Division of Labour: July 2005 Archives
July 31, 2005
A “solution” to counterfeiting – without a problem
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.
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.
July 29, 2005
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].
Rational Voter Sighting
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.
Productivity in U.S. and France
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.
July 28, 2005
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.
July 27, 2005
Is it worth it?
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.
Interesting rejoinder to Sen. Clinton
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.
Before Stadia Were Used for "Economic Development" ...
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."
Is your college becoming a diploma mill?
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.
How valuable are the Olympic Rings?
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.
Those who can, do. Those who can't, can't do it alone.
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?
Fortune 500 stupidity?
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
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?
Another Google Map App
Find cell phone towers in your neighborhood.
July 26, 2005
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.
Gordon Brown grabs for seigniorage
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.
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.
Payola in radio
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.
Is the London Tube Safe?
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.
Are you spending too much time in airports?
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.
Comments open if you have your own submissions.
Would Sh*thead be OK?
"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."
When cost is no object?
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.
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.
July 25, 2005
I am Not a Federalist!
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?”
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?”
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.
Unions losing strength (boo hoo)
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
Is it the actor or the director?
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.
July 24, 2005
Fed rumor mill: who’s on the "short list" for appointment to the Board?
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:
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.”
July 23, 2005
Buying crisps with a wave of the card
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.
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?
An end to tokenism
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?
Scary use of Google Maps
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.
July 22, 2005
Ethnic Profiling in the News
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.
Google to replace NASA?
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.
July 21, 2005
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 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.
China's revaluation not a surprise
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.
Postrel on Child Labor Research
Virginia Postrel has a nifty column on recent child labor research in today's NYT.
Fuzzy Math Sighting
This snippet appeared in today's NCPA Daily Policy Digest:
So what happens to cohabitating couples down the road? A 2000
o Within five years of a live-in relationship, half of couples
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.
Gas Prices and Stolen Vehicles
The recent rise in gas prices has affected the preferences of carjackers. The derived demand for stolen vehicles reflects changing consumer market preferences.
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.
July 20, 2005
Move to privatize Japan Post in trouble
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.
Reverse Auction Damages
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.
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.
Markets in Everything--Kenyan Runners
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.
Nod to MR for the markets in everything notion.
July 19, 2005
One economist's prediction
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.
Al Qaida vs. Allstate
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 »
Opposition to extending TRIA in its current form has come largely from Republicans, but it's hard to suss out their motivation. It's not a case of the GOP kowtowing to financial services' lobbyists. The American Insurance Association wholeheartedly supports TRIA's extension.
Why not draw the logical conclusion? Democrats pushing the renewal (especially the two senators from Connecticut) are kowtowing to insurance industry lobbyists. Some Republicans seem to be standing up for free-market principles (for once).
It could be that Congress is worried about unfunded liabilities. Business Week in June tallied some $6 trillion in potential claims the federal government has assumed, ranging from the Pension Benefit Guaranty Corp. to the Federal Deposit Insurance Corp. to terrorism insurance. But given the potential economic damage that would ensue if the insurance market were to freeze up, acting as a catastrophic-terror insurer is one of the least objectionable forms of government intervention in the risk business.
Unfunded liabilities – meaning taxpayers put on the hook for someone else’s risks – is exactly the issue. Whether TRIA is more or less costly than the PBGC or FDIC remains to be seen, but that's not good company to be in.
So long as the federal government provides taxpayer-backed reinsurance for free, we can’t expect to see a market in private reinsurance develop.
Another possibility: The areas that benefit most from affordable terrorism insurance are the areas that have the highest concentration of people and companies, and the most expensive property—i.e. the coasts and the big cities. Blue States.
For “affordable terrorism insurance” here read “subsidized terrorism insurance”. Gross is right that under TRIA the rest of the country subsidizes the high-risk areas. The result is the equivalent of subsidizing flood insurance to people who build in the flood plain: too much building in high-risk areas relative to building in safer areas. If “Red State” voters and politicians don’t want to subsidize firms in “Blue States”, can you blame them?
If we're engaged in a war on terror, insurers shouldn't be asked to bear the full cost of war damages.
If insurance is properly priced (and competitive markets are better than government for getting the prices right), insurance customers bear the expected cost. There’s no moral case for subsidizing New York and DC -- over and above the billions spent on national defense -- at the expense of Boise taxpayers.
Each year, taxpayers already spend hundreds of billions of dollars on defense, intelligence, and homeland security. So the government is already in the business of insuring against terrorism attacks. In the end, TRIA is a slightly different kind of investment in homeland security.
TRIA invests nothing. Instead it helps mask some of the cost of high-risk buildings and policies. Pricing insurance properly is essential to giving builders the right incentives regarding building design and location. The moral hazard effects of TRIA reduce rather than increase homeland security.
« Close It
To crush liberty, crush moneychanging: 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.
Pienaar places Zimbabwe in the context of the ongoing conflict between money and tyranny through world history. As they say, read the whole thing.
How is the Zimbabwean economy doing under Mugabe's rule? Not well:
About a third of Zimbabwe's economy has been wiped out in the past five years, putting it among the fastest shrinking in the world. Inflation runs at 164 per cent, the highest in Africa.
No Hedonic Damages for Dog
Some economic experts testify to the value of hedonic damages in court. It truly deserves the term junk science. They present studies on risk and safety that attempt to value how much people are willing to pay to avoid a small risk and use that research to argue that this implicitly allows us to place a value on the enjoyment of life. Of course, the number they present to the jury is in the millions. No such valuation is possible without a cardinal utility index. Mainstream economics moved past that silliness in the middle of the 19th century thanks to Jevons.
Some states have permitted the testimony, while others have prohibited. My own state of Ohio has left the decision on whether to admit the testimony to the trial judge.
In Carbasho v. Musulin the West Virginia Supreme Court has just decided that emotional damages (hedonic damages) cannot be awarded for the death of a dog. Had they decided otherwise we might soon see economists placing an emotional value of the life of a dog.
Here is a report from Tom Ireland who has a nice website detailing economic damages in the courtroom.
July 18, 2005
Snarky PBS Comment
Something to keep in mind next time someone proclaims that PBS fills a niche that the other 50+ channels of TV do not: Last night our local PBS affiliate aired "The Diana Conspiracy" about conspiracy theories of the Princess of Wales's death. I was unable to locate a transcript (and certainly didn't waste a scare hour of my life watching), but here's a description:
"Ever since her death in 1997, conspiracy theorists have sought to prove that the crash that killed both Princess Diana and Dodi Al Fayad was no accident. Now, while a year-long investigation that will lead up to a U.K. inquest takes place, THE DIANA CONSPIRACY examines the various theories. The documentary poses questions about the origin of these theories and wonders why people cling to them."
Sounds like something that E! would gladly air were there no PBS.
The Economics of Same-Sex Marriage
Posner is blogging on the law and economics of gay marriage. This is a misnomer. The issue is not gay marriage; it is same-sex marriage. There is not a test for separating straights from gays. Therefore, there is no way of knowing whether the individuals are formalizing their relationship for sex or for social convenience.
We also have to keep in mind that the issue is governmentally sanctioned marriage, and not religious marriage. As Posner points out, with the legal marriage come certain benefits and costs. This represents a transfer between the society and the married couple. The benefits and costs that society imposes on the married couple may be for purpose of social engineering. We may want to benefit behaviors that encourage the survival of the species. Now, I may disagree with governments engaging in social engineering, but I can understand the desire to do so.
Posner suggests that permitting homosexual marriages may not have a significant impact on the Social Security system, because they would make up only a very small percent of total marriages. He may be right, but this fact is irrelevant. Again, we are not only permitting homosexual marriages, we are permitting all same-sex marriages. Any two individuals who want to share fringe benefits or Social Security benefits can get married. If we have two people, one with a record of Social Security earnings and the other without, they could increase their combined monthly benefit by 50% after marriage. They don’t have to sleep together or even live in the same home. With side payments, they could both share in the increased benefit.
Denying government marriage to same-sex couples, only denies them legal benefits enacted for mixed-sex couples. It does not deny them the opportunity for private covenants and contracts. Posner proposes a contractual approach to marriage. The current argument, however, is not over the right of private contract. It is about the social contract that transfers resources to married couples. Were the government to get out of social engineering, there would be little to be gained by entering into a marriage contract as opposed to a private contract between two individuals.
The Klan's "Success": Secrecy or Violence?
Last week I hosted some of my colleagues for a book club discussion of Freakonomics. One of my history colleagues took issue with the book's contention that the Klan's appeal depended more on secrecy than violence and sent me the following list of violent acts:
June 12, 1963 - Medgar Evers assassinated, Jackson, MS
My take: This is an interesting criticism of the book's contention that secrecy was more important than violence to the Klan, but I'm not entirely convinced. Note that all of the dates in the list provided by my colleague are well after the "outing" of the Klan on the "Adventures of Superman" show. It could be that secrecy worked well until a mole came along, but that the Klan had to increasingly turn to violence after Stetson Kennedy removed the secrecy.
(NB--I have not credited my colleague by name b/c I have not obtained permission; I am however grateful for a provocative observation.)
Eminent Domain and "Economic Development"
From yesterday's WaPo (HT: Dan Alban):
"When I read about last month's Supreme Court decision permitting the city of New London, Conn., to use its power of eminent domain to seize working-class homes so that developers can build a waterfront office, residential and hotel complex, my first thought (after pitying the homeowners who thought that their property rights meant something) was: Oh no, not another misbegotten urban renewal program."
From George Leef:
"It is one of those statist clichés so beloved of power-hungry politicians that economic development (and thereby the people’s standard of living) needs to be fostered by government action."
Spot on George and kudos for an exceptionally fine article.
Finally a question from yours truly: Why is it that folks who like to demean economics as being "just about money" are the people who favor the Kelo decision? After all, giving the green light to takings that will ostensibly generate higher tax revenue casts aside people's subjective value of their homes and communities.
July 17, 2005
Update on the Jack Nicklaus banknote from the the Royal Bank of Scotland
It’s popular. Hundreds of people lined up to buy them (at the face value of £5 each) on the first day of The Open championship. (We in the US like to call it the "British Open", but its official name is simply The Open.) Reports the Evening Telegraph:
Demand was so great that the RBS stall in the tented village had to limit the number people could purchase to 20.
How many of the notes will end up on eBay, you wonder? Hundreds already have, some in lots of 19 (keep one, sell the rest). Realized prices are largely in the range of £14-20 for one note (sightly less per note in larger lots), more if a “presentation folder” is included.
Reader mail department
Posted with the permission of the author, who wished to remain anonymous, here's a thoughtful reply to my recent post on Hillary Clinton's call for government to oversee video game ratings:
I've been following the recent outbreak of senatorial censorious[ness] toward the ESRB, which seems to have started with Sen. Schumer's out-of-the-blue evocation of the game "25 to Life," which hadn't gotten much industry press until he pointed it out, and I agree with your point that Sen. Clinton is calling for unwarranted federal regulation.
Point taken; I was painting with much too broad a brush. Btw, for my favorite example of a mind-stretching video game, try Lemmings. An online version is available here. (Hat tip: my daughter.)
July 16, 2005
Aftermath of a Hicksian Paradox
So the NHL strike is ended with a collective bargaining agreement that sounds a lot like the original offer by the owners last year. Local hockey team owner Tom Hicks announced that the Dallas Stars would lower the upper deck tickets from $25 to $10. The Stars website announces:
The Dallas Stars today announced the hockey club's season ticket prices for the 2005-06 season. The Stars have reduced prices on every season seat by an average of 16.0% per seat, the lowest prices for the club since it moved into American Airlines Center.
These are some huge discounts as far as sports ticket pricing goes. The Anaheim Ducks have slashed the lowest price tickets from $25.00 to $9.50 per game (a 62% reduction!) and have lowered season ticket prices by approximately 6%. Most of the other team sites I hit had not announced ticket prices for the upcoming season, but outside of Detroit, expect to see prices drop considerably across the league.
Our local Fox Sports affiliate (which shows most of the Stars games) is replaying the 1999 Stanley Cup run of the Stars. Tonight's game is game 6 of the Sabers-Stars series that went to triple overtime before the Stars won it all in sudden death. I don't know if that game is being broadcast in other parts of the country, if other exciting games of local regional flavor are being shown, or if no hockey at all is being shown. Nevertheless, what a great way to get people excited about hockey once again - pull out one of the best games ever. Maybe they should have waited until the players made it to camp, but it is probably never too soon to try to rehabilitate the league.
After the 1994 baseball strike, per-game season ticket prices actually rose an average of 1.5% across the league; the largest decline was 4.6% (the Detroit Tigers) and the greatest increase was 34.3% (the Colorado Rockies moved into their new stadium that year). Many baseball teams simply held nominal prices fixed, but I don't think hockey will be able to get away with that.
Baseball attendance had essentially recovered to its pre-strike levels by the end of the 1996 season - attendance would have likely have recovered faster if prices had dropped significantly in the 1995 and 1996 season. However, given the game's history it is likely that baseball team owners rightly predicted that attendance would recover on a timely basis. Those who argued that baseball was dead after the 1994 strike were a bit premature.
What damage has been wrought on hockey attendance will be an interesting question. I bet the hockey team owners are correct in predicting that in-house demand will not quickly recover at the pre-strike price levels. The more team sthat drop their prices will be a strong indication of fan disenchantment, which lower prices are an attempt to purchase.
An even more interesting question will be what happens to television viewership. Hockey already knows its in trouble in this area from previous trends, which is why the league wants more scoring and fewer stoppages in play. Hence the proposed rules changes aimed to increase scoring (yet again). However, I am not convinced that it is a lack of scoring, or even the fighting, that keeps people from watching hockey on television. I think it is a game that most people don't understand and it is very fast (which is good for some and not so good for others) on television.
July 15, 2005
Update on the terrorism insurance subsidy battle
Congress is holding hearings on renewal of the Terrorism Risk Insurance Act, which subsidizes the insurance industry and its customers by backing their policies with an unfunded federal guarantee. Consistent with the prediction that politicians from insurance-company-heavy Connecticut will support the subsidy, Sen. Christopher Dodd (D-Conn) spoke up for extending the Act.
Dodd has introduced a bill, supposed by some Republicans, that would prevent the insurance program from expiring.
CEA chair Ben Bernanke and Treasury Secretary John Snow didn’t exactly call for abolishing the subsidy, but did call for reducing it:
Bernanke said that if Congress extends TRIA beyond its expiration on Dec. 31, the program should be changed to increase the role of private insurers and "significantly diminish the public responsibility for terrorism risks."
Insurance industry lobbyists naturally love the Act and are pleading for its unmitigated extension.
Martin DePoy, spokesman for a group of businesses organizations called the Coalition to Insure Against Terrorism, said they view the current terrorism insurance program as ``a great success.''
For a depressing list at all the heavy hitters from the insurance and construction industries that are backing the Coalition, look here.
The “current program” of unfunded federal backing is a “great success” only in the sense that it hasn’t cost taxpayers anything yet. Neither did the FSLIC cost taxpayers anything before the unchecked moral hazard it brought about caused all hell to break loose in the savings and loan industry, costing taxpayers about $150 billion.
The Wrath of Khan
Bollywood hunk Salman Khan, whose poor acting was previously noticed here, is now at the center of an ugly fracas over off-screen dialog that seems to have all India in a tizzy. The Hindustan Times has released transcripts of a 2001 phone call, reportedly from a police tap on Khan’s phone during an investigation of his underworld ties, in which (allegedly) a nasty drunk Khan curses at his then-girlfriend, actress Ashwariya Rai, and threateningly boasts about his underworld connections. Khan’s lawyer says the tape is “fabricated”.
Here’s a choice excerpt (and yes, most of the "conversation" is in English):
SK: Don't you dare f**k with me, Ash. I know Abu Salem, Chhota Shakeel, Dawood Ibrahim, Guru Satam... Underworld people call me up here. I am their main man in Bombay. I do all that s**t.
Groups of activists calling Khan a “traitor” have disrupted screenings of Khan’s latest film, which opened today, throughout India. (The film plays tomorrow night here in St. Louis; presumably calm will prevail.)
According to one report:
In Mumbai, nearly 100 activists of Bharatiya Janata Yuva Morcha were arrested, when they staged demonstrations in front Salman Khan's residence in suburban Bandra, police said.
A legislator member of the nationalist Shiv Sena party has called for Khan to be arrested and tried for having underworld ties. Leaders of the BJP have joined in the denunciations.
Why all the furore? The news accounts don't mention this explicitly, but Khan is Muslim, as are many in Bollywood, and as are some of the gangsters he names on the tape.
Trinamool Congress Students Union president Baiswanar Chatterjee said the protest was not against the star or his films but against "a man who supported anti-nationals and their activities."
Meaning: Khan is linked to the Mumbai underworld, which is allegedly linked to enemy Pakistan. Thus it’s a pretext for Hindu nationalists to go on the political offensive.
It is amazing what you can find googling. The alleged terrorist, Magdy M.M. Elnashar, was just taken into custody in Egypt. His webpage at Leeds U. is no longer up, but Google has a cached version where you can find the following information:
Magdy M.M. Elnashar
Office: Garstang 10.110
The current research interests are devoted to key aspects of biocatalytic materials and include the chemistry of enzyme immobilization on natural and synthetic polymeric supports, biocatalysis and the design and operation of biocatalytic processes with potential for technical applications.
b. 1972, 1990-1994 BSc. Chemistry Cairo University, Egypt; 1995-1998 MSc. Organic Chemistry, Cairo University; 1999-2000 MSc. Chemical Engineering courses, North Carolina, State University (NCSU), USA; University of Leeds 2000-
A summary of the research paper can be found here
Remember when Republicans believed in deregulation?
George W. Bush is no Reagan. When it comes to regulation, he’s not even a Bill Clinton. David Nicklaus of the St. Louis Post-Dispatch, citing a study by Susan Dudley of GMU’s Mercatus Center and Melinda Warren of Washington U.’s Weidenbaum Center, notes that Bush has let the regulatory state grow faster than ever under his watch:
Ronald Reagan cut [regulatory] spending during his first term, and Bill Clinton presided over a relatively modest increase of 3.2 percent a year.
Prison and Radical Islamism
Mona Charen points out that prisons are breeding grounds for radical Islamism. It is especially appealing to violent and disaffected young men, many of whom are serving sentences for drug convictions. Is this another unintended consequence of the war on drugs? Would you rather live next to a druggie or a radical terrorist? I prefer the individual who is more directed at killing himself, rather than others. Maybe it is time for Huxley’s soma dream.
The Minimum Wage and Welfare
The abstract of a recently published paper:
Although minimum wages are advocated as a policy that will help the poor, few studies have examined their effect on poor families. This paper uses variation in minimum wages across states and over time to estimate the impact of minimum wage legislation on welfare caseloads. We find that the elasticity of the welfare caseload with respect to the minimum wage is between 0.1 and 0.2, but this estimate is sensitive to the sample period and assumptions about state trends. We tentatively conclude that higher minimum wages increase welfare dependence; however, more research is warranted.
July 14, 2005
Take Back The Memorial Petition
To Governor George Pataki, Mayor Michael Bloomberg and the Lower Manhattan Development Corporation:
We, the undersigned, believe that the World Trade Center Memorial should stand as a solemn remembrance of those who died on September 11th, 2001, and not as a journey of history's "failures" or as a debate about domestic and foreign policy in the post-9/11 world. Political discussions have no place at the World Trade Center September 11th memorial, and the International Freedom Center honors no one by making excuses for the perpetrators of this heinous crime. The memorial should be about what happened that day, about the brave heroes who risked their lives so selflessly, and about the innocent lives that were lost... nothing more.
Where in the world?
To join and expand Bob's game:
Hillary Clinton channels Tipper Gore
Last night on the Daily Show, Jon Stewart gave a hard time to author Bernard Goldberg about his book 100 People Who Are Screwing Up America, on the grounds that Goldberg was ragging on “mostly powerless” celebrities who are merely contributing to cultural crassness and shrillness. Goldberg’s real targets, Stewart advised, should be people in government with real power over our lives.
Although it’s always easy to fault an author for not writing a different and more important book, Stewart has a point. What we really need to worry about are people like Senator Hillary Rodham Clinton, D-NY, who is threatening legislation to keep violent video games like Grand Theft Auto out of teenagers’ hands. Wrote Clinton to the Federal Trade Commission today:
There is no doubting the fact that the widespread availability of sexually explicit and graphically violent video games makes the challenge of parenting much harder. I will be exploring legislation to help parents with this challenge when it comes to purchasing video games soon and I hope you will work with me to ensure that the ratings system - the best tool parents have to filter this material - is meaningful.
The games ratings system is currently non-governmental, run by an industry group. Clinton is advocating that the federal government forcibly take over the system. Carjack it, you might say.
I’m willing to grant that Grand Theft Auto – where the objective is to steal cars and kill people who get in your way – is morally corrupting. But as a parent, I found it fairly easy to keep such junk out of my young childrens’ hands: I didn’t buy them a video game system. Even the most benign video games are typically mind-numbing and develop only the trigger finger. Get your kids a mind-exercising PC instead, and filter the internet as you deem appropriate.
I wonder whether the Daily Show will give a hard time to Senator Clinton’s proposal. Btw, the show's studio guest tonight will be the generally sensible Fareed Zakaria, author of The Future of Freedom: Illiberal Democracy at Home and Abroad (which I recommend).
How Many States/Countries Have You Been To?
Some time ago, I recall some bloggers listing the states they've been to. Having a few minutes to spare, I figured I'd do a count myself. I am not counting places that I just visited via airports but I am counting a few states that I only passed through in a car.
My state count is 40: Alabama, Arkansas, Arizona, California, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.
My country count is 18: USA, Canada, Mexico, Bahamas, U.K., Germany, Spain, Austria, Switzerland, Liechtenstein, Slovak Republic, South Africa, India, Indonesia, Philippines, Hong Kong, Georgia, Armenia.
Trailers of Historically Significant Films
At the Digital History site you can find trailers for many popular films. The trailer for the original War of the Worlds reminded me that we attempted to stop the aliens with nuclear weapons in the first film. The are no weapons of mass destruction in the Spielberg version. What happened to the weapons of mass destruction? Would it be pollitically incorrect to use nuclear weapons against space aliens?
Incentives Matter--Teacher Pay for Performance Edition
"Teachers and staff at Little Rock’s Meadowcliff Elementary School are $134,800 richer this summer as a result of a privately funded pilot program to reward employees for what turned out to be a 17 percent student achievement gain on a nationally standardized test."
Full story here. One assumes there was no cheating such as that documented in Freakonomics.
July 13, 2005
Car Pool Accused of Unfair Competition
This story appeared in the Guardian
They might have been congratulated for their "green" efforts in an area of heavy air pollution.
This story doesn't state what law they are supposed to have violated. If you know, you might leave a comment.
No pork for Boise
In the course of a fairly sensible op-ed about homeland security, former Senator (D-Missouri) Tom Eagleton comes clean about having been a pork-barrel spender in office:
Even Boise, Idaho - not exactly high on al-Qaida's list - is getting antiterrorism money. In other words, we are treating homeland security money like pork-barrel spending, and pork goes where pork-loving senators - as I was and Sen. Christopher S. "Kit" Bond is - guide it.
Now that he’s out of office, of course, he’s against pork. Or at least against some pork. Note the curious clause that begins the next sentence:
Pork-barrel spending may have its place in politics, but not when it comes to fighting terrorism, which is literally a life-or-death matter.
Applying the “life-or-death matter” criterion, I infer that pork likewise has no place in spending on: national defense, VA hospitals, medical research, highway safety, water projects …
Corruption in Liberia
A few months ago, I went home to Monrovia to take a look at the rebuilding going on now that Charles Taylor is finally gone and our civil wars are over. I arrived at Robertsfield Airport in Liberia and was promptly hit up for a bribe by the immigration woman who demanded my passport.
I didn’t even think twice about giving her a dollar when she asked me what I had brought home for my people. I knew that was code for “give me money or I’ll keep you here in this hot little room until you come to your senses.”
Of course, corruption is hardly confined to Liberia. South Africa recently dumped its deputy president Jacob Zuma because of corruption allegations.
ADDENDUM: Like many I am skeptical of top-down, governmental foreign aid. Billions of dollars of official development assistance have been ineffective at best and counterproductive at worst. Yet, I've decided that I'd like to donate to an organization or two that works to aid development in Africa and has respect for classical liberal notions such as private property, rule of law, and limited government. I've left the comments section open--I'd appreciate any suggestions.
The Sexiest Discipline Known to Mankind
"U.S. colleges and universities awarded 16,141 degrees to economics majors in the 2003-2004 academic year, up nearly 40% from five years earlier, according to John J. Siegfried, an economics professor at Vanderbilt University in Nashville, Tenn., who tracks 272 colleges and universities around the country for the Journal of Economic Education."
Thomas Paine, the original blogger?
W. Caleb McDaniel, a graduate student in the department of history at The Johns Hopkins University, asks how new blogging really is.
[HT: Erica B.]
Calling Morgan Spurlock
A North Carolina woman has eaten nothing but McDonald's food for the last two months (insert stomach churn here) and has lost 33 pounds. Story here.
Welfare: The Root Cause of Terrorism
We will soon find out more about the terrorists (yes MSM, this is the correct term) that attacked London. It is likely that all of these characters have probably spent a considerable amount of time on the dole. You might want to recall this article from 2001 in Slate by Mickey Kraus that documented the link between welfare payments and terrorism. The logic is pretty straight forward. If you are looking for a job to feed your family, you don’t have time to read terrorist literature, mope around the mosque, or build bombs.
Kraus doesn’t include the US and UN subsidies to Palestinian refugee camps or government subsidies to student terrorists. Only a wealthy society like ours can support terrorism in the style it has become accustomed to. We like to blame the Saudis for supporting terrorism, but they are pikers compared to the Western governments. If we include all transfer payments in support of terrorism, the likelihood that a terrorist has received some government support is no doubt close to 100 percent.
Update via Charles Krauthammer on the killer of Theo van Gogh
TWO fugitive London bombers have been living in Britain on state benefits, it emerged last night.
Somalian Yasin Hassan Omar, 24, received £23,000 in housing benefit over six years while living at a flat in Southgate, North London, which was raided yesterday.
Flatmate Muktar Said-Ibrahim tried to bomb a bus.
Home Again/Tradeable Permits
I'm glad to be home after being away for 3+ weeks. Northern Michigan was wonderful for vacation even if the weather topped 90 several days. The IHS seminar at Bryn Mawr had a wonderful combination of faculty and students (and stellar IHS staffers--including Mini Me). Then it was off to Vegas for APEE and the thin air of Mount Charleston (see Bob's post).
One of Lynne Kiesling's IHS lectures included a riff on the use of tradeable permits to establish property rights. Some students seemed awed that they could buy and retire the right to emit a ton of SO2. Lynne used the example of an elementary school class in Milwaukee buying a permit in the mid 1990s. It turns out that there is a more systematic effort underway to retire permits--the Acid Rain Retirement Fund. Not only is there a distributive justice rationale for having people who value clean air be able to purchase it, there is also a knowledge problem rationale for the possibility of purchasing and retiring permits. There's no reason to think that govt regulators possess the knowledge to set just the "right" level of permits; if "too many" permits are issued then individuals may purchase and retire permits to reduce the amount of pollution. Alas, if too few permits are issued there's no mechanism (other than lobbying/legislation) to make more available. (HT to Craig Newmark for the Acid Rain link.)
July 12, 2005
Good news for curry consumers
Researchers at the University of Texas have found that an ingredient in turmeric and curry powder (specifically, the yellow spice curcumin) acts to reduce the growth of melanoma (skin cancer) tumors.
This is the kind of lab finding that obviously cries out for an epidemiological cross-check. People with diets rich in curry have reportedly already been found to have reduced rates of colon cancer. How much reduced? What about reduced skin cancer? Other cancers?
The Senator from The Hartford
You might guess that Joe Lieberman (D-CT), being Senator from the state that is home to many of the largest American insurance companies (Aetna, Chubb, The Hartford, CIGNA), would favor retaining and even expanding the subsidy to the insurance industry provided by the Terrorism Risk Insurance Act. And you’d be right. Writes Lieberman in Forbes:
This [Act] was a prudent policy response that made clear to all that the government would be there standing behind the private sector to bear the burden of another possible attack.
In other words, taxpayers elsewhere in the US would be there to bear the burden.
Under TRIA, those who have insurance can have the piece of mind their claim will be paid, even if it threatens the solvency of their insurance company. Without a terrorism insurance program, the liability for catastrophic economic losses will shift to banks, pension funds and others in our economy.
Actually, with a private terrorism insurance system, the liability will fall on insurance companies and their customers – exactly where it belongs.
Hat tip: Geoff Manne.
Ohio gets an F in Fiscal Discipline
The free-market Americans for Prosperity Foundation today released its new "Fiscal Discipline Report Card" [by Barry Poulson] that grades states on how well their tax-and-expenditure limits restrain the growth of state government spending and provide relief for their taxpayers.
Diminishing marginal returns and the space shuttle
We have spent the last two years and a lot of money to ensure that the space shuttle will be even safer than it was. I wonder about the returns to these additional dollars. Are not astronauts already heavy risk takers, perhaps even risk lovers? If we are throwing tourists into space it would be important to make sure that there is a 99.9999% chance of returning to earth safely. I wonder if the shuttle should be that safe - perhaps for national pride's sake?
I gathered data on successful and unsuccessful U.S. earth orbit space shots from 1957 through 2002, so these data would not include the Columbia explosion. Fitting a linear time trend to the data one obtains %SUCCESS = 0.7017 + 0.0081TIME (where both parameters are statistically significant). The linear model predicts perfect success rates around 1993. This is a bad prediction.
I fitted a saturation model using non-linear estimation. I obtain the following %SUCCESS = 1.014TIME/(1.534+TIME), again both parameters are statistically significant. The non-linear saturation model predicts perfect success rates sometime around 2065 (perhaps - who knows?). More importantly, however, the model predict 98% success rate in 2001 and a 99% success rate sometime around 2020. The model is arguably naive, i.e., it does not take into account technological advancements, dollars spent on NASA research efforts, etc. However, the results do not seem entirely unreasonable.
The upshot: We have spent two years and some millions of dollars to increase by less than 1% the odds that the shuttle will return safely. It is easy to increase the odds that the space shuttle will not return safely, but it is becoming increasingly expensive to squeeze out a couple extra tenths of a percentage point in increased safety. The Columbia explosion could have been avoided by using a different insulation scheme, but did we need to spend two years on a new scheme? Are we not in the range of diminshing returns?
Here is a picture of the data, the linear, and the non-linear fit. The vertical axis reports the percentage of escape space shots that were successful. The horizontal axis measures time, starting in 1957 and running through 2002.
Charleston Peak Trip Report
It wasn't all "work" in Las Vegas.
On Sunday co-blogger Frank and I set off at 6:30 a.m. from the South Loop trailhead parking lot (only 45 minutes from the Las Vegas strip) headed toward Charleston Peak (elev. 11,919')--8.5 miles and 4269' in elevation gain away. The weather was perfect with complete sun and a starting temp in the upper 60s.
After hiking steadily uphill on seemingly endless switchbacks for 2 miles or so we finally got a good view of the mountain [see picture]. Charleston Peak is the tallest mountain in southern Nevada (4th tallest in the state) and the only peak in the Spring Mountain range above the tree line. Although the snow is usually gone by July, the larger than usual winter snowfall meant that there were still many snowy spots to negotiate.
After about 2+ hours, 3+ miles, and 2000'+ of elevation gain, Frank decided to turn back leaving me to head for the summit alone. This was Frank's first foray into hiking at elevation in the west, and he did very well to get this far.
After leaving Frank, I picked up the pace and passed two groups of hikers along the way. At about 11,000' in the middle of a large scree field, I came across some beautiful flowers [see picture] and made it to the summit alone [see picture] at 11:00. From the top you can see parts of Las Vegas (but not the strip) to the southeast and Death Valley and the Sierra Nevada to the west. It was pretty windy and almost cold so I didn't linger. At 11:15 I headed back down the same trail and was back at the car by about 2:15.
There are a number of shorter day hikes (such as Cathedral Rock) in the area and I highly recommend this area for anyone travelling to Las Vegas. It's a great way to beat the heat if nothing else.
More fallout from Indian EF study
UPDATE: Congress President and Chairperson of Rajiv Gandhi Foundation, Sonia Gandhi has rejected the resignation of Bibek Debroy who had put in his papers as Director (Research) of the Rajiv Gandhi Institute for Contemporary Research. Story.
Can I have my one-nth portion of the bailout back?
From Yahoo comes this little ditty about U.S. Airlines:
Some U.S. Airlines May Return to Black
Can we get a rebate of the bailout from a couple of years ago? Such bad policy should not be encouraged through the posting of said "profits."
Euro-Dollar Parity closer than we think?
Okay, probably not for this reason, but this Reuters story linked through Drudge might explain why the EU constitution can't get off the ground. The short story can't be abridged - so here it is in it's entirety (sorry):
I knew those Greeks were too loud for their own good, and as for the Luxembourgians (perhaps no 'i'?), don't get me started. But seriously, penalties will be enforced because these states haven't drawn a map so that they can then "formulate a plan"? Here's a solution to the noise, how about they ban "cars, planes, machinery" from areas with 100K+ people? That should do wonders for the Euro and the European economy.
(Admission: I am not a monetary economist, and therefore I am probably not qualified to mention the words "parity" and "Euro" and "Dollar" in the same sentence.)
Socializing terrorism insurance -- but just the losses
The little-known Terrorism Risk Insurance Act, enacted after Sept. 11, 2001, the New York Times reports,
obligates the U.S. government to reimburse insurance companies for most of their insured losses - up to $100 billion a year - that arise from terrorism.
Kudos to the opponents of extending the subsidy. One economist defending the law, somewhat surprisingly, is Bush’s former Council of Economic Advisors chair Glenn Hubbard. Hubbard, now dean of the Graduate School of Business at Columbia University is frequently mentioned as a candidate for appointment to the Federal Reserve Board of Governors.
Why does Hubbard defend the subsidy for insurance companies?
A report last year by Hubbard and Bruce Deal, a principal of the Analysis Group consultancy, warned that "the extreme and unpredictable losses associated with catastrophic terrorism cannot be borne by the private sector alone." The report was financed by the insurance industry.
Methinks Hubbard and Deal meant to say “borne by the insurance industry alone”, except that then the plea for an industry subsidy would have been that much more transparent. When the federal government spreads the burden to the taxpaying public, the resources taxpayers have to fork over also come from the private sector. The public sector doesn't have any resources of its own to help share the losses.
Proper Sin City pricing
Of course, Bob, there are a number of possible reasons for the difference in price:
July 11, 2005
They don't call it Sin City for nothing
I'm at this bar last night having a few drinks with a friend who is single. These two hot girls are standing nearby and he nods at one of them and within seconds they're both talking to us. I have to play along of course to help out a buddy. Here's an approximate transcription of what the one girl and I said to each other.
HER: Where are you from?
She walks away. Meanwhile my friend has had almost the exact same conversation with his girl. She walks away too. The thing is his girl quoted him a price of $300. Was this price discrimination or was it a $200 compensating differential for having sex with me? I'm hoping it was the former.
July 10, 2005
More GM uses
Here you can look up 911 incidents using Google Maps.
What do we think about this?
This article in the Chronicle suggests that the academic job-seekers should not have/contribute to blogs.
You go girl...
Paula Jones plans to make her first visit to the Bill Clinton presidential library a profitable one - she plans to wear a T-shirt emblazoned with a sponsor's name.
Beautiful. (Story here)
July 08, 2005
Keep the change
On Friday, June 17, a temple elephant named Mahalakshmi, in Kinnigoly, India, reportedly ate a female worshipper’s plastic bag containing keys, coins, and Rs 7,000 (about $160) in currency notes.
The woman had just borrowed the money to pay her daughter’s college fees. She spent the next two days patiently waiting and sorting through the elephant’s manure, fearing that the paper notes had been digested. Finally, on Sunday evening,
the elephant reportedly discharged about Rs 4,000 worth of notes - a few in Rs 500 and the rest in other denominations - but they were all in drenched and discoloured state. They may not be fit to be put into circulation again.
New mass-spectroscopy method detects drug traces on currency
According to Innovations Report:
Research published in this month’s edition of the journal Rapid Communications in Mass Spectrometry, describes a method that can detect a pattern of contamination on banknotes from drug related crime that is different from the pattern seen in general circulation.
Next time I see a drug deal in the movies or on TV, I’ll expect to see the drugs sealed in one plastic bag, and the currency sealed in another. Or maybe this is just the thing needed to jump-start the Mondex card that allows peer-to-peer electronic cash payments.
July 07, 2005
What's good for GM is good for Ford?
My back of the envelope calculation found that the average GM discount was about 15% from the MSRP and the discount program increased GM's sales by about 30%. This would suggest an elasticity in the neighborhood of 2, or that GM's profit maximizing price is approximately 50% greater than marginal cost (according to the Lerner condition).
Assuming this is true, the reduction in price should increase revenues for GM, although whether profits increase is still unclear.
Is Ford's demand likely to be similar? It will be interesting to see.
Google Transparencies allows you to look at Google Maps and Google Sattelite images at the same time.
July 06, 2005
Indian Economic History Lesson
The agenda for economic reforms in India today consists of turning the clock back to 1969. Economic policy of the 1969-1976 period consisted of enormous powers being usurped by the state. From 1969, Indira Gandhi turned left seeking political support, and India witnessed an unprecedented increase in control raj. Economic enterprise and private initiative were sharply restricted. Most of the policies of the period are still with us.
Randy Kroszner for Fed Board of Governors?
To my amazement, the Financial Times is reporting:
Randall Kroszner, an academic economist and former member of President George W. Bush's Council of Economic Advisers (CEA), was interviewed last week for the vacant position on the Federal Reserve's board of governors. […]
The FT isn’t digging very deeply here. Randy has published widely in mainstream journals (see his impressive publications list here), but much of his work on monetary policy and institutions respectfully challenges mainstream thinking. I especially like his paper “Free banking: the Scottish experience as a model for emerging economies”. (It makes up for his earlier Scotland-skeptic paper with Tyler Cowen, “Scottish Banking before 1845: A Model for Laissez-Faire?”, which I have criticized elsewhere.) Randy's book with Tyler, Explorations in the new monetary economics (Blackwell, 1994) contains anything but “mainstream views on monetary policy”. (I reviewed that book in the Journal of institutional and theoretical economics 152 (1996).)
I’d say more, but I wouldn’t want to lessen Randy’s prospects for being nominated and confirmed by criticizing -- or by endorsing! -- his work. Should he get nominated, the confirmation hearings could be quite interesting.
More Uses for Google Maps
Until recently, runners have had to guess at their running distances or get in the old family station wagon to use the trip odometer to trace the course. The disadvantage of this is that you can't always take your car the same way you run (one-way streets, trails/bikepaths, etc.). There are new popular GPS units for runners that claim to do the job, but these need a clear line of sight to the sky and tend to get confused around tall buildings or under heavy tree cover.
Here's a great new application for Google Maps that allows you to double click your way around any course to determine your total distance.
It works perfectly as far as I can tell.
[HT: Dave Reed]
To Kelo or not-to-Kelo? or "Shut-up and learn to love Kelo"
The land grab in Arlington is likely to get ugly in the next few weeks. In today's Star-Telegram:
Owners of 26 properties in the path of the Cowboys stadium project could face condemnation if they don't make a deal with the city soon.Thank you Justice Souter, et al. The city admits it doesn't want to resort to eminent domain, but they have no choice. The voters voted for a stadium (before we knew where it would be located), the city/team decided where the stadium would go (acting as our delagates or trustees?), and these folks need to "get over it" and move on. Sound familiar? Did the Court anticipate that the language in Kelo would have such direct relevance so soon?
However, there was a nice quote from one of the non-annointed, i.e., not a Supreme Court Justice:
Norma Matthews, who lives in south Arlington, said the city is usurping the property rights of residents.Alas, Norma, you are so naive. Arlington is not stealing property from Person A and giving it to Person B. As our mayor has so often repeated, Arlington will own the $700 million dollar stadium and will rent it to Jerry Jones for two million per year (the equivalent to renting a $100,000 house for $285 per year - not likely a profit-earning move on the part of the house owner but a great deal for the renter!).
Norma, embrace Kelo, learn to understand the benefits of Kelo, make "a deal" with Kelo
The siezed property isn't going to be given to a billionaire, just rented to a billionaire for the next thirty years - after which the billionaire would have the option to purchase the then-dilapidated stadium for a cool million dollars (today the 75 acres for the stadium is appraised at $27.1 million).
There's a bit of irony there that I haven't thought about before. Today, a run-down neighborhood and a trailer park has a taxable value of $27.1 million. After building a $700 million stadium, allowing it to depreciate over 30 years, and internalizing the specific-asset nature of the stadium, the best deal the city can strike with the team is to sell it for $1 million? Arguably the land will be worth more than $1 million in 2040, which is evidence of the massive rent transfer from the good folks of Arlington to Jerry Jones. However, assume the city extracted all of the residual value of the stadium in the $1 million deal, what would this say about the "value" of a stadium?
Okay - off to grade.
More google maps apps
I am back from vacation and am wading in the shallow end of the Matrix - I have to teach tonight and I have some grading to do today - but here is an interesting application of Google Maps:
This is pretty interesting.
Economist resigns over economic freedom study
Noted economist Bibek Debroy has quit his post as director (research) of the Rajiv Gandhi Institute for Contemporary Research. He will leave his current position in August.
More evidence that India's "liberal democracy" reputation is undeserved.
July 05, 2005
Freedom = Socialism?
[WARNING: This is a snarky post. If you are easily offended by snarky posts, then do not read any further.]
A South African group calling itself the Basic Income Grant Coalition calls for more "economic freedom." Of course, they really want nothing of the kind. What they want is more taxes to fund more grants/safety nets/welfare so that people will stay poor and need more grants/safety nets/welfare so that people will stay poor and need more grants/safety nets/welfare so that people will stay poor and need--oh hell you get the picture.
Calling a thing "freedom" doesn't make it so.
Economic Freedom of North America 2005
The Economic Freedom of North America 2005 Annual Report was released last week by Canada's Fraser Institute and the U.S.'s NCPA.
Hey babe, what's your
Endurance athletes want to know. But unless you're an endurance athlete you've probably never heard of VO2 Max or even care what it is.
So in honor of Lance Armstrong's attempt at a seventh straight Tour victory, it's time for a little tutorial (UPDATE: Armstrong took the yellow jersey today.)
VO2 Max measures the amount of oxygen your body can consume (i.e., burn) per minute per kilogram of bodyweight. An average thirty-something healthy male has a VO2 Max of about 40 meaning that he can use no more than 40 ml of oxygen per minute per kilogram of weight. Lance Armstrong by contrast reports a VO2 Max of about 84 to 85, but even this is a bit lower than the highest-ever recorded VO2 Max of 93.
If you're a runner and want to know your VO2 Max, you can avoid the expensive test and estimate it based on your recent race times. Based on yesterday's 5k race result (20:11), my VO2 Max is about 49.
Tierney on Eminent Domain
A brief return from my travel-related hiatus. John Tierney has an excellent eminent domain piece in today's NYTimes. The timing is perfect because my IHS lecture this morning was on property rights and eminent domain abuse. (Sorry no link--there's something funky about the the MT interface and the Firefox/Mac combo I'm using at the moment.)
Hat tip to Aeon Skoble, one of my awesome IHS colleagues. Kudos too for Lynne Kiesling, Mike Allen, and Elizabeth Hull for some rocking (to use one of Lynne's favorite adjectives) lectures.
World’s largest financial institution to be privatized
The lower house of Japan’s parliament has narrowly voted to privatize Japan Post. (Additional info here.) Japan Post not only delivers mail and packages; it also sells insurance (it has a 40% market share in Japan) and operates a Postal Savings system with deposits of $1.9 trillion. Its total assets of $3.1 trillion (that’s right – trillion) make it the largest financial institution in the world, twice the size of Citigroup. The bill now goes to the upper house. Reports the Washington Post:
The legislation calls for dividing state-run Japan Post into separate businesses for mail delivery, banking services and insurance starting in 2007. A fourth company would handle employee salaries and manage post office properties. All four companies would be grouped under a holding company at first, but the umbrella organization would then sell its shares in the banking and insurance enterprises by 2017.
The rationale for the privatization is to gain efficiency, but the plan seems to overlook the likelihood that Japan Post’s current scale is too large for efficient operation. Why not divide the deposits among two or three new private banks? The insurance policies among two or three new insurance firms?
In any case, this is a milestone for financial privatization. Perhaps Japan will inspire other countries in Asia (like India) to sell off inefficient state-owned commercial banks.
ADDENDUM: Perhaps Japan's lead will even inspire the US Congress to privatize the US Postal Service?
On top of spaghetti
In a 1994 interview with Charlie Rose available on the Pulp Fiction bonus dvd (an excellent Father’s Day present I was watching the other night), director Quentin Tarantino told Rose (transcript here) that his three favorite movies of all time were Brian De Palma’s Blowout, Howard Hawks’ Rio Bravo, and Martin Scorsese’s Taxi Driver. More recently Tarantino (along with several other directors) gave the Independent (UK) a list of his ten favorite movies. (Hat tip: Tyler Cowen at Marginal Revolution.) The top three: 1. The Good, the Bad and the Ugly (Leone, 1966), 2. Rio Bravo (Hawks, 1959), 3. Taxi Driver (Scorsese, 1976). Blowout isn’t even among the new QT top ten, although De Palma’s Carrie comes in at #8.
I’m guessing that Tarantino today better appreciates his debt to Leone’s work after making the spaghetti-western-inspired Kill Bill.
July 04, 2005
Brennan-Buchanan trumps Pigou in London
Last year I rented a car at Heathrow and drove into central London, knowingly incurring the £5 congestion charge. (Enforcement is by cameras that catch license plates. You have to phone in and pay by credit card -- that day. Fine for being late: £100.) Next time I’ll take the bus. Not only was it harrowing to drive on the left-hand side down narrow London streets, but starting today the congestion fee is £8.
The £5 charge was already effective at reducing traffic congestion. Bloomberg reports that there has been
an 18 percent decline in traffic since the introduction of the toll in February 2003 […]
So what’s the rationale for raising the charge to £8? Because it’s been discovered that £5 is too low for efficiency (i.e. too low to fully internalize the traffic cost each additional car imposes on others, as economist A. C. Pigou would have recommended)? No. It’s all about the revenue. Writes Ben Webster in The Times:
Ken Livingstone, the Mayor of London, is imposing the increase largely because he will make an additional £35-45 million in annual profit. […]
British economists who supported the congestion charge as an efficiency measure must now be having second thoughts. As Brennan and Buchanan’s Leviathan model predicts, the level of the charge is now being set not for the sake of traffic efficiency but revenue-maximization. In the tragedy of the fiscal commons, Brennan-Buchanan trumps Pigou.
July 03, 2005
Gives new meaning to "circulate at par"
Happily, the faces on commercial bank notes are not limited to dead politicians and royals. News from Scotland, the most golfing-mad of the three regions (the other two are Northern Ireland and Hong Kong) where private notes are still allowed:
Jack Nicklaus will feature on a 5- pound ($9) note to be issued by Royal Bank of Scotland Group Plc to commemorate his last appearance as a professional golfer in the British Open at St. Andrews.
How cool is that? (No cutting remarks, please, about how the Golden Bear has become a Paper Bear.) Story here.
July 02, 2005
Nixon to Bangladesh: Drop dead
Recently declassified Nixon White House tapes show Tricky Dick to have been even more of an inhumane power-abuser than previously realized. While (West) Pakistan’s military slaughtered an estimated 3 million civilians in trying to put down the secession of Bangladesh (then East Pakistan), Nixon and Henry Kissinger continued to aid and support Pakistan’s military dictator General Yahya Kahn, apparently because (1) Nixon didn’t like India’s prime minister Indira Gandhi, who favored Bangladeshi independence, and (2) Nixon had “special feelings” for General Khan, who was one of Nixon’s communication links to Red China.
Most incredibly, Nixon and Kissinger were willing to risk a superpower confrontation to stop the government of India (being flooded with Bangladeshi refugees) from sending troops over the border to help Bangladesh win its independence. (India eventually did, Pakistan quickly surrendered, and Bangladesh became independent.) In the words of Asia Times reporter Debasish Roy Chowdhury, Nixon
to put India in a spot, even went to the extent of pleading with the Chinese to initiate troop movements toward the Indian border in coordination with Pakistan, and assured it support in case the Soviet Union jumped into the fray. Near the end of the war, in a highly secret meeting on December 10, 1971, Kissinger pitched the idea to Chinese ambassador to the UN, Huang Ha. The declassified documents reveal that China took a couple of days to think about it and finally said it was not game, much to Kissinger's disappointment.
When the US consul general on the scene protested that the US should be denouncing the Pakistani atrocities, Nixon cabled back: "Don't squeeze Yahya at this time." And Nixon wasn’t just limited to talk:
The US government supplied military equipment worth $3.8 million to the Pakistani dictatorship after the genocide started, even after telling Congress that all shipments to the regime had ceased. Throughout the war, the US government tried everything in its power to hinder India. The US policy included support of Pakistan in the United Nations, where it branded India as the aggressor, and putting pressure on the Soviets to discourage India, with the threat that the US-Soviet detente would be in jeopardy if Moscow did not play ball. When war broke out, Nixon promptly cut off economic aid to India, and at one point dispatched the nuclear-powered aircraft carrier USS Enterprise to the Bay of Bengal to "intimidate" India. When nothing worked, it pleaded [with] China to join the war to scare off India.
Incredible. Thank goodness the US government has stopped playing geopolitical power games in Asia. Oh, wait ...
HT: William Marina at Liberty and Power.
Labor theory of value
Over at Marginal Revolution, guest-blogger Fabio Rojas notes that copies of Bertell Ohlmann's Marxist board game "Class Struggle" are going for about $15 on eBay. My question: does $15 exactly correspond to the socially necessary labor time for producing the game?
July 01, 2005
Bernanke and monetary regimes
Ben Bernanke is now at the head of the Council of Economic Advisors. In fact, he’s the entire Council at the moment – the other two seats are vacant.
I earlier noted my surprise at finding out that Bernanke was a closeted Republican. In his former life as a Princeton academic, Bernanke (perhaps understandably) kept a low political profile. The NY Times reports:
Mark L. Gertler, a professor of economics at New York University who has written more than a dozen papers with Mr. Bernanke […] said he did not know his close friend's political affiliation until relatively recently […]: "He's not ideological. I could imagine Ben working with economists in the Clinton administration."
Bernanke has, however, expressed strong opposition to a couple of ideas near and dear to me: he’s hostile to the gold standard and laissez-faire banking.
In a 2004 speech available here, Bernanke reviewed the Great Depression and drew these lessons:
The gold standard orthodoxy, the adherence of some Federal Reserve policymakers to the liquidationist thesis, and the incorrect view that low nominal interest rates necessarily signaled monetary ease, all led policymakers astray, with disastrous consequences. […] Another lesson is that central banks and other governmental agencies have an important responsibility to maintain financial stability. […] Finally, perhaps the most important lesson of all is that price stability should be a key objective of monetary policy.
The “gold standard orthodoxy” is the idea that a central bank should live up to its commitment to redeem dollars for gold at the promised rate. The “liquidationist thesis” is the idea that the economy will recover from a recession more soundly if policymakers do not try to re-inflate the economy or otherwise prop up bankrupt firms.
You might shrug this off with the thought that it’s purely an antiquarian question -- the US isn’t going to consider a return to gold, or the abolition of the central bank or deposit insurance, any time soon. But the choice between gold-like systems and discretionary central banking is a live question in other countries. I wonder where Bernanke will come down when the US is asked its opinion on the options for a developing country that is facing a monetary regime choice. Will his view of the Great Depression blind him to a history lesson that cuts the other way, namely that – as Kurt Schuler has shown – a developing country typically does better with a serious pre-commitment for its monetary regime (dollarization or a currency board) than with a discretionary central bank?
A little fun for the kiddies
Over the weekend, a lot of ice cream will be eaten. Why not burn some calories and have some fun with the kids by making your own ice cream without an ice-cream maker?
Thanks mom, I think?
"To everyone else, it seems like a stupid thing to do. To me, $10,000 is like $1 million. I only live once, and I'm doing it for my son," she said.
So says Kari Smith who had her forehead tattooed with the Web address of a gambling site for $10,000.
If (like me) you were disappointed by the attempted fusion of Bollywood and Hollywood in Gurinder Chadha’s Bride and Predjudice, get ready for Willard Carroll's Marigold, set for a January 2006 US release. B&P paired a leading Bollywood beauty (Ashwariya Rai) with a no-name western actor (Martin Henderson). Marigold pairs a leading Bollywood hunk (Salman Kahn) with a no-name western actress (Ali Larter). I see a problem: Salman Kahn is a star (especially among NRI teenage girls) for his dancing and physique, not for his acting. (He was truly awful in Baghban.) So I’m keeping my expectations low.
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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