than they intend, which can result in their sounding brusque, dismissive, or simply as if they're not listening.”
Or in the words of West Side Story
Larry's biology made him do it?
Evidently, so says Richard Bradley in the Boston Magazine. I haven't read the article in depth, but after a discussion of Larry Summers's career and recent past, the last four paragraphs drop the hammer:
So great was the bewilderment over Summers's lack of social skills that some in the Harvard community wondered if there might be a clinical reason for his behavior: a neurobiological disorder called Asperger's syndrome. A form of autism, the disorder was first described by a Viennese physician named Hans Asperger in 1944.
So, Larry suggested testable hypotheses that led to awkward situations because of his biological and nuerological makeup? Hmmmm.
First off, the claim of autism is not one to be thrown around lightly. However, evidently some folks can get away with that while others can't (weren't some people castigated for suggested Bill Clinton might have some compulsive behaviors?)
Secondly, my take is that Larry Summers gets himself into awkward situations because he is an economist. People use the term "awkward," but that is really a cop-out. The situation is only awkward because of other people's feelings, something that Summers cannot control. If Larry Summers makes other people feel awkward by his thoughts, provocations, and hypotheses, that sounds less like Larry's biology and more like other folks' limitations.
Something to print out for tonight...
From today's Chronicle of Higher Education (reg required):
Foreign applications for graduate study in the United States are down 5 percent this year, the Council of Graduate Schools reported on Wednesday. The drop follows last year's 28-percent decline and suggests, the council said, that "despite significant efforts by the federal government" and graduate schools, "international interest in graduate study in the U.S. is not rebounding."
We are down more than that in our graduate program in economics. I wonder how the PHD programs are faring? It seems that we are in for a seller's market in economics come five or six years from now when the supply of newly minted economics PHDs starts to contract. The cobb-web theory of labor markets suggests that in the next decade or so there would be an increase in domestic students getting economics PHDs
Interesting enough, the article indicates that the costs of obtaining and maintaining visa status seems to have dropped over the past few years (which is news to me). However, there is more worldwide competition for graduate students and the U.S. is not perceived as being as friendly as we once were.
More information will be made available at the Council of Graduate Schools sometime next week.
Posted by Craig Depken at 11:49 AM
March 09, 2005
A Politically Correct Bake Sale
In 2003 the college Republicans at the University of Washington sponsored an Affirmative Action Bake sale that generated a significant reaction from campus liberals. In their words,
“We priced the cookies according to the same categories the University of Washington uses in its admission application. With a little flour, sugar and a dash of street comedy, we set out to show the campus that Affirmative Action, which judges people based solely on their skin color, is inherently racist.”
The campus police refused to protect the young Republicans from marauding leftist who tore down their tent and trashed their cookies. Rather than defending their right to free speech, these aspiring Betty Crookers were accused of creating an unsafe environment by university officials.
Well, what’s good for the gander is good for the goose.
A women’s group is now sponsoring a Pay Equity Bake Sale. This is the announcement for the sale.
I am pleased to observe that price discrimination will not be used to enhance profits and lessen competition.
Q. Name the classic 1965 film that ends with the hero asking:
Is there a moon? Is there a sky? Are there dreams?
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A. Beach Blanket Bingo.
Okay, so I'm using "classic" ironically. In addition to Frankie and Annette, the cast includes Don Rickles, Paul Lynde, 1980’s icon-to-be Linda Evans (!) at the age of 23, and 1920s-30s icon Buster Keaton (!) at the age of 70. With Jody McRae as “Bonehead” and Harvey Lembeck as “Eric von Zipper”.
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The political risk of depending on government for your retirement check
Nathan Smith at The Citizen Journal makes an important point:
Opponents of Social Security privatization often claim that private accounts mean trading a guaranteed benefit for a gamble. The phrase “guaranteed benefit” implies that political risk does not exist. But despite every fiber of Senator Boxer’s being, political risk does exist.
Read the whole thing.
Hat tip: Mike Rappaport at The Right Coast.
Cowen on Social Security
In the April 2005 issue of Reason (sorry, not online yet), Tyler Cowen argues against Bush's plan for private retirement accounts. I find his argument very compelling. Perhaps this is just because his opponent, James Glassman, fairs so poorly. For my fellow bloggers with access to the article, I'd like your thoughts on the issues Cowen raises.
To summarize Cowen's major arguments against the Bush plan (numbers are mine, everything else is Cowen's):
1). Whether we like it or not, government would come to be seen as offering an implicit guarantee for these accounts.
2). You can make people lock up funds in an account, but they can respond by borrowing more on their credit cards, taking out a bigger mortgage, and in general investing less in their future. The net increase in savings will be much less than the mandated increase. So the government will control more of our lives but without making our old age much safer. In essence we would see substitution from privately initiated saving to government-controlled saving. Is this really a step in the direction of liberty and responsibility?
3) When subsequent generations of the elderly retire, we must pay taxes to fund their benefits. So arguably the Glassman reform is simply taking an implicit future liability and making it explicit in the present. Unfortunately, the reality is grimmer than such logic would suggest. In theory it would work if government raised our taxes today, and the cut our taxes tomorrow as future retirees relied on their personal accounts. But is that how governments operate? How often do they cut taxes out of generosity? More likely they would keep the higher levels of taxation (and/or borrowing) in place. The plan would lead to a permanently larger role for government.
I find 3 the most compelling argument, followed closely by 2 and then 1. Your thoughts?
March 08, 2005
Just wait, you guys are next
Here in Tejas we have no income tax. Property taxes, use taxes, and sales taxes are supposed to fund government at the state and local level. This system seems to have worked pretty well until about the last decade or so. Demands on the government, from those who do and do not pay into the tax coffers, has led to persistent state deficits.
The big ticket item is financing K-12 education - go figure - which the state is under court order to figure out.
The geniuses in the state legislature have decided that a A Three Percent Snack Tax is the answer. The snack tax is for "sugary soda, potato chips, pretzels, donuts, candy" and so forth but is only applicable on sales for consumption off premises. That's a big loophole - McDonald's sells a soda "for here" and there is no tax, McDonald's sells a soda "to go" and add six cents to the price.
It gets better:
By a 6-2 vote, with one abstention, the House panel approved an increase in the state sales tax rate to 7.25 percent from 6.25 percent. The bill also creates a new payroll tax to replace the loophole-ridden franchise tax, but the new version has a rate of 1.15 percent instead of 1.1 percent, as originally envisioned.
This is on top of increasing local sales taxes for our insane stadium project and increasing property taxes on the way because Arlington voted to freeze the city property tax for the elderly.
Where is any compensating differential? When the wind chill was -20 in New York, the wind chill in Texas was 58.
The tax man just can't stop taking more of our money. The only upside in these proposals is that they are not raising property taxes and they are not trying (yet) to institute a state income tax - both of which are difficult to avoid. I don't eat candy but I do read two newspapers a day, and I am not sure if Diet Mountain Dew counts as a sugary soda.
Most of the things I don't consume on a regular basis, although a sales tax for car repairs will suck - I drive an 88 MB 560SL bucket of bolts. Guess it's time to go get an old Nova or Mustang that I can actually turn a wrench on. Front end on the Benz ran $1200 last year thanks to the bad roads of Arlington - that would have been another $100 in sales tax.
More reasons to flee the Lone Star State.
The snack tax in Texas - get ready folks this one is gonna sweep the nation.
Posted by Craig Depken at 10:27 PM
A new study on Social Security vs. Private Retirement Accounts
Thomas A. Garrett and Russell M. Rhine have contributed “Social Security versus Private Retirement Accounts: A Historical Analysis” to the latest issue of the Federal Reserve Bank of St. Louis Review (March/April 2005, 87(2, Part 1), pp. 103-21). Their conclusion: based on actual historical returns, and reasonable assumptions about the tax treatment of the accounts, private accounts would have yielded more retirement income for 95 out of 100 workers. Indicative results, from Table 8: an average-earning worker who retired in 2003 at age 65 cannot do better with SS than with an investment in the S&P 500 even if he lives forever. An average-earning worker who retired at age 70 would have to live another 38 years to do better with SS.
Here’s the abstract:
This paper compares Social Security benefits relative to those paid from private investments: specifically, whether 2003 retirees would gain more retirement income if they had invested their payroll taxes in private accounts during their working years. Three different retirement ages and four possible earnings levels are considered for two private investments—6-month CDs or the S&P 500. On average, the results suggest less than 5 percent of current retirees would receive a higher monthly benefit with Social Security.
The paper is online here (pdf file).
Maybe English is a Romance Language Too
"A review of 7,300 Arizona teenagers' behavior, which should translate well to other states that border Mexico, including Texas, found that 31 percent of Hispanic teens who speak primarily English have had sex, more than twice the percentage of those who speak primarily Spanish, 14 percent."
No, it's not because they can pick up people using two languages--bilingual Hispanics have a 24% rate of sexual activity. Story here. Hat tip Drudge.
Drudge links to this article about $200,000 of contributions from a cable company to a "tax-exempt group that touts McCain's views and has showcased him at events." Yup the McCain reference is to the holier-than-thou senator behind the McCain-Feingold abomination.
Of course, it's a good thing I got this posting up now--Bob's Capital colleague-turned FEC commissioner Brad Smith predicts a coming crackdown on bloggers.
A New York State judge has decided you don’t own your kidneys (Law.com). Robert Colavito had a kidney donated to him by a dying friend. It was alleged in the complaint that the kidney meant for Colavito was found unusable after the other donated kidney had already been transplanted into another patient. Colavito sued the hospital for misdirection of the kidney. (See the comment below for additional information on the complaint.)
Judge Dora Irizarry decided that Colavito did not have a cause of action because public policy discourages the treatment of organs as private property. Consequently, not only is it illegal for you to sell your body parts, you also cannot gift your organs to a specific individual or, I would assume, a specific purpose.
It is likely that this decision, which may well be a reasonable interpretation of the present law by Judge Irizarry, will further decrease the supply of transplantable organs by reducing the related non-pecuniary benefits of a directed donation. It is certainly not clear how society benefits by mandating a zero price on body parts.
Additional report in Newsday
Read More for selected excerpts from the court decision.
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COLAVITO v.NEW YORK ORGAN DONOR NETWORK
IRIZARRY, District J.
…Plaintiff argues that, upon Mrs. Lucia's directed organ donation, the kidneys became his property, unconditionally and irrevocably. Plaintiff further argues that the defendants' actions constitute conversion because they intentionally and wrongfully acquired the second kidney when they misdirected it to another transplant recipient. To support a claim for conversion, "a plaintiff must establish legal ownership of a specific identifiable piece of property and the defendant's exercise of dominion over or interference with the property in defiance of the plaintiff's rights."…
…Courts have thus not applied traditional, all-encompassing conceptions of property to cases involving a deceased's body or organs. However, the courts have considered modified or "quasi" property rights in several scenarios, which are relevant in explaining the court's reasoning in the instant matter…
For example, an individual has a right to direct the disposition of his or her body at death, but such disposition "forms no part of the 'property' of one's estate in the usual sense, as other chattels or property."
As to other individuals, the courts in both New York and other states generally recognize a "quasi-property" right, belonging to the spouse or next of kin to possess the body for the purposes of ensuring proper burial…."The quasi-property right in a corpse is not pecuniary in nature, nor should it be. The right encompasses only the power to ensure that the corpse is orderly handled and laid to rest, nothing more."
This quasi-property right is also a foundation for a close relative's claim of negligent mishandling of a corpse, for which emotional damages are recoverable.
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Georgia's governor wants to establish a kiosk in the Atlanta airport to sell lottery tickets to travelers. Apparently the airport has some concerns that the kiosk will divert sales (of which the airport gets a share) from other vendors. If only one heard these reservations as part of the economic impact studies for new stadia etc.
March 07, 2005
Another Bell Curve
From the current issue of Southwest Economy, an article about information technology. An interesting graph depicts the amount of U.S. venture capital dedicated to information technology:
Climbing to the peak in 1999-2000 included such high quality investment endeavors as selling burial plots online. What does the graph tell us? First, the market took a while to figure out how we were going to use the internet and that the internet was not going to fundamentally overturn economic theory. Second, information technology is here to stay: the distribution of investment is skewed exactly in the direction we would expect, now that we know the computer impacts the productivity of certain industries (just not cemeteries). Third, the next big thing is probably not the computer (pharmaceuticals maybe?)
Posted by Craig Depken at 11:28 PM
The future rests with China?
From this issue of Southwest Economy is an article about future Medicare and Social Security spending.
Two images do not bode well, unless we get a hell of lot of productivity growth in the next couple of decades:
The last picture depicts our gift to my nine-month old daughter...sorry kiddo.
I wonder if, as the United States begins to spend much more on our entitlement programs, the rest of the world hopes another big consumer country comes along, one that isn't so financially predetermined. Perhaps India or China? When this happens, our "buying power" might not be so great - we see what's happening in the oil markets at the moment.
When the worm turns on us for good, will we be okay with that? We will get to live longer but we won't be able to consume as much because: a) the big G takes it all, and b) the Chinese or the Indians bid up the price of all the things we want to get our mitts on.
Posted by Craig Depken at 11:15 PM
Another Econ Major Makes Good
"Fossett has been as successful in business as he has in adventuring. He received a bachelors degree in economics from Stanford and his MBA from Washington University-St. Louis."
Story here; hat tip Wilson Mixon.
Should Philosophers Take a Pro-Union Stand?
Some members of the American Philosophical Association have petitioned the Association to move its upcoming Pacific Division annual meetings from San Francisco, where the meeting hotel (the Westin St. Francis) is one of 14 hotels currently in negotiation with the Hotel and Restaurant workers’ union. The San Franciso Chronicle reports that the Organization of American Historians chose to move its meetings to San Jose to avoid the SF labor dispute. The paper adds:
As a pressure tactic on the negotiations, the unions are calling groups headed for San Francisco, warning them of labor strife and asking them to remove their business from the hotels in the dispute.
The St. Francis has promised the APA “that no lock-out is planned and that the hotel is at the bargaining table.”
The APA has been surveying its participants as to their preference for relocating the APA - Pacific meetings to San Jose, should it be feasible. The survey adds:
Please also answer the following question: if moving the meeting from San Francisco proves infeasible or undesirable for participants, would you like the meeting organizers to arrange voluntary ways for you to support the union while you are in San Francisco?
Here’s a thoughtful reply to the survey from Neera Badhwar (Department of Philosophy, University of Oklahoma), reproduced here by permission:
Since, as you say, "we have obtained a written commitment from the St. Francis management that no lock-out is planned and that the hotel is at the bargaining table," there is no strike, and "the parties are at the table bargaining," I see no reason to move. The question, however, is whether they will be at the bargaining table when we get there. Is it possible to make a conditional agreement with a hotel in San Jose in case the situation at St. Francis deteriorates?
Men, Women, and Aspirin
A headline in today's Washington Post:
Study: Aspirin Impacts Women Differently Than Men
Hmmm... I wonder if Larry Summers performed this study. Geez, if aspirin affect men and women differently then I wonder what other ways in which men and women might differ and if, maybe, just maybe, those differences might manifest themselves in women's performance in different fields of study? Instead of a deserved apology to Summers by his critics, I bet we're more likely to see the aspirin study authors called out in the court of political correctness for daring to suggest that differences between men and women exist.
The Dems Have it Backwards
Larry's post on Kennedy having it double backwards (shouldn't that equal forwards?) reminded me of an idea that has been bouncing around in my head for awhile.
The Dems claim to be (perhaps rightly so) the party that favors truly saving Social Security in something resembling its present form. It, therefore, seems to me that they should favor making Social Security's implicit liabilities explicit by issueing bonds and incurring the transition costs. (See this post from Larry about transition costs.) After all the govt is less likely to default on bonds than it is to enact legislation cutting future benefits. Moreover, such a change from implicit liabilities associated with a particular retirement program to explicit liabilities of the federal government as a whole would remove the impetus for cutting SS benefits. So why don't the Dems recognize this point? It seems to me that they favor scoring political points against GWB or are mighty scared of personal accounts rather than truly saving Social Security.
Selective Free Speech
In a previous post, "Gringo American Studies," I pointed to the selective defense of free speech in Colorado. David Harsanyi at the Denver Post has now uncovered a similar case at CU. Read "A CU prof deserving of sympathy." I am sure there are many more incidents that are yet to be widely reported. We need only look at the Hans Hoppe situation to see the hypocrisy of the Left in their defense of free speech.
Elasticity of Legal Damages
The legislatures of several states have attempted to limit damage awards by placing caps on non-economic damages. (Of course this is a misnomer to an economist who perceives all damages as economic.) A recent article in the New York Times, “Go Ahead. Test a Lawyer's Ingenuity. Try to Limit Damages” (free registration required) discusses the ability of lawyers to substitute one type of damages for another.
There are apparently two types of substitution effects. The first is the additional emphasis on economic damages as opposed to non-economic damages, especially if there is a link between economic damages and the permissible amount of non-economic damages. For example the Supreme Court in BMW v. Gore has indicated that there should be a reasonable multiple between economic harm and punitive damages. The second is the substitution of one type of case for another. A case that largely relied on economic damages might have been previously rejected in favor of one that appeared to offer a little more in non-economic damages. A complaint that requested primarily economic damages might now be tried first.
The result is that damage caps may be much less successful than we might expect in reducing total damage awards. As reported in this article,
“The new study, by Catherine M. Sharkey, a law professor at Columbia, may change that. The study, to be published in the New York University Law Review in May, analyzed jury verdicts in 22 states in 1992, 1996 and 2001. It did not consider cases settled out of court. It found that the median compensatory award in states with caps on damages was $324,000, compared with $387,000 elsewhere - figures that Professor Sharkey found were roughly equivalent after the data was adjusted for variables like the kind and number of plaintiffs and defendants, the percentages of local doctors and lawyers, and jurors' wealth and ages.”
Senator Kennedy gets it double-backwards
According to the Associated Press, reporting reaction to Senator Chuck Hagel’s proposals for Social Security reform:
But some leading Democrats said they could not support Hagel's plan because he would pay for private accounts by borrowing and increasing the nation's deficit. Sen. Edward M. Kennedy, D-Mass., told ABC's "This Week" that would be "a great threat to seniors" because it would raise interest rates.
1. In fact, Hagel’s plan does not increase the nation’s deficit. Private accounts would be fiscally neutral because the diversion of payroll taxes into them is matched by reductions in future traditional obligations to the workers who open the accounts. It "refinances" the debt to workers; it doesn’t add additional debt.
2. If, contrary to logic, we suppose that the debt refinance were to raise interest rates, senior citizens would stand to gain, not face a “great threat”. They are net interest recipients from their accumulated savings, after all, not net borrowers.
RE: Lies, Damn Lies, and No Statistics!
I posted this as a comment to Bob's "Lies, Damn Lies, and No Statistics" but he suggested it might be worth a posting of its own.
Here's part of the abstract of NBER Working Paper #8904 by Xavier Sala-i-Martin (warning it contains some technical mumbo-jumbo):
"We use aggregate GDP data and within-country income shares for the period 1970-1998 to assign a level of income to each person in the world. We then estimate the gaussian kernel density function for the worldwide distribution of income. We compute world poverty rates by integrating the density function below the poverty lines. The $1/day poverty rate has fallen from 20% to 5% over the last twenty five years. The $2/day rate has fallen from 44% to 18%. There are between 300 and 500 million less poor people in 1998 than there were in the 70s. We estimate global income inequality using seven different popular indexes: the Gini coefficient, the variance of log-income, two of Atkinson's indexes, the Mean Logarithmic Deviation, the Theil index and the coefficient of variation. All indexes show a reduction in global income inequality between 1980 and 1998. We also find that most global disparities can be accounted for by across-country, not within- country, inequalities. Within-cou
Yep--the whole premise that the poor have gotten poorer (whether by "globalization" or some other bete noire) is (to choose a family-friendly word) horsefeathers. In a separate paper (NBER WP #9865), Sala-i-Martin examines reasons why Africa has been a growth laggard over the past three decades--one of his findings is insufficient international interaction.
ADDENDA ON THE IMPORTANCE OF ECONOMIC GROWTH:
1. Here's Tyler Cowen: "The importance of the growth rate increases, the further into the future we look. If a country grows at two percent, as opposed to growing at one percent, the difference in welfare in a single year is relatively small. But over time the difference becomes very large. For instance, had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990. At a growth rate of five percent per annum, it takes just over eighty years for a country to move from a per capita income of $500 to a per capita income of $25,000, defining both in terms of constant real dollars. At a growth rate of one percent, such an improvement takes 393 years."
2. The failure to adopt policies conducive to growth can have disastrous consequences. An (extreme) case in point:
"At least 115 bodies have been recovered at press time and several hundred others are believed missing following a 25-acre, seven-story-high garbage pile collapse on a shantytown in Quezon City, Philippines, outside Manila on July 10 .
The mountain of garbage, on which several thousand impoverished squatters climbed daily to search for salvageable items to sell, had been loosened by recent typhoon rains."
March 06, 2005
My essay on libertarianism will be posted tomorrow (Monday March 7) on Econ Log, at Liberty Fund.
A snippet, for those who want a preview:
At the Munger house, we snack high on the food chain. I don't know if God gave man dominion over the beasts of the field, but She certainly gave me an ATM card and big metal cart for cruising meats at Piggly Wiggly. That beats dominion.
Thanks to Russ Roberts for the suggestions, and the editing. I was thinking about this, and wanted to ask: Do you know anyone else who is in the intersection of these three sets...(a) Excellent economist, (b) clear writer and speaker on economic matters, and (c) excellent editor of other people's prose? The intersection contains Russ Roberts, and not many others.
A fascinating account of “the most audacious bank raid in British history”, and its political fallout
Andrew Anthony in The Sunday Guardian’s Observer Magazine spells out how the Northern Bank heist was pulled off, and interviews people knowledgeable about the IRA’s involvement. He also offers this persuasive bit of public choice analysis, from the mouth of ex-Sinn-Féiner Anthony McIntyre, explaining why Sinn Féin leader Gerry Adams seems determined to throw monkey wrenches into the peace process:
‘At times,' he continued, 'Adams is the most popular politician in the south. Why? It's not due to his policies, they are no different to anyone else's down there. It's the result of the tremendous international public profile that the leader gets. If the peace process ends, the wind in the sails goes down rapidly. So the object of unionism is to bring the process to a conclusion, and the object of republicanism [in the sense Sinn Féin and the IRA] is to postpone the conclusion.'
March 05, 2005
Bill Maher welcomes Ward Churchill and Janet Reno
Ward Churchill appeared live and in person on HBO’s Real Time with Bill Maher last night (no transcript is online yet).
Maher distanced himself from Churchill's infamous “little Eichmanns” comment, but otherwise suggested that Churchill had important insight to offer us into the question Maher likes to call “why they hate us”. Highlight of the segment was Maher bringing out Michael Faughnan, a man whose brother – a financial office worker – died in the World Trade Center attack. Faughnan called Churchill out on the “little Eichmanns” comment, arguing that it was insensitive and absurd to say that his brother was akin to the Nazi engineer of mass murder. Churchill, who had earlier told Maher that he exempted janitors from the Eichmann analogy, allowed as maybe he could make an exception for the brother. But, he asked in reply, would Faughnan claim that none of the WTC workers were culpable? Yes, came the reply; the people I knew in my brother’s office were all good people.
Of course, Churchill’s “argument” isn’t that the WTC workers were personally evil-minded. It’s that they were willing cogs in an evil machine. All WTC stockbrokers were (somehow) complicit in the US war machine. Let’s see if we can parse the logic … the Pentagon is financed by the US Treasury, the US Treasury runs on borrowed money, and stockbrokers work for firms that also have a hand in the buying and selling Treasury bonds? Couldn't be more obvious. But it’s not obvious how janitors escape the same guilt-by-association – they too facilitate the work of financial firms, which (according to Churchill) means that they aid and abet US military policies.
Later in the show, Maher’s panel included Janet Reno, who endorsed the recent Supreme Court decision banning the death sentence for under-18s. Nobody asked her whether her expressed view is consistent with her decisions as Attorney General that imposed a pre-emptive death sentence on the Branch Dravidian children in Waco.
Senator Conrad opposes Social Security choice for being fiscally responsible
Reuters today reports:
In the weekly Democratic radio address, Sen. Kent Conrad of North Dakota also criticized Bush's plan to carve private investment accounts out of Social Security, saying that "slashing benefits and hoping to make up the difference in the stock market is risky." Conrad also drew attention to how the accounts would work, noting that those who opted for the investment accounts would have their traditional Social Security benefit reduced. "The president's plan assumes the Social Security trust fund loaned you that money. And you have to pay it back with interest," he said.
Slashing benefits and not giving workers the option of moving into personal accounts guarantees them low returns. Is that better?
If Conrad is against reducing benefits to fix the underfunding gap in Social Security, he must be in favor of raising taxes. Which means that young workers will have less disposable income that they can save for retirement in any vehicle that earns decent returns. That’s doing them a favor?
Yes, of course those who opt for the investment accounts – i.e. reduce they amount of payroll taxes they pay in to traditional Social Security – would have their future traditional SS benefits reduced (by the amount opted-out plus compound interest). That makes opting-out fiscally neutral. Would Conrad have it any other way? Should a taxpayer’s opting-out instead come at the expense of other taxpayers? Ironically, the rest of Conrad’s radio address was a plea for fiscal responsibility.
BTW, the president’s plan doesn’t assume that Social Security “loaned” you any money. It's closer to assuming that you are "lending" Social Security money. If you choose to "lend" less (pay less in), you should get less back.
Lies, Damn Lies, and No Statistics!
Consider the following claim:
Free trade has increased poverty. As the world gets richer, so should the poor. But they aren't. Over the last 20 years the rich and powerful have pushed the idea that only free trade and privatization can solve the problems of global poverty. This has not worked. Millions remain trapped in poverty and it is the institutions, conditions and rules of international trade, more than anything else, that keep poor people poor.
Source here. [Hat tip: Casey]
While such empirical claims are common (the rich are getting richer and the poor are getting poorer), they are rarely backed up with any actual empirical evidence. So let's look at the evidence:
Using real gdp per capita growth (ppp) between 1980 and 2000 as the dependent variable and real gdp per capita in 1980 as an independent variable (data source is the World Bank's World Development Indicators CD) we can estimate the following regression equation:
Growth = 0.627 +0.000073 (1980 GDP Per Capita)
The coefficient indicates that for every $10,000 in additional GDP per capita in 1980, the ensuing twenty year growth rate was 0.73 points higher. So indeed countries that were richer in 1980 grew faster than countries that were poorer. This is not quite the same thing as saying that the poor got poorer, but they most definitely got richer less quickly than the rich got richer. In other words, the gap appears to be widening.
But the low R-squared leaves one to wonder if there's more going on. So I decided to add one additional variable, the economic freedom rating, to try to capture the differences in economic liberalism among the countries. Here is the result:
Growth = - 6.26 - 0.000062 (1980 GDP Per Capita) + 1.21 (EFW)
Notice the switch in the sign of the coefficient! Now we find that the poorer the country was in 1980, the higher the growth rate was during the next two decades. Each additional $10,000 in income in 1980 results in a 0.62 point lower rate of growth. So the gap is closing at least after controlling for economic freedom. Economic freedom itself is a highly powerful predictor of growth.
So what should we conclude? Some poor countries are indeed getting poorer but some poor countries are getting richer, and the ones that are getting richer are the ones that have pursued the most economic freedom. This is exactly the opposite conclusion that the quote above would lead you to believe.
Not that I expect real world evidence to matter to these people...
[The analysis above is quite simple, for a more detailed analysis with similar results go here (.pdf)]
What a year!
As the cliche goes, I don't usually pass these along, but...
What a YEAR!!!!
I want to thank all of you who have taken the time and trouble to send
Thank you for making me feel safe, secure, blessed, and wealthy.
Because of your concern:
I no longer drink Coca Cola because it can remove toilet stains.
I no longer drink Pepsi or Dr. Pepper since the people who make these products are 'atheists' who refuse to put "Under God" on their cans.
I no longer drink anything out of a can because I will get sick from the rat feces and urine.
I no longer use Saran wrap in the microwave because it causes cancer.
I no longer check the coin return on pay phones because I could get pricked with a needle infected with AIDS.
I no longer use cancer causing deodorants even though I smell like a water buffalo on a hot day.
I no longer go to shopping malls because someone will drug me with a perfume sample and rob me.
I no longer receive packages from UPS or FedEx since they are actually Al Qaeda in disguise.
I no longer shop at Target since they are French and don't support our American troops.
I no longer answer the phone because someone will ask me to dial a stupid
I no longer eat KFC because their chickens are actually horrible mutant freaks with no eyes or feathers.
I no longer buy expensive cookies from Neiman Marcus since I now HAVE their recipe.
I no longer worry about my soul because I have 3,163,214 Angels looking out for Me.
I no longer have any savings because I gave it to a sick girl who is about to die in the hospital (for the 1,387,258th time).
I no longer have any money at all, but that will change once I receive the $15,000 that Microsoft and AOL are sending me for participating in their special E-mail program.
Yes, I want to thank all of you soooooooo much for looking out for me!!!
I will now return the favor. If you don't send this E-mail to at least 1200 people in the next 60 seconds, a large bird with diarrhea will crap on your head at 5:00 PM this afternoon and the fleas of a thousand camels will infest your armpits. I know this will occur because .. it actually happened to a friend of a friend.
Woman Accused Of Naked Dog Wrestling
"An arrest affidavit indicated that Katherine Earle scaled the four-foot fence just before midnight Tuesday, then stripped in order to wrestle with the male Labrador retriever-blue heeler mix.
Residents of the home awoke from the noise and called police."
March 04, 2005
Because I can...
I will release Pres. Bush's Saturday Morning Radio Address at 10:13 pm central time FRIDAY:
THE PRESIDENT: Good morning. In the short time since I returned from my trip to Europe, the world has witnessed remarkable developments in the Middle East. In Lebanon, tens of thousands of people took to the streets in peaceful protest over the brutal assassination of former Prime Minister Hariri. For years, the Lebanese people have suffered from the aftermath of a horrific civil war and occupation by Syria. Lebanese citizens who have watched free elections in Iraq are now demanding the right to decide their own destiny, free of Syrian control and domination. Syria has been an occupying force in Lebanon for nearly three decades, and Syria's support for terrorism remains a key obstacle to peace in the broader Middle East.
I didn't hack into anything...the speech was in my e-mail box this evening.
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Today, America and Europe are standing together with the Lebanese people. The United States and France worked closely to pass U.N. Security Council Resolution 1559. This resolution demands that Lebanon's sovereignty be respected, that all foreign forces be withdrawn, and that free and fair elections be conducted without foreign influence. The world is now speaking with one voice to ensure that democracy and freedom are given a chance to flourish in Lebanon.
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They're people too.
My cab driver to the Hartford airport this morning was an educated chap from Tanzania originally. We talked about the corruption problems in Africa and he was quite knowledgeable.
He was a computer programmer here in the States but said his job was "outsourced" to India. I braced for the usual rant about outsourcing stealing our jobs, but he surprised me. He said (I paraphrase), "this is just the way the world works. I didn't cry for those factory workers who lost their jobs because people like me were buying cheap 50 cent screwdrivers from China. Why should anyone feel sorry for me? Besides those people in India and China are people just like me. They have a right to work too."
Well said, friend.
Shaviro on David Bradford
During the first week of employment at the Joint Economic Committee, I was required to read David Bradford's Blueprints for Tax Reform - twice! It greatly influenced my work at the JEC so I was sad to hear of his passing via Marginal Revolution.
NYU Law professor Daniel Shaviro wrote an excellent tribute to him in Tuesday's Wall Street Journal. An excerpt:
Some of David's other main achievements may initially seem esoteric to lay readers, but were no less important for how we think today about fundamental tax reform.
For example, he helped pioneer the growing realization among tax policy thinkers that income and consumption taxation are less different than had been previously thought, because they differ only in their treatment of the riskless rate of return, which the income tax reaches but the consumption tax excludes, and which has historically averaged only about 1% a year above the inflation rate.
In other words, we are not talking about the choice between taxing or exempting Bill Gates's fortune, which arose because Mr. Gates earned considerably more than a 1% annual return on his initial investment. Either system would tax Bill Gates in similar degree, although his burden under the consumption tax might be less obvious.
David Bradford also helped lead a breakthrough in our understanding of transition issues, such as those arising upon the shift from an income tax to a consumption tax. He showed that the transition revenue gain counted on by plans such as Hall-Rabushka was not a free lunch as had been supposed, and amounted to wiping out income tax basis for assets while solemnly (but how credibly?) promising never to do it again.
Here is also the NY Times obituary.
Posted by Joshua Hall at 02:55 PM
A Buyout of the NHL?
Today's WSJ has an article (sorry subscription required, but a similar story is here) about an offer by Bain Capital Partners to buy the NHL. It's unlikely that all NHL owners would agree to sell; even if they did there would surely be an anti-trust suit about the resulting single-entity ownership a la the WNBA.
Posted by E. Frank Stephenson at 01:59 PM
Update on Sinn Féin and the Northern Bank raid
Police in the Republic of Ireland have now reportedly “confirmed the £2.3m and other money seized in Cork last week is from the Northern Bank raid.” Police seized the money from individuals linked to the IRA and its political front Sinn Féin.
I had earlier speculated that one reason for the IRA to resort to bank robbery is that their ability to raise funds in the US has been diminished since 9/11/2001. Now they seem to be caught in a vicious circle: the linkage of IRA and Sinn Féin to the bank robbery, and of the IRA to a recent slaying in Belfast, is further hurting their US fundraising. Sinn Féin president Gerry Adams has announced that on his visit to the US next week he will not be raising funds as previous planned.
Pete Baker at the blog Slugger O’Toole explains the change in plans: Sinn Féin has to apply for special visas when visiting the US for fund-raising, and they feared the embarrassment of being denied the visas. Denial was likely given that the Bush White House has, unlike the practice in previous years, pointedly declined to include Adams among those invited to the White House on St. Patrick’s Day.
Oil and the Law of Supply
Don Boudreaux's Cafe Hayek post on the law of supply (linking to this NYT article about drilling in residential neighborhoods) reminded me of this early DOL post on the oil boom in Tennessee. (Wouldn't it be rich if Al Gore started drilling on his Tennessee land holdings?)
What's good for the goose?
China evidently doesn't like how the United States ranks China's human rights record.For the past several years, China has released their own study of human rights in the United States, with predictable results. (Here's the 2004 report). From a story at China View:
Of course there are concerns about "human rights" in the United States, but of a different sort altogether than what much of the world's population is concerned with on a daily basis.
Posted by Craig Depken at 12:04 AM
March 03, 2005
Who is Hans Riemer?
Hans Riemer of Rock the Vote (see below) is also [CORRECTION: was previously] Director of the “Social Security Information Project” of the Institute for America’s Future. Busy guy! Here’s some of his Congressional testimony from earlier this week [CORRECTION: from 2002]:
While President Bush, his Commission, and members of Congress want Americans to think that privatization is voluntary – the President’s principles guiding the Commission specify that accounts should be voluntary – the Commission's benefit cuts are most certainly not voluntary. Through mechanisms such as price-indexing and the retirement age change, the Commission proposed deep cuts for all beneficiaries in order to help pay for individual accounts for those who believe they can afford to take the risk of investing their Social Security taxes. Rhetoric about the “voluntary” nature of privatization, therefore, is highly misleading.
What a breathtaking confusion of the issues. Perhaps they should change his title to Director of the Social Security Misinformation Project.
Privatization (aka optional Personal Retirement Accounts, aka opting-out) is distinct from fixing the underfunding gap in Social Security. Benefit cuts, via re-indexing and retirement age change, are one approach to fixing the underfunding gap. Tax hikes are the other. Some combination of the two is unavoidable given the collision course we're on. Choose your poison (and don't simply bitch about the other guy's choice). Neither one is voluntary. But neither one has anything to do with “help[ing] pay for individual accounts”. Opting-out, which is voluntary, pays for itself by reducing future benefit payments. (Under the Bush plan, opting-out actually more than pays for itself: the opting-out price in future benefit reductions is set higher than required.) Rhetoric – from opponents or proponents of privatization – that blurs the two issues is highly misleading. Rhetoric that refuses to admit the need to choose between cutting benefits and hiking taxes to fix the underfunding gap – and Riemer on Monday admitted nothing of the sort – is highly misleading.
Back in 2001 (pdf file), at least, Riemer was more candid about his preference for hiking taxes.
CORRECTION: An email correspondent informs me that Hans Riemer hasn't worked at the Institue for America's Future for a couple of years. The testimony I cited, thinking it was dated from "earlier this week", was from Feb. 28, 2002, as was clearly indicated on the website to which I linked. My mistake in misreading the date.
What do you get when MTV meets the AARP? You might think the answer I’m looking for is “VH-1”. No, what I have in mind is the strange alliance between Rock the Vote (founded by music industry people and heavily promoted by MTV) and the AARP in opposition to Social Security choice. At Rock the Vote’s homepage, you can buy a t-shirt that says “I [heart] Social Security”. (Wow. You can’t get much more rockin’ than that.)
The two organizations have jointly sponsored a "poll" on Social Security reform (together with the Joint Center for Political and Economic Studies, a liberal think-tank devoted to African-American concerns). According to the press release, they found that most Americans “oppose private accounts once they learn the likely consequences of putting the accounts into effect.” Translation: we found biased ways to frame our questions such that most of the people being polled chose the answers we preferred.
Most Americans in the 18 to 39 age group, for example, say that they would flat-out oppose the accounts if […] diverting some Social Security payroll taxes means "massive new federal debt in order to pay current benefits" (63 percent say they would oppose).
The notion that diverting taxes to personal accounts means new federal debt is, I have pointed out before, false.
The key lessons of the AARP/RTV poll:
Political Director of Rock the Vote Hans Riemer said, "This poll shows that young people do not support changing Social Security if it means dismantling the basic safety net, cutting benefits dramatically, or massively increasing the national debt. They get all three at once under most private accounts plans. We hope the politicians who say they want to help younger generations are paying attention."
Curiously, the poll didn’t ask young people whether they support preserving Social Security through a massive increase in their taxes. Which is the only option left, once you rule out benefit cuts or dismantling. (Debt merely defers the tax increases.)
The AARP’s opposition to any Social Security reform is to be expected. Even though Bush promises not to touch benefits for anyone now over 55, his proposal to allow people to opt-out funds into personal retirement accounts might loosen future voter attachment to Social Security. Rock the Vote’s opposition to a reform that would benefit young workers is harder to figure, since Rock the Vote purports to represent young people (its main focus is, or used to be, registering young voters). But here’s a hypothesis: the real mission of Rock the Vote is actually not to promote the political interests of young people, but rather the political interests of liberals.
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The issue of Rock the Vote’s real mission is not new. Here is an exchange between the above-quoted Hans Riemer and the Capital Gang’s Al Hunt from 2003:
HUNT: You have enlisted in this effort the Dixie Chicks, who aroused controversy, as you know, with their criticisms of President Bush and the war. And critics say that rather than wanting to increase the young voter franchise, what you really want to do is to get more liberal young voters, and you wouldn't be pleased if it ended up turning out conservative voters. Is that a fair rap?
Note Riemer’s evasion. He was asked: don’t you have a liberal slant? And he answered: we’re non-partisan, meaning, we don’t officially endorse either political party.
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Is this symptomatic?
The Senate Dems have named their Washington D.C. building after their erstwhile leader Tom Daschle. I wonder if this is symptomatic of the entire party. Daschle was not a very good leader, other than keeping the Dems in line. He was good at stonewalling and filibustering but he never seemed to have a good thing to say. Remember how eveything to him was "disappointing" or a "disappointment." I hope he is not so disappointed in civilian life.
He did bring the Dems to a Senate majority in 2001 by cherry picking Jim Jeffords of Vermont, who it turns out was a Repub in Name Only. This, evidently, is why he is being thusly awarded. However, Daschle's recruting of Jeffords never set well with me, especially after we discovered that Daschle paid Jeffords off by extending the dairy subsidy. Stealing players from the other team is why Red Sox fans hate the Yankees, and I don't think it's'good form in politics either.
Yet, all the maneuvering and strategizing only lasted until the 2002 election, during which Daschle's leadership cost the Dems the Senate majority. However, not to be accused of resting on his past achievements, Daschle led the Dems to even greater losses in 2004 when he himself lost his seat. According to the article, "He was the first party leader to lose a re-election bid since 1952." Nice.
I am not sure Daschle is a leader the Dems want to memorialize and, ostensibly, emulate. But what the heck do I know. BTW, the Repub counterpart building is named after Ronald Reagan. Is that a stark difference or what?
Posted by Craig Depken at 11:29 AM
Mike Lester on Blacks and Social Security
I opened up my Rome News-Tribune this morning and saw this offering from cartoonist Mike Lester. Just a guess, but I bet this one generates some letters to the editor.
There is some support for the idea in Lester's cartoon as this abstract from an April 2003 Southern Economic Journal article by Liu and Rettenmaier suggests:
"This article evaluates the Social Security outcomes for different racial and education groups. Outcomes differ across groups due to the interactions between group-specific mortality risks and lifetime earnings, the benefit formula, and the benefit package, which includes life insurance, spousal benefits, and retirement pensions. Based on either the rate of return or present value, individuals with less education fare better than those with higher educations. This holds even before accounting for preretirement survivors' benefits, which, when accounted for, reinforce this finding. Single whites do considerably better than single blacks when outcomes are compared by internal rates of return. Accounting for survivors' benefits reduces regressivity, but blacks continue to fare worse than whites. In contrast, based on present values, whites generally do worse than their respective counterparts."
George Neumayr at the American Spectator has an interesting point. If the government doesn’t respect the constitution, why should the people?
"The Supreme Court's judicial activists are cutting off the branch on which they sit. By rejecting the law and putting their personal opinions in its place, the justices invite the people to imitate them and disregard their decrees with the same willfulness they disregard the Constitution. If Anthony Kennedy isn't bound by the framers' words, why are the people bound by his?"
A constitution has been viewed as a contract among the people, and between the people and their government. Contracts often need interpretation. It is impossible for a written contract to include remedies for all potential contingencies. When the courts fill unavoidable gaps in contracts they often look to the intentions of the parties when they signed the contract. It should be obvious that the intentions of those who were not parties to the contract should be irrelevant.
We the people of these United States are the parties to the U.S. Constitution. Therefore, it is pretty much irrelevant how the Europeans, the Chinese or the Africans might intend this contract to be performed. Even worse, when the Supreme Court looks to the desires of non-signers in order to impose their own tastes on contract performance, then they abrogate the contract. A contract that is so one-sided that the party with market power can interpret the contract any way they desire and impose whatever costs they want on the other has been deemed by the courts as unenforceable. It is an unconscionable contract; it offends the conscience of the court. But what happens when the court is the party that imposes its unconstrained will on the terms of the contract? What happens when the court is guilty of unfair surprise? It discovers clauses in the fine print of the contract that the people had no idea they were agreeing to. Were the original signers tricked into giving away state’s rights because they didn’t read the fine print? At what point do the people say, “We didn’t sign that.”
Thanks to Lynne Kiesling for her kind mention of DOL and co-blogger Larry on KnowledgeProblem. She has lots of good stuff on energy markets, spectrum policy, and industrial org. She and I will also be among the faculty members for an Institute for Humane Studies seminar this summer. The IHS summer seminars are a fantastic experience; student readers are encouraged to apply (for any of them, not necessarily the one where I'll be teaching).
March 02, 2005
Cause...Effect? I can NEVER keep those two straight
I am quite sure you don't have to be an idiot to teach at the NYU Poli Sci department. They have many distinguished faculty.
But....well, check this out. I give you Bertell Ollman : ay, marry now, unmuzzle your wisdom.
The rules of basketball have changed often over the years, so I hope no one will object if I offer a few modest revisions to make this truly wonderful game even better:
First, I would charge an admission fee not only to watch the game but to play in it. And the more one pays, the longer one gets to stay in the game.
Second, there should be a price paid for each shot taken, and the easier the shot, the more it should cost.
Third, as for fouls, one should be able to pay the referees, so that they never call any fouls on you (or walking or double dribble violations for that matter).
Fourth - and maybe most important - there is no good reason that the baskets should be the same height for both teams. It should be possible for the team that pays more to have its basket lowered, and for double that amount to have the basket the other team is going for raised.
Under present rules, those players who are taller and better coordinated and can run faster and jump higher have all the advantages. My rules would exchange the advantages enjoyed by these people for other advantages that would benefit a different group, one that has been poorly served by basketball as now played. That group is the rich. With my rules, the rich would possess all the "talent" (what it takes to win) and - more in keeping with what occurs in the rest of society - never lose a game.
Nod to MWT, even though he probably buys this stuff.
Speaking at Trinity College
I'll be speaking at Trinity College in Hartford, CT tomorrow evening on the topic "Economic Freedom and the Wealth of Nations: Why Rich Countries are Rich and Poor Countries are Poor".
How not to make the case for Personal Retirement Accounts
It’s going to be hard to sell Social Security choice to the public if its Congressional proponents can’t get the argument straight. Here’s Senator Rick Santorum, R-Penn., muffing the question of the “transition cost” of establishing PRAs (Personal Retirement Accounts), i.e. of allowing workers to opt their payroll taxes out of Social Security in exchange for correspondingly reduced future benefits:
Lastly, some individuals expressed concern that in order to establish PRAs, the government will have to borrow money. My suggestion is that we invest or even borrow some money now to save more than $10 trillion down the road. Transition costs are not new costs, but rather moving forward more than $10 trillion of future cost, and in essence paying it off early at a reduced rate, much like refinancing a mortgage or paying off a credit card. A relatively smaller amount of money would need to be borrowed now to establish PRAs, compared to the painful choices that await us if we do nothing. The bottom line is that PRAs are an essential part of the solution to help relieve the long-term financial burden today’s system places on our children and grandchildren.
What he should have said:
Senator Ted Stevens has found a powerful ally in the House for his mission to subject satellite radio and cable TV to the same indecency regulations that broadcasters must follow. House Commerce Committee chairman Joe Barton, R-Texas, said late Tuesday (March 1) that he supports his counterpart in the Senate on legislating indecency enforcement across media platforms.
By that logic, it’s also “not fair” to have a different set of rules – no FCC oversight – for Blockbuster and NetFlix and Mike's Video down the street.
By all means let’s level the playing field. Let’s give over-the-air broadcasters robust property rights in the spectrum they’ve been using, and subject them to the same FCC indecency regulation to which satellite and cable TV, satellite radio, and dvd rentals are subject -- namely none. Blockbuster voluntarily chooses not to stock hardcore porn, so as not to offend its core clientele. We can be pretty sure that the major broadcast TV networks would do likewise.
A regular reader writes,
Regarding antibiotics requiring an Rx - the main reason I agree that they should is that many people take them when they have a viral infection and it leads to antibiotic resistant bacteria.
I understand the argument, but I'm not convinced that the problem is much less severe if you require an Rx or not. Many other countries allow OTC antibiotics. I guess I'd prefer to see some actual research before people restrict my freedom not just some "what if".
Even if this is true, you have to balance this effect against the problem of people suffering needlessly because they don't want to bother with an office visit to say nothing of the added cost.
As a compromise, why not let pharmacists dispense some common drugs without a doctor's note? Or perhaps we could have an "intelligent patient" license to allow those of us who do know the difference between viral and bacterial infections to sidestep the doctor. I'd be happy to take a course.
In the end I think the Rx requirements have much more to do with maintaining the doctors' cartel than public health.
Eminent Domain Cartoon
McCoy has a fabulous cartoon in which a robber is exercising eminent domain over a victim's wallet; I've linked it to avoid any copyright problems. Hat tip: Dan Alban.
Posted by E. Frank Stephenson at 08:47 AM
I am a member of the generation that was born immediately following the end of WWII. When I look back on what we view today as risky behavior, it is amazing that any of use reached this century. What follows is list of behaviors that were commonly engaged in forty to fifty years ago that today are either legally or socially regulated. I am sure that I could add to this list with some further thought.
A risk averse society requires warning labels. See M-Laws Wacky Warning Labels.
March 01, 2005
Who's the friggin' genius?
A $7,600 grab bag sold on e-bay?
Man, the seller's a genius.
Posted by Craig Depken at 10:27 PM
Hang on, let me get the vacuum cleaner
A new Dyson vacuum cleaner can order its own replacement parts. The vacuum user still makes the phone call to the Dyson service center, then the user puts the phone to the vacuum and it tells Dyson what it needs.
Posted by Craig Depken at 10:23 PM
India treads water on economic reform
India’s prime minister, Manmohan Singh, is a former academic economist with a reputation for supporting liberalization, privatization, and globalization reforms.
But his Congress Party governs in a coalition with several Communist parties. (Yes, Vijaya, more than a decade after the collapse of the Soviet Union, India has real Communist parties. They even use the Gulag death symbol, the hammer and sickle, as their logo.)
So which view dominates the government's newly announced budget plan? Hint: the Commies think it "could have been worse".
One "populist" gleefully summarizes the budget plan this way:
“NO talk of privatisation. No mention of disinvestment. No changes in labour laws to enable hire and fire. No proposal to close down losing public sector enterprises. That is the 2005-06 Budget.”
Anticipated proceeds from selling state-owned enterprises in 2005-06: zero. The international and domestic airlines are still government-owned, and notoriously inefficient. So are most of the banks.
Planned discretionary social spending: sharply up. Why?
Communists leaders say the head of the Congress party, Sonia Gandhi, has taken on board the left's concerns on the social sector and the rural poor and restrained the reformist instincts of Prime Minister Manmohan Singh and [Finance Minister] Chidambaram.
Misleading or Worthless Economic Statistics
This article on Germany's 12.6% unemployment rate illustrates the limitations caused by people entering or exiting the labor force.
For my money, however, the trade deficit is the most useless, overreported, and probably counterproductive economic statistic. (Cato's Dan Griswold explains why here; he also has a spot on op-ed "Lou Dobbs: The Dan Rather of Financial Journalism" Don Boudreaux and Russ Roberts of Cafe Hayek also have many good posts debunking trade deficit hysteria.)
I've opened the comments section for other nominations--I'm sure there will be at least one about income distributions.
Trading Games and Governors' Report Cards
1. Re Bob's trading game: I don't do the assigning points and averaging bit because of the temptation to make interpersonal utility comparisons. I like the innovation of doing a small group then the full class as a way of illustrating the benefit of expanding the scope of the market. (It's of little consequence to the game, but instead of small items, I use index cards with pictures of items from magazines etc.)
By the way, the John Stossel special that aired 2-3 weeks ago showed a high school teacher doing a tragedy of the commons game. Kudos for Stossel; I'll post info on the game if I locate details.
2. Re Josh's post on the ranking of governors: Based on his past performance (2003-04), I think Perdue's D is a bit harsh. He did propose some tax hikes (boo, hiss) but they were relatively modest (cigarettes and the like, nothing broad-based) and were only partially enacted. Meanwhile he held the line on spending, including strong pressure to pony up more for government run colleges and universities. Looking ahead, however, I think the D is too generous; Perdue has proposed some $1B in new spending for the upcoming budget. Consequently, I'm working on a TEL proposal similar to the one Josh, Bob, and others put together for Ohio.
Posted by E. Frank Stephenson at 05:45 PM
A couple people have asked me about what kind of game I did with the kids in my daughter's class. It's pretty simple and fun. Here’s what I do:
(1) Buy small trinkets from the dollar store (one for each kid): decks of cards, small toys, pens, pads of paper, lip gloss, hair bows, etc.
(2) Distribute randomly one small trinket to each kid. (You can teach about scarcity here when some complain that they don’t like what they get.)
(3) Ask them to rate on a 1-10 scale how much they like the item. Take the average.
(4) Now let the kids trade with each other. (This is fun.)
(5) Ask them to rate on a 1-10 scale how much they like the item they have now. Take the average. (Today I just asked for a show of hands if their number went up after trade because they don’t know averages yet.)
(6) I usually sketch out a simple bar chart to illustrate the point.
I have done this many times and I have NEVER had the average fall. This shows them that trade creates value. You can usually talk with individual students who made trades and get them thinking about how the trade made both parties better off.
I also do a little follow-up by asking them if they have ever traded with anyone in Vietnam. Most say no. Then I ask them to check the label on each others’ shirts and we list the countries on the board. Today’s class of 17 ended up with 12 different countries! Luckily Vietnam was one of them.
Posted by Robert Lawson at 03:03 PM
Supreme Logic--Get This Judge a Pollster
The Supremes today declared executing 16 and 17 year olds to be unconstitutional. I care much less about the decision than about how it was reached. Here's Justice Kennedy in the majority decision: "Our society views juveniles ... as categorically less culpable than the average criminal."
I thought the Constitution was about rights of individuals, not about which categories of people are more or less culpable. Indeed, if society's views on culpability are really what should determine their eligibility to receive the death penalty for heinous crimes, then isn't the legislative process the appropriate forum for determining punishments? It seems that 535 people elected by the people from various states/districts would be a better reflection of "society's views" than would 9 Supreme Court justices.
I also suspect that Kennedy and the rest of the Supremes performed no serious research to determine "society's views." For example, one could crank up the econometrics to assess whether 17 year old killers are less likely to be sentenced to death than are 18 year old killers. After all, if society really is less comfortable with executing juveniles then one would expect juvenile killers to be less likely to receive death sentences from juries.
Not surprisingly (see the last 3 paragraphs of the linked article), Scalia skewers the majority's reasoning.
UPDATE (3/1, 5 PM): One of my favorite expressions is that democracy is two wolves and a lamb voting on what's for dinner. Moreover, a decent share of my research is on public choice topics. Hence, I should have added some disclaimers (e.g., special interests, logrolling, agenda-setting) to my suggestion that a legislature of 535 might be more representative than 9 judges. Indeed some argue that the Supreme Court is more representative than Congress (hat tip to Trent McBride). Perhaps I should have phrased my suggestion as follows: For better or worse, legislatures are supposed to reflect the popular will whereas the Supreme Court is supposed to rule on constitutional principles.
Posted by E. Frank Stephenson at 01:25 PM
The Factors of Production
I visited my daughter's fourth grade class today to talk about some basic economics (they cover economics on the 4th Grade Proficiency Exam in Ohio--go figure). We played a little trading game and it all worked out great.
The teacher had the class sing this cute little song (to the tune of The Wheels on the Bus):
The Factors of Production
The factors of production are all around
The first ingredient is the land
Next we have the labor force
Do you know about capital goods
Don't forget the entrepreneurs
Put it all together and what do you have
Written by: Mrs. Haylor, Mrs. Niswander, and Mrs. Kelnhofer
Posted by Robert Lawson at 12:32 PM
Trust the Toad
Editorial (pdf file) from the Journal of American Physicians and Surgeons discusses two GAO reports from 2002 and 2004 that found that 96% of simple Medicare billing questions posed to Medicare customer service reps (CSRs) were answered incorrectly.
The author, a Dr. Huntoon, decided to pose several "yes/no" Medicare questions to a local toad (the hopping kind). The toad jumped right to indicate "yes" or left to indicate "no." Evidently the toad answered the questions "correctly" 50% of the time.
If Dr. Huntoon's interpretation of the GAO report is correct (I haven't been able to track it down yet), then 96% of Medicare claims that were completed with the help of Medicare CSRs were incorrect. The lesson seems to be that doctors should bill Medicare in a random fashion as the odds that a claim will be repaid seem a bit higher. On the other hand, the 4% of claims correctly filled out with the help of CSRs might have been big ticket items, thereby making the expected value of the CSR-assisted claim higher than the toad-assisted claim.
Nevertheless, I would trust the toad.
One great paragraph from the editorial:
Posted by Craig Depken at 12:28 PM
Dead Man Eating
What's on the menu?
The Supreme Court continues to erode state's rights by deciding that the constitution protects minors from execution. Some prisoners will now be denied their traditional death row meal. A particularly tasteless site Dead Man Eating has the last meals of previous diners.
2004 Report Card on America's Governors
Ohio's Bob Taft gets an F. Georgia's Sonny Perdue gets a D.
All grades can be found here on the Cato website.
Hat tip: Matt Hisrich at Buckeye Institute Blog.
Posted by Joshua Hall at 11:57 AM
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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