Today is Berry's Spring graduation. Yes, I'm going this time--mainly because of an outstanding group of economics graduates. Congrats to Andrew Chupp, Ted Crouse, Jeremy Smalley, Justin Slaughter, Jeff Hoffman, Wilson Meads, and Steven Simms--it's been a pleasure to have you in classes over the past 4 years.

Our speaker is Atlanta Mayor Shirley Franklin. I'm not a big fan, but she's more competent than the last mayor. Apparently she's more honest too--the last mayor is under indictment for corruption.

Warning: Politically Incorrect Material to Follow

Translate your webpage with this website. Here's DoL's current Adam Smith quote translated:

"The dawg of system...seems ta imagine that he can arrange tha different memba of a bootylicious society wit as miznuch eaze as tha hand arranges tha different pieces upon a chess-board...but that, in tha bootylicious chess-board of human society, every single piece has a principle of motion of its own..."

Adam S-M-to-tha-izzith

[Hat tip: Keith]

Middle-Age Obesity Linked to Dementia in Later Life [Story.]

Ok, how obese to you have to be and how much more likely are you to get dementia? Surprisingly, the article cited above actually gives us most of the needed facts:

Investigators analyzed data for 10,276 members of Kaiser Permanente medical care program in California who underwent detailed health checks from 1964 to 1973 when they were aged 40-45 and who were still members of the health plan in 1994.

In 1994, dementia was diagnosed in 713 (7 percent) participants. [RL: Hurray! They give us something like a baseline risk here.] Obese people (body mass index 30 or above) were 74 percent more likely to have dementia, while overweight people (body mass index 25-29.9) were 35 percent more likely to have dementia compared with those of normal weight (body mass index 18.6-24.9). [RL: Roughly speaking this seems to mean that someone with normal weight is about 5% likely to get dementia and an obese person is about 9% likely to get it. (UPDATE: My calculations are wrong here but you get the idea.) Is this increase big or small? I dunno.]

Body mass index predicted dementia more strongly among women. For example, obese women were 200 percent more likely to have dementia than women of normal weight, while obese men had a non-significant 30 percent increase in risk. [RL: At least they didn't disregard the 30 percent figure just because it was "non-significant" in a statistical sense.]

Both men and women with the highest skin-fold measurements had a 60-70 percent greater risk of dementia compared to those with the lowest measurements.

In the new cinematic explosion-fest “XXX: State of the Union,” according to this morning’s St. Louis Post-Dispatch:

It's not long before Stone [the protagonist, played by Ice Cube] runs afoul of George Deckert (Willem Dafoe), the secretary of defense, who may be involved in a right-wing conspiracy to overthrow the moderate President Sanford (Peter Strauss).

Ho-hum. Right-wing conspiracies to overthrow the US government are a familiar plot device, e.g. "The Manchurian Candidate". Are there any movies with a left-wing conspiracy to overthrow the US government? (In last year’s second-funniest movie, “Team America”, there is a left-wing conspiracy, but not to overthrow the US government.) I can't think of any. Can anyone help me out with titles of movies on each side, so we can get a sense of which list is longer? I’ve enabled comments.

A few days ago (April 25) the author of the book South Park Conservatives: The Revolt Against Liberal Media Bias visited the MSNBC show “Scarborough Country”. (You can view video of the discussion: go here, then enter “South Park” into the search bar. Hat tip: Ivan.)

Much as I admire the marketing chutzpah of the book’s title, the tv show South Park is not – culturally or politically -- conservative. It is the opposite of culturally conservative: it goes out of its way to be outrageous. Cultural conservatives are oblivious to popular culture, but South Park is entirely clued in. (Scarborough shows a clip of Barbra Streisand as MechaGodzilla, defeated by Robert Smith of the Cure as Ultraman. Genius.) Would cultural conservatives create a talking piece of feces (“Mr. Hankey”) to represent the spirit of Christmas? Give a fourth-grade teacher (Mr. Garrison) a leatherbound gay lover (Mr. Slave)? Lampoon church doctrine that the mentally handicapped can’t get into heaven? If you’ve watched the show, you know the list goes on and on.

More than anything else, South Park’s politics is libertarian. In my favorite episode, “Underpants Gnomes” (unauthorized script here) from Season 2, the owner of a local coffee shop (Mr. Tweak) wants to keep a giant coffee chain (“Harbucks”) from opening a shop in South Park to compete with him, so he writes an anti-globalization screed for our gradeschooler heroes to pass off as their own term paper. The lesson, as Kyle and Stan spell it out when they come clean:

Kyle: Big corporations are good! […] Because without big corporations we wouldn't have things like cars and computers and canned soup. Stan: Even Harbucks Coffee started off as a small, little business. But because it made such great coffee, and because they ran their business so well, they managed to grow and grow until it became the corporate powerhouse it is today. And that is why we should all let Harbucks stay!

There’s also a subplot, involving gnomes who steal underpants, the lesson of which is: you can’t make a profit without a coherent business plan.

The key comedic insights of Trey Parker and Matt Stone, creators of South Park and Team America, are that (1) nothing is funnier than deflating the sanctimonious, and (2) the most sanctimonious people these days are mostly liberals.

Most likely not. Forbes list of the most expensive zip codes

From zip code 93108 (SANTA BARBARA, CA, median house value: $2,176,251) the cheapest property listed at realtor.com is this little mobile home gem at:

2155 ORTEGA HILL # 15 RD
SUMMERLAND, CA 93108

$439,000
2 Bed, 1 Bath
850 Sq. Ft.

Estimated payment:
$1,997 Per Month*

$516 per square foot? Ouch. Here in Arlington we are getting approximately $70 per square foot.

This is the next cheapest property listed:

265 DAWLISH PL
SANTA BARBARA, CA 93108

$1,349,000
4 Bed, 2 Bath
0.38 Acres

Estimated payment:
$6,137 Per Month*

Absolute insanity. (hat tip: J-walkblog)

For those who like old school hip-hop.

Okay, given the past behavior of the IOC, perhaps the prediction is not that much of a stretch. However, immediately after announcing who will suffer the winner's curse of hosting the 2012 Olympics, the IOC will hold 28 sequential votes (evidently on the same day) on each of the different sports in the summer program. Failure to win majority support and the sport will be dumped. Twenty eight votes in a row? Sounds like a marathon on C-SPAN.

From this article:

The last sport to be removed from the Olympic Games was polo in 1936.

In 2002 the IOC decided to cap the numbers of sports at an Olympic Games at 28, the number of events at 301 and the number of athletes at 10,500.

At that same session in Mexico City Rogge proposed that baseball, softball and modern pentathlon be dropped, and golf and rugby added.

However IOC members resisted and no vote was taken.

Three years ago the sports earmarked to be dropped were able to rally support and launch campaigns that ultimately saved their status.

With every one of the Olympic sports up for the vote in Singapore there is no obvious target and IOC insiders believe this will make it much harder for vulnerable sports to rally support.

Certainly Rogge remains unsentimental. "It is clear that no sport has an eternal right to be on the Olympic program," he said last week.

Whew. I am glad to see that olympic events do not have rights. For a minute there I was expecting the opposite - after all it is the Olympics.

Yet to claim that there is no obvious target would seem to be a stretch. Swimming, gymnastics, track (most events at least), and basketball are likely safe. The various sports federations want to keep their respective sports in the summer olympics because to do so elevates their sport relative to non-olympic sports, providing psychic or monetary rents. Thus, with no obvious target the uncertainty should increase the overall amount of rent-seeking efforts (lobbying, bribes, etc.).

As one person in the article stated:

There are going to be 28 separate votes, one after the other," one high-ranking official told Reuters. "Will the IOC members really be able to, or be prepared to, concentrate fully on each vote? I'm not so sure. A lot of people are worried and concerned about this vote.

Well, if you line their pockets with a lotta-dolla-bills, I am sure the good folks at the IOC would be able to, indeed would be prepared to, "concentrate fully on each vote." I would be surprised if the vote in July isn't followed by another major scandal within the IOC.

Jon Stewart just announced that "rogue" economist Steve Levitt, author of the much-discussed Freakonomics, will be his guest tomorrow (Thursday) night on Comedy Central's The Daily Show . Levitt's blog is here.

Yesterday evening I saw the most perfect rainbow -- ever. It was lightly raining where we were but the sky was clearing in the west as the sun was setting making the conditions just right. There were literally a dozen adults standing in a parking lot where we were -- all of us staring at the sky. We all agreed that a lifetime could go by without seeing another as perfect as this one. Not only were the colors (rembember ROY G BIV) very clear the entire thing was visible from horizon to horizon. I didn't have a camera myself but one of my students (thanks Meghan!) sent me this pic. Alas it doesn't come close to doing it justice.

Today’s Wall St. Journal (hat tip: Mahalanobis), in a head-to-head comparison among the three purported leading candidates to succeed Alan Greenspan as Fed chairman (Martin Feldstein, Glenn Hubbard, and Ben Bernanke), says the following about Bernanke:

He may need to pay more political dues before getting a shot at the chairmanship. Though a libertarian Republican, he displays few partisan leanings.

“Displays few partisan leanings” is certainly true – so true that I’m not aware of any expression by Bernanke of libertarian (or even Republican) views. Can anyone direct me to one? I have enabled comments.

Somewhat belatedly, I'd like to welcome Tim Shaughnessy to the DoL fold. Tim is an econ prof at LSU-Shreveport. He went to a great graduate school for his doctorate. Go 'Noles!

What if the US had adopted personal retirement accounts as Chile did, rather than adjusting taxes upward and benefits downward, back when both countries' social security systems faced financial problems back in the early '80s? NY Times columnist John Tierney compares his prospective checks from the Social Security Administration to a childhood friend's Chilean pension. Guess who's way ahead?

Hat tip: Aeon J. Skoble at Liberty and Power.

Senate hearings on Social Security reform began today. The distortions and exaggerations by both sides will no doubt pile up faster than anyone can correct them. But let’s at least pick off a couple. Reuters reports:

Sen. Max Baucus of Montana, the top Democrat on the committee, said that while lawmakers should deal with Social Security's finances sooner rather than later, private accounts were not the answer. "We do not need to privatize Social Security to save it," he said. "The president's plan would dig Social Security into a deeper hole."

Private accounts are the answer if you are asking the right question, namely, “How can we give young workers better retirement saving returns without burdening other taxpayers?” They’re not the answer if you’re only asking, “How can we preserve Social Security in its present form?” Baucus is right that we don’t need to privatize Social Security to save it. We only need to privatize to improve it.

The president’s plan for personal accounts would not, in fact, “dig Social Security into a deeper hole.” Personal accounts are fiscally neutral with the right “clawback” rate, namely with future benefits reduced, per dollar redirected into a PRA, by that dollar plus compound interest at the Treasury’s borrowing rate. Bush’s proposal actually sets the rate higher than necessary for fiscal neutrality (the Treasury pays less to borrow than the 3% real rate he proposes).

The latest issue of the Cato Journal (Winter 2005), entirely available online, contains a number of interesting papers about international monetary reform. See especially the papers by George Selgin on currency privatization, Kurt Schuler on dollarization, Anna Schwarz on China, and Leland Yeager on capital freedom.

The latest issue of Constitutional Political Economy has an article by Selgin and your truly on "Credible Currency", together with another by Tyler Cowen and Chris Coyne on "Postwar Reconstruction".

The AARP managed to get a federal judge to block EEOC rules that allowed employers to reduce health care benefits to retirees when they turned 65 and could qualify for Medicare.

The AARP claimed that the rule was discriminatory because it provided more substantial benefits for those under 65.

“The EEOC argued that without the exemption, employers will reduce or eliminate health benefits for all retirees, no matter what their age, because retiree health benefits are becoming so expensive that employers cannot afford to give the same level of health benefits to all.”

The law does not require that firms provide retired workers health care. In most cases it is voluntarily provided and not contractually obligated under employment contracts. Firms must now face the difficult choice of providing expensive but perhaps unneeded benefits to those 65 and over, or terminate benefits to those under 65 who do need the protection.

Why would AARP operate against the interest of their members? What’s missing in this story? Comments welcome.

About a month ago, I posted on the dubious finding that half of bankruptcies are medically related. I just can't seem to let this baby go.

Both this good article in Forbes and this article in the Atlanta birdcage liner cite the study that came up the 50% statistic. So, a la Don Boudreaux, I've been firing off letters to the editor.

The author of the Forbes piece sent back an interesting question: Since Medicare expenditure per enrollee varies widely across states (lowest state Hawaii=4165 per enrollee, highest New Jersey=7994), couldn't medically related bankruptcies also vary widely? This is a reasonable question--Medicare expenditure per enrollee might reflect interstate differences in healthiness and it might capture any systematic treatment differences across states. If such differences in healthiness or treatment intensity differs then there could be big differences in medical expense related bankruptcies.

So I found some data on bankruptcies and Medicare expenditure per enrollee (scroll down to the download for 2001 Medicare expenditure by state). And the result? There is essentially no correlation (0.028) in Medicare expenditure per enrollee and the number of households per bankruptcy filing. Though not statistically significant from zero, the point estimate actually has the wrong sign.

So the John Bates Clark Award goes to Daron Acemoglu. Congratulations. There are only two more awards offered before I will turn 40, so I expect a phone call one day.

Okay, seriously. Mucking around in sports economics and the other areas of guerilla research I engage in will not merit a JBC award. It is interesting to see who wins and what they do with their skills afterwards. From today's Chronicle of Higher Education (reg req'd):

In a written statement, the association praised Mr. Acemoglu, 37, as a "broad and productive economist" who has made "valuable contributions" in the fields of labor economics, macroeconomics, institutional economics, and political economy. "Especially innovative," the statement says, is his recent work on the role of institutions in development and in political economy.

Mr. Acemoglu was one of the authors of a paper, "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," that appeared in the Quarterly Journal of Economics in 2002. The authors argue that among countries colonized by European powers, those that were relatively rich in 1500 are now relatively poor because of colonial policies -- an argument against the notion that geography is destiny.

In a working paper published in March by the National Bureau of Economic Research, Mr. Acemoglu and other authors argue that there is no evidence that countries that increase their levels of education are likely to become more democratic.

Mr. Acemoglu is the editor of the Review of Economics and Statistics and is a member of the editorial board of the Journal of Economic Growth. He was a lecturer at the London School of Economics and Political Science before he became a professor at MIT.

Eleven of the previous 29 winners of the medal have gone on to win the Nobel Memorial Prize in Economic Science. Previous winners include Paul Krugman, a Princeton University professor and columnist for The New York Times; Jerry A. Hausman, another professor at MIT; James J. Heckman, a professor at the University of Chicago and co-winner of the Nobel in 2000; and Lawrence H. Summers, president of Harvard University.

From Buzzwhack:

time toilet: Any project, assignment,
meeting, etc., that takes more time than
expected -- effectively flushing away
whole your day.

Sounds like a good name for most college faculty meetings - our's is this Friday.

"Although they have only 1 percent of the world's inhabitants, they hold a quarter of United States stocks and nearly a third of all the globe's assets. They're tax havens: 70 mostly tiny nations that offer no-tax or low-tax status to the wealthy so they can stash their money."
So reports David Francis in the Christian Science Monitor. Apparently the non-wealthy aren't allowed to put money in these countries. No word on the wealthy-nonwealthy cutoff. The article includes the obligatory "nations are losing X millions of dollars in lost tax revenue." Lost? I lost a ten dollar bill that was mine and fell out of my wallet. The government lost nothing when I decided to send that $10 to a place where it wouldn't get pilfered.
Next, the article discusses the bandwagon of religious groups wanting "tax justice." I was at a small conference for religious students a few years ago where Pete Boettke gave a talk on basic economics. Some of the students laughed a bit when Pete made some religious references. I turned to one and asked "It's funny when the economist tries to sound like a theologian? Well, it's funny to us too when you all try to sound like economists."
The worst part about the article? It doesn't even tell you how to send money to these tax havens! Gimme something I can use!

Last week, Timothy blogged on corruption in Louisiana. Colleague Courtney LaFountain and I have a forthcoming paper in Public Choice investigating the pecuniary externalities imposed on states through corruption (a version is available here). We look at the impact of corruption on state bond ratings.

We use the number of public officials convicted of corruption at the Federal level per 100,000 people as our measure of corruption. Here's the corruption index of Louisiana relative to the national average:

Here are some simple regressions.

.reg corrupt sfindex, robust

     corrupt |      Coef.   Std. Err.      t    P>|t|   

     sfindex |   .0004932   .0206273     0.02   0.981   

       _cons |   .3044246   .1479997     2.06   0.040   

Our measure of corruption is NOT strongly correlated with Fraser Institute (originally wrongly associated with Simon-Fraser University - thanks Robert Lawson for the reminder) index of economic freedom (oops: earlier I mistakenly claimed this was the Fraser Index of corruption).

. reg startups corrupt, robust

    startups |      Coef.   Std. Err.      t    P>|t|   

     corrupt |   -179.423   59.81447    -3.00   0.003   

       _cons |    3264.49    419.431     7.78   0.000   

States with higher corruption tend to have fewer business startups.

. reg statetax corrupt, robust

    statetax |      Coef.   Std. Err.      t    P>|t|  

     corrupt |   .2666923   .0374503     7.12   0.000  

       _cons |   9.791858   .0477708   204.98   0.000  

States with higher corruption tend to have higher state tax burdens.

The city of Dayton is now offering free wireless networking to anyone on the streets of the city. The network connections are largely limited to the central business district. Other cities, including Philadelphia, are planning similar projects. Cleveland already has free access in parts of the downtown area.

How do we justify this public provision of wireless networking? Wireless networking does not fit the economist’s classic description of a public good. Consumers who do not pay for the service can be easily excluded from the market by encryption, and additional consumers impose congestion costs on the network. In addition, any external benefits from the private consumption of Internet services are probably minimal or non-existent. Moreover, the best proof that it is not a public good is that wireless services are already being sold in private markets.

Municipal governments like Dayton justify this public provision of a private good by claiming it will close the Digital Divide and it will attract tourism and industry. The Digital Divide is the latest term for the gap between those who do not have access to the new technologies (the poor) and the rest of us (all who are not poor). This program, however, is more likely to widen the divide, rather than close it. In order not to compete with private networks, you are not able to pick up Dayton’s wireless system indoors. To use the system you typically have to be outdoors with a laptop. Now, how many poor people do you know roaming the city streets with a notebook computer? I suppose if you are homeless, but not computerless, it might help. The Dayton Daily News reports, “Most users are likely to be business people checking their email or doing Internet-related work outside the office, said Travis Tangeman, said HarborLink’s chief technology officer.”

Clearly, any public resources devoted to this enterprise will allocate government revenues away from the poor and toward the middle class. Like public support for a college education, this could be another public benefit for the middle class.

It is also difficult to give much credence to the tourism or industry argument. When is the last time you jumped on an airplane because you wanted to sample the wireless signal in Seattle or Philadelphia. However, you might want to come to Dayton to see the Five Rivers Fountain of Lights another expensive boondoggle that never lived up to the promises that were made. With cell phones commonplace and businesses and hotels having broadband connections, does it really matter whether or not you can get a wireless connection while riding in your car? Is this our answer to international outsourcing?

For more on municipal wireless networks see ‘Not In The Public Interest –The Myth of Municipal Wi-Fi Networks’ Why Municipal Schemes to Provide Wi-Fi Broadband Service With Public Funds Are Ill-Advised"

Cross Posted at Buckeye Institute Blog

There are government boondoggles and then there are government boondoggles. One of the biggest oinkers is a scheme for a manufacturing zone located around an airfield not too far from where I grew up in eastern NC. The plan, known as the Global TransPark (shouldn't that be TransPork?), has been a dismal failure:

"Original predictions of the GTP’s economic impact were ambitious. Studies said that it would create 55,000 jobs by 1998 and pump $2.8 billion dollars a year into the region’s economy. Since 1991 more than $140 million in federal, state and county funds have been spent on the GTP, but the project has failed to land a major corporate tenant, has no manufacturing facilities as tenants and has not created a single manufacturing job."

Full story here; hat tip to the Locker Room.

Note that this lemon started under a Republican governor; yet another reason to call myself a libertarian. Note also the irony that the original brainstorm came from some bloke who is the Director of the Kenan Institute of Private Enterprise at UNC-Chapel Hill--Orwell must have come up with his job title. Shamelessly, his biography proclaims that "he is considered the leading developer of the aerotropolis concept defining the roles of aviation and airports in shaping 21st century urban growth and form."

[Sidenote: looks like Frank and I were simultaneously blogging on the same topic]

Recent data released by the BLS suggests that:

About 2 percent of workers age 25 and over earned the minimum wage or less. Among those age 65 and over, the proportion was 4 percent.

The press release goes on to mix sub-samples of the population, so you have to keep track of what the "denominator" is, however "[a]bout half of all hourly-paid workers earning $5.15 or less were under age 25."

Here's a picture of the percentage of workers paid hourly for which the minimum wage is binding (they are paid at or below the federal minimum wage):

What causes the spikes? Looks like every time the minimum wage is increased, more people are paid the minimum wage. How about the number of people who are priced out of the labor market?

D.pctminwage |      Coef.   Std. Err.      t    P>|t|   

minwageinc   |   1.966667   .3973271     4.95   0.000

_cons        |        -.9   .1421392    -6.33   0.000    

The dependent variable is the one-year change in the percentage of workers paid hourly that are paid at or below the minimum wage. These results suggest that in years when the minimum wage is increased, approximately 2% more of the hourly work force is paid at or below the minimum wage.

How about the number of people hired who are paid hourly? Contemporaneously there doesn't seem to be a statistically significant relationship between the number of hourly workers hired and an increase in the minmum wage. However, if you regress the yearly change in workers paid hourly against the one-period lagged value of a dummy variable that takes a value of one when the minimum wage is raised you get:

D.totalhrly    |      Coef.   Std. Err.      t    P>|t| 

lag minwageinc |  -887.5079   395.8992    -2.24   0.035 

_cons          |   1137.222   236.9102     4.80   0.000  

where the dependent variable is measured in thousands. What this simple regression suggests is that increasing the minimum wage causes a reduction in those paid hourly by 887,000 people. This doesn't capture those who are moved to salaried positions, so this number would seem to be an upper bound. I don't know this literature, perhaps one of my co-bloggers or a reader can indicate if this is consistent with the other evidence.

It seems that the largest proportion of minimum wage workers are in the service sector (duh) and it seems that most minimum wage workers are young (again, duh). Does this mean that raising the minimum wage will have no effect in the labor market? Nope, it just means that, excluding union contracts that tie union wages to the minimum wage, the minimum wage binds on a subset of the labor force that typically doesn't vote.

This page has lots of facts and figures about employment and minimum wage. Most interesting to me was Table 10 which shows that the percentage of workers earning at or below $5.15 per hour has fallen to 2.7%. Two thoughts:

1. This small percentage probably explains why Dems get so little traction advocating minimum wage hikes--so few people (even if one includes those earning a dollar to two above minimum) would benefit.

2. Some folks (example here) like to trot out the nugget about minimum wages being needed to offset monopsony power. Conceptually, it's difficult to take such arguments seriously in an age where people are willing to spend 30 minutes or more each way on their commutes. Empirically, the decline in minimum wage employment from some 15% of all workers in the early 1980s down to less than 3% of all workers is inconsistent with monopsony. Obviously much of the decline is associated with the declining real value of the minimum wage, but if monopsony was a significant feature of labor markets then the monopsony firm would gladly maintain wages at $5.15 per hour rather than paying rates above the minimum wage.

In this post last August, I expressed skepticism that the difference between actual wins and Pythagorean wins (the number of wins predicted by runs scored and runs allowed) is a meaningful measure of a manager's skill. This observation was motivated by an article in the Weekend section of the WSJ which argued that actual wins-Pythag. wins is a good indicator of managerial skill.

While putting off writing my final exams this morning, I decided to catch up on SABR's "By the Numbers." Thomas Thress has articles in the May and August 2004 issues that support my skepticism. In the May issue (scroll down to p.19), he modifies the Pythag win formula for home and road wins. (The modification reflects the fact that home teams that win use fewer innings to do than do visiting teams.) In the August 2004 issue (scroll down to p. 3) he then examines the relationship between home and road deviations from predicted home and road wins. (For example, did the Braves win more games on the home and on the road than would have been predicted based on the number of runs they scored and allowed both home and away?) If the difference between actual wins and Pythag. wins is indicative of managerial skill, Thress argues, then there should be a correlation between the home and road residuals. He finds no statistically significant evidence of such a correlation.

Got 5 minutes to spare? Check out this seriously cool Flash animation introduction to the libertarian philosophy courtesy of ISIL.

You may have seen the “news of the weird”–type story in yesterday’s online Boston Globe, headlined “Most condoms in India used to make saris”. The article explains:

The condoms are valuable to manufacturers because of the lubricant on them. Sari weavers place the condoms on their thread spools and the lubricant on the prophylactics is rubbed off on the thread, making it move faster through their sewing machines.

If you think like an economist, you immediately wondered: how on earth can it be cheaper for the sari-makers to get the lubricant by taking it from condoms, than by buying the lube without the condoms (presumably they could buy it from the same firms that supply the condom-makers)? If you instinctively guessed “they must be getting condoms at a subsidized price,” it turns out that your instincts are exactly right. The Globe story echoes a widely reported Daily Telegraph story from last year. But yesterday's Globe version omits the key fact: the Indian government gives away about 900 million free condoms each year. Industrial users apparently buy them very cheaply from corrupt officials at the agencies that handle distribution:

Sari maker Yusuf Bhai said they purchased the condoms from agents, who reportedly acquired them from agencies involved in family planning and AIDS prevention schemes.

Some other novel uses: pavers mix condoms into asphalt (the latex increases crack-resistance); rural villagers use condoms as disposable water containers; soldiers use them to keep dust out of gun barrels.

Economic moral (also noted here): demand is very elastic at a near-zero price.

Ecuador ousted its President, Lucio Gutierrez, on Wednesday. Prices of Ecuadorian government bonds have fallen (yields have risen 100 basis points) in speculation against the trustworthiness of the new leftist President, the former Vice-President Alfredo Palacio. But the exchange value of Ecuador’s currency hasn’t dropped one penny against the dollar – because there is no national Ecuadorian currency. Ecuador officially adopted the US dollar in 2000, when the sucre hyperinflated. From Bloomberg.com:

With oil prices still high and Ecuador's currency linked to the dollar, a change in government is unlikely to hurt the economy, said Jose Cerritelli, an Andean region economic analyst for Bear Stearns Co. in New York. ``The president could fall, but the economy will most likely not be affected, because dollarization as well as high oil prices shield the economy from politics,'' Cerritelli said.

Score another point for dollarization.

To say that “Ecuador’s currency [is] linked to the dollar,” by the way, is as misleading as saying that Wisconsin’s currency is linked to the dollar. It simply is the dollar.

The new president has been an outspoken opponent of dollarization. It would be extremely foolish and economically damaging for him to try to reinstitute the failed regime of an independent national currency. But that's no guarantee he won't do it. It was likewise extremely foolish and economically damaging for Argentina's Duhalde government in 2002 to break its currency's link with the dollar (in that case there was only a linkage and not dollarization, nor an orthodox currency board), and yet (egged on by ill-informed American economists) they did it anyway. (I’m reminded of the famous Ren and Stimpy episode, “Space Madness”, in which Stimpy, egged on by the voice-over announcer, can’t resist pushing the history eraser button.)

Nanotechnology? Medicine? Hibernation upon demand?

Looking at vehicles on the web, I wanted to check out the Nissan Murano. www.nissan.com is not the home of Nissan motor company.

bus that is. From Regret the Error, a hilarious archive of newspaper mistakes, comes this mistake in the Washington Post:

A graphic with an April 19 Metro article incorrectly reported the number of passenger miles traveled by U.S. school buses. The correct figure is 4.3 billion miles each year, not each day.

A graphic with an April 19 article incorrectly reported that the number of school bus fatalities per passenger miles was 0.01. The correct figure is 0.01 school bus fatalities per 100,000 passenger miles.

Yep, those bus drivers aren't nearly paid enough. Plus what's an order of magnitude or two, or five!? Nice editing.

This was the first hit from googling school bus deaths.

Guess the Google presents montage of pictures and you guess the google keyword that generated it. They start to repeat, but the first time I played I scored 119 and the second time 260 (with three repeats - two I got right and one I didn't).

Interesting what comes to mind when you see things.

Every semester I offer a bet with my students - half a letter grade on their final grade if they can find a published definition of "price gouging" in an economics textbook. I haven't found one, and I suppose the students don't try too hard looking. I did have someone show me "price gouging" in a dictionary of management terms, but that didn't count. If anyone knows of a definition in a textbook, let me know.

I am glad to report that in it's dictionary of economic terms the The Economist does not attempt to define "price gouging." Here are the pertinent 'P' terms in alphabetical order :

... Predatory pricing, Preference, Present value, Price, Price discrimination, Price elasticity, Price mechanism,Price regulation, Price/earnings ratio, Principal-agent theory, Prisoners' dilemma...

It isn't in the "G"s either. Good on 'ya laddies.

According to the Financial Times, Richard H. Clarida of Columbia University is the leading candidate to fill Ben Bernanke’s seat on the Federal Reserve’s Board of Governors when Bernanke moves over to the Council of Economic Advisors. (Hat tip: Brad DeLong, who gives Clarida a thumbs-up.)

What kind of monetary policy would Clarida support? From the FT article:

Mark Gertler, a professor at New York University who has co-authored papers with Mr Clarida, said: "Basically, he's an inflation targeter. He believes in following a monetary policy rule that is consistent with inflation targeting."

Many of Clarida’s papers are helpfully available as pdf's on his Columbia website. A quick look at one of his papers with Jordi Gali and Mark Gertler, "The Science of Monetary Policy - A New Keynesian Perspective" (Journal of Economic Literature, December 1999), confirms Gertler’s statement. Like Bernanke, Clarida et al. promote inflation targeting. I’d say about their version of inflation targeting, though, what Johnny Depp says about the Pirate’s Code in Pirates of the Caribbean: it’s more of guideline than a rule.

Oh, and don't let the self-applied "New Keyensian" tag scare you. Here it means much the same as "Old Monetarist": it posits a non-frictionless world in which monetary policy has real effects in the short run.

Another day, another story of Louisiana political corruption. It got me thinking of the U.S. Economic Freedom Index published by the Pacific Research Institute. I know other groups produce similar reports.
So why is Louisiana always last? Maybe it's because we're 40th on the list; geographically the closest states with similarly bad business environments is New Mexico and Kentucky. Sigh.

Fr. Robert A. Sirico writes,

We have already heard a thousand times or more that the new Pope is a conservative. As counterintuitive as this may sound, I believe that insofar as the new papacy has implications for economics and politics, it is in the direction of a humane and unifying liberalism. I speak not of liberalism as we know it now, which is bound up with state management and democratic relativism, but liberalism of an older variety that placed it hopes in society, faith, and freedom.

ATSRTWT

A large multiethnic study unveils that a diet containing lots of processed meats, like hot dogs and sausages, raises the risk of pancreatic cancer. [Story 1 and Story 2.]

Ok, what I need to know is how much do you have to eat and how much does it raise your risk?

From the news articles, it turns out that the risk of getting pancreatic cancer was 67% higher among people eating 40 grams or more of processed meats daily. 40 grams is not a lot of meat--only about 1.4 ounces. So a quarter pounder hot dog (113 grams) per day should increase your odds of getting pancreatic cancer by nearly 200% (assuming linearity).

Wow, this doesn't sound like a lot of meat and the increased risk (200%) sounds pretty big. But the real question is how big is a 200% increase? If the baseline odds of getting pancreatic cancer are just 1 out of a million (0.000001), then eating a big daily hot dog will increase your odds to about 3 out of a million (0.000003). [Note, I do NOT know the baseline risk of getting pancreatic cancer; this is just an example.]

It is entirely reasonable for someone to say, "I really love eating hot dogs, and a lifetime of enjoyment is worth the additional 2 out of a million chance of contracting pancreatic cancer." Of course a reasonable person could say, "Wow, although I like hot dogs, that too much risk for me to take."

Medical science can give us the relevant parameters but it cannot decide if the risk is worth it. Only people can decide this for themselves.

But my big beef (pardon the pun) is that medical journalists ALMOST NEVER give us the baseline risk information without which you cannot make such a judgment. I need to know the baseline risk in order to judge if a 67% (or 200%) increase is big or not.

[UPDATE: I'm not sure if this is the baseline or not, but this press release indicates that 482 people out of 200,000 contracted pancreatic cancer over the seven-year period. This implies a 0.0024 risk.]

The Mini gets longer

Story here.

Create your own here.

Hat tip: Andrew Cline at The Locker Room.

"In December, a four-year-long court battle came to an end when a U.S. Court of Appeals dismissed a $2 million religious discrimination lawsuit brought against Costco, the nation’s largest wholesale retailer, which logged some $47 billion in sales last year.

The case, brought by West Springfield, Massachusetts, employee Kimberly Cloutier, was certainly not your average religious discrimination matter. Provoked by a change in the wholesaler’s dress code policy, it pitted facial piercings against professional appearance, and involved, among other things, an eyebrow ring and a small church [The Church of Body Modification] that few people have ever heard of."

Full story here.

Sorry but religious freedom shouldn't guarantee one a job because it infringes on employers' freedom of association. Likewise, even though I think abortion is murder, I don't support state laws guaranteeing pro-life pharmacists jobs. Instead they should find (or start!) pro-life pharmacies that will employ them without requiring that they distribute medications that offend their consciences. (Many states, including my own, have passed laws making it illegal to fire pharmacists who refuse to fill scripts on conscience. At least one state, IL, has passed a law mandating that pharmacists fill abortion pill scripts. Some background is here and here.)

See Cnet

A day after Intel said it would offer $10,000 for a copy of a magazine in which Moore's Law was first announced, a University of Illinois engineering library noticed that one of its two copies had disappeared

Librarians at Stanford University, the University of Washington and other universities say they are angry at Santa Clara, Calif.-based Intel for posting on eBay a $10,000 bounty for a copy of the magazine. The bounty went up on April 11. Since then, others have posted bounties too.

The Annual Report on the Economic Status of the Profession, 2004-2005 has just been posted by the AAUP. The report indicates that the salary ratio of university presidents to full professors at doctoral institutions has increased over the last decade. Thus, the divergence between compensation at the upper level and the mid level at universities seems to have mirrored what has occurred in private industry.

Between 1993-94 and 2003-04, however, increases in average presidential salaries accelerated, and the gap between chief administrator and faculty broadened. Unfortunately, the CUPA reports for the years between 1993-94 and 2003-04 do not distinguish between the public and the private sector within these institutional categories. The failure to do so obscures significant variation. Economist James Monks, a member of the AAUP's Committee on the Economic Status of the Profession, found that presidents at public research universities earned approximately half as much as their private university counterparts in 2001-02 and 2002-03, even taking into account differences in institutional characteristics.

Still, it is clear that presidential salaries in both sectors began to move significantly ahead of faculty salaries during the latter half of the 1990s, and that the trend apparently continues. This development is one further indication that a more corporate organizational hierarchy is emerging in colleges and universities, in potential conflict with the mission of institutions of higher education to operate for the benefit of society as a whole.

>

From AdAge comes this story about how the internet (let's drop the capital 'I') is going to cost the newspaper industry approximately $4 billion between now and 2007:

The newspaper industry's traditional lock on classified ads as its key revenue source is being seriously eroded by non-newspaper online classified ad sites.

Luis Ubinas and Jochen Heck warned that newspapers could lose $4 billion of "highly profitable" classified revenue by 2007 -- or around 20% of newspapers' 2004 classifieds revenue and just under 9% of the $46.6 billion in total newspaper ad revenue last year -- if trends that afflict help-wanted classifieds spread to automotive and real-estate classifieds.

Let's see, from the reader's side: the (physical) newspaper's classified ads are not searchable, are not always located in the place I, as the reader, might expect, and are not easily archived. From the advertiser's side: the classified ad is only good for a week or so, it is highly uncertain that your ad will be seen, it is likely more expensive to run a classified ad in a newspaper than on-line.

Yep, the days of the classified newspaper ad might be on the wane. From a newspaper executive:

The chilling part, Mr. Ubinas said, is that the key problem is not the competitors but rather what their pricing is doing to the entire classifieds model, calling it "price destruction."

Price destruction? Who comes up with these terms? I think the underlying complaint is similar to the complaints of the candlestick makers, liverymen, and typewriter repairmen: New product replaces old product and someone's ox gets gored.

Side note: The woes in the newspaper industry, real and perceived, are evidently not the fault of the newspapers, their content, or their business model. Not only are other industries stealing their advertising revenue, the readers are to blame:

"Our customers these days are a slippery bunch," said Gregg K. Jones, the NAA's chairman and also co-publisher of the Greeneville Sun in Tennessee. "Harder to find and harder to hold onto."

"Do they still love us? Do they still need us?" he wondered. "Consumer [sic] today aren't following patterns in media, or anything else." He described American consumers as having gone "from the 'we' generation to the 'me' generation to the 'it's all about me' generation."

Makes me want to discontinue my TWO newspaper subscriptions.

This morning was spent dealing with vehicles. Kid-mobile had to go to the shop. Downside? Our other vehicle is a holdover from the pre-kid years, a MB 560SL. Beautiful car, fun to drive, completely impractical.

Eventually catch a ride from a nice person and get back home. Take the bucket o' bolts for its annual state inspection. There are few other rackets the government is involved in that are as insane as car inspections. Yearly expenditure to make sure that my headlights, blinkers, horn, and windshield wipers work? I need the government to help me out with this?

Of course, the real reason we have to have inspections in the big cities is for pollution control. Right. The city of Arlington's (and the whole Dallas-Ft. Worth metroplex) traffic system is so efficient it's the badly maintained car that causes the pollution. I think it is the amount of time we sit around at stupidly timed red lights - an idling engine is the least efficient.

Nevertheless, I watch my friendly technician give the BoB an auto colonoscopy and she's "running like a top" (so says our techie). Here's the run down on a fairly well maintained 1988 MB560SL with 141000 miles (oil changes regularly, four years ago I had to replace the rear valve springs but nothing else done to the engne):

High Speed Emission Results (25mph)
Hydrocarbons (ppm): Maximum allowed - 137    BoB's Score- 11
Nitrous Oxide (ppm): Maximum allowed - 956    BoB's Score - 434

Low Speed Emission Results (15mph)
Hydrocarbons (ppm): Maximum allowed - 140     BoB's Score- 21
Nitrous Oxide (ppm): Maximum allowed - 1046    BoB's Score - 467

Overall result? The BoB passed with flying colors.

$39.95 cash, check, or charge. Why we have to do this every year is beyond me. There is little reason to suspect that the BoB will score appreciably worse next year. The government just took my money for no reason, but the penalty for driving without being inspected is a lot more than $39.95.

I often chalk the inspection up to a bit of useful information about the BoB's innards. But this is just a rationalizatoin. I really get steamed after I leave the inspection joint because I feel like something happened that I won't want to talk about in the morning.

Side note: Two or three years ago the state changed the requirements placed on the equipment to perform inspections. New equipment cost? Approximately $40,000 at the time. My mechanic said "uncle" and got out of the inspection business. As one would expect, the prices of inspections increased. However, Taylors, the place I go to (which is actually reputable and quick), used to take only cash or check and if it was cold or hot out, well then suffer outside. A new inspection joint (which also offers oil changes) has opened immediately next door. Now Taylors accepts credit cards (at least I got 39.95 frequent flyer miles) and they are building an air conditioned and heated waiting room.

Hooray for competition!! I suppose we take our victories where we find them.

Like Bob, I would like to see the US government get out of the business of issuing pennies. But then, I'd like to see government get out the business of issuing currency of all denominations, and let private firms do it. That's the only real way to discover whether the benefits of the penny (or dollar coin, etc.) outweigh its costs. Pipe dream? No, there's good historical precedent. My frequent co-author George Selgin is now working on a book about how private penny issuers saved the Industrial Revolution.

While driving in this morning, I heard some sort of radio promo proclaiming that one out of two men is at risk for cancer. (I think that's an exact quote, but since I was driving and couldn't jot down the ad word-for-word, I've left off the quote marks.)

Geez, I thought all men were AT RISK for cancer, though not all would actually contract some form of it. Stated differently, is it now possible for 50% of men to smoke like chimneys or engage in other cancer related behavior (too much sun exposure and melanoma) and still not come down with cancer? (Of course we may not know which 50%.)

Of course, what I think the ad was trying to say is that 50% of men will contract some form of cancer at some point in their lifetimes. Maybe I'm just grumpy from lack of sleep (note the time on my previous post), but it sure would be nice for the cancer folks to make a clear statement about lifetime probability rather than a mouthful of statistical mush.