Division of Labour: May 2005 Archives
May 31, 2005
This Will Be Published?
Via FoxNews we learn:
"A study of 85 infant boys found a correlation between increased exposure to some forms of the chemical phthalate and smaller penis size and incomplete testicular descent.
A paper describing the research will appear in a future issue of Environmental Health Perspectives, a journal of the National Institute for Environmental Health Sciences."
A sample of 85--this reeks of junk science and we haven't even examined how the researchers measured "increased exposure."
Iraqi Institute for Law, Liberty & Prosperity
A friend of mine from my days at Buckeye, Omar Altalib has started a classical liberal think tank focused on Iraq. From the website:
The Iraqi Institute for Law, Liberty, and Prosperity (IILLP) seeks to attain individual freedom and the rule of law for the Iraqi people through targeted mentoring of the most promising future Iraqi leaders, a coordinated program of widespread Iraqi public education, and a series of detailed policy proposals for Iraqi institutional change, such as privatization of Iraqi state-owned industries, elimination of Iraqi state monopolies in such areas as education and Iraqi telecommunications, reform of the Iraqi judicial system, better definition and enforcement of Iraqi property rights, elimination of restrictions on Iraqi free exchange, and establishment of effective guarantees of Iraqi freedom of religion and speech.
I wish him the best of luck.
So Deep Throat wasn't Pat Buchanan after all!
Straight to dvd
Mostly because video piracy is such a problem, Bollywood films are typically released to dvd in the US as soon as they leave the theaters in India – which is usually a week or two after being released. (Thirty years ago, smash-hit Bollywood films used to celebrate 25 weeks in the theaters. Now a three-week run constitutes a smash hit.) Immediate dvd release also allows the dvd to benefit from the same publicity campaign that launched the film in theaters. Sure, the knowledge that the dvd is coming so soon cuts into theater ticket sales, but those are an ever-smaller part of the revenue pie these days anyway.
Hollywood is beginning to follow suit. The Boston Globe reports that the average delay between theatrical and dvd release for US films has shrunk to 4 months, down from 6. Some studios are planning to experiment with immediate dvd releases. If the experiments go well, look for dvd release lags to shorten even further. Really, even if the movie will be out on dvd as soon as it leaves the theaters, your date will still be impressed that you took her to the theater to see it.
France votes “non”
As expected, French voters rejected the European Constitution. The margin, 55% to 45%, was even larger than expected. The vote pitted the centrist UMP ruling party of Jacques Chirac (“oui”) against a coalition (“non”) of just about everyone else: socialists, conservative nationalists, and classical liberals. The ruling party is so shocked, they’re even talking some sense. Party leader Nicolas Sarkozy (his family is originally Hungarian), has viewed the vote as calling France to move toward a more free-market economy:
The leader of France's ruling UMP conservatives called on Sunday for major changes in France's economic and social policy after initial results showed voters overwhelmingly rejected the EU constitution.
Sarkozy has been described as an “admirer of the Thatcher-Blair revolution in Britain”. (Aside: Thatcher revolution, okay, but “Thatcher-Blair”?! What did Tony do, except not reverse what Maggie had accomplished?)
The vote showed that France has a split between rouge-etats (Paris) and bleu-etats (the rest of the country). While the rest of the country rejected the constitution,
Parisians voted 66.5 percent 'oui' and 33.5 percent 'non.'
Synopsis of various SS reforms
Is available in this CBO document (apologies if Larry already linked to it). I especially liked the appendix, which contains explanations of various reform proposals.
Upshot seems to be that there is relatively little that can be done to extend the life of the "trust fund" and that most proposals hit the upper half of the income distribution (go figure).
I don't know which is more scary - the document or this.
Buzzword of the day
MBA: To a small part of the workforce, it's a coveted business degree. To the folks who work for bosses with MBAs, it more often stands for Mediocre But Arrogant.
"Pen makers cater to fussy scribes"
An excerpt from an article in today's AJC:
"When it comes to pens, some people couldn't care less. But others, like Jumanne, care a lot. They want the right color, the right feel and the right look.
Satisfying those tastes remains a huge business, even in the age of digital assistants and laptops conspiring against simple writing implements. Pen makers these days are constantly trotting out new tweaks on an age-old design to try to keep pens in fashion."
With a nod to MR, markets in ink pens. There are also echoes of Virginia Postrel.
Girls Just Want to Have Rent Control
Cyndi Lauper sues over rent control. Hat tip: Tyler Cowen.
Time after time (sorry, I just couldn't resist) we see wealthy or politically connected folks reaping the benefits of rent control. Other examples are Mia Farrow and Ed Koch. An econometric analysis can be found here; it finds that:
"Pollakowski found that rent control provides little benefit to residents of the outer boroughs or the lower and middle-income neighborhoods of Manhattan: residents in Queens, Brooklyn, Staten Island, Upper Manhattan, the Lower East Side and Chinatown save less than $10 a month from rent control.
Only residents of controlled units in the affluent parts of Manhattan -- the Upper East and West Sides, down through much of lower Manhattan -- gain significant benefits, as their rents are about $400 a month lower than their counterparts in the unregulated sector.
In effect, Pollakowski found that rent control mainly benefits those already well off."
May 30, 2005
Just got back from four wonderful days in Virginia learning more about Public Choice. David Levy has done a wonderful job taking over from Mark Crain as he put together a wonderful outreach conference. The faculty included James Buchanan, Gordon Tullock, Sandra Peart, Don Boudreaux, Mike Munger, Bryan Caplan, Daniel Houser, Thomas Stratmann, Robin Hanson, and David Colander. I was very excited to have the opportunity to meet David as I have been a big fan of David's since reading The Making of an Economist and Why Aren't Economists as Important as Garbagemen? He was as delightful to talk to in person as his work is to read.
The Public Choice Outreach Conference is a wonderful time and I highly recommended it to any graduate students interested in public choice. You get the opportunity to spend considerable time with some cool faculty and students.
I believe some photos as well as some video from the conference is available here for those interested.
More on Wal-Mart
The Christian Science Monitor ponders "Is Shopping at Wal-Mart Immoral?" There's lots of teeth-gnashing about ethics (based on notions of "distribution" not personal freedom, of course), but it also includes this claim:
"This "race to the bottom" in labor costs also seems to rub off on a surrounding area, according to research from economists Stephan Goetz and Hema Swaminathan at the Northeast Regional Center for Rural Development at Penn State University. While the national poverty rate dropped 2.4% between 1990 and 2000, the rate fell by just 0.2% on average in counties that added a Wal-Mart. One theory: Although Wal-Mart creates jobs, the company also eliminates jobs by putting others out of business.
"We didn't expect Wal-Mart would be able to affect poverty on a countywide basis, but lo and behold it did," says Goetz."
I found the underlying paper here; I haven't yet given it a careful read but a quick skimming already finds a problem with the passage in CSM. The sentence reporting "the national poverty rate dropped 2.4% between 1990 and 2000, the rate fell by just 0.2% on average in counties that added a Wal-Mart" is incorrect. The study finds that the marginal effect of an additional Wal-Mart is 0.2 percentage points not the 2.2 (=2.4-0.2) percentage points impied in the quoted sentence. As Stephan Goetz summarizes on his website:
"The statistical model developed for this study suggests that the counties that added a Wal-Mart store during the decade saw the poverty rate decline by a smaller amount than did counties not adding a store. The net predicted effect of a new store was relatively small, amounting to a 0.2 percentage point higher poverty rate for one new store, 0.4 percentage points for two new stores, and so forth compared to the case where no new store was added. Even so, the effect was statistically significant."
The 0.2 percentage point effect is a more plausible magnitude, but I'm still skeptical that Wal-Mart caused a smaller decrease in poverty between 1990 and 2000. Instead I suspect that it's locations just happen to be correlated with places where poverty declined more slowly in the 1990s. (Note that the study does attempt to control for other factors that might be related to poverty; how well it does so might be another matter.)
If you're not getting enough Wal-Mart here at DOL try AlwaysLowPrices.
UPDATE: Art Carden has a Wal-Mart article on the Mises blog.
ANOTHER UPDATE: I've written a letter to the editor of CSM about the incorrect poverty statistics. Based on the anti-Wal-Mart letters that CSM has already printed (link here, scroll down), I'm not optimistic about having my letter published.
May 28, 2005
What's up with Europe and Africa?
I am not an oil economist, but on a whim I grabbed active oil and natural gas rig counts from Baker Hughes and end-of-month spot oil prices from the EIA. I limited the sample to January 2002 through April 2005 and estimated (simple) price elasticities of active rigs: U.S. about 0.56, Canada 0.51, Middle East 0.27, South America 0.49, Far East 0.28, Africa -0.17, and Europe -0.49.
What's up with Europe and Africa?
Here is Europe's rig count plotted against end of month spot oil prices from January 2002 through April 2005:
Here is Europe's rig count and the end-of-month spot price trend lines from January 2002 through April 2005:
For comparison, here are the similar pictures for:
My initial thoughts:
If someone has an explanation, I'm listening. It's kinda late over here, so maybe I am missing something obvious.
For those interested - here's the STATA data file.
May 27, 2005
Hate groups in the USA
In the "for what it's worth" section, the Southern Poverty Law Center has the scoop on who's hatin' in the USA.
In Texas there are supposedly 40 active hate groups. The count is probably a little low because I don't think they consider that in Texas Aggies hate Longhorns, Hornfrogs hate Ponies, and Owls hate Cougars. I am not trying to belittle the work of the SPLC, I guess it is worthwhile keeping a "private" eye on these groups to make sure they don't act crazy, but I have lived in the Dallas area for nine years and I haven't heard of any of the groups they mention as "active" in the Dallas area. I suppose you can be an active hate group and not do anything newsworthy - perhaps that's the point nowadays?
Anyway, it is good to know that the SPLC doesn't find any active hate groups in Arlington, although I know some Cowboys' fans who really don't like the Washington Redskins.
My home state of Georgia has 41 active hate groups, with Black Separatist groups being the largest single category with 14 groups (although combined White Separatist/Supremist groups still outnumber the Black Separatists - 27 to 14).
Florida, New Mexico and South Dakota are hate group free? Isn't La Raza active in New Mexico?
The website also has a list of hate incidents here
It’s all about the Benjamins
U.S. paper money in circulation, as of Dec. 31, 2004, by denomination:
Note - Value in circulation (billions)
That’s right, 72% of US currency (516.7/719.5) is in $100 bills. 55-66% of the US currency stock is estimated to be circulating overseas. For obvious reasons, it’s difficult to know exactly how much is in suitcases in Moscow versus briefcases in Miami.
If the $100 is so popular, why isn't there a $500 bill? The European central bank issues €100, €200, and €500 notes. Here is a similar breakdown for the euro:
Note - value in circulation (billions)
Note that the euro is much less skewed toward the high end of the spectrum. €100 and up accounts for only 56% (278/500) of euro notes in circulation.
Inference: euro notes don’t yet circulate as widely as the dollar in the "bulk cash" markets outside their home area (e.g. in Russia, Latin America, Asia).
Will France vote “Oui” or “Non” on the European Constitution?
France holds a national referendum on May 29, with opinion polls currently running slightly (closer than previously) against the European Constitution. The Netherlands votes on June 1, with polls tilting similarly.
There are many bad arguments on both sides of the debate, but the crucial point (for me, if I were a European voter) is that the European Constitution would centralize power in the European Parliament and its unaccountable “Euracracy”, removing the last traces of inter-jurisdictional competition that remain today. Its defeat might help return the European Union to focusing on areas where it can be useful, dismantling barriers to trade and migration. Economic regulation and social engineering are already bad enough at the national level; they would be even less restrained at the trans-European level.
Wal-Mart Creates Jobs
The February issue of the Review of Economics and Statistics contained an article by Missouri's Emek Basker analyzing the effects of Wal-Mart on job creation. Abstract below (full version can be downloaded from SSRN):
This paper estimates the effect of Wal-Mart expansion on retail employment at the county level. Using an instrumental-variables approach to correct for both measurement error in entry dates and endogeneity of the timing of entry, I find that Wal-Mart entry increases retail employment by 100 jobs in the year of entry. Half of this gain disappears over the next five years as other retail establishments exit and contract, leaving a long-run statistically significant net gain of 50 jobs. Wholesale employment declines by approximately 20 jobs due to Wal-Mart's vertical integration. No spillover effect is detected in retail sectors in which Wal-Mart does not compete directly, suggesting Wal-Mart does not create agglomeration economies in retail trade at the county level.
Yep--contrary to the rants of the anti-Wal-Mart hysterics, Wal-Mart doesn't, on net, "destroy" jobs. Of course, they'll whimper and whine about the pay or the benefits or ...
Of course, regardless of Wal-Mart's real or imagined effects, the real issue is liberty--things like freedom of association, freedom of exchange, ...
ADDENDUM: Basker also has a paper examining Wal-Mart's effect on prices. Not surprisingly, Basker finds that Wal-Mart does push down retail prices--a big benefit to lots of poor consumers, but you won't hear that from Wal-Mart bashers. The paper is available here.
Another trade deficit with China?
As if things weren't bad enough, we now have a trade deficit in dogs with China. Evidently, China can make dogs faster and cheaper (but are they of higher quality?).
Okay, seriously...From the May 25th New York Daily News:
Thirty dogs, given a reprieve from death at a Beijing animal shelter, are being flown to Long Island, where they'll be put up for adoption. The pooches - basset hounds, Dalmatians, German shepherds, terriers and, yes, Pekingese - land at Kennedy Airport tonight.
I don't want to hear any New Yorkers complain that the economy is in the tank when they can find 30 grand to fly dogs across an ocean and a continent. Have these people ever encountered the concept of opportunity cost?
A side note:
In Beijing, some 41 breeds are verboten, and it's illegal to own a dog taller than 14 inches. Also, the residents of China's capital can't have more than one dog each.
It's illegal in Beijing to own anything but a yip dog? What about seeing eye dogs and such? Alas, another cost of statism.
Update: Perhaps there are no seeing eye dogs for two reasons. Either there are no blind people in China or China is so labor intensive that there are seeing eye people instead of seeing eye dogs.
Sunil Dutt, RIP
Veteran Bollywood actor Sunil Dutt, 75, died on Wednesday. He had amazing range: he most famously played an embittered poor young farmer in the classic 1957 melodrama Mother India, and – at the opposite extreme – a clueless rich young urbanite in the classic 1968 comedy-romance Padosan [the title roughly means Girl Next Door].
His last appearance was a cameo in Munna Bhai MBBS, a popular 2003 comedy starring his son Sanjay. It has been reported, by the way, that -- in a reversal of the usual pattern in which Bollywood borrows plots from Hollywood -- director Mira Nair will be remaking Munna Bhai MBBS as a Hollywood movie entitled Gangsta MD.
Taxes on Everything
From the Beatles:
"If you drive a car-car I'll tax the street
"Denmark, with the world's highest income tax levels, wants sperm donors to pay tax on the 500 crown (46 pounds) reimbursement men receive for their services."
Andrew Chamberlain of the TF rightly notes:
"However, the story isn't what it seems. It turns out that until recently fees earned by sperm donors have been tax exempt. So the so-called "sperm tax" is in fact the removal of a distortionary tax preference from the Danish tax code. For better or worse, that's usually good tax policy since it simplifies tax rules and treats income from different sources more equally."
More on the Wright Amendment
Angela Shah at the Dallas Morning News takes a crack at explaining some of the issues around the Wright Amendment and actually tackles, however briefly, how economists would try to evaluate the impact of the amendment's repeal. Personally, I think she does a pretty good job.
"There's economics and there's economics," said Craig Depken, a professor of economics at the University of Texas at Arlington, referring to the unique ability of the dismal science to sometimes enable conflicting analyses. "It depends on whose ox is being gored."
I actually meant to say something like "there's economics and then there's the bottom line," but oh well.
Broadly speaking, economists have a philosophical allegiance to creating a marketplace free of protectionism.
I like the first paragraph touching on philosophy, although there are probably some who might take issue.
UK Doctors Imitate the Onion
"[British emergency] doctors are calling for a ban on long pointed kitchen knives to reduce deaths from stabbing."
And a classic from The Onion:
"WASHINGTON, DC--Vowing to "vigilantly defend the Second Amendment and preserve our most basic civil liberties," the National Machete Association denounced congressional efforts to enact machete-control legislation Monday."
Adam Smith Statue
The Adam Smith Institute is raising funds to install a large bronze statue of Adam Smith in a prime location in Edinburgh. Can you believe there isn't one already?
Viagra: It's Not Just for New York and Florida Sex Offenders
Cambodian Midget Fighting League
No, there isn't such a thing, but apparently there used to be until the league owner had his 42 fighters challenge a lion. Story here--note the bit about the Cambodian govt approving the event as long as it got a 50% cut of the proceeds. Death and taxes ...
Hat tip: Todd
UPDATE: Mark tells me the suspicious sounding article is indeed a hoax. Details here.
Shame On You!
Economists like to examine how incentives mold behavior. However, they often ignore an important controlling force, social opprobrium. Shame costs little and can provide beneficial externalities for the community. It is now being used by city governments to shame lax homeowners.
Dayton has joined a small number of cities nationwide that try to pressure property owners into cleaning up their act by posting large signs on rundown, vacant houses identifying the owners and how to contact them.
"We're basically calling it shaming," said Bill Nelson, director of Dayton's building services department. "Even if it has only marginal success, the impact will help some of our neighborhoods."
May 26, 2005
Economists making a difference?
Colleague Mike Ward has a penchant for on-line petitions. His latest deals with the so-called Wright Amendment which protects Dallas-Ft. Worth Airport from direct competition with Love Field. Southwest Airlines is not allowed to take long-haul flights out of Love - they must stop in one of the border states of Texas.
The Amendment is a classic example of the infant industry argument taken to extreme. Proponents suggest that DFW must be protected from competition in order to remain an economic engine in the area. The argument might have held some water 30 years ago - after all we do live in a second-best world - but now that DFW is one of the five busiest airports in the nation, I suspect they can handle a little competition.
I think repealling the amendment will lead to a contestable market outcome rather than direct competition, at least for many people. Love field is about thirty miles away - almost a forty minute drive on a good day - and DFW is only twelve miles and about twenty minutes away. For most of us in Tarrant County (where Ft. Worth and Arlington are located) the airport of choice will continue to be DFW.
Mike's petition made it into today's Ft. Worth Star-Telegram and couple of North Texas congressmen have introduced legislation in Congress to repeal the Wright Amendment. They don't have a good acronym, but the bill is the Right to Fly Act. Unfortunately, most of our Republicrat Congressional Caucus is hesitant to repeal the act - either because they are truly protectionist at heart or they fear lost campaign contributions.
From the Startelgram article:
Southwest officials said they weren't surprised that the economists support repealing the law.
Economists are used to howling in the wind, so it isn't surprising that AA was unawares of our little protest. What is interesting is that 21 economists who agree about a single issue (which is rare enough) is considered news.
5:00pm update: Today has been interesting. Dallas Morning News, Star-Telegram editor, and an airline employee have responded to the original story. Even a small contribution to the removal of the protectionist policy would be a great victory (especially after the trouncing "we" took last November in the stadium vote).
Here's a link to Mike's petition.
Quickfacts on North Slope
If you are thinking of traveling to the North Slope to despoil the environment, here are some Quickfacts that might be of interest to you. Over the last decade there has been a population explosion of 23.4%. The current population is 7,218 and the population density is one person for every 12.3 square miles. At this rate of growth there will be about 59,000 on the North Slope 100 years from now and only 1.5 square miles per person.
The good news is it only takes on average 7.9 minutes to get to work and the average household income is $63,173. The bad news is that 100 years from now they might need a traffic light and the cost of a green salad is probably horrendous.
Another Example of Gender Bias?
Gender discrimination may extend beyond potty bias. Entrepeneurs.com has just listed the Hot 100 entrepreneurs for 2005. Of the Hot 100 only 9 are women. Why do males dominate this aggressive group of entrepreneurs? Which is it Larry Summers, nature or nurture? Do we need a government program to provide incentives for female risk takers?
May 25, 2005
Examples of non-price rationing
One of the central problems in economics is that of how to ration scarce goods among competing users. We can use market prices to ration goods, but we can also use various non-price mechanisms. Some examples:
New York City Marathon: c. 30,000 Quota and Lottery.
Chicago Marathon: 40,000 Quota and First-Come/First-Served.
Boston Marathon: Qualifying Time Required.
For Discussion (ala Arnold Kling): Why don't we just use price to ration the spots in these marathons or to hike Mt. Whitney?
NFL to New York - FUGGETABOUTIT
The NFL just awarded the 2009 SuperBowl to Tampa. So much for promising the 2009 Super Bowl to New York if the Jets got their new stadium. Does this mean that if the Jets get a stadium the 2010 Super Bowl will go to New York, or the 2011 Super Bowl?
Wait a second. The NFL promised us the 2011 SuperBowl for building the Cowboys stadium. Would the NFL have the gall to promise the same Super Bowl to two different cities?
The land grab here in Arlington began yesterday. The first three houses have been approved for purchase - at least one for more than appraised value.
The old Eastern Star retirement home, which is on 30 acres of nice property, is being seized for the stadium. The original plan was to seize 75 acres of land, but this has now increased to 165 acres. The main problem? It isn't clear if the Rangers and the Cowboys will be able to share parking!! Please.
Now, there is a developer who would like to use the Eastern Star land for a hotel, condominium and retail development. It isn't clear from whom he would buy the land - the Cowboys, the city of Arlington, or the original owners of the Eastern Star retirement home.
My bet? He would buy the land from the Cowboys.
Let's see. The city of Arlington purchases private property with the not-so-veiled threat of eminent domain in their back pocket. The taxpayers of Arlington get the bill for that. Then the city gives the land to the Cowboys who then turn around and sell it to a developer.
Sounds like a winning deal to me. Here's some more at Heavy Lifting
He Should Have Gotten the One with Tinted Windows
"Metro Nashville police said [Titans player Tyrone] Calico, 24, was issued the misdemeanor citation early on May 12 near Nashville's Music Row area. A police officer found the player and Domonike Wheeler, 18, having sex in the back seat of Calico's Cadillac Escalade, police spokesman Don Aaron said Monday."
Honey, What's that Stopwatch Doing in the Bed?
It's a Dynamic World
Yesterday the House passed a bill calling for the use of embryos created for IVF but never implanted to be used for stem cell research. The underlying idea is that these "excess embryos" would be discarded so they might as well be used for research purposes. Well here's one (of perhaps many) reason not to do so--it's a dynamic world. Using so-called excess embryos for research might create an incentive to produce more IVF embryos thereby leading to more embryos being destroyed.
May 24, 2005
More Than You Ever Wanted to Know About Baseball Usage
Wal-Mart and a Rent-Seeking Union
From yesterday's WaPo:
"Wal-Mart's opponents, led by Local 400 and Giant Food, have already won several high-profile victories. Six jurisdictions, including Prince William, Calvert and Montgomery counties, have passed zoning rules that make it harder, if not impossible, for the chain to open a supercenter, its most profitable format. Several more jurisdictions, including the District, are considering such rules. And in April, the Maryland General Assembly passed a bill backed by Giant and Local 400 requiring Wal-Mart to spend more on employee health benefits. The governor vetoed the bill, but some legislators have vowed to override it.
"Our goal is to block them out," Lowthers said. The union has circulated sample zoning bills targeting Wal-Mart to local governments, rallied members to speak out against the retailer at public meetings and called on state leaders to support anti-Wal-Mart legislation.
It was a Local 400 official, for example, who first suggested the idea of a big-box bill targeting Wal-Mart in the District, said D.C. Council member David A. Catania (I-At Large), who sponsored the legislation. Catania said he agreed to offer the measure because he believes Wal-Mart's employee health care benefits are inadequate. As the bill was drafted, Catania said, the union was consulted on the language."
"The results can be seen at the cash register. At the Wal-Mart supercenter in Spotsylvania County, which opened in March, a basket of 23 popular household products, including such brands as Jif peanut butter, Maxwell House coffee and Reynolds Wrap aluminum foil, cost $60.37. At the nearby Giant, less than a mile away, the same 23 products cost $75.55, or about 25 percent more."
Yet another cool use for Google Maps
How about Google Maps interacted with Gas Buddy?
Interesting use of Google Maps
Reported Chicago Area Crimes.
Most homicides occur on the street (23 according to the database). As for Aggravated assault: Hands, feet, fists, there have been 247 reported assaults of this type in Chicago public schools and only 3 in private schools. Perhaps there is a reporting bias with the private schools. After all, aggravated assualt doesn't look good on the private school's recruiting brochure.
Here's the map for fake checks. Is there something about the South Side of Chicago? Must be White Sox Fans (he he he). It is not surprising that most reported fake checks come from banks (34 versus 4 at department stores), what is surprising is that 34 folks would try to put one over on a bank.
Munger accused of being an Old Fogey
His first take here.
He responds to his critics here.
My sense is that he's not an old fogey because:
1. He still can clean the boards like Bill Russell in his prime.
2. He's right.
I'll never forget the day I scheduled to take the GRE in Athens. It was the Friday after Thanksgiving. The testing place was across from the econ department so I stopped by after the test to see if someone I knew might be working. I was expecting to find no one.
I was suprised to find three people working. All full professors. All over 65 years old.
Now it may be that everyone else was working from home, or working at other times, or was allocating the work effort differently over their lifetime, but one couldn't infer that from their vitas. And I think that's Munger's point.
James Buchanan said the best piece of advice he ever got about how to be a succcessful academic was "keep the ass to the chair." While it is not a sufficient condition for success, it is a necessary condition. And that seemed to be the basic point Mike was making.
And even if Mike is wrong it is still a good strategy to act as if he is right.
Posted by Joshua Hall at 07:54 AM
Interesting seminar on Freakonomics over at Crooked Timber including a response from Levitt.
May 23, 2005
25% off good through May 30.
Not too shabby.
Six long and glorious days of being unplugged from the matrix have come to an end.
Our flight back from Greeneville-Spartanburg was 2 1/4 hours, and it took us almost an hour to get from gate to car. I fail to understand why in the twenty-first century it should take this long to get one's bags and head to the parking lot, but DFW has perfected the art out of making it increasingly difficult to get from point A to point B on the airport grounds. This in spite of spending almost a billion dollars on a new "people mover" system.
Laffer Curve and Tariffs?
I'm working hard on the updates for the 2005 Economic Freedom of the World report to be released in September. Taking a break from the mind-numbing data entry work this morning I decided to check out the relationship between the mean tariff rate (i.e., the statutory mean of tariffs) and the average revenue raised by tariffs (as a share of exports and imports) for the countries in my data set.
One should expect a Laffer Curve type relationship. As the tariff rate increases, revenue should increase at a diminishing rate eventually turning in the negative direction.
The graphic below shows the results. While individual tariffs on certain goods may be so high as to be prohibitive, it doesn't appear that too many countries are on the "wrong side" of the Laffer Curve as a whole.
More JC and Mazzone
The NYT has also picked up on JC's Mazzone Effect research--this article even has quotes!
May 22, 2005
I ran the Cleveland Marathon this morning to beautiful skies and mild temperatures.
Final Times: 3:29:56 (clock); 3:29:27 (chip)
All in all a good day.
Women's Restroom Equity Bill
Having campaigned successfully for a ban on indoor smoking, Mayor Bloomberg now wants to micro manage indoor plumbing. His proposal, the Women's Restroom Equity Bill, will ensure equality of outcome in public facilities.
The Central Planning Authority has determined that it is optimal to have two stalls for women for every one for a man. Yes, two for one! Moreover, a men’s urinal counts the same as a toilet. Not only are men denied a seat, but women are awarded two in return for a standing quickie. As a male, my feelings are hurt. But I shouldn’t be too fast to criticize. The legislated gender ratio of toilets is probably based upon some high-powered studies paid for by public funds. These have most likely been followed up with focus groups that got at our deep feelings on potty parity.
No doubt more needed rules will follow. I don’t think Mayor Bloomberg considered the many other factors that must be controlled. You can’t go about planning in a half-hearted manner like the Soviets did. We need to get serious. For example, the current act does not regulate sheets of toilet paper or water flow. Men use less toilet paper than women and urinals require less water per use. How can we be sure that money grubbing capitalists will stock the additional women’s restrooms with the needed amenities? There needs to be a statement on the proper ratio of men’s to women’s toilet paper and water usage rates; otherwise, the whole planning hierarchy is likely to collapse.
Obviously, Yvette knows what is good for business and it is nice of her to share it with those whose livelihood depends on attracting customers. Without her free advice, these retailers (useful idiots) would most likely work against their own self-interest. While some may view this as socialist planning, it should be seen as attempt to save the capitalist system from its self destructive ways.
What the commissars really must now consider is the whole question of disparate impact. The only way we will really know if we have achieved parity is to measure gender specific effluent. Is two for one really optimal and is it optimal in all parts of the country? In colder regions where individuals wear more clothes the ratio may be different than in others where one can more easily achieve the proper arrangement of garments. The correct objective is a one-to-one ratio of male to female body waste.
You might suggest that the ratio of men to women visiting an establishment like a sports bar may be different from the ratio at the local mall. Therefore, we might not expect an equality of outcome. That, however, takes too narrow view of the problem. Inequality of effluents is proof of either inequality in the availability of facilities or other more insidious discrimination. Sports bars are notorious for attracting more men than women. These establishments must find ways of correcting this gender imbalance. Effluent equity could be an effective way of achieving a better balance. Just like colleges have disbanded wrestling teams to achieve a better balance in women’s sports, something similar could be done in sports bars. The men’s room could be locked until effluent equity is achieved. We need to all get behind Mayor Bloomberg and all be Proud Proponents of Potty Parity.
Remember, what’s good for women is good for men. We should all thank God or Mother Earth for concerned citizens like Professsor John F. Banzhaf III of the George Washington University Law School. This self-proclaimed father of potty parity is the driving force behind this needed legislation. I am sure he has hung around enough public restrooms to know what he is talking about.
May 21, 2005
The costs of Iraq
Because I’ve repeatedly criticized Paul Krugman’s columns on Social Security, I should note for the sake of fairness that I think his recent column on Iraq is basically right. Saddam was a bad guy, but not a threat to the United States (neither via WMDs, nor via terrorism). The invasion and occupation have been very costly. The sensible course is to get out sooner rather than later.
May 20, 2005
No Teacher Left Behind
A California school district names all 575 of its teachers as teachers of the year. Hmmm ... here again we have an example of the mentality that has led to the widespread adoption of so-called high stakes testing.
“If you think that China is a cheap place for labour, think again”
An excerpt from The Economist:
"Fierce competition and a limited supply of talent is resulting in high turnover rates. “The biggest issue is retention of people,” says E&Y's Mr Wu. “Retention is much cheaper than recruitment.” One in ten executives changed job in the southern city of Shenzhen last year and one in 12 in Beijing, according to Hewitt. The same research points to a nationwide employee churn rate of 11.3% in 2004, up from 8.3% in 2001. Some smaller firms see turnover as high as 30%, but leading global firms are not immune. L'Oréal, with 3,000 people in China, says that staff turnover in its marketing department is nearly 15%. “A lot of fresh graduates leave. We lose almost all we hire in the first three years,” says Daisy Dai, its human-resources director.
Pay and benefits are soaring. A Chinese middle manager at a foreign company in Beijing or Shanghai can now command total annual cash compensation (salary plus bonus) of $27,000-$32,000, says Hewitt. Senior managers receive between $46,000 and $54,000 and top executives can expect $80,000 to $90,000 or more. While underlying inflation in China is around 2%, average annual salary increases for mid-level and senior managers are now 6-10%. Lai Kam-tong at the Hong Kong Institute of Human Resource Management says that accountants' salaries are rising by 14% a year. Jürgen Viethen, general manager for F&G China Electric, a small Spanish-owned electrical switchgear-maker, is offering key employees raises of up to 50%—and still losing them.
Bonuses, longer-term incentives, free housing and meals, a mobile phone and a set of wheels are becoming standard perks. More than one-third of 1,600 multinational firms surveyed by Hewitt now offer a company car. More holidays, maternity and paternity leave, more frequent job rotation and share options also now feature. Add in the big contributions that employers must make to China's national security fund system and the total cost of an employee can be double his basic pay."
Full story here.
Repeat After Me: Voluntary Exchange is Mutually Beneficial
I saw this quote in the comments section of a sports blog:
"I have to say that these personal attacks, though slightly funny, are just petty. I guess it comes with making so much money at our expense, but I wish everyone who posts could get grilled this bad for making mistakes at work, especially those connected to pride and overconfidence."
The quote is part of an exchange about the Braves awful closer Dan Kolb; much of the exchange is garbage so I don't want to dignify it with a link. Kolb has been rotten, but baseball players don't make money at our expense. They make money in exchange for providing us a service--entertainment--and both parties benefit. Some players don't perform up to the expectations at the time teams sign them to contracts, but Kolb is hardly alone in this regard.
WSJ on the Mazzone Effect
I am happy to report that my former undergraduate student, Todd Nesbit, successfully defended his Ph.D. dissertation at West Virginia University on Wednesday. I was honored to serve on his dissertation committee. He'll be starting a one-year position at Wabash College this fall.
Why aren't feminists free marketeers?
There's a new study on the "gender gap" around the world published by the World Economic Forum.
This analysis came to me from Berry College's Wilson Mixon:
I ran a rank correlation between the Econ Freedom Index and this one. Here are the results:
For the variables 'MktWtchR' and 'EFI'
The scatter plot is below. EconFreedom index on X-axis.
May 19, 2005
Half Dome Trip Report
Ben Powell (San Jose State University) and I left our camp in Curry Village in Yosemite Valley at 6:15 a.m. on Sunday, May 15, 2005 with the intention of hiking to the summit of Half Dome (8842' elev.). The high Sierras have had tons of snow all winter including a good storm the weekend before so we weren't sure that we'd be able to get to the top. The weather this day was perfect though--sunny and 75 for the high in the valley and about 60-65 at 8000'. We had heard conflicting information from people the evening before--some said it was impossible and others said it should be doable. We decided that we'd just have to see for ourselves so we were on our way.
Half Dome of course is the signature mountain in the valley with its sheer north face towering nearly a mile above the valley floor. See picture. The hike is long at around 16 miles with an elevation change of about 4800'.
We took the (aptly named) Mist Trail past Vernal and Nevada Falls. The water volume was amazing as the winter snows have been much higher than normal. After Nevada Falls we took the John Muir Trail through the relatively flat Little Yosemite Valley around the south side of the dome. Many hikers do the Half Dome hike as a two-day hike by camping here. In fact, I don't think anyone on the Half Dome Trail on this day started from the Yosemite Valley floor like we did.
The final apprach to Half Dome is from the east. See picture. We hit snow not long after ascending from the Little Yosemite Valley. Fortunately, other hikers had blazed the trail and the snow pack was firm so we were able to walk with only moderate difficulty.
Finally we reached the base of the massive granite wall of Half Dome itself. Not being technical climbers, Ben and I were going the "Cables Route"--they have two steel cables that allow you to make your way up the last 800' of the trail and 400' of elevation (making for about a 50% average grade!). During the summer season, the cables are "up" with posts and boards that work almost like steps and railings, but they're still "down" this time of year--that is they're just there on the rock. No matter. We proceded to pull ourselves up Batman and Robin style. See picture.
After reaching the summit, we found ourselves alone on the massive (football field sized) top of the dome. See picture. (One hiker, probably the first of the day, was coming down just as we began our climb on the cables, and five others were behind us. So we figure only 8 people summitted this day. About 20 more were in the area but declined to attempt the cables. For comparison, in the height of the summer season some 500 people per day will reach the top. To be up there alone for any amount of time is really special.)
The way back down was uneventful and we got back to our tent cabin by 5:00. We were surprised that we didn't feel that sore. Finally we headed to the bar to drink heavily telling anyone who would listen about our day!
The most eventful thing was the next morning. It rained hard all night and we were one of the last cars to get out of Yosemite Valley before they closed the flooded roads for almost the next 24 hours.
‘Nine departed leafy friends’
From a recent issue of the Rome News-Tribune:
"About 45 mourners attended a service for the oak trees, which were mistakenly cut down."
As part of a road project, GA DOT inadvertently cut down nine old growth oaks. They were quite majestic (I passed them on my daily commute) and community wishes to avoid having the trees cut delayed the project for several years.
No doubt some readers are expecting me to make a gratuitious comment about tree huggers. I won't, but you should feel free to do so.
Instead, I'm more interested in this part of the RNT article:
"GDOT has also promised to offer some sort of mitigation for the loss of the oaks ..."
But who is GDOT? Taxpayers! One of the differences between the public and private sectors is that private sector people who cause harm may be sued for damages. With goverments we get a pile of passive voice mush about "mistakes were made." Even when a government agency admits a mistake the remedy comes at additional cost to taxpayers. Yes, someone might be fired (though I have no indication of it in this instance) and, yes, there are some abuses of the tort system but public sector goofs end up costing taxpayers twice over.
Markets in Everything--Inkjet Cartridge Brokers
An article in the May 6 WSJ just oozed entreprenuership, competition, and the like. An excerpt:
"Mr. Wood is one in a growing cadre of cartridge brokers that helps nonprofit groups raise funds, encourages recycling and supplies a network of mostly small remanufacturers that offer consumers a lower-cost option for running their printers. It is a win-win proposition in many respects, except for the big printer makers such as Hewlett-Packard Co. and Lexmark International Inc.
Brokers like Mr. Wood and the remanufacturers they supply are pinching the printer giants, which rely heavily on profits from repeat sales of new cartridges. The printer companies also are beginning to feel a squeeze from office-supply outlets that sell do-it-yourself refill kits and chains such as Cartridge World and Island Ink-Jet, which are setting up across the nation as cartridge-refilling stations for consumers."
A nod to Marginal Revolution for the "Markets in Everything" concept.
Alan Murray's column in yesterday's WSJ ($) took on GE's plan to release a "Citizenship Report." Murray's column displayed a healthy skepticism of the "social responsibility" notion, but the most interesting part to me was the penultimate paragraph:
"Most important, Mr. Immelt [GE's CEO] says he had concluded that efforst to control carbon emissions pose a huge business opportunity for GE. The company makes a host of products--wind turbines, efficient jet engines, nuclear-power plant components--that stand to benefit."
Yep, we have a nifty illustration of Bruce Yandle's bootleggers and Baptists. Some folks favor regulations on principle others, such as GE, do so as a form of rent-seeking.
NB: Yandle's title comes from regulations against alcohol sales; Baptists dislike alcohol in principle and bootleggers favor prohibition so they can make higher profits smuggling.
"Researchers: To win in sports, wear red"
"If winning is everything, British anthropologists have some advice: Wear red.
Their survey of four sports at the 2004 Olympic Games in Athens shows competitors were more likely to win their contests if they wore red uniforms or red body armor."
Include me in the skeptics, at least until I read the underlying study or I read that it has been extended to cover more than four sports.
Full story here. Hat tip: Kara.
Fear of Hurricanes
NOAA has just released its prediction for the 2005 hurricane season and it doesn’t look good. There is a 70% chance of an above-normal hurricane season.
Fear of Quake
If you live in California and would like to know the probability of the roof falling in over the next 24 hours, visit the Earthquake Hazards Program
If the probabilities look bad and you are thinking of getting out of town, you might check the probability of an airline crash.
Fear of Flying
If you would like to compute your chances of getting out of town safely on that next flight, AirSafe.Com has all the information you would need. There are data on fatal events by airline, aircraft model and geographic region.
May 18, 2005
Economics of Public Policy exam
Airlines that fly from Dallas Love Field (namely, Southwest Airlines) are limited by a special federal law: they can only fly to a few adjacent states. Reason: to drive business to DFW. Because Southwest can’t fly nonstop from Dallas to St. Louis, American Airlines’ fares on the STL-DFW route are higher than on other routes from STL of similar length. News story here.
"Competition between airlines is fantastic," Cox said. "But not between airports that are eight miles apart and have common ownership. When you unravel a hub, it has a negative impact on the entire community. I think the people in St. Louis know about that."
2. Mr. Cox is
For the answers:
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The correct answers:
ADDENDUM: In answers 1 (a) - (c) I've made a replacement in what I first posted: "valid" instead of "sincere". Mr. Cox may be perfectly sincere in his argument, but that isn't really the question.
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My daughter graduated summa cum laude from Emerson College in Boston on Monday. She done me proud. The commencement speaker was entertainment mogul Robert F. X. Sillerman (owns American Idol and 85% of Elvis), who gave an interesting talk (at least for me, the economist in the audience) on the changing competitive landscape in the entertainment industry. In a nutshell: technology has given consumers a lot more choices, so aiming for the median consumer is out; niche products are in.
I discovered one advantage of living in a stagnant rust-belt city like St. Louis rather than a happening town like Boston: restaurant wait times here are never as long as 90 minutes.
The Filibuster Game
A vote against the filibuster is the dominant strategy for the Republicans.
Old braodcasters never die, they just fade away
After being relieved of the Evening News, Dan Rather was supposed to continue on with the Wednesday Edition of 60 Minutes. This allowed both CBS and Dan Rather to save face. With the cancellation of the Wednesday Edition of 60 minutes it is clear that this was a convenient was of easing Dan's departure.
See: NY Times
Now that the program has been canceled, Mr. Rather will probably be given a slot on the Sunday edition of "60 Minutes" through 2006, according to two people familiar with his contract.
Don't hold your breath Dan. This is only wishful thinking by the New York Times.
How appropriate that this comes on the heels of the Newsweek episode, another case in which the media over relied on anonymous sources. When the media report on anonymous sources, they are implicitly vouching for the reliability of those sources. There was a brief time when the media would not repeat charges that could not be verified. The media was not in the business of spreading rumors. Unfortunately, that time has passed.
I do believe the media should be able to use anonymous sources. They must recognize, however, that when they use unnamed sources, they are gambling on their credibility. Merely spreading vicious lies, lowers their informative value. With named sources there is no such responsibility. Knowing the source, the reader can independently assess the source’s credibility.
Today, You Have To Swing at Gary Sheffield
While it seems almost incredible now, until Conn Smythe left the Gardens in 1964, a jacket and tie was considered compulsory attire for season-ticket holders of red (now gold) seats. In letters to subscribers, Smythe would sometimes remind them of this rule, warning that repeated violations of it could lead to a non-renewal of their season-tickets.*
Ken Dryden, The Game (Canada: Wiley, 2005), p. 94.
May 17, 2005
A couple of snippets from a Ronald Bailey article:
"For example, the Times notes that only 37 members of the Forbes 400 richest Americans inherited their wealth, down from almost 200 in the mid-1980s. The percentage of Fortune 500 CEOs with Ivy League degrees dropped from 16 percent in 1998 to 11 percent in 2004."
"What does it say about class differences in "culture and taste" when the lowest price ticket for the NASCAR Pocono 500 is $99.00 while the cheapest ticket for Tosca at the Met is $26.00?"
Listening to the radio while returning from lunch, I heard an announcer dedicate a song to Jennifer from Duluth. The song--Billy Idol's "White Wedding." Presumably, this is Jennifer from Duluth.
Intellectual Diversity, NO; Social Diversity, YES
Summers announced a $50 million program to promote social diversity at Harvard. Maybe now the Left will let Larry stay at his post. Is it worth the price?
Story at Baltimore Sun.
French Communists Get Religion
France has traditionally “observed the day after Pentecost Sunday, the Christian feast commemorating the descent of the Holy Spirit upon the Apostles on the 50th day after the Resurrection of Christ.” (NY Times)
The French government decided to cancel this holiday to raise money for the elderly. Since we all know that dollars are fungible, this reason was a lame attempt to assuage anger over a lost holiday. Most angered were the communist labor unions who apparently found God’s work in the traditional day off and are now hooked on the opiate of the masses.
Do we benefit when the government declares a holiday? At most it simply creates a redistribution of income and reduces overall income. Private employers are not going to pay their workers more than their marginal worth. If they have to pay for a day of unearned pay, they will make it up by reducing overall salaries. The only workers that benefit are those working for employers who are not constrained by the market, those employed by local and national governments. For them, an official holiday is an increase in real income that must be defended. As expected, the most active supporters of a protest strike were teacher’s unions and public transport workers.
The teacher’s unions, of course, were only a strike because they were sincerely interested in the education of their students. “The country's main federation of parents urged keeping children home, and the teachers' union reported that up to 90 percent of students from the ages of 11 to 18 did stay home.”
France's national railway company, SNCF, ran 20 percent more trains than the usual number to help compensate for local transportation disruptions and to transport those who took a three-day weekend. But the railway is treating the day as a holiday for its employees, requiring its workers to make up the time by working 1 minute 52 seconds more each workday.”
No doubt, they are adjusting the time clocks right now to account for that precious 1 minute and 52 seconds.
There were some unexpected benefits from the eliminated holiday. “Since parking meters in Paris are run by a computer program that had not been changed to eliminate the holiday, there was free holiday parking here.”
May 16, 2005
Haven't heard this interpretation 2
Re: Newsweek retraction of Koran-flushing story.
Haven't heard this interpretation 1
Re: Republican anger over Democratic Senators filibustering judicial appointments.
How much would you pay?
The Titanic sailed in April of 1912.
First Class (parlor suite) $4,350
If the Titanic sailed today (using 1913-2005 inflation calculator at the BLS):
First Class (parlor suite) $84,934
Using ex post information, how many people would have paid to sail on the Titanic? Yet at the time the Titanic seemed like a good bet, the safest ship in the world and whatnot.
Is the Federal Government and Social Security the Titanic of our day, or is it privatization?
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As an aside: From Travelocity comes this cruise on Princess Cruises 14 nights from London to New York (via Belgium, etc.):
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I'm Too Stupid for My Shirt...Too Stupid
Could people possibly be any more confused about "good" investment strategies?
Here is an idiotic story in the LA Times "proving" that the government needs to manage peoples' investments.
Douglass C. North, an economist at Washington University in St. Louis, won the Nobel Prize in 1993 for work on the importance of institutions in fostering growth. However, in deciding how to invest his prize money, he trusted his gut rather than institutions. He concluded that the stock market had peaked, and poured the money into low-interest municipal bonds. When stocks confounded his predictions by doubling in value, he said, "my wife spent years berating me."
Still, he hung onto the bonds, and stock prices eventually reversed course. Chief among the rewards he said he collected: "My wife quit berating me."
That's a fib. I know Elizabeth Case pretty well, and she just quit berating Doug North about that one subject. All the other subjects he deserves to be berated about...she is still after him on those.
Seriously, North didn't throw the money away, he chose a low risk, high after-tax yield investment instrument. Suppose that North had invested the entire amount on the winning number of the New Jersey Lottery, a dollar at a time, every day since 1993. He would have earned trillions of dollars. Now, North is a fine man, but he is as greedy as the rest of us. If he had known the winning lottery number, he would have invested in it.
Just like if he had known that stocks would rise so dramatically, he would have invested in it.
Comparing a solid investment strategy to the one high-risk strategy that happened to maximize returns, ex post, and then saying the sensible strategy is wrong....well, it shows that you don't understand anything about markets, and the efficient capitalization of information. Criticizing someone for not buying the winning lottery ticket....doesn't make sense. And one certainly can't conclude that lotteries are good investments from the fact that ONE person won big.
So, my proposal is this: the government should take over the investments, and all other aspects of the lives, of those who know least about markets: the reporters, editors, and staff of the LA Times. Leave the rest of us alone.
I am confident that North's investments, and those of the other Nobelists, outperformed the anemic return on Social Security, even with their inherently conservative investment strategies.
(Nod to Craig N, who also has a most excellent rant on this subject. Craig includes reporters for the Boston Globe among those who are too stupid to live on their own. I would restrict this service to actual bipeds. But to each his own.)
A Toast to Freedom
Washington, D.C.-In a case with huge implications for interstate and electronic commerce, the Washington, D.C.-based Institute for Justice and its clients today hailed the U.S. Supreme Court’s decision striking down laws that forbid the direct interstate shipment of wine to consumers. IJ represents family winery owners Juanita Swedenburg from Virginia and David Lucas from California, as well as New York consumers who would like to purchase their wines. The Institute and its clients issued the following statements after learning of today’s decision:
“This is the best day for wine-lovers since the invention of the corkscrew,” said Clint Bolick, the strategic litigation counsel for the Institute for Justice. “This landmark ruling is a victory for consumers and small businesses and a defeat for economic protectionism. It demonstrates that in the era of the Internet, the Court will vindicate the principles of free trade that made this country great.”
I'm not much of a wine drinker (though I've recently developed a fondness for Sauvignon Blanc from the Marlborough region of New Zealand), but I'll raise a glass to any victory for individual liberty.
Hat tip: Dan Alban
PS: No doubt this is a triumph of hope over reason but maybe the winery ruling is a good omen for the Kelo eminent domain case.
Does Jerry Jones Play Tennis?
"Nina Lovel has a vision for a new tennis center. As a member of the Rome Tennis Advisory Council, she wants a facility that’s bigger, better and has more courts in one place.
With close to $10 million pumped into the community each year from tennis tournaments, she isn’t the only one.
City, county and Rome-Floyd Parks and Recreation Authority officials are interested in replacing the current 16-court facility on West Third Street with a larger one on Riverside Parkway.
One reason is money. The Georgia State League Championships, currently occupying 70 courts in seven locations across the county, is expected to bring in around $2 million during the four days it’s here."
Reminds me of a certain Dallas Cowboys stadium fleecing.
More seriously, if tennis tournaments are such gushers of money then why doesn't some entreprenuer spring for the $750k that the article reports would be necessary to build a new tennis center? Even if the new tennis center could capture only 10% of that magical $10m that tennis tournaments bring to Rome, it would pay for itself in only 1 year. Not many investments pay for themselves that quickly! The fact that no one in Rome--or anywhere else apparently--builds a private facility suggests that the $10m is a wee bit inflated.
An anecdotal reason to suspect it's inflated: While eating Friday night at a restaurant that should be one of the beneficiaries of tourist spending, my better two-thirds, Pee Wee, and I observed less than a dozen people in tennis attire. While some may have changed clothes there couldn't have been too many tennis players eating there because the restaurant was only half full.
Compensating Wage Differentials
Sayeth Adam Smith:
"The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighborhood, be either perfectly equal or continually tending toward equality."
So why am I thinking of compensating wage differentials and Adam Smith?
"[Milwaukee Metropolitan Sewer District] is now paying an average of $460 a day for one worker to scoop spent condoms from the surface of tanks at Jones Island [treatment plant]."
Yucky story here. And it does get worse, especially the part about what a fisherman saw in Lake Michigan.
Economics - It's Everywhere!
I'm reading Ken Dryden's The Game, one of the greatest books ever written about hockey. It was named the top hockey book of all time by Sports Illustrated. SI also named it the top book written solely by an athlete.
Anyway, I'm only 75 pages in and I've already found several items that would make great test questions. For example, when Ken Dryden was growing up hockey sticks were very expensive. He and his brother Dave would receive a new stick at the beginning of hockey season and maybe another one later in the year. So Ken and his brother agree to get each other hockey sticks every year for Christmas.
Then one year Dave again gets Ken a hockey stick for Christmas. However, Ken doesn't get Dave a hockey stick, he gets him socks. Dave, naturally upset, employs a trigger strategy as punishment.
May 15, 2005
Interesting take on country music
Available in this Power Point Presentation.
From a story in USAToday:
"Just 56% of students surveyed said they put a great deal of effort into schoolwork; only 43% said they work harder than they expected to. The study says 55% of students devote no more than three hours a week to class preparation, but 65% of these report getting A's or B's.
Students on the college track devoted the most time to preparation, but only 37% spent seven or more hours a week on schoolwork, compared with 22% of all high school students. Among seniors, just 11% of those on the college track said they spent seven or more hours a week on assigned reading, compared with 7% of all seniors."
So schools hand out fistfuls of A's and B's to students who do little work. Maybe this is why "high stakes" testing has become so prevalent.
ADDENDUM: Perhaps I'm incorrect, but one rarely hears moaning and groaning about testing at private schools. Assuming I'm correct that there is less testing at privates, why might this be? Two possibilities: less grade inflation (i.e., grades convey more accurate information about student achievement) or students who are not a (more or less) captive audience. My hunch is that the latter is more important; private schools that don't deliver value will lose their students. Some private schools might measure value added by using standardized tests, but the real quality control mechanism is not the test per se but the possibility that parents will move their kids to other schools.
Hat tip: George Leef
May 14, 2005
On ticket prices and salaries
To follow up on Frank's entry on ticket prices and salaries in baseball (and sports in general), I went to my handy database and pulled up real salaries and real ticket prices (both in 2000 dollars). I generated an indicator variable for whether real salaries increased or decreased from year to year, and an indicator variable for whether real ticket prices increased or decreased, (salaries in 2000 $XX.XXm and ticket prices in 2000 $XX.XX).
Here are the raw means for MLB teams from 1991 through 2001 (312 observations):
Here are means conditional on whether salaries increase or not:
Variable | Obs Mean Std. Dev. Min Max
Variable | Obs Mean Std. Dev. Min Max
Variable | Obs Mean Std. Dev. Min Max
-> rtixup = 1
Variable | Obs Mean Std. Dev. Min Max
May 13, 2005
Tips for Riding Out Hurricanes
Growing up in eastern NC, I recall people holding parties while hurricanes blew by. Apparently Floridians have an even better way to spend the time.
From a recent CNN program on "high stakes" testing:
NARRATOR: While SOL scores have shot up, performance in other tests, like the SATs, remain far below the national average.
SOL is Virginia's Standards of Learning test. The narrator is discussing a high school in Norfolk. Note, however, the statistical sleight of hand. The narrator doesn't say whether SAT scores have gone up or down; instead they "remain far below the national average." Perhaps the avg SAT was even worse before the SOL regime. Another possibility--the SOL regime has been so successful that many kids who wouldn't have considered college or taken the SAT have been taking the test. An increase in the percentage of students taking the SAT typically lowers the average SAT score.
I don't mean to suggest that standardized "high stakes" test are ideal. But then neither were government schools before testing programs were implemented.
Player Salaries and Ticket Prices
Sports economists cringe when they hear assertions that higher player salaries push up ticket prices. The reverse is more likely correct; here's an explanation why.
Now an excerpt from a recent issue of Time:
"Under [owner Arte] Moreno, who purchased the club from an indifferent Disney ownership in May 2003 for $183.5 million, the Angels are soaring. Soon after buying the team, which was a surprise winner of the 2002 World Series but finished under .500 the next year, Moreno did the unthinkable for a sports owner: he lowered the cost of family-ticket packages and upper-deck seating, cut the price of premium draft beer from $8.50 to $6.75 and increased payroll to field a competitive team. The Angels have the 22nd lowest (out of 30) average-ticket price in baseball and the fourth highest payroll."
Yup, salaries went up (can you say Vladimir Guerrero?) and ticket prices went down.
Ripping off James Taranto and BOTW
I found a local example of "It's the Eponymy Stupid:"
Kenneth Prude took the stand Thursday as the first defense witness during his child molestation trial and cried as he talked about a plaque he received from a parent the night of one alleged incident.
The guy is an ex-high school coach.
May 12, 2005
Even a smart Supreme Court Justice can have trouble with supply and demand analysis
Some amusing moments from the transcript of the medical marijuana case that my friend Randy Barnett argued before the Supreme Court in March. (Barnett argued that Congress can’t stop California from legalizing home-grown medical marijuana, because home-grown and home-consumed pot -- regulated by the State of California to prevent it’s leaking into the national market -- doesn’t fall under the Congress’s power to regulate interstate commerce.)
JUSTICE STEVENS: Let me ask this question. What is your view with respect to the impact of the activities concerned in this case on the interstate market for marijuana? Is it your view that it will have no impact, that it will increase the interstate demand, or decrease the interstate demand? So there are three alternatives. Which is the one we should follow?
Hat tip: Jim Lindgren at The Volokh Conspiracy
Steve Levitt on Crack
"Our analysis suggests that the greatest social costs of crack have been associated with the prohibition-related violence, rather than drug use per se."
Charles Krauthammer lays bare the Democratic Party’s strategy on Social Security reform.
May 11, 2005
The need for a secular political philosophy
Jonah Goldberg on NRO:
In other words, while Christianity may be a complete philosophy of life, it is only at best a partial philosophy of government. [...] I don’t mind at all a president who has a personal relationship with Jesus. It’s just that I don’t think Jesus is going to have useful advice about how to fix Social Security.
Podhoretz Pans Star Wars
The business of the news media is not the news; it is selling eyeballs. The more they hype the news, the more they sell. But what’s the business of movie critics? John Podhoretz at the National Review thinks their self interest lies in good reviews.
This seems about right to me, but his argument is much too elitist. The whole point of movie reviews is to convey information. But it is subjective information, not objective information that the reader wants. The reader wants to know whether he will find the movie enjoyable. Therefore, he wants a movie reviewer whose tastes are either highly positively or negatively correlated with his own. Therefore, the survival of a movie critic depends on reflecting the tastes of his audience.
If Star Wars is going to make a jillion dollars, then movie critics in a press that appeals to a mass audience should generally have a favorable opinion of the movie. Therefore, the discerning movie viewer needs to find a critic who writes for a niche audience that shares his or her tastes. The Wall Street Journal seems to print reviews that generally reflect my own tastes; although, the relevant correlation coefficient is probably no more than a .8. Joe Morgenstern at the WSJ, like most critics, liked the Lord of the Rings. I thought it was awful gibberish.
Paul Krugman, in his latest column:
Suppose you're earning $60,000 a year. On average, Mr. Bush cut taxes for workers like you by about $1,000 per year. But by 2045 the Bush Social Security plan would cut benefits for workers like you by about $6,500 per year. Not a very good deal.
Not a very good deal to get $1000 today in exchange for giving up $6500 after 40 years? As any economist knows (though Krugman neglected to mention it), that depends on the assumed discount rate for translating future values into present values.
We can easily calculate the break-even rate. Assume that I (as a hypothetical 25-year-old) will pay taxes for the next 40 years (2005-2045, ages 25-65), then draw Social Security for 40 years (ages 65-105). My calculator says that $1000 today grows into $6500 after 40 years given a rate of return of 4.79%. Conclusion: anyone paying more than 4.79% to borrow today would consider the package ($1000 today, -$6500 40 years later) a good deal.
Assume instead, more realistically, that I’ll pay taxes for the next 40 years, then draw Social Security for 20 years (I’ll live to be 85 rather than 105). Then the deal is even better. Discounting at 4.79% again (for illustrative purposes), the present value of the tax cuts is $17664. The present value of the SS benefit cuts is -$12690. Net present value of the package is positive, $4974. A good deal, at the assumed discount rate.
Quality control at BYU
Nicholls State (a fellow-member of the proud Southland Conference) has been placed on 4 years of probation by the NCAA for academic fraud. Specifically, football and basketball players dropped out of NSU courses and enrolled in on-line correspondence (oxymoron?) courses at Brigham Young University:
He [NSU president Stephen Hulbert] said the university registrar noticed last August that nine athletes who had withdrawn without grades from Nicholls State courses or had below-standard ACT scores had gotten Bs and B-pluses in on-line correspondence courses from Brigham Young University.
What? Were is the quality control at BYU? Is BYU offering the on-line correspondence courses as a cash cow?
The benefits of cheating in football at the Division I-AA level are not that great, however the costs might be relatively high (at least for Nicholls State):
Strange things were also afoot in the women's volleyball program:
The volleyball team also was fined $10,000 and forfeited its conference championship. But Potuto said it was for a mistake rather than fraud - using an ineligible course to calculate a player's grade-point average. That player has graduated, Hulbert said.
One interesting tidbit about the limits on scholarships:
[Football] will be restricted to 60 scholarships - instead of the maximum NCAA-permitted 63 for class I-AA - for the next two years. That won't affect the number Nicholls awards because it hasn't been able to afford more than 60 for years, spokesman Michael Logue said.
Non-binding punishments are not likely to alter behavior.
Where is BYU in all of this? My libertarian streak doesn't like the NCAA cartel in many ways, and I agree that NSU bears the cost of the actions of its representatives, but if NSU is using correspondence courses to pad grades, so are other schools. Who is to blame - the dealer or the user?
Moral hazard at UK
The University of Kentucky is missing $2 million worth of computers that were purchased for faculty and staff. Well, it is a shock that no one at UK saw this one coming. Do the bureaucrats simply not care about the moral hazard problem, that is they are budget maximizers, or do they just not believe in the moral hazard problem, some form of cognitive dissonance?
The loss in computers is staggering:
Either UK is buying some pretty sweet machines, and people are encouraged to steal them for personal use, or UK is buying some really bad machines that no one is really going to miss. My money would be on the latter.
The story goes on:
Nietzel said some computers probably have been stolen. He said the university has no central storage area for used computers. Older computers that are not used by faculty or staff at home are often placed in building hallways or unsecured rooms, he said, and some of them are stolen.
What!?! Computers are just left in the hallways at UK? Here at UTA old computers are stacked on pallets and wrapped in major-league seran wrap and carted off to a warehouse on campus. Once a year UTA holds an auction, put on by these folks, and it is a lot of fun. A pallet of old Pentium I machines might go for $40 or so.
Is it really that hard to do things right?
May 10, 2005
Have a Frosty on me..
To reward their customers for sticking by them - and to lure those customers who ran for the hills - after the false "finger in chili" accusation from California, this weekend Wendy's stores are offering a free Junior Frosty - no purchase necessary:
Our customers stood by us while we defended our good name and protected our employees' livelihoods, so now we're showing our appreciation with free Frostys," Tom Mueller, Wendy's chief executive, said in a press release. "We're moving on." ...
They never sleep at MIT
"I love freedom more than I hate cigarette smoke"
Those are the admirable words of my state senator Preston Smith. Alas he was in the minority; the legislature passed and the governor signed a state ban (with a few loopholes) on smoking in public places. Kudos to Senator Smith for the good fight.
Better news--GA has repealed its requirement that one give a fingerprint when getting a drivers license. Better yet would be abolishing drivers licenses.
Town Declares Orgasm Day
Finally we have a government doing something useful.
Don't tell the folks at Harvard, but there do seem to be brain differences between men and women (although the fact that I like Aqua Teen Hunger Force and my wife thinks it's the dumbest thing on the planet was proof enough for me).
This Scientific American article lays a lot of the existing evidence on the table. No proof that women can't do math or science, but that wasn't what Larry Summers suggested anyway.
Maybe what Larry proved is that, in the minds of many, economists (and especially university presidents who are economists) are only supposed to talk about GDP, unemployment, and trade balances.
Economist spends $1 for public good
Okay, it isn't that dramatic. However, in the clearance section of our local Half Price Bookstore I came across the Howard Payne University 2003 Alumni Directory on CD-Rom. HPU is a small Baptist school in Brownwood, Texas.
I picked it up for a $1 just to see what information would be included. Lo' and behold it has name, spouse, kids, address, telephone, job description, work address, e-mail, degree earned, and when.
I assume that the folks listed gave permission for them to be included, but I wonder if they thought the CD-ROM directory would be sold to a used bookstore and end up on the clearance shelf where anybody could walk away with it for a buck. I am sure that a good identity thief wouldn't need a $1 CD-ROM to get the information. However, the directory does have 13,290 entries, so the cost per name/address would be pretty cheap.
I don't know anyone who went to Howard Payne University, so I figure I'll take a hammer to the CD-ROM. One less opportunity for identity theft.
New Governance Indicators Released
For the press release...
Read More »
NEW REPORT AND WORLDWIDE GOVERNANCE INDICATORS
As of the afternoon of May 9th, 2005, we are launching the new report containing the updated and expanded set of worldwide Governance Indicators for 209 countries and territories. The research methodology as well as the new data and analysis are contained in the new report, Governance Matters IV: Governance Indicators for 1996-2004, authored by D. Kaufmann, A. Kraay, and M. Mastruzzi. This is the fourth such report in a research series that started in the late nineties.
Salient features include:
Some results include:
« Close It
Competition Lowers Prices
A nice example to use in an econ principles course.
Using Pot to Buy Pizza
Story here; make up your own joke about the munchies.
May 09, 2005
Low activity this week
We are in exams this week, and I have 33 graduate students in econometrics and 14 in graduate industrial organization. Needless to say, a lot of grading between now and Friday.
Freakonomics and Galbraith
Josh's link to Craig Newmark's take on the Galbraith bio reminded me of a quibble with Levitt and Dubner's Freakonomics--they refer to Galbraith as "the hyperliterate economic sage."
Although I finished reading the book about 10 days ago--just minutes before Levitt's appearance on "The Daily Show"*--I haven't gotten around to blogging on it. There's a lot to like about the book and I hope it's bestseller status will help raise the sex appeal of economics among non-economists, but I ended up a bit diappointed. It's not Levitt and Dubner's fault--it's my own. I've been a fan of Levitt's work for some time now (I use several of his crime papers, including the abortion one, in my law and econ class) so I was already familiar with much of the research summarized in Freakonomics. Consequently, I found reading Freakonomics to be akin to reading a mystery already knowing the outcome. Aside from this disappointment and my niggling quibble about Galbraith being a "sage," I had a couple of other thoughts.
First, I think some of the work that Levitt and Dubner did not include is at least as significant and/or clever as the research summarized in the book. For example, Levitt's 1998 JPE paper on juvenile responses to harsher punishment is a significant contribution to the rational actor/economic approach to crime.
Second, I hope readers focus on the clever ideas underlying Levitt's work rather than just the mountains of data he sifts through. That is, I hope readers will be excited about the applications of economics rather than viewing the discipline as dry and technocratic. I think the latter outcome is unlikely because of how well the book is written, but the myriad of lists (especially in the chapter on children's names) does create the possibility.
Sorry to have left this post hanging--a colleague came in for a chat while I was composing and I then had to pick up Pee Wee. Speaking of Pee Wee, he thought the book's cover--a green apple exterior with an orange interior--as pretty cool. Even though his research finds no significant effect from reading to young kids, I assume Levitt is all for kids reading his book.
*You could just see the wheels turning in Levitt's head during "The Daily Show" appearance: "So Jon Stewart wants to know how I control for other factors; dare I say regression analysis on Comedy Central?"
One-liner about externalities
I try to listen to Neal Boortz's radio show as much as I can. Today's Nuze section of his webpage includes this gem from his producer Belinda:
One Cat, Priceless
How much is your pet worth? No doubt, your subjective value on your best friend is significantly greater than replacement cost. The same probably holds true for the home you live in, which is why eminent domain is typically a bad deal.
Economists are not good at estimating subjective values and typically reject attempts at contingent valuation. However, juries are often called upon to value subjective preferences. In cases involving negligence and the accidental death of pets, courts have typically restricted damages to replacement cost. That may be changing. In a pervious post I pointed to a news article on Lucky. It discusses a negligence case in which plaintiff’s lawyer intended to ask for Lucky’s subjective value.
We now have the case of Yofi in which a judge has already decided the issue of subjective value. Yofi, a feline, was mauled by the neighbor’s dog. Seattle District Court Judge Barbara Linde ordered the dog's owner to pay $45,480.12 in damages. The dog owner, “thought the punishment was excessive considering that dogs and cats are natural enemies. "Cats eat birds and dogs eat cats," he said."”
I am sure Ms. Roemer, the cat’s owner, suffered emotional stress, but isn’t this a little excessive? I can replace my cat for about $100 with shots. I like my cat and I would not part with her at that price. But, at any offer over $1,000 that cat is gone.
Lobbyists are Constitutionalists?
On the way to kung fu class on Friday I was listening to NPR (either that or Paul Harvey, what would you pick?) and heard a story on lobbyist Jack Abramoff who apparently is another fuff in the Tom DeLay kerfuffle. Inevitably, this story was followed by a "commentary" by one Jay Bryant who argued that lobbyists protect the only part of the first amendment that never gets any rousing support. Sure, we all want to protect freedom of religion, speech, the press, and assembly, but who protects the right "to petition the government for a redress of grievances?" Why, lobbyists do, of course.
If the news gives you the Lemons Problem, Make Lemonade
Steven Taylor writes an interesting piece combining quotes, and analysis, on blogging and credibility.
The Eason Jordan situation is harder to analogize, because there is no one to “fire” a blogger who made such comments, except in terms of losing readership.
And in terms of corrections: on balance, bloggers’ corrections are easier to see than those of major papers. If I find an error I usually go back and correct it within the post in question, and mark said correction with bold “Updates” and strikthroughs. Does the NYT go back into ita archives and makes actual changes in the text that clearly show a corrected error? I think not.
Another blogger technique in issuing corrections is to post a new story–which is the same thing as the NYT placing their corrections on the front page–something that they aren’t prone to doing.
My own view is that Akerlof tells us much of what we need to know about the problem. The reason that CBS, and the NYTimes, have value as brand names is that they trade on their credibility. But they suffer from the problem that they sell ads, and therefore have reason to distort and embellish and sell more copies (however you want to define eyeballs looking at content, those are "copies"). (Interesting analysis by Steckbeck and Boettke)
Bloggers potentially suffer from the "lemons" problem: no monitoring mechanism, so no reason to be honest, fair, or accurate. But (and here's the thing) bloggers don't charge, and most don't sell many ads. More technically, most bloggers have no profit motive, and so the incentive link necessary for adverse selection to operate is severed. I think Taylor has it exactly right when he talks about the means for showing corrections and updates.
So, you heard it here first: Blogs are a better news source, as a group, than the NYTimes. But, if you are only going to read one thing and act on that first reading, read the Times, because they have the clearest financial incentive to get it right, fastest. Because that is how the market for information works.
Craig Newmark Gets Cranky
And we all benefit. His comments on the NY Times review of the new Gailbraith biography are excellent.
May 07, 2005
Co-blogger Craig has invited comment on the Pozen proposal for “progressive blending” of Social Security re-indexation. Actually, that’s the idea I blogged about two days ago when I commented on Paul Krugman’s take on the proposal.
The JEC report to which Craig linked contains a useful chart (no. 2). What it shows is that if everybody’s initial SS benefits continue to be wage-indexed (as they are today), everybody’s initial benefits double in real terms by 2077 (reflecting the assumption that nominal wages continue to outgrow the consumer price index by 1% per year). If everybody’s initial benefits are instead price-indexed, they remain at today’s levels in real terms. Pozen’s proposal is that benefits for low-income earners (30th percentile and below) remain generously wage-indexed, while benefits for the highest earners become entirely price-indexed (a restraint on projected benefit growth that saves SS money), and benefits for mid-range workers are re-indexed to a combination of the two. As the blue bars in the diagram show, the “blending” is “progressive” in that benefits for low-earners rise relative to benefits for high-earners.
Why all this rigamarole? Why not re-index everyone the same way? The rigamarole is necessary if you want to reduce the underfunding gap without raising taxes, and without restraining projected real benefit growth for those who rely most heavily on Social Security for retirement income. If “progressive blending” is the only politically salable way to restrain projected benefit growth, I can live with it. Personally, I’d be just as happy with across-the-board restraint.
The Pozen proposal is a step in the direction of everybody getting the same monthly SS check, regardless of how much they paid in SS taxes. It’s a step in the direction of further diminishing the importance of SS to middle- and high-income earners. One might complain that it isn’t “fair” to middle- and high-income earners. But look: Social Security isn’t fair to anyone to begin with. Bush has endorsed the Pozen proposal in the hope, I suppose, that it will shame Congress into tossing a bone to high-income earners: letting them opt out some of their taxes into personal retirement accounts. In any case, for those of us who favor voluntary retirement saving over compulsory transfers, restraining projected benefit growth -- in whatever way -- is better than raising taxes.
Laffer Curve of Life II (Chicago Marathon Results)
DoL reader, Dirk Eddelbuettel (a big ol' hat tip to Dirk--NEW: read his blog here), replicated my marathon finishing time model using the data from the 2004 Chicago Marathon (which was his first marathon). Here's the estimated equation:
Time = 321 - 2.33(14.51)Age + 0.0406(19.84)AgeSq - 30.95(59.58)Male - 13.37(25.77)OutOfState
R-Squared = 0.1295
Time = the length of time in minutes to finish the marathon
The results are pretty similar. The "optimal" age comes out to be about 28 years old, a bit younger than in my model. The women did a bit better relative to men at Chicago finishing about 30 minutes behind. And the out of staters did about 13 minutes better than the Illinois residents.
Take note of the incredibly large t-stats. 33,000+ observations will do that! (This is one of the many reasons why "statistical significance" is an overrated concept. It's easy to find "statistically" significant results if you have enough data.)
[Update to my earlier post. I forgot to include my R-Squared (0.2012) and number of observations (403). So my model did have a slightly better fit. This is not surprising as the Chicago Marathon attracts both elite runners and a large number of very slow ones compared to the small Towpath Marathon I studied.]
May 06, 2005
The painless fix to SS?
According to this Joint Economic Committee report, it all comes down to indexing benefits correctly. They suggest blending price and wage increases rather than using only wage (productivity) increases. If I read the report correctly, it seems like a no-brainer but I doubt it will show up on the nightly news anytime soon.
Perhaps Larry can comment?
May 05, 2005
Does this sound right?
Talk about moral hazard, the NTSA is selling on e-bay the things it has seized over the past few years.
How about fifty pounds of corkscrews and bottle openers? ( Going price tonight is $77)
35 pounds of plastic handled scissors (Going price - $20)
Here are the rest of the NTSA auctions.
Students for "Saving" Social Security
I blogged earlier about the incongruity of Rock the Vote, which purports to represent the interests of young voters, joining hands with the AARP to argue for preserving Social Security in its current form which soaks the young to subsidize the old.
Now comes news of a new organization that really does represent young people’s interests:
Students for Saving Social Security is a non-partisan grassroots network on college campuses across the country. We represent the interests of our generation by advocating for genuine Social Security reform through personal ownership. Our parents and grandparents will be protected - it's our generation's future at stake. For young people the crisis is real, and the crisis is now.
The SSSS website has links to op-eds, links to pro-reform organizations like Cato and Heritage, and email addresses for a list of local campus coordinators.
The Krugman spin machine
Paul Krugman, it seems, will use any argument to bad-mouth Social Security reform. He once wrote, correctly (but intending it as a criticism), that
private accounts will at best have a "net neutral effect" - that is, they will do nothing to improve Social Security's finances. Mr. Bush says the system faces a crisis; what does he propose to do about it?
But Krugman has also written that
As soon as voters heard that privatization would involve benefit cuts, support for Social Security "reform" plunged.
The second statement contradicts the first: if privatization were to involve benefit cuts (and Krugman implies that what “voters heard” is correct), it would do something to improve Social Security’s finances. Benefit cuts would reduce the looming gap between promised benefits and scheduled tax revenues.
Last week, distinct from his fiscally neutral proposal for personal retirement accounts, President Bush proposed to do something about the funding gap: a “progressive” form of re-indexation that would cut more from the future benefits of high-income workers than from the benefits of low-income workers. So is Krugman pleased? Of course not. In his latest column, Krugman writes:
Sure enough, a close look at President Bush's proposal for "progressive price indexing" of Social Security puts the lie to claims that it's a plan to increase benefits for the poor and cut them for the wealthy. In fact, it's a plan to slash middle-class benefits; the wealthy would barely feel a thing.
Who ever claimed that it was a plan to increase benefits for the poor? Nobody I’ve read, and Krugman names no names. But by making that “claim” the benchmark, the proponents of the plan are painted as dishonest liars. And why is it a lie that the plan would cut benefits for the wealthy?
because people with high incomes don't depend on Social Security benefits.
Oh, so it isn’t a lie. It’s simply that because Social Security benefits are such a small percentage of their retirement incomes (only 1%) to begin with, even cutting benefits to zero wouldn’t cause much of a loss as a percentage of their total incomes. One can only imagine Krugman’s outrage if benefits to retired millionaires were large enough to add more than 1% to their incomes.
Krugman concludes with this flourish:
The important thing to understand is that the attempt to turn Social Security into nothing but a program for the poor isn't driven by concerns about the future budget burden of benefit payments. After all, if Mr. Bush was worried about the budget, he would be reconsidering his tax cuts.
Yes, this is about ideology -- on both sides of the debate. Krugman's ideology calls for higher taxes. Social Security reformers are driven, not by concerns about the future "budget burden" in Krugman's sense (for which higher taxes are a "solution"), but by concerns about holding the line on the future tax burden of benefit payments.
Concentration in on-line advertising?
In this article it is reported that e-marketer predicts on-line advertising spending to increase by 34% this year to approximately $13 billion. A little tidbit:
David Hallerman, senior analyst at eMarketer, said Google now accounts for 23% of all online ad spending, while Yahoo controls 21%.
Wow. The CR2 in on-line advertising is 44?
How long until the antitrust folks get around to taking on Yahoo! and Google? (note: writing Google and Yahoo!? didn't look right).
Teachers against privatization
Not the school-choice kind of privatization, but of social security.
MP3 file of NEA president Reg Weaver insisting that the NEA is "committed to opposing so-called rerforms such as privatization and mandatory participation by public employees." (available here) The rest of us mere mortals are forced into the social security "promise" while some some teachers and public employees are allowed to opt out of the system and contribute to private plans in order to build real wealth. What's good for Congress and the teachers is evidently too risky for the rest of us.
The money shot is around the 43 second mark. It's not so much what he says, which is bad enough, but how he says it. The tone of his voice is amazing.
(rumor: I have heard claims about some public employees with private retirement plans entering the workforce for a small amount of time in order to earn the minimum social security benefits, in effect double-dipping. I wonder if that is true?)
May 04, 2005
Lowes decides consumer is sovereign
David Rossie at De Gustibus sent an update to a previous post. Local governments were considering passing laws that would force theaters to advertise a truthful starting time. Lowes has announced it will now publish the approximate start time of the main feature.
Global warming panic a result of publication bias?
Perhaps. Would it be surprising that evidence against global warming, or against humans causing global warming, can't make it into the bigger science journals?
Duluth, Georgia - Fashion Center of the World?
From e-bay is a Jennifer Wilbanks inspired masterpeice for the ladies.
Can we vote again?
Here in Arlington we foolishly (in my opinion) voted a 1/2 penny sales tax increase for the next thirty years to build Jerry Jones and the Cowboys a stadium. On Tuesday, our state legislature announced its master plan to raise enough money to edumicate the children of Texas.
In "exchange" for a 25% decrease in our local school property taxes (which will last how long?) the state proposes:
To pay for the overhaul [of state educatin], the Senate plan would adopt a broad new business tax, increase motor vehicle taxes by 50 cents on the dollar, raise the price of cigarettes by 60 cents a pack and, yes, ask those who like to toss one back after work to pay 25 percent more in taxes -- on top of a half-cent sales tax increase.
For the unaware, the state of Texas doesn't have an income tax and school districts are funded with local property taxes. Not all districts have the same value property which causes inequities in school district funding. The state, in turn, introduced the so-called "Robin Hood Plan" (I'm not kidding) which shifted property taxes from rich school districts to the poor school districts. As almost all districts in Texas are supposedly "independent" (as in Arlington Independent School District and Dallas ISD) this plan was somewhat ironic. Ultimately, the courts thew the plan out claiming that it was basically a state income tax, which is against our state constitution.
Nevertheless, the language the newspapers are printing (I assume the language was provided by the plan's proponents) is a wonderful example wordsmithing. This is how you spin a tax story. Let's see how it breaks down.
Current Consumption Taxes:
So, the cigarette tax will increase 146% - which probably wouldn't sound too good on the nightly news. The wordsmithing about the tax on vehicles is the most confusing. I haven't been able to confirm this, but I guess the legislature will increase the tax rate by 50%, which would yield an increase of $0.50 on the dollar (in tax revenue), so the new tax on cars will be 9.375% (buy your new car now). The state tax on beer is $6.00 per 31 gallons, which makes the state tax on 12 oz curls about $0.019 each or about $0.46 per case. Increasing that by 25% will raise the tax to about $0.58 per case.
The business tax has no basis of comparison in the state of Texas. There is a "voluntary" business tax that no one pays and the state doesn't enforce. The business tax is a payroll tax (the greater the payroll, the greater the business tax) and is effectively an income tax. Likely it shouldn't pass muster in the courts, but you never know.
For me the upshot is that whenever possible voters should freeze or roll back their taxes (as happened in nearby Bedford in February) because the involuntary tax increase is always around the corner. I wonder if we held another stadium vote today if we would get a different outcome.
Too D@#! Funny
"College administrators have been enthusiastic supporters Eve Ensler’s play The Vagina Monologues and schools across the nation celebrate “V-Day” (short for Vagina Day) every year. But when the College Republicans at Roger Williams University in Rhode Island rained on the celebrations of V-Day by inaugurating Penis Day and staging a satire called The Penis Monologues, the official reaction was horror. Two participating students, Monique Stuart and Andy Mainiero, have just received sharp letters of reprimand and have been placed on probation by the Office of Judicial Affairs. The costume of the P-Day “mascot” — a friendly looking “penis” named Testaclese, has been confiscated and is under lock and key in the office of the assistant dean of student affairs, John King.
The campus conservatives artfully (in the college sense of "artful") mimicked the V-Day campaign. They papered the school with flyers that said, “My penis is majestic” and “My penis is hilarious.” The caption on one handout read, “My Penis is studious.” It showed Testaclese reclining on a couch reading Michael Barone’s Hard America, Soft America."
UPDATE: Testaclese photos here.
If the price of gasoline increases, what happens to the demand for SUVs?
a. Nothing because the deamnd for gasoline is perfectly inelastic.
Read More »
May 03, 2005
Ugly Child Discrimination
The New York Times article “Ugly Children May Get Parental Short Shrift,” (free registration required) cites studies indicating that parents take better care of handsome children. Do parents discriminate against ugly children? As one research states in the article,
Obviously, we need an Office of Equal Opportunity for Ugly Children. Similar to Kurt Vonnegut’s equality masks, good looking children could be forced to wear ugly masks. With every child equally ugly, parents are more likely to provide an equality of attention. Ugly masks, however, will not make up for past neglect. For some temporary period we will need affirmative action for ugly children and a temporary ban on beauty contests.
We might first, however, take a critically closer look at these studies. Has the ugliness of the parents been held constant? Casual observation leads one to believe there is a high correlation between ugly children and ugly parents. It may be that ugly parents take poor care of their children. Were this the real problem, ugly masks would be an ineffective solution. Ugly masks on all children in the family would have no impact on the allocation of attention. This would be a societal problem rather than the result of an intra-familial allocation of resources. Parenting clinics for ugly parents would be the preferred solution.
We might also want to know why ugly parents take less care of their children. It may be that ugly people have more children. (Casual observations of large families at theme parks seem to support this hypthesis.) They may opt for quantity over quality. Given the greater number of children, per capita investment and per capita attention are likely to decline. The real problem may be that ugly people are having too many children. The sterilization of the ugly would be a draconian solution we would most likely want to avoid. However, government subsidies for Planned Parenthood to undertake a special outreach program aimed at ugly families might be favored.
In a world of all ugly children or all handsome children, all will receive an equal share of mother’s love and there will be no ugly ducklings. With efficient social engineering, we may someday all have a Happy Mother’s Day.
Note: The author has four children, all of whom are quite good looking.
The future of war?
Might it be less noisy? From Defense Review comes information on the DREAD - a new type of small arms "gun" that doesn't use gunpowder for propulsion but uses centrifugal force. The upshot: the DREAD is hyped as being quiet, delivering up to 120,000 .308 caliber rounds per minute, and it is "safe."
The weapon is advertised as offering stealth technolgoy" because it doesn't leave a heat signature, there is no noise, no muzzle flash, and therefore it is difficult to detect. This sounds a little too good to be true. Didn't Isaac Newton prove that for every action there is a reaction and thus if a projectile will be sent out at 4000-8000 feet per second there will have to be recoil somewhere. Perhaps it is possible to try to corral the recoil and use it (as in automatic and semi-automatic weapons) but it would seem that physics would ultimately get in the way.
Here is a Quicktime promotional movie (warning: 18MB)
Is there any irony in the movie suggesting that the DREAD is "safer" than conventional arms - ostensibly for the guy pulling the trigger - because there is no gunpowder, toxic fumes, etc.
May 02, 2005
Salon of the USSR wooden cell phones
I'm not sure, but I think this is a pretty savage satire on communism by Russian artist Andrei Kozlov. Think of your visit as a belated commemoration of May Day. To translate the page into English, enter the URL into the Babelfish translation engine.
Hat tip: Gregory Nicoll.
The Laffer Curve of Life
I had a few minutes to kill today in between final exams and decided to run a regression using the data from the 2004 Towpath Marathon. Here are the results:
Time = 329 - 3.22(2.56)Age + 0.0487(3.29)AgeSq - 42.7(9.52)Male - 4.76(1.09)OutOfState
Time = the length of time in minutes to finish the marathon
(t-stats in parentheses)
My priors were that Age would be negative and AgeSq positive indicating a Laffer Curve relationship--getting older will lower your times for a while but eventually getting older will increase your times. According to these results the optimal age is 33 years old. Yikes! I'm past my prime already.
Males ran faster than females as expected--by about 43 minutes on average.
Out of State runners ran slightly (and statistically insignificantly) faster by about 5 minutes. I had thought that people who travel longer distances to run may be better runners.
I am happy to report that I ran it about 20 minutes faster than predicted based on my age and sex.
Who will replace Greenspan? Bernanke the bookmaker's slight favorite
At the online betting site of Irish bookmaker Paddy Power, here are the current odds for Alan Greenspan’s replacement:
Ben Bernanke 13-8
Apparently you can only bet for a candidate, not against. With Greenspan rumored to favor Kohn, the former aide who is now a Fed Governor, Kohn seems underpriced.
Hat tip: Hamish McRae of The Independent.
Price elasticity of demand?
What price elasticity of demand? The University of Wyoming is considering requiring all students to purchase a laptop upon enrolling. We considered that type of mandate a few years ago and scrapped it because of extraordinarily high prices for the laptops and difficulties in maintainence, etc. At the time the laptop proposal was anticipated to increase the cost of enrollment by almost 50% - when almost all the economists raised their hand to ask about the price elasticity of demand to our school, well, you can guess the response.
The short-run price elasticity is small, but a permanent increase in the cost of attending a university will have an impact on enrollment, otherwise why increase the cost through a laptop when the university could just charge more for courses and give the money to faculty and staff?
(The issue of cost) is sort of a red herring," said Walker, who speculated a laptops might cost a student $300 a semester. "We're not talking about a quantum leap in cost here -- and you would get something in return. It wouldn't just be going to a black hole."
Not a big leap in cost? I went to the University of Wyoming website and looked up the tuition and fees for 18 credit hours: in-state tuition and fees are $1882. So, the $300 per semester is only a 16% increase in the cost of college. Whenever schools attempt to raise tuition by even 2-5% the outrage is immediate. What exactly qualifies as a "quantum leap in cost?"
Laptop mandates are bad policies (for numerous reasons, including moral hazard, rent-seeking, and less-than-obvious or less-than-proven academic benefits) and yet they continue to pop up year after year.
More on cars...
The little one is almost a year old and we are now in the market for another car. Current status of the Depken automobile portfolio: 1988 MB 560SL, 1998 VW Golf GL. The MB is fun but impractical as there are only two bucket seats and no backseat at all. The Golf has been a great car (it only just turned 50,000 miles) but it is too small to be used as a family car.
After the baby, my perception on the the SUV craze has changed. I am not so convinced that mom wants to drive an Excursion or a Yukon XL just because she wants to be safe, or to sit higher in the saddle. I am now convinced that the bigger vehicles are a natural implication of the laws (passed in the past twenty years or so) that every kid has to have a child-seat and a seat-belt. Because the kids aren't "running" all around the car but have to sit in a single seat, this naturally requires bigger vehicles, something that is not so obvious until you have kids.
The sit-in-your-seat laws also cause a different set of interactions in both the front and in the back seats. How can you play "I Spy" when your brother is literally on the other side of the car? The end result, give the kid a DVD player and a video game to keep him/her settled.
It is obvious that if you have three kids, you need three seats for the child seats or kid booster seats. If you are going to have any of your kids' friends with you you need a couple more seats. Slam, bam, you are in a Suburban or some such vehicle. Is this an unintended consequence of the do-gooders who force us to use car seats?
We have cycled through the American made cars - the Escape is a nice size truck but is evidently not made very well, and neither GM nor Chrysler have a compact SUV (although Jeep has the Liberty). The Pacifica-type vehicle is the natural evolution of the SUV to a more efficient, safe vehicle that will do everything the SUV does (mainly the room to get kids in and out of the vehicle without breaking your back) but do it on a platform that mom can actually control (out here in Texas moms - and many dads - are simply unable to control the Sequioas and Hummers they are driving).
Unfortunately, it seems the Pacifica is not made very well. Ford has the Freestyle, but after hearing the bad stories with the Escape I am skittish. One sibling drives a Murano (Nissan) and she is happy with it - this is backed up by a neighbor's experience. The small SUV of choice might be the Honda CR-V, which is just as big as the Escape/Liberty but has the quality reputation of Honda.
As for the study cited by Robert, if the back seat is so much safer why aren't cars designed to put the driver in the back seat? I would wager the majority of miles driven are driven with one or no passengers.
May Day - The Real Story?
Catallarchy has a nice collection of essays on the real deal concerning statist economies. Haven't read through them all, but it looks pretty good.
(hattip: Trent McBride)
Stick shifts and safety belts have all got to go
There is an audio clip available (scroll down) on Amazon.Com.
Stick shifts and safety belts
When I'm driving in my car
I need you here with me
I need you to be here with me
But when we driving in my Malibu
I say "Baby scoot over please"
I need you here with me
I need you to be here with me
Well a lot of good cars are Japanese
I need my baby, I need my baby next to me
Stick shifts and safety belts
When I'm driving in my car
I need you here with me
I need you to be here with me
I really like it when little bit (9 years old) rides in the front seat with me in the car. It seems like we have our best conversations in the car like this. When she sits in the back seat, the dynamic is changed for some reason and it doesn't work the same.
Of course I know riding in the front seat is more dangerous than the back seat. For the record, I usually let her sit in the front only in the old Benz (sans airbag) as opposed to the new Subaru (with airbag). And she always wears her seat belt no matter which car.
Am I a bad parent to let her sit in front?
New study alert: Back Seat Safest For Children, Study Confirms
It looks like the raw odds of a child dying in a car accident are about 0.48% (1800 child deaths out of 370,000 accidents in which children were present). If the child is wearing a selt belt, then the odds are cut by "more than half" to about 0.24%.
According to the study, the odds of surviving increase by 40% if you're in the back versus the front seat taking the odds (conditional on wearing a seat belt) from 0.24% to about 0.34%.
My bottom line: This tiny increase in safety is worth sacrificing for the quality time with little bit. She can ride in front all she wants.
This is how I want to die
A man who took up bicycling after bypass surgery gave him a second chance at life died of a heart attack the day after completing a 2,400-mile, cross-country trip.
Broc Bebout, a 57-year-old retired engineer, died Thursday on the van drive back to his home in Anderson, about 25 miles northeast of Indianapolis, one day after completing the bicycle ride from Carlsbad, Calif., to Brunswick, Ga.
Mom is not replaceable
As you probably heard on entertainment news, Salrary.com “has estimated that a fair wage for the typical stay-at-home mom would be $131,471 for executing all of her daily tasks.” This value is based upon a labor theory of value rather than a marginal utility theory of value. The longer it takes to get the housework done, the more valuable you are.
If the value were correct, however, feminists might be asked the following question. “If stay-at-home moms are so valuable, why would any mother choose market work over household chores?”
May 01, 2005
Anyone up to the challenge?
It is exhausting to try to respond to tirades such as this, but I suppose it has to be done or these types of ideas take root and the next thing you know...
Some choice nuggets:
Thus the core problems in our economy derive from the fact that it is a free enterprise or free market system. Participants are free to produce, purchase and work as they as individuals wish. This sounds ideal, but unless an economy is under considerable social control it will mostly serve the rich and powerful and deprive the poor.
The basic question should always be, what arrangements will maximise the overall social benefit, and in general these will restrict some freedoms, especially those of the few who are most rich and powerful and therefore most able to take much more than their fair share and thus to deprive others.
And those were only in the first few paragraphs.
From Ayn Rand:
"Any stray mediocrity rushes into print with plans to control the production of mankind -- and ... no one questions his right to enforce his plans by means of a gun." Atlas Shrugged
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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