Not content merely to call for a tax hike on Scotland’s and Northern Ireland’s note-issuing banks, the UK Treasury report previously mentioned here adds insult to injury. The Herald (UK) reports that the Treasury also wants to quash the banks’ tradition of issuing commemorative notes, like last month’s Jack Nicklaus note (mentioned here):

The Treasury is arguing that, by having a variety of different designs in circulation for notes of the same value, it is easier to pass off counterfeit currency. Discussions are now under way to find ways of improving protection against fake banknotes.

One of the proposals is to limit the number of designs available to the three banks that print their own notes north of the border.

In a departure from the tradition of commemorative notes, the banks would be limited to issuing just one standard design for each denomination.

Question: is there any evidence that counterfeiting of private banknotes has actually been a problem? Is there any reason to think that the costs of counterfeiting don’t fall on the banks themselves, giving them plenty enough incentive to combat it?

The one time in my career I’ve been invited to give Congressional testimony was during hearings over the redesign of Federal Reserve notes with anti-counterfeiting devices. I was invited because a staffer working for Congressman Ron Paul noticed a couple of paragraphs on counterfeiting in my book Free Banking in Britain. Counterfeiting wasn’t a problem for 19th century Scottish banks, I noted, because notes didn’t stay in circulation long. When they were deposited in the issuing bank (or other banks, and returned through the clearinghouse), they came under the gaze of bank tellers who had an incentive to spot fakes. (Federal Reserve notes, by contrast, are simply re-issued by US commercial banks, who have no incentive to spot fakes.) Banks’ policy was typically to accept fakes from innocent depositors, provided they fingered the source. The bank could track down the counterfeiter while the trail was warm. I’m not sure the three Congressmen in the room when I testified were bowled over by the idea, but my message was that privatizing note issue is a way to mobilize private incentives against counterfeiting.

I don’t know why we should expect that counterfeiting of Scottish or Northern Irish bank notes is any more of a problem today.

Here's the graph of U.S. Real GDP on a quarterly basis from 1947 through Q2:2005. Notice the jugernaut that is the U.S. economy. Second quarter growth in U.S. estimated at 3.4% annual rate! more here.

Lots of interesting comments if you sit and stare at it long enough. When did Voelker come in, when did Reagan cut taxes, when did the ADA, Clean Air Act, Gulf War I, Tax increases come in?

When I started grad school in Q3:1991 real gdp stood at 6.035 trillion. Fifteen years later the U.S. has doubled to 12.37 trillion and evidently still cranking along. In another fifteen years the U.S. will be at $25 trillion.

Short of catastrophe, the folks in Congress seem to be incapabable of really screwing things up. As long as they transfer their fifteen to twenty percent of GDP from Peter to Paul but don't monkey with incentives (i.e., marginal tax rates) things will go along swimingly. Congress people get to spend more nominal money, make more people "rich" including themselves, the rest of us are able to enjoy the good life because the incentives to cure cancer, make a better car, a bigger flash drive, or whatever the next big thing will be, are still in place.

Sitting around my office and talking, in awe, about the small picture, we made bigger pictures in STATA, but I chose not to post them because not everyone has an 18" monitor. However, even the small graph reveals that real GDP is still convex to the origin and that the Malthusians are still wrong! At least in the United States we have not reached diminishing marginal returns to human activity.

STATA data here for those who want to play (date, real gdp, nominal gdp) [original link broken - now fixed].

From politicsphilly.com (scroll down):

A short blurb about election day hijinks in the August 1st edition of Business Week:

An Philadelphia they're calling it "The Cheese Caper." A Deputy City Commissioner asked the District Attorney's office to investigate who passed out flyers on primary election day -- May 17 -- promising free cheese to voters for particular candidates. The flyers are topped by a handwritten scrawl, "Come Out + Vote," adding below, "For Who Ever." In type, they say "Free Cheese." The flyers list two candidates, both Democrats, running in an area dominated by the 300-plus-unit Hill Creek housing project. "This guy comes to the polls, votes, and asks us for his free cheese," says Eileen Kleindienst, a Republican judge of elections. Geraldine Hacker, the Republican official who sent Kleindienst's complaint to the DA, thought the food might be from a government nutrition program.

The woman who wrote the flyers, Hill Creek tenant council President Gerri Robinson, doesn't think she did anything wrong. "The people around here, you can't get them to come out and do nothing unless you're giving them something," she says. Besides, she adds, the flyers worked: The two cases of cottage cheese were gone by day's end.

Consider a thought experiment: Suppose countries A and B each have 10 people employed and that output per worker in the two countries is equal. Workers within each country are not equally productive but the distribution of productivity is the same in both countries. (If it is easier to grasp--assume 10 sets of identical twins have been separated at birth with one child from each set of twins going to each country.)

Now suppose that country B decides to enact some sort of tax or labor market regulation. As a result of this policy the least productive worker in country B is no longer employed. (For concreteness, the policy might be a minimum wage law that makes it unprofitable for a firm to hire the worker at the minimum wage.)

What effect does this policy have on the productivity of workers in the two countries? Country B's productivity now appears to be higher than country A's because the least productive worker in country B is no longer employed and no longer counts in the productivity calculations. (This is akin to having one's course average increase when the lowest grade is dropped.)

So, professor, where are you going? To Paul Krugman's column in today's NYT:

"First things first: given all the bad-mouthing the French receive, you may be surprised that I describe their society as "productive." Yet according to the Organization for Economic Cooperation and Development, productivity in France - G.D.P. per hour worked - is actually a bit higher than in the United States."

The key part here is per hour worked. The difference in employment between the two countries is quite large--France's 2003 employment to population ratio was 51.9% while it was 62.3% in the U.S. I bet that French output per working age adult--that is adjusted in some manner for people who are out of work--is lower than in the U.S. Stated differently, I bet the most productive 51.9% of the U.S. population is more productive than the 51.9% of the French who are employed.* In other words, I think Krugman and the OECD comparing apples to oranges when claiming that French productivity exceeds U.S. productivity.

*I'm implicitly assuming that differences in the employment-population ratios are due entirely to taxes and labor market regulations. There may well be some other factors (e.g., demographics) that account for part of the difference, but I don't think these factors would alter my conclusion.

My former student John Coleman has a review of Freakonomics on Townhall.com. I would have guessed that my law and economics class would have given him a lifetime dose of Steve Levitt.

Three students are recording my lectures in Econometrics II (euphemistically called "Research Methods") which have covered panel data, maximum likelihood, stochastic frontiers, limited dependent variables (logit/probit/mlogit/oprobit/tobit/truncated variables), and what I like to call the "good, the bad, and the ugly" of econometric practice.

I half jokingly asked at the end of tonight's class, the last of the semester, if one or more were podcasting me without my knowledge. Luckily no light bulbs went off (on?), but one student stated he had them all saved (sixteen two hour plus lectures) and that he would give them to me.

I hesitated when he said they would be in .wav format - which would require multiple CD's - but he immediately pointed out he would burn them to a DVD, probably with room to spare. So much for me being on the cutting edge of technology, I am still burning CD's.

I will now be one step closer to the scene in Real Genius when eventually the class was held with the students' desks holding tape recorders and the professor's lecture being played from a tape recording.

Actually, I am terrified to hear myself yapping on about such stuff. I cringe when I hear myself on a my voice mail message at home/work/cell, I wonder how bad it will be to hear me discussing econometrics (so might Profs. Cornwell and Atkinson at UGA ;-).

I wonder if anyone else has experience with this - from either the student or professor viewpoint. Comments/experiences/and whether it is worth podcasting your lectures appreciated. I am personally becoming more turned off by technology on both sides of the lectern (even more than I initially was back in the 1990s), but I wonder if I am missing something.

Sen. Clinton wants a "study" of Grand Theft Auto and other games and their effects on the children. I have "played" Halo - I played Doom and Quake in grad school, but nothing like the games of today. I didn't have the patience to spend hours understanding what Halo was all about, so I had my buddy put the settings to "kill all and never die" and spent an hour or two blowing the heck out of everything that moved.

Did I understand how to shoot one weapon or another, sure, but I had no idea of what the game was all about.

Enter this opinion by Steven Johnson in the LA Times, and I have to agree with a lot of what he says. At the very least, his ideas are observationally equivalent to what Sen. Clinton claims is going on.

I especially agree with the football story. I played NCAA 2004 on an X-box last year and got roundly trounced. What exactly is a red-dog 44 scat back blue (or whatever the play was called)? American football is a blast to watch (especially my Dawgs!) but it is an extremely complicated game when you are the coach. The intellectual side of games is probably not recognized enough by those who have not played them. Also, when the technology allows us to wage war remotely from six thousand miles away, we will have an Ender's Game generation.

From Volokh Conspiracy's Orin Kerr on Summer for the Gods, a history of the famous Scopes "monkey" trial by Prof. Edward Larson that won the Pulitzer Prize for history in 1997:

"The ACLU placed advertisements in local Tennessee papers looking for someone who would challenge the law. Local citizens of Dayton, Tennessee saw the advertisment, and realized that a prosecution under the law in Dayton would help the local economy by making people come to Dayton for the trial. A local prosecutor agreed to bring a prosecution if they would find a local teacher who would go along. John Scopes agreed to be the defendant for the test case. Scopes wasn't actually a biology teacher, but he had taught a biology class as a substitute teacher, and had used a state-assigned textbook that taught evolution. The "prosecution" was designed to be a friendly affair. The ACLU would get its test case to bring before the appellate courts, and Dayton's economy would benefit from all the attention brought by the trial. Scopes would face a fine in theory, but it was understood that he wouldn't actually have to pay it."

The line between real colleges and diploma mills continues to blur as more and more reputable schools get into the distance learning game and the "transcripting" of life experience or other work for college credit.

A case in point, Otterbein College just got busted for transcripting bogus coursework.

The IOC is famous for cracking down on people "inappropriately" using the five- rings logo that symbolize the Olympics. The IOC currently sells the right to use the Olympic logo on a two-games cycle (winter and summer) for between $50 million to $75 million - there are 11 contracts currently let out.

The IOC is anxious about selling more TOP (The Olympic Partners) spots lest the price fall too far, which seems to have opened up an arbitrage possibility. The folks on the Beijing Organizing Commitee have decided to create the missing market in Olympic advertising by selling their own partnerships to companies from around the world. Johnson and Johnson, along with Anheuser-Busch and VW, Addidas, and others, have signed on as partners with the BOC for the right to advertise during the Olympics (but evidently not using the five-ring logo). AB is the international beer sponsor of the Olympics (thank goodness).

Has the IOC essentially painted themselves into a corner with their logo licensing? $50-$75 million for two games with the rings versus $15 million for one summer games without the rings? For at least the 2008 games, I'd wager that, when there are a billion eyes staring at your ad during the games, whether a ring-logo is on the ad or not is inconsequential.

more here

I was listening to Rush on the drive to lunch, and a caller who was a teacher expressed support for the No Child Left Behind Act because, and I'm paraphrasing, "it makes parents more accountable for their child's education. We teachers can't do it alone."

Now, I'm all for accountability in general, and in your child's education in particular. But it made me wonder why we so readily accept that type of statement as an excuse for the demonstrably horrible service from the bureaucracy providing this "public" good.

Have you ever heard the following:

Mailman: "You know, you really should take this letter and deliver it yourself. It's just across town. We mailmen can't do this job by ourselves."

Dogcatcher: "Sorry sir, but you have to be more responsible for the stray dogs in your own neighborhood."

Military: "You all really need to start taking more responsibility for protecting your own country. We can't do it alone."

So why do we let public school gov't employees get away with it?

Last night I saw the Burger King rocking chickens commercial advertising their new chicken fries. It was not a good commercial, especially because I had it on mute and with a bunch of guys dressed like chickens playing music it took a while to understand what BK was pitching.

From today's Ad Age Daily comes this little ditty:

BURGER KING'S COQROQ.COM TRIGGERS CONTROVERSY

Some Sexual Double Entendres Removed From Site Overnight

CHICAGO (AdAge.com) -- Even though it has suddenly removed sexual double entendres from its new Web site, CoqRoq.com, Burger King today denied it had received any complaints from consumers or other outside groups.

I didnt' see the website address on the commercial, but what is BK thinking? Their other ad during the Spring with Hootie (or the Blowfish?) singing while scantily clad women tell you to "come and get it" was a bit risque, but the website's name?

I wonder if the web site would pass muster on Net-nanny or Surfpatrol?

From the website itself comes this message when you select "Message Board":

The message board is currently unavailable due to high traffic and will be back soon.

What kind of high traffic? The good kind or the bad kind?

Find cell phone towers in your neighborhood.

[HT: Dave]

Adult per Capita Cigarette Yearly Consumption and Major Smoking and Health Events, United States, 1900–1999 (Source: Center for Disease Control)

Map of Virginia

1. Driving through western Ohio on my recent vacation, I noticed a business called "Endless Endeavors." Unfortunately for the owners naming a business endless cannot hold back the perennial gales of creative destruction--the business was closed and its building for sale.

2. One of my favorite snippets of economics is Steve Landburg's telling of Peltzman's seatbelt research and driver safety in "The Armchair Economist." To the folks who think people don't change their driving behavior in response to perceived changes in risk, I offer another example. While motoring along I-75 in Ohio, I drove into a strong thunderstorm. And how did I and other drivers respond? We slowed down considerably, just as the Peltzman hypothesis would predict.

3. During our vacation my wife thought it would be fun to take Pee Wee to the Henry Ford Museum and Greenfield Village. While examining an exhibit documenting Henry Ford's failures in the airplane business, I had a snarky thought about the notion that Ford's success was partly attributable to his paying his workers above market wages. If this is such a winning strategy then it seems that Ford should have been able to similarly overpay his airplane workers and been successful in the plane business. (NB I wasn't impressed by Greenfield Village; of course your mileage may vary.)

4. A few months back the WSJ started a feature on philanthropy called "Giving Back" in it's Friday edition. I dislike the "Back" part--it suggests that donors have taken their wealth rather than earned it via mutually beneficial voluntary exchange. This is not a complaint about philanthropy--lot's of people do lots of good via charitable endeavors. For example, John Walton, who was recently killed in a plane crash, made large gifts to the Children's Scholarship Fund. Of course some giving isn't as effective--think Ted Turner and his gift to the U.N.

5. While excavating the pile of WSJs that accumulated on my desk, I noticed an article on Title IX (July 6) featured a photo of Danica Patrick. I also recall lots of references to Title IX during the coverage of Michelle Wie, Morgan Pressel, et al during the women's U.S. Open. Title IX may well be a wonderful thing, but I have a hard time seeing how it deserves credit for Patrick's success. How many high schools or colleges have auto racing teams? I suspect very few, if any. Likewise, I doubt teen golfers like Wie and Pressel have played on golf teams that wouldn't have existed but for Title IX. Then there are the foreign golfers like Birdie Kim and Annika Sorenstam who are not Title IX beneficiaries. Indeed, I suspect that most of their defeated opponents are Title IX beneficiaries.

6. Much has been made of the sluggishness of movie attendance/box office receipts this year. After returning home a couple of weeks ago, my better two-thirds needed a bit of a break from her 10 days home alone with Pee Wee. I loaded Pee Wee in the car and took him to the Herbie movie so my wife could get two hours of peace and quiet. Based on that experience it's easy to see why lots of folks opt for home viewing. The theater was freezing cold, the volume was too loud, and we had to sit through 8-10 trailers (some of which weren't suitable for a 4 year old). Then there are the expensive snacks and the lousy selection of movies that comes to our multiplex. By contrast, a family with a large tv and surround sound at home can control its surroundings and pick a film of its choice via on-demand services or Netflix.

An aside to my movie outing with Pee Wee: I'm pretty clueless about current celebrities--it hasn't always been this way but I've been pretty tuned out of movies and music since Pee Wee came along. For example, the other faculty at my IHS seminar had fun at my ignorance of Colin Firth. (I actually had seen some of his films but I didn't know his name.) Thanks to my outing with Pee Wee, my celebrity awareness is now improved--I can now identify Lindsay Lohan.

Three long-standing commercial banks in Scotland and four in Northern Ireland continue to be allowed to issue their own banknotes – a business legally monopolized by the central bank in most countries – under provisions of the Banknotes (Scotland and Ireland) Acts of 1845. Each bank is required by the law to hold 100% reserves against its notes in circulation, beyond a specified initial uncovered issue, in the form of central bank liabilities (Bank of England notes) that pay them no interest. (Part of my doctoral dissertation was about the history of these arrangements.) The reserve requirement means an interest-free loan to the UK government that owns the Bank of England. The technical name for the BOE’s profit from having its note held is “seigniorage”.

Compliance with reserve requirement is currently monitored and enforced once a week, on Saturday evening. That detail was news to me, but not to the vigilant Gordon Brown, who is Tony Blair’s Chancellor of the Exchequer (equivalent to the Secretary of the Treasury in the US). The banks naturally invest in interest-earning assets during the week, and switch to 100% BOE note backing just in time to pass inspection. Brown’s staff has today published a report estimating that the UK government can get an additional £80 million a year in seigniorage by making the reserve requirements continuously binding. Reports the Times:

Mr Brown has decided that this [once-a-week compliance] gives the eight [sic] banks involved an unfair advantage over other institutions, as well as cutting into his revenues.

The Treasury proposes a Bill to oblige all eight of the Scottish and Northern Irish banks to back their own notes with Bank of England notes at all times. That would also hand supervision of the arrangements to the Bank of England, rather than the Revenue Commissioners who now police them.

Stripped of technicalities, Brown is proposing a tax increase on the issuing banks. The result will be poorer service for their customers. It will, for example, take away the banks' current incentive to off ATM withdrawals of their own notes free of transaction charges.

As far as "unfair advantage" goes, UK banking law could be amended to allow newer banks the same note-issuing rights.

Note: I spend a week in Belfast every year, and as far as I know, there are only seven banks of issue today in Scotland and Northern Ireland combined. The news article lists “the National Bank” as a fifth issuer in Northern Ireland, but I’ve never seen any notes in circulation from a bank with that name. The National Bank of Ireland was absorbed by the Bank of Ireland in 1969. (The National Bank of Scotland was absorbed by the Royal Bank of Scotland in the same year.) Perhaps the article is double-counting the National Australia Bank Group, which owns the Clydesdale Bank in Scotland and the Northern Bank in Northern Ireland.

Eliot Spitzer, your state attorney general of New York, went after Sony for allegedly paying radio stations, and radio station personnel, for air-time for their music. Sony has now settled. Evidently this was taboo in the radio industry thirty years ago, but it is not surprising to me that money was exchanging hands. Sony wants air time, which is scarce, radio stations have air time, which is scarce, and it is hardly surprising that mutually beneficial trade would take place.

Evidently, taking such "payola" is against state and federal law. This seems odd, seeing as how Coca Cola pays television and radios for precious advertising time. If listening to the radio is a form of sampling, then paying to have a song played seems no different than advertising. I suppose there is the appearance of impropriety because the payola isn't announced or widely recognized as implicit, as in the case of regular advertising.

However, the attorney general of New York goes a little further and suggests that consumers interpret a song played on a radio as a signal of quality, rather than listening to a song and deciding on their own if it is a quality piece of music or not. This sounds like the Kaldor argument against advertising: advertising alters tastes and preferences rather than the Becker/Stigler argument presented in "De Gustibus."

It seems rather simple for most music listeners to decide on their own if they like Cold Play, Jessica Simpson, or Nat King Cole. But Spitzer's office claims that, to some, playing a song on the radio signals that it has some artistic value. This seems to be a rather condescending view of the consuming public (I might excuse the youngsters who might not know better, yet).

"Our investigation shows that, contrary to listener expectations that songs are selected for airplay based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees," Spitzer said.

So where is the inefficiency? Where is the economic damage? Some claim that the payola keeps a good, local/smaller bands off the radio, but this has never set well with me. The claim is that small labels and smaller bands do not have the resources to buy their way onto the radio. However, why would Sony spend their money on artists that are of lower quality than others? If Sony has the choice of signing a low-quality artist and having to pay to get their music played versus signing a high-quality artist and not having to pay to get their music played, the problem seems trivial. When you add the complications of multi-media crossovers and marketing, such as is the case with Jessica Simpson, then the music might just be a loss-leader. Sony ignores the high-quality, non-sexy, performer for the sexy, low-quality performer.

I quit listening to FM radio years ago because during my ten minute commute I could never find any music - just ads and dj's yapping. Hence, switch to AM and catch some Joe Q. Public or hit the MP3 disk in the deck. The future of broadcast music radio is probably irrevocably damaged by satellite and MP3 services. Thus, instead of banning what is a natural market, why not just require full information /disclosure?

If everyone knows that the music they hear on the radio is paid for, they can take it or leave it, just as they do with paid advertising in the rest of the matrix.

Is the payola illegal? perhaps. Is it immoral? That is less clear.

Drudge now links to a couple of additional stories: here and here .

Compared to what? Driving in London?

Tim Harford, guest blogging at Marginal Revolution, says,

It turns out that the quarterly road deaths in London last year averaged 54. 52 people were murdered in the July 7th attacks (and four times more people travel by tube or bus than drive, cycle or walk). Leaving public transport is only going to be safer if the terrorists strike much more often in future.

This is not a idle question for the Lawson clan as we leave for a London vacation in less than a week.

Economist Stephen Landsburg (who writes a nifty column for Slate btw) once wrote that "if you've never missed an airplane, you're spending too much time in airports."

Economists of course get this. When making decisions optimally (i.e., trying to equate marginal benefits and marginal costs), it is rarely the case that the optimal amount of something is zero. In the case of airport waiting, you have to weigh the cost of missing the plane against the cost of getting there too earlier and wasting time. Of course no one wants to miss a plane, but then no one wants to waste time in the airport either. By weighing the expected marginal costs of each against the other you decide how early to leave for the airport. But it seems reasonable that (given the time uncertainty in getting to and through the airport) you should miss a plane here or there.

However, when I say this kind of thing to normal people, they rarely get it. Usually I'm met with a strange look, "Who is this nut?" their faces say.

Anyway, here are few other fun rules to consider:

If you've never had a speeding ticket, you're driving too slow.
If you've never been audited, you're paying too much in taxes.
If you've never been hungover/passed out/puked, you're not drinking enough.
If you've never been fired, you're doing too good a job.
If you've never been slapped by a girl, you're not asking out enough girls.

Comments open if you have your own submissions.

Story here

"A good name," wrote Cervantes, "is better than riches."

Mamdouh El-Hakem would agree. After spending years fighting a former employer who thought his name wasn't good enough, El-Hakem was vindicated by the 9th U.S. Circuit Court of Appeals last week with a modest amount of money -- and an opinion that reaffirms the value of his name.

In a ruling that bolsters plaintiff arguments that discrimination can take many forms, the 9th Circuit said that Gregg Young, the CEO of BJY Inc. should not have insisted on calling El-Hakem "Manny." Or, for that matter, "Hank."

Regardless or because(?) of market-based reforms, China seems to be falling into the winner's curse when it comes to the 2008 Olympics (originally incorrect). Evidence? From Reuters via today's Amusement Business News comes initial estimates of the cost for the 2008 Olympics in Beijing:

As of early June, China's total investment in five main Olympic venues had hit 30.7 billion yuan ($3.79 billion), with more than 12 billion yuan slated to go to the sites this year alone, the semi-official English version of the People's Daily said.

Organizers' estimates of the total bill for the 2008 Olympics have risen to $40 billion from $37 billion, with most of the money targeted for new roads and subway lines and efforts to improve the city's power grid and environment.

Almost 90 billion yuan ($11 billion) would be poured into 60 key construction projects this year, the People's Daily said.

Granted, China might be going a little over-the-top in the construction projects, perhaps leaning more towards national pride than practicality. The $40 billion comes out to thirty to forty dollars per capita, which is a bit better than the one hundred to three hundred per capita Greece spent last year (depending on the number you wish to believe). Yet, while China has a much smaller per-capita income, they are spending close to 0.72% of per-capita income on the games, whereas Greece had per-capita spending of about 0.43% of per-capita income (statistically different?).

However, the economic impact to Beijing is likely to be less than $40 billion - if a million visitors showed up that would amount to $3000 to $4000 per capita (depending on your candidate for the much-abused multiplier effect). That sounds high to me. Evidently, Beijing is putting a lot of emphasis on national identity and perhaps the hopes of future development (which is likely to happen with or without the Olympics).

The Olympics are becoming even more of a white elephant than they were in the past - remember Montreal. The venues in Athens are already not being used because of depreciated structural integrity and lack of demand. At least Atlanta turned their Olympic stadium into The Ted.

The Demoncrats are conducting a witch hunt. Soon every lawyer and judge will be dragged in front of the Senate Judiciary Committee and asked. “Are you now or have you ever been a member of the Federalist Society?”

According to the New York Times.

The status of Judge Roberts in relation to the conservative Federalist Society also remained unclear. "He has no memory of ever joining or paying dues to the Federalist Society," Mr. McClellan said, while conceding that the nominee had taken part in events sponsored by the society.

There have been conflicting news reports over the past few days as to the extent of Judge Roberts's association with the society, formed two decades ago by conservative judges and lawyers hoping to counter what they saw as growing liberalism in the courts.

Judge Roberts declined to answer questions on the topic today on Capitol Hill, which he visited for a fourth day of get-acquainted meetings with senators. He conferred with Senator Dianne Feinstein, Democrat of California and a member of the Judiciary Committee.

To “Bottle-opener” Senator Ted Kennedy we can only ask, “Have you no decency, Sir?”

Possible substitutions
Federalist = Communist
"Bottle-opener" Ted Kennedy = "Tail-gunner" Joe McCarthy

Update from the Washington Post, Roberts may have been a card carrying member of the Society.

Roberts Listed in Federalist Society '97-98 Directory

Supreme Court nominee John G. Roberts Jr. has repeatedly said that he has no memory of belonging to the Federalist Society, but his name appears in the influential, conservative legal organization's 1997-1998 leadership directory.

I suppose when capitalism has worked so well for 70 years, it's hard to blame capitalists for anything. Thus, CNN reports that the AFL-CIO may potentially lose four of their member unions. The four scabs are complaining that the union spends more effort on political action than recruitment of new members. Indeed, union membership has been plummeting in the private sector for decades while growing in the public sector. For reference, see Richard Freeman, JEP 2, no. 2, Spring 1988, pp 63-88. Of course, if we can define government as an institution holding a legal monopoply on force, then it's easy to understand why unions find a welcome home there, since both are basically in the same business.

Where the heck was this trend 15 years ago? I would have been a demigod.

And, from the tootage of one's own horn file. (note: our paper usually only archives for about 4 days)

In an act of conspicuous consumption, the Lawson clan bought two copies of the new Harry Potter book so we wouldn't have to compete as much on the first weekend. The wife finished on the first night; I finished on the second; and little bit is almost done now.

Great book. Perfect. I love Harry.

Damn that woman for taking so long between books! I want to know what happens to Harry NOW. NOW. NOW. If we had central planning, we could MAKE her write for us. Of course, what she would write would suck if we had central planning, so....

Oh well, the next movie comes out at Thanksgiving.

I don't get the purported anti-Americanism. British-centric yes, but anti-American? Nah. The world doesn't actually revolve around the good ole U. S. of A. much as we'd like it to. (Btw, as I recall, there were American wizards witches from Salem, Mass. at the Quidditch World Cup in Book V.)

Ewan McGregor stars in The Island, co-produced by DreamWorks and Warner Bros., that opened this weekend to a tune of $12 million dollars in 3,122 theaters. His previous movie, Revenge of the Sith opened with $108m in 3,661 theaters.

This makes me wonder if it is the actor or the director that causes such dramatic changes in box office totals. Opening totals are often misleading because a movie might only be in two or three theaters in the opening weekend. However, the Island (which I had not heard of until Thursday evening when I saw a brief commercial for it) opened in the number of theaters consistent with a blockbuster.

I am out of the market for movies, but Box Office Mojo seems to put the failure at the feet of the director.

McGregor's films have displayed significant variance (although whether more or less than other actors/actresses I haven't gathered the data to say): His average opening is approximately $15m with a standard deviation of $30m. However, this includes only four films that have opened with more than $15m, the three Star Wars movies and Robots.

McGregor's films average $78.5 million in total gross revenues during their domestic theater run. The average is not too bad. However, The Island cost $122m to make and will probably not earn anywhere close to McGregor's average, much less turn a profit.

The lack of profit is surprisingly common in Hollywood. Like venture capitalists, oil wildcatters, and other similar industries, it seems that the studios throw money after a lot of projects that end up not panning out - even while it would seem that the "formula" for making a successful movie is fairly well understood at this point.

I understand the studios taking a shotgun approach to the industry, but what about the actor/actress? It does seem that some stars go through oscillations in their quality of work, such as Keanu Reeves and John Travolta. Perhaps a movie that doesn't generate a lot of revenue satisfies some part of the actor's idiosyncratic artisitic desires - Battlefield Earth comes to mind. On the other hand, perhaps actors agree to the script before knowing how bad the production will be, but with sufficient reputation at stake might purchase insurance against a flop? Finally, in the case of McGregor, I wonder if he really is an actor that can generate Revenge of the Sith type revenues on his own.

I think Box Office Mojo is right - the lack of excitement for The Island is likely not the fault of McGregor.

According to Reuters and Business Week, the list for the Board of Governors seats vacated by Ben Bernanke (now at CEA) and Ed Gramlich (stepping down in August) now includes:
• Economist and author Todd Buchholz, ex-advisor to GHW Bush
• University of Chicago economist Randall Kroszner
• Kevin Warsh of Bush's National Economic Council
• Michael Dooley, ex-IMF economist and professor at UC Santa Cruz

Meanwhile “sources” say that Richard Clarida, ex-Treasury official and professor at Columbia U, is off the short list.

I earlier commented that the Financial Times had inaccurately characterized Kroszner‘s views. Business Week does better, noting that “Kroszner, a former member of Bush's CEA, is a regulatory expert who counts monetarist Milton Friedman and free marketeer F. A. Hayek as his biggest influences.”

In other payment technology news, Oyster, a contactless London transit card (a kind of E-ZPass or SpeedPass for the tube), may soon be spendable at stores above ground:

Barclays Bank, BBVA, JPMorgan, Royal Bank of Scotland and Paypal are among the firms to have been shortlisted as potential partners for Transport for London's (TfL) Oyster e-money project.

TfL says twenty companies initially replied to its request for proposals on extending the use of Oyster contactless transit passes to pay for low value purchases at retail stores in the capital.

[…] Trials of the scheme will take place in late 2005 or early next year.

Jay Walder, managing director of finance and planning at Transport for London says: "The use of contactless smart cards for low value payments is growing in popularity around the globe. Such schemes are now well established in Hong Kong and Japan and significant trials are taking place in the United States."

He says Oyster has the largest customer base of all smart cards in the UK, with 2.2 million users and a significant level of public trust.

"Extending Oyster to include low value payments is a natural progression which will make the smart card even more convenient.”

This seems like a plausible way forward for prepaid card money – expanding the circle of acceptance for a card that people carry already, rather than trying to get them to carry a new card (which has never test-marketed well). But why not let all trustworthy potential partners become Oyster issuers, rather than make it a franchise monopoly?

The Nashua Telegraph reports that New Hampshire is phasing out its turnpike tokens in favor of the electronic toll system E-ZPass. (Sale of tokens ends August 31; acceptance ends Dec. 31.) Soon the state will face the question: what to do with millions of obsolete brass-nickel tokens?

This combination made by a kid at Clemson (dang Tigers) combines google maps with the white pages. Type in an address, get the map and a list of names, addresses, and phone numbers of the other people who live on the street - at least those who are listed in the telephone book?

When using my street, the app kicked back about eighty percent of the folks - thankfully my address/phone number was not among them, but our phone is unlisted.

Privacy? Seems that horse done left the barn a long time ago.

Ethnic profiling seems to be a hot topic again following the terrorist attacks on London. Heated debates between proponents and opponents can be found on numerous cable news programs. The arguments are loud and furious, but generally poorly made.

Ethnic profiling can be viewed as an empirical question. Does it increase or decrease the cost of enforcement? There should be no doubt that profiling in the short-run can decrease the cost of enforcement. Concentrating your resources on a group that has a higher propensity to commit a crime must lower the number of crimes. The counter argument is that if you target a specific ethnic group, the targeted group will take advantage of that profiling by assuming a different disguise. That is probably correct, but to do so is costly. To the extent that we can increase the cost of terrorism, we make it less likely.

What the cost of enforcement does not take into account are the costs imposed on the innocent in the targeted group. To be stopped and searched imposes material and psychological costs on the individual being searched. The real question is whether the reduced cost of enforcement that is shared by the wider society outweighs the cost that is concentrated on the specific group. Welfare is transferred from the targeted group to society as a whole. Unless the targeted group also perceives a net benefit from profiling, (the added safety offsets the added cost) they are likely to be against profiling.

Assuming that profiling results in a net benefit to society as a whole, a side payment from the non-targeted group to the targeted group may gain their compliance. For example, suppose the authorities pay each individual that was searched $20 out of general revenue. This could be viewed as the price of the information gained from the search. If the cost imposed on an individual being searched was less than $20, then they would receive a net gain in welfare. Moreover, if reduction in enforcement costs and the added safety to society was greater than $20 from a profiled search, then the non-targeted group is also better off. Thus, profiling would result in a Pareto optimal move. An unintended consequence is that some individuals in the non-targeted group may take on the demeanor of those in the targeted group with the hope of getting searched and collecting $20. This would not only be a waste of $20, it would also increase the cost of enforcement.

Isn’t it enough for profiling to be Hicks-Kaldor efficient? We estimate that the marginal benefit exceeds the marginal cost, but a side payment is not made. The problem is that without the side payment the targeted group feels discriminated against. This is likely to affect the long-run cost of enforcement. The long-run cost of enforcement will depend on the assistance of the targeted group. The targeted group can increase the cost of a search through non-compliance and may even be swayed to the side of the terrorist.

Sponsor a mile of a 1,800 mile round trip hike to the South Pole and back.

Can the sponsors be held liable if the hikers perish? Nevertheless, I wish them (the hikers) luck.

Take a look at Google Moon. I suppose we could replace NASA with Google and be done with it all. The discoveries might be impressive - try zooming all the way in. The details are amazing.

I've been in D.C. for a couple days doing a some lectures for the Mercatus Center's Capitol Hill Campus program.

I took little bit along for a little tourist action since she's never been there. A few random observations about the Smithsonian and the Nationals Baseball team:

The new American Indian Museum building is more impressive by far than the exhibits inside. Yawn!

The Air and Space Museum is too crowded as usual. If you're ever in Dayton Ohio, go to the far superior, less crowded, and equally free Air Force musuem at Wright Patterson Air Force Base.

The National Gallery has a lower than average quality to time spent ratio compared to most major galleries. (The relative lack of Spanish works always bugs me.) But it is still my favorite place on the mall.

The American History Museum is the best of its kind. If you're in D.C. soon and haven't been in a while be sure to go. It's slated to be closed for an extended period of time for major renovations.

The Natural History Museum is good, but NYC's is better.

The food service throughout the Smithsonian has improved dramatically in the last decade as it has been contracted out to the for-profit sector. The massive McDonald's/Donato's/Boston Market operation at the Air and Space Museum is an exhibit of the efficiency of modern capitalism in its own right.

We went to Tuesday night's Nationals (locally called the "Nats") game at RFK. What a dump! Ok I'm against taxpayer financed stadia and eminent domain land grabs. But they do need a new stadium. The sightlines are fine. But the steps are non-standard heights and people damn near fall on their faces all the time (we were in upper level box seats -- maybe it's better down below). The concourses are narrow and dank. The seats are just awful. Cupholders are not a luxury item in my book any longer. The entreprenuers outside the park are great. Free (sort of -- I think they expect a donation) programs are given away outside with scoresheets included. The crowd was pathetic I thought for a first place team in a new city. And it didn't "fill up" if you can call it that until the 3rd inning. Growing up in Cincinnati, I've never gotten used to people showing up late for baseball games though I gather it's common pretty much everywhere. In Cincinnati you get there early and you stay all the way.

Today’s 2.1% appreciation of China’s renminbi yuan finally bears out what has been anticipated for months in the forward market, with a bit more appreciation anticipated during the coming year. From the Hong Kong Monetary Authority’s semi-annual report (pdf file) released in June (p. 16):

At the end of May, the one-year NDF [non-deliverable forward] rate implied a 5.5% appreciation of the renminbi against the US dollar in a year’s time.

Virginia Postrel has a nifty column on recent child labor research in today's NYT.

This snippet appeared in today's NCPA Daily Policy Digest:

So what happens to cohabitating couples down the road? A 2000
study in the journal Population Studies reveals:

o Within five years of a live-in relationship, half of couples
marry, while 40 percent split up.

o Another 20 percent continue living together.

It's not clear if the mathematically challenged folks are at NCPA or the Journal of Population Studies.

The recent rise in gas prices has affected the preferences of carjackers. The derived demand for stolen vehicles reflects changing consumer market preferences.

Story here

Other trends observed in 2004 demonstrate the correlation between consumer preferences and increasing gas prices with vehicle thefts. The growing number of thefts of the Fullsize Utility vehicle segment, including the Cadillac Escalade and Land Rover, is consistent with the rise in popularity of these vehicles. Additionally, The Heavy Duty Station Wagon vehicle segment, which includes those vehicles known for their gas guzzling, has dropped off of the top 10 most stolen vehicle segments list, and the more efficiently fueled Basic Economy vehicle segment has moved up that list.

Due to defections among members of the ruling Liberal Democratic Party, the upper house of Japan's Parliament may not approve the plan for gradual privatization of the world’s largest financial institution that barely passed the lower house. If the bill fails, Prime Minister Koizumi has said he would consider it “a vote of no confidence in his government” and might dissolve the Parliament for new elections.

There is an interesting article on Law.com by Justin Scheck entitled, “Reverse Auctions Lack Class” that might be of use in game theory classes. When attorneys represent different groups in a competing class action defendants may be able to reduce their damages by accepting the low cost offer.

Dardarian experienced a rarity in employment cases, but it's common enough in the class action bar that there's a name for it: the reverse auction. In big cases, defendants facing multiple suits can pit plaintiff firms against each other in hopes of getting the cheapest -- and most comprehensive -- settlement.
…
Sometimes the problem arises when two plaintiff firms unknowingly file similar class actions. Other times, after one plaintiff firm spends years -- and a lot of money -- building a solid case, latecomers rush in, file copycat suits and look to settle fast and cheap.
…
Stopping a reverse auction generally requires convincing a judge to rule that a proposed settlement is unfair. But this doesn't always work, and plaintiff lawyers are often forced to take other measures -- in and out of court -- to prevent another firm from settling their claims.
…
He ( McMonigle)said that competing filings can allow defendants to pick the plaintiff with the weakest case. With weaker opposition, he said, defense lawyers have more leverage to reach a cheap settlement.

There is the danger that a lawyer in that position might be tempted to cut a worse deal for his clients just to make sure he gets paid. Since there are few clear rules on the duty a plaintiff lawyer has to a prospective class that hasn't been certified, there's some ethical wiggle room. "It certainly isn't something that makes the legal profession shine," McMonigle said.

It is not clear who benefits and who losses in this auction and what impact it may have on market efficiency. There is obviously a transfer of welfare among competing claimants. However, given that it lowers total damages does this lead to a more or less efficient level of compensation? This might be worth a Ph.D. dissertation.

Morning Edition, July 20, 2005 · Some of the best professional runners in the world are from Kenya. But lucrative contracts are luring Kenyan athletes to run for Bahrain and Qatar. Officials in Nairobi are not happy.

Listen here; similar story here.

Nod to MR for the markets in everything notion.

Whomever Pres. Bush nominates for the Supreme Court this evening, the Democrats will protest and howl that they want a uniter not a divider, that they don't want extremists on the court, and therefore it is unfortunately necessary for the Senate Democrats to invoke the judicial filibuster.

The Republican response will be interesting. Do they pull the trigger on the "constitutional option" or do they try to buy off the Democrats with something/someone else?

What if Bush nominated someone who doesn't have a law degree? I know it won't happen but that too would be interesting.

Daniel Gross in Slate wonders how anyone could oppose renewing the Terrorism Risk Insurance Act, under which the federal government guarantees to absorb large terrorism-related losses, thereby subsidizing property insurance companies and their customers at the expense of ordinary taxpayers. Here I try to explain how, in a point-counterpoint.

Ordinarily, extending the life of a government program that provides crucial support to a vital economic sector, works as it was intended to, is supported by the financial services industry, and hasn't cost the taxpayer a dime would seem to be a no-brainer.

It “hasn’t cost the taxpayer a dime” yet – just as federal deposit insurance didn’t cost the taxpayer a dime until the savings and loan industry collapsed under the weight of FSLIC-bred moral hazard. TRIA is no free lunch.

Read More »

In what reporter Hans Pienaar reckons “must be the most bizarre campaign on earth,” the government of dictator Robert Mugabe in Zimbabwe

has been trying plan after plan to combat the "black market" or what is correctly called the "parallel market". First there were bans and arrests of ministers on charges of "externalising foreign exchange".

Then came Operation Murabatsvina, which has “made up to 300 000 people homeless.” In the Operation,

The army and police have been called in to destroy the parallel market and the environment it believes is sustaining it - informal settlements mushrooming around the cities as people flee from collapsing towns and farms. Never mind that the greatest volume in moneychanging is happening in its most established buildings and institutions.

Most recently, the government has cut off its own nose (the seigniorage it gets from large-value banknotes) to spite its face:

the government has withdrawn its own Z$20 000 notes in an attempt to choke the black market to death.

The parallel cash economy nonetheless carries on, as it does throughout Africa, even in the cities, where retail banking services are often available only from bureaucratic state-run monopolies:

In various parts of Africa, the main purpose of black markets is not to dodge the tax collector, which is often a hypothetical creature. They are driven by the need to have ready cash available in countries where banks are heavily bureaucratised, or where enormous bank charges are levied.

Such banks cannot operate properly because of corruption […].

So governments tend to look the other way, especially since officials often take part and ruling elites benefit and control such markets themselves.

In many African cities one would have money-changing streets, w