Division of Labour: October 2005 Archives
October 31, 2005
Are you morally outraged by the high price of gasoline and looking for a scapegoat? Don't calm yourself down with an economic analysis of how the high price signals (temporarily) greater scarcity, rations demand and encourages supply. No, stay mad. In an op-ed piece in the St. Louis Post-Dispatch today, Senator Richard Durbin (D-Illinois) not only eggs you on, he tells you whom to blame:
But don't blame only the hurricanes or Saudi sheiks for the outrageous fuel prices. The biggest culprit is the greed of Big Oil.
Durbin’s evidence: oil companies made record profits last quarter. I guess that clinches it -- after all, how could we explain an increase in profits without an increase in greed? (Durbin doesn’t mention it, but I suppose he must also believe that the drop in local gasoline prices from a peak of $2.99 to the current level of about $2.40 reflects a 20% drop in greed. Or maybe, as Russ Roberts suggests, the suppliers have simply forgotten how to gouge?) Why analyze supply and demand factors when “greed” provides a much simpler and more emotionally satisfying theory?
Durbin wants a “windfall profits tax” in order to “punish the profiteers” and insure that oil companies “will be discouraged from gouging consumers”. Some of the tax revenue, he proposes, will be used “to provide financial incentives to auto makers to make more fuel-efficient vehicles”. So let me get this straight: although higher gasoline prices give consumers an incentive to pay more for fuel-efficient cars, and thereby provide auto makers with a financial incentive to produce such cars, we can’t do it that way. We need to put government in the middle to siphon off an arbitrarily defined “windfall” component of higher gas prices and dole the revenue out as artificial subsidies to auto makers.
In its print edition, the Post-Dispatch quotes Winston Churchill making a telling rejoinder to Durbin's type of outrage: “It is a socialist idea that making profits is a vice; I consider the real vice is making losses.”
Population growth in NYC c. 1905
Some interesting information in the Oct. 31, 1905 NYT concerning population growth in the five NYC boroughs between 1900 and 1905 (and 1890-1900).:
Over at the U.S. census the population data for the same five boroughs from 2000 through 2003:
Manhattan: 2000 - 1,537,195 2003 - 1,564,798 (1.8% growth)
What a difference 100 years makes. Granted there isn't much room left in the five boroughs (see page 11), but is NYC a less attractive place to live for other reasons? Could a lack of growth be associated with the fact that NYC has the highest cost of living in the United States? Could it be the severe unemployment losses after the terrorist attacks of 2001 (more here)? Could it be that NYC is too cold?
Hubris or revenge?
The Budget Reconciliation package (PDF) contains $71.4 billion in new savings but it also spends $32.4 billion. Portions of that new spending were intended to be Katrina relief funds, but it seems Alaskan interests have once again succeeded in redirecting funds (PDF) to the state which has become famous for its "Bridge to Nowhere."
This comes on the heels of attempts by Tom Coburn to kill funding for the famous Bridge to Nowhere. Amazing.
Why not paper €1 notes?
Just over half of the members of the European Parliament – 371 out of 732 deputies – have signed a resolution calling for the European Central Bank to issue €1 and €2 paper banknotes in place of the current €1 and €2 coins. The argument for the initiative is odd:
News agency Apcom reported that the initiative, the brainchild of MEP Amalia Sartori (Forza Italia), aims to combat the ‘psychological’ devaluation brought about by the perception that coins have an inferior worth compared to notes.
The monetary authorities have rejected the idea:
But the whole idea has been scorned by the Economics and Monetary Commissioner, Joaquin Almunia and by the European Central Bank.
I suspect that the ECB knows that coins last longer, so they generate a larger seigniorage profit for the ECB.
Here’s a suggestion: instead of forcing a conversion to notes, at ECB expense, why not make it optional and at private expense? Let commercial banks issue €1 and €2 notes at their own expense, just as the banks in Scotland and Northern Ireland currently issue banknotes as low as £1 at their own expense. Let members of the public use notes or coins as they prefer.
2004 Global Labor Survey
Abstract: The 2004 Global Labor Survey (GLS) ($ unless your university subscribes) is an Internet-based survey that seeks to measure de facto labor practices in countries around the world, covering issues such as freedom of association, the regulation of work contracts, employee benefits and the prevalence of collective bargaining. To find out about de facto practices, the GLS invited labor practitioners, ranging from union officials and activists to professors of labor law and industrial relations, to report on conditions in their country. Over 1,500 persons responded, which allowed us to create indices of practices in ten broad areas for 33 countries. The GLS' focus on de facto labor practices contrasts with recent studies of de jure labor regulations (Botero et al., 2004) and with more limited efforts to measure labor practices as part of surveys of economic freedom (Fraser Institute) and competitiveness (World Economic Forum). Although our pool of respondents differs greatly from the conservative foundations and business leaders who contribute respectively to the Fraser Institute and World Economic Forum reports, the GLS and the labor market components of the economic freedom and competitiveness measures give similar pictures of labor practices across countries. This similarity across respondents with different economic interests and ideological perspectives suggests that they are all reporting on labor market realities in a relatively unbiased way. As a broad summary statement, the GLS shows that practices favorable to workers are more prevalent in countries with high levels of income per capita; are associated with less income inequality; are unrelated to aggregate growth rates; but are modestly positively associated with unemployment.
October 28, 2005
It's high Noonan for the U.S.
In her latest column for OpinionJournal, Peggy Noonan seems to sound like everyone's cranky old uncle, but maybe a little more eloquent:
I think that a lot of people are carrying around in their heads, unarticulated and even in some cases unnoticed, a sense that the wheels are coming off the trolley and the trolley off the tracks. That in some deep and fundamental way things have broken down and can't be fixed, or won't be fixed any time soon.
She focuses principally on the growing number of problems President face, and thus can't face. But, the presidency is only one manifestation of what I interpret as her fear that the US, and maybe the world, is going to be swallowed up into a big pit. You really have to read it to see how far goes her despair.
Certainly not a Virginia Postrel or a Michael Cox. Why is it that the "dismal" scientists seem to be the most optimistic about the future? I suppose when you see data of rising per capita GDP and lifespans, of falling infant mortality and disease rates, all around the world except in dictatorships, and you know WHY these trends occur, it tends to make one's glasses more rose-colored. In fact, why is it that only those who seem to seek political solutions to every problem are the ones most pessimistic about the future? I suppose if the taxpayers think the world is going to end because of bird flu, high gas prices, Scooter Libby, global warming, then they won't care about paying half their income to Uncle Sam. You can't take it with you, anyway.
So, what comes to my mind that should engender feelings of optimism?
We all have more control over our own lives than we think. How does it improve your life being pessimistic? You'd think Ms. Noonan, who wrote a book on John Paul II, would follow his spirit of hopefulness.
Why Hayek was correct
There are plenty of people (alas, some economists even) who truly believe that centralization is a better way to run a mousetrap. Whether it is nationalized health care, nationalized education, or anything else, it seems that some have an unending faith that a single entity will somehow take care of things. Hayek argued that there was so much pertinent information to internalize, organize, and ultimately act upon that a centralized government/firm/bureaucracy would be unable to provide the same service as the private market.
Now to my point - I blog from Le Chai - galerie du vin, the best little-known wine shop in the Coastal Empire. Located in the Starland District of Savannah, my kid brother pushes the juice to all who value old world wine. Why am I in Savannah? Let's see if I have what it takes to be a novelist:
Thursday, 6:30 pm CDT, the phone rings.
Richard B: Craig, what are you doing?
Craig D: Richard, how's it going? I am making mashed potatoes.
Richard B: Dude, I have an extra ticket to the Georgia-Florida game [in Jacksonville, FL on Saturday afternoon]. Get your a** to Savannah and you can go.
Craig D: I don't know, what's the price of a ticket? [wife gets on the DSL and checks out AA.com]. Oh man, it's $638 and I have to fly back on Monday. Things don't look good at the moment.
Richard B: Expedia has a flight on ATA for $479.
Craig D: [Hem and Haw] How long can you give me before you need to contact someone else?
Richard B: About an hour or so.
Craig D: Let me see what I can do, I will call you back.
I hang up and calmly sit down to eat dinner with the family, after all I had a good pork roast cooked up and wasn't gonna let that go to waste. After dinner, I get on the horn to American Airlines. Over the course of the next forty minutes and about six phone calls between AA, Savannah, and Charlotte, I have flight/game plan finalized.
Go DAWGS!! My first GA-FL game ever, and it wouldn't have happened if life was centralized. Thank goodness for decentralization - my consumer surplus is huge ( $100 plus some frequent flyer miles for the plane ticket and face value of the game ticket). What are the chances that a centralized airline industry would be so accommodating to get me half way across the continent and back in three days in order to see a football game.
K. G. Mungowitz to talk at Capital U.
“Why Democracy is Overrated”
Suggested popular writings by Michael C. Munger:
Thanks JC/Name Game
1. I spent Wednesday visiting John Charles Bradbury and his students at Sewanee. I had a fabulous time and even got to see the Adam Smith stained glass window in Sewanee's chapel. Thanks for your hospitality, JC.
2. My turn on the name game. There are Frank Stephensons who:
--designed the Mini (and moved on to Ferrari/Maserati and now Fiat)
--is a print technician at Oaklands College UK
--is a senior technical manager at Applied Biosystems
--is editor of FSU's Research in Review
--is the author of the novel "An Unlikely Journey"
--is director of the Stevenson School's annual fund (Not only does a Stephenson direct the Stevenson School's annual fund, it also has a (Ron) Provost as its dean of students.)
--is a Joel Chandler Harris scholar.
--was [thanks Larry] a cricket player in India
--is my dad and was a guest on Michael Feldman's NPR program to discuss his "Great American Chitlin Cookbook" (BTW, I don't eat chitlins and fortunately they were hardly ever served when I was a child.)
October 27, 2005
It's good to be the king
Over at the Club for Growth Blog Andrew Roth links to a story at the Tax Foundation on oil industry profits and gasoline/diesel taxes at the federal and state level. The topic is timely as Congress debates whether to impose a windfall profit tax in the oil industry (doesn't that violate some equal protection clause?). The windfall profit tax is one of the worst possible policies Congress could choose, however the politics of the windfall tax are undeniably luring.
The Tax Foundation provides a similar picture (but I like mine better):
The picture shows that oil profits are much more volatile than the state and federal taxes generated on refined gasoline products. While Congressmen are quick to accuse private oil companies of price gouging when their profits are "suspiciously" high, where are the howls of protest when the federal and state governments make out like bandits (oops) when the oil companies take it in the shorts? Oh yeah, it's good to be the king.
Here is some brief statistical evidence. Looking at the descriptive statistics of oil profits and state and local taxes over the period 1977-2004, here's what we get:
Variable | Obs Mean Std. Dev. Min MaxThe volatility of oil profits over the sample period is much greater for oil company profits relative to state and federal taxes. Difference in variances test suggest that the standard deviation of oil profits is greater than state taxes (F=6.67, P<0.000) and federal taxes (F=3.156, P<0.002). I provide a STATA data file below.
Indeed it's good to be the king. The federal and state governments face little risk while sucking tax dollars out of the system whereas private oil companies face all sorts of risk and costs changes which influence their profits.
Name Game, and Sowell on Parks
I'm the first "Tim Shaughnessy" that pops up in Google.
Thomas Sowell discusses the passing of Rosa Parks in his most recent column. Why was the bus segregated in the first place?
It was politics that segregated the races because the incentives of the political process are different from the incentives of the economic process. Both blacks and whites spent money to ride the buses but, after the disenfranchisement of black voters in the late 19th and early 20th century, only whites counted in the political process.
Were it left private, no business owner in his right mind would alienate a large customer base by segregating. Of course he could, but his profits would suffer.
Alas Robert Lawson, like Larry White, is a pretty common name:
Robert Lawson, the very famous children's author/illustrator.
Robert Lawson, an MP in the Parliament of South Australia.
Robert Lawson, law professor at the University of Kentucky.
Robert Lawson, well-known 19th Century architect.
Robert Lawson, admissions officer at the University of Exeter.
Robert Lawson, professor of education at Ohio State University right here in Columbus.
Robert Lawson, some scientologist.
Robert Lawson, emeritus professor of economics at Ball State U.
Robert Lawson, motivational speaker and former colleague of mine at Shawnee State University (yes we had to trade mail all the time too). Also, I sold him my house in Portsmouth Ohio causing no shortage of confusion among the bankers.
On common names
Following up on Larry's post on name confusion, as far as I know there is only one other Craig Depken. He too has a doctorate, although in mechanical engineering. I have never been accused of being him, but the reverse has happened. This is likely because he has only a handful of mentions on the net whereas Craig Depken Mark II has (perhaps) hundreds.
Having a relatively uncommon name has the somewhat pleasant outcome that the self-google is much less time consuming, and is perhaps more informative, than with a more common name. On the flip side, I don't have plausible deniability when it comes to certain Google hits. Whether this becomes more important in the future - either in the private sector, government, or in academia - is an interesting question (sounds like a Hal Varian paper topic).
Ohio Issue 1: The Two Billion Dollar Boondoggle
By: Robert A. Lawson, Ph.D., posted October 27, 2005 by Buckeye Institute.
This November, Ohioans will be asked to vote on an amendment to our state constitution called “Jobs for Ohio.” Issue 1, as it is known, has three parts: $500 million in more money for the so-called “Third Frontier,” $1.35 billion for “public infrastructure,” and $150 million for private business site development. All of this is to be financed using bonds. Before saddling our state, and our grandchildren, with $2 billion of debt voters should know the facts that belie the rhetoric.
First, the advocates of Issue 1 claim that it will not raise taxes. This is disingenuous at best. Every single dollar of the $2 billion in bonds has to be paid back by taxpayers with interest totaling about $600 million. It is natural for the politicians to say vote for this and it won’t cost you anything, but we should know better. There is no such thing as a free lunch.
Second, the largest chunk of money is for “public infrastructure.” No doubt they emphasize this because they feel the public is more likely to support money for ‘roads and bridges.’ The problem is that we already have money in the pipeline from other bond initiatives for such items and there has been no demonstration that we need an infusion of new money.
Furthermore, voters should ask why the legislature would not allow them to vote on these three different bond issues separately, as supposed to be required by the state constitution. In the end though, these other two components of the amendment are ‘poison pills’ that make Issue 1 a bad idea no matter how much you might like to see more spending on roads and bridges. The state has no business spending taxpayer dollars to invest in private businesses. The idea that state development officials will do a better job of finding profitable investment opportunities than private investors is simply laughable.
Third, advocates say that thousands of jobs will be created. But the fact remains that there is simply no evidence that these sorts of corporate subsidies create net jobs. Taking money from taxpayers (thus destroying jobs) and giving it to favored businesses (thus creating jobs) doesn’t create jobs, it simply moves them around. But politicians know they can claim success whether the jobs are real or just the result of a sleight of hand illusion.
Fourth, in addition to the flawed economics of this plan there are serious political implications. Issue 1 allows for the state of Ohio to engage in joint ventures with private firms. This raises serious concerns about the opportunities for corruption, as the state will be directly investing funds in private companies. This makes Governor Taft’s Third Frontier the perfect breeding ground for the kind of corruption and scandals that are all too common in state and local government as it is.
Additionally, such investments by the state will have a corrupting influence on businesses as they will begin to look for investment opportunities that are not profitable perhaps but will get them funding from the state. Businesses should be focused on pleasing their customers and private investors, not on getting state funding.
Lastly, the Ohio Constitution recognizes many of these flaws and indeed several constitutional safeguards will have to be waived within Issue 1 to make it happen. Issue 1 allows for more debt issuance within a fiscal year than the Constitution permits. It permits the state to directly aid private entities including forming joint ventures, which the Constitution forbids. It also exempts the bond issue from a number of Constitutional requirements such as the requirement that taxes must be provided for to pay for the interest and final bond repayments.
Clearly the rhetoric does not live up to reality when it comes to the arguments behind Issue 1. Voters should know exactly what they are voting for when they pull the lever on Issue 1 come election day, and it is nothing more than industrial planning, corporate welfare and socialism dressed up as a jobs plan.
Robert A. Lawson, Ph.D. is Professor of Economics and George H. Moor Chair at Capital University in Columbus, Ohio and a Senior Fellow with The Buckeye Institute.
History in pictures
A fascinating archive of WWI pictures (some are somewhat graphic). The comments are also interesting.
October 26, 2005
The Federal Department of Tuition Management?
From today's Chronicle of Higher Education (reg req'd):
The measure, which has been wrapped into the House's plan to reauthorize the Higher Education Act (HR 609), would assign institutions a "college affordability index" based on a comparison of their rate of tuition growth to the Consumer Price Index, a measure of inflation that has averaged around 3 percent or 4 percent in recent years. Colleges that raised their tuition by more than twice the rate of inflation for three consecutive years would be required to submit "action plans" outlining steps they would take to slow the rate of growth.
You truly have to wonder if there is something in the water in Washington, D.C. This is a great idea! We will have a bureaucracy in Washington that monitors the pricing behavior of some 3,000+ institutes of higher education and put them on a "watch" list when price increases are greater than the CPI changes? Can someone please send Congressman Howard P. (Buck) McKeon, a Republican from California, and author of the measure, macroeconomics and a microeconomics textbook? As the CPI is an average of a large basket of goods, including gasoline and pickled pork brains (okay, those may not be in the basket), pegging the legal increase in the price of a good to the average price changes of all other goods is pure insanity.
Here in Texas individual public schools were granted the ability to set tuitions according local market conditions - previously all tuitions had been set in Austin. Of course tuition rates have adjusted as schools reach new equilibrium prices, but at the same time so has the amount the state is providing higher education.
From what I have read of other states, this trend is almost universal. Public education is slowly becoming more "privatized," by which more of the cost of a student's education is paid by the student and less by the general treasury. There are good arguments for why this might be efficient, but don't tell that to the Aggie Mom and Dad who has seen their tuition bill increase 20% in the past two years.
At my humble school of 25,000 we are not spending much more per student although state support for the school has been falling over the past few years. It seems a little naive for the state to cut the subsidies and then pitch a fit when schools raise tuition to cover the lost subsidies.
B.C. Comic strip today
October 25, 2005
It ain't me, babe
A British comic named Dave Gorman had a mildly amusing TV series where he just traveled around the UK meeting other people named Dave Gorman.
I’d have an even easier time than Dave. Among the other Larry Whites out there that I’m not:
● The NYU business school economist (back when we were both at NYU, we used to trade mail and phone messages frequently)
● The past president of the Interscholastic Sailing Association and recipient of US Sailing’s Nathanael G. Herreshoff Trophy
● The University of Alabama’s associate athletic director for media relations
● Singer / songwriter / jazz instrumentalist
● Founder of Larry White Associates, Inc., a healthcare job-search firm
● The pitcher who had late-season cups of coffee with the LA Dodgers in 1982 and 1983 (although I do have his 1983 Albuqueque baseball card)
● Owner of Lo-Lo's Chicken & Waffles in Phoenix, AZ
● The producer of documentaries, including Leona Helmsley - The Queen of Mean
● The gospel singer, founder and president of Larry White Ministries in Saginaw, MI
● The Vermont yoga instructor
If my parents had anticipated Google, they’d have given me a less common name.
Jane Galt parrots the official line on why the Fed removes food and energy prices from the consumer price index (CPI) to measure “core” inflation:
Well, the answer is that food and energy prices are very vulnerable to sudden supply shocks. … Central bankers don't need to know whether certain important goods are in short supply; they need to know whether they are printing enough, too much, or too little money … . So they strip out volatile items in order to see whether the general price level is rising too fast.
The problem with that view is that food and energy prices are part of the general price level. Discarding them is discarding relevant information.
My hypothesis is that Fed likes multiple measures of inflation mostly for PR purposes. If (like today) “core” inflation is below CPI inflation, Fed spokesmen trumpet the “core” numbers to show what a good job they’re doing. If (as when food and energy prices are falling) CPI inflation is below “core” inflation, they prefer to cite the CPI numbers.
Jane also buys into the argument that a little bit of inflation helps the economy cope with “sticky” wages. She unfortunately doesn’t mention that a little bit of inflation itself makes wages a little bit stickier. When due to increasing productivity (like in the late nineteenth century), a period of stable or even gradually falling consumer prices is not a problem.
Today's WSJ reports (p.A2; sorry no link) that Wal-Mart CEO Lee Scott "called on Congress to consider raising the minimum wage."
Why would Wal-Mart advocate a minimum wage hike? Scott claims it's time to "help working families" who are having a difficult time buying products from Wal-Mart. (Here's a previous post on the "working families" gibberish.)
Scott's argument that a minimum wage hike would help Wal-Mart's sales is specious. Here's an excerpt from an NBER Working Paper's abstract:
The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase , their hours and employment decline, and the combined effect of these changes is a decline in earned income.
For Wal-Mart's real motivation we return to Bruce Yandle's notion of bootleggers and Baptists. The WSJ reports,
Though Wal-Mart pays above the current $5.15 per hour minimum wage--the average hourly wage among its 1.3 million U.S. workers is just under $10 per hour--some of its smaller competitors don't pay as much. As a result, a boost in the minimum wage could pressure the profitability of Wal-Mart competitors.
ADDENDUM: Below is part of an email I received about three weeks ago. I cannot fathom what would have made the sender think I'd be interested.
As you may know, this fall filmmaker Robert Greenwald will release Wal-Mart: The High Cost of Low Cost. In order to help generate interest, and action around this film’s release, Moving Ideas is hosting an online discussion featuring filmmaker Robert Greenwald, labor leader David Bonior and journalist Harold Meyerson on October 6 from 2 to 3 pm EST.
We'd love to give as many people as possible the opportunity to talk directly with the filmmaker and our other esteemed panelists. Pease consider sharing this chat with your audience to help involve more folks in the fight against the big box Goliath.
UPDATE: Ulterior motives are nothing new for minimum wage supporters. From Alex Tabarrok on MR:
It's no surprise that progressives at the turn of the twentieth century supported minimum wages and restrictions on working hours and conditions. Isn't this what it means to be a progressive? Indeed, but what is more surprising is why the progressives advocated these laws. A first clue is that many advocated labor legislation "for women and for women only."
Progressives, including Richard Ely, Louis Brandeis, Felix Frankfurter, the Webbs in England etc., were interested not in protecting women but in protecting men and the race. Their goal was to get women back into the home, where they belonged, instead of abandoning their eugenic duties and competing with men for work.
Unlike today's progressives, the originals understood that minimum wages for women would put women out of work - that was the point and the more unemployment of women the better!
October 24, 2005
I’ve been doing press interviews by phone this afternoon, as my campus’s “designated expert” on monetary policy, on the nomination of Ben Bernanke to succeed Alan Greenspan. What have I found myself saying? That Bernanke is no Harriet Miers – he’s got expertise and experience. That he was probably the least worrisome of the frequently mentioned candidates for the job. That I wish he were more of an unambiguous inflation hawk (back in 2003, he was worried about deflation when there wasn’t any; his voting record as an FOMC member is moderate). That he’s been an advocate of explicit inflation targeting, unlike Greenspan, so it will be interesting to see whether Bernanke changes his tune once he’s sitting in Greenspan’s seat, or instead (as would be a step in the right direction of limiting the Fed’s discretion) he actually implements inflation targeting.
On counting streams
A fairly well written article from the Wall Street Journal concerning the literature debate between Hoxby and Rothstein over school competition.
Why can't econometrics textbooks provide such intuitively appealing descriptions of the instrumental variables technique?
Testing a hypothesis in economics isn't as straightforward as, say, testing a drug, where researchers can randomly assign some subjects to receive a placebo. Many economists believe they can approach scientific rigor, however, by taking advantage of random events like draft lotteries and judicial assignments. For Dr. Hoxby, streams offered such an opportunity: Cities with lots of streams had been randomly chosen by nature to have more school districts and more school competition, while cities with few streams were naturally home to fewer districts and less competition.
The current literature spat focuses on Hoxby's particular instrument - the number of small and large streams instruments for the number of school districts in a particular city. Rothstein argues against Hoxby's instrument and ultimately quesitons her conclusion that competition amongst schools improve school performance (which right there says more than anything else, IMHO).
While the criticism of a particular instrument is a common place, after all if there were a perfect instrument then there wouldn't be a need for the instrumental variables technique in the first place, such debates rarely make it outside of the journals or poorly attended conferences. It is interesting to see this particular debate make it into the MSM, and in a fairly well written article.
Does he have a hood and robe in his closet?
From a letter in today's AJC (scroll down):
As usual, positives ignored by press
Last Wednesday evening, I was delighted to read on the Internet that Georgia fourth- and eighth-graders had outscored their counterparts in such non-Southern states as Illinois, California, Arizona, New Mexico, Nevada, Hawaii and Alaska. The next morning I read your article, which I would have headlined by telling of our successes. But that wouldn't be consistent with your agenda, would it?
As a diverse, multicultural state, we will never outscore students in monolithic states such as New Hampshire and North Dakota, where the kids look like they came out of an injection molding machine.
Talk about soft bigotry of low expectations--the writer seems to think that non-whites are incapable of scoring as well as whites. Must have been written by some gap-toothed bubba driving a truck with a gun rack, right? Actually, I'd bet dollars to doughnuts that the writer is a lefty (one clue--the phrase "diverse, multicultural"; another--his residence in Decatur, an overwhelmingly liberal city; another--his sneering at NH and ND). If I'm right, this letter provides a great counterexample to the nauseating moral superiority of leftists.
Something’s Gotta Give
Bloomberg is reporting an odd constellation of events in Venezuela: inflation is currently around 16 percent and is expected to keep rising, but nominal interest rates in bolivars were 8.4 percent last week and have been falling. Normally, as any good student of money and banking knows, the nominal interest rate is above the inflation rate (because the market-clearing real interest rate is positive) and the two move in the same direction (to preserve the same underlying real interest rate).
How does Venezuela manage to have negative real interest rates? Later in the Bloomberg article comes this hint:
[Central bank director] Maza said he isn't concerned inflation will accelerate because Venezuela has a fixed exchange rate and government-set price limits.
Not surprisingly, the fixed exchange rate is bolstered by exchange controls: you can’t buy all the US dollars you’d like at the official rate. The black market rate is considerably higher. So part of the reason people are willing to lend bolivares at a negative real rate is that they don't have much choice: the government blocks them from lending at positive real rates in other currencies.
The falling nominal interest rate, I’m guessing, is the temporary “liquidity effect” of a massive injection of new bolivares by the central bank.
October 23, 2005
Who Dey!? Who Dey!? Who Dey Think Gonna Beat Dem Bengals!?
Two sports questions today:
How many years has it been since Steelers fans have said they "are getting ready for the Bengals this weekend."?
How many years has it been since I've yelled "Who Dey" without feeling like a complete idiot?
October 22, 2005
Risk Averse Borrowers
The Residential Finance Survey: 2001 from the Census is now available.
The ratio of adjustable rate mortages to all mortgages is little more than 10 percent. It amazes me that almost 75 percent of home mortgages are traditional fixed rate mortgages. Given the spread between fixed rate and adjustable rate mortgages, the banks are more willing to accept the interest rate risk than consumers.
Mommy Knows Worst : Highlights from the Golden Age of Bad Parenting Advice
James Lileks fans should know that his new book will be released this week according to Amazon.Com.
Shhh. I'm getting a copy for my wife for Christmas.
Work and Live Longer?
A new study claims that people who retire early do not live as long as those who work longer. The study claims to have controlled for the obvious selection bias in that people often retire early for health reasons. As they say, more research is needed. [Media link.]
UPDATE: Here's a better link covering the study.
JC in the AJC
My friend JC Bradbury of Sabernomics has his work on the Mazzone effect cited in today's AJC:
Throughout the years, it has been extremely rare that a Braves pitcher performed better once he had moved on to another team. A Sabre-matician named J.C. Bradbury, in a statistical analysis performed last year, found Mazzone to be worth .63 ERA points to the average pitcher.
October 21, 2005
Permissum venalicium increbresce
Here's an image of the seating chart at U.S. Cellular Field in Chicago:
SEC: 518 ROW: 15Are there going to be scouts at tomorrow night's game? The prices above lead one to suspect that either a) nettickets is not a legitimate ticket broker, b) the seats behind the dugout are really bad compared to upstairs, right field line, or c) whoever is trying to sell tickets for $11,000 a pop is likely to have tickets after the end of the game.
Every year there are howls of protest as those who are "lucky" or "connected" obtain relatively low-priced tickets to a megaevent, such as a World Series or Super Bowl, and turn around to sell them for what seems to be an enormous profit.
While it is easy to point to the megaevent as a goldmine for ticket brokers/scalpers/fans, where were the complaints when the Sox played the Royals on a Tuesday afternoon in July? The scalpers likely didn't do very good then. Outside of the megaevent, small-scale ticket scalping does not seem to be a very profitable industry (from what little data/anecdotal evidence we have) - average returns seem to be just a little greater than those enjoyed by grocery stores.
Nevertheless, every year many commentators, public officials, and outraged fans demand anti-scalping laws, with the anticipation that anti-scalping laws will somehow a) reduce the window price of tickets (this is ambiguous in theory and not supported empirically in football and baseball - see link to my paper below), b) reduce the street price of tickets (this is likewise ambiguous, but highly unlikely unless expensive enforcement efforts are undertaken), and/or c) "improve" the distribution of tickets (which is in itself an ambiguous goal). I should note that my paper looks at the window-prices of regular season games. Antiscalping laws, if fully enforced, might reduce the window prices for megaevent tickets, but if the law isn't enforced properly or if there is sufficient demand from non-scalpers, ticket prices may not change at all.
While anti-scalping laws are in place in a number of states/municipalities, scalping IS NOT prohibited in Illinois, although you do "need" a broker's license to legitimately sell tickets at above face value. However, the enforcement of an anti-scalping law is so difficult that the Illinois regulation is easily ignored; most enforcement arises from undercover policemen and such. The only place where scalping will be strongly enforced (at least in Chicago) is on the grounds of U.S. Cellular field. and that only up until the first pitch, after which ticket prices will drop quickly (although even this enforcement makes little economic sense).
Economists have long wondered about the apparent under-pricing of megaevent tickets. Various explanations have been proffered, including whether there are differences in risk aversion or cost structures between scalpers and event promoters, whether scalpers act on private information unavailable to event promoters, whether event promoters try to assure a "full house" by selling all tickets (even if at a lower than market clearing price), along with a number of other hypotheses. The existence of the secondary market is of interest, but many anti-scalping advocates are not against the market but against the outcome of the market (nothing new here).
Of course, selling a ticket in the secondary market while following the old adage of "buy low and sell high" is no different than what the blind trusts of the politicians do in the stock market, what the jet set does when purchasing a penthouse in the new Trump Tower, and what goes on in any other market in existence. Nevertheless, anti-scalping diatribes turn the morality of the market on its head and claim those who sell tickets for a profit are price gouging capitalist pig-dogs who deserve popular scorn.
I always wonder where the anti-scalping crowd thinks the "immorality" of scalping tickets lies. Is it in the ultimate price of the ticket ("no one should be forced to pay $3,000 for a baseball ticket"), in their perceived opportunity cost of the expenditure ("think of what society could have done with the $3,000 you spent on a ticket"), or in the distribution of the ultimate value of the ticket ("I am mad because I didn't get a chance to sell two tickets for a huge profit")? If a long-time Sox fan found two tickets in the gutter, it is entirely possible (indeed, perhaps probable?) that if someone offered that fan $4,000+ per ticket then the fan would sell the tickets and go to the local pub to watch the game. Of course, the fan could choose not to sell the tickets, but the decision would be hers.
Bruce Springsteen once commented that people were fools for paying $150 on the street to see one of his shows, after all he wouldn't pay that much! Such a statement requires interpersonal utility comparisons, which are generally not possible. De gustibus non est disputandum, caveat emptor, et permissum venalicium increbresce (or something close to that).*
* "Let the market prevail." I'll admit to weak Latin skills, but don't tell my high school Latin teacher. Maybe someone with better skills can help out on this one? (Update: Jake Mortens emails to point out that "increbresco" should likely be "increbresce").
More Coffee, Less Crime
I heard this one on Boortz while driving in this morning (excerpted from WaPo):
BLUFFTON, S.C. -- A would-be carjacker got a different kind of jolt from his intended victim's morning cup of coffee, authorities said.
The suspect tapped the car window Wednesday morning with a gun and motioned the driver to get out, Chief Deputy Roy Hughes said.
But the driver _ who had just bought a cup of hot coffee _ slammed the car door into the carjacker's legs, threw the coffee at his neck and face and wrestled him to the ground
Hey, Senator, is that a threat or a promise?
When I was a child, my mother would respond to my tantrums ("Mom if I can't _____ then I'm going to run away from home!") by asking "Is that a threat or a promise?"
I was reminded of my mother's query (and, no, she didn't really want me to run away) by Alaska Senator Ted "Bridge to Nowhere" Stevens in this excerpt from the WaPo:
Sen. Tom Coburn (R-Okla.), a staunch opponent of pork barrel spending, tried to block $453 million for two Alaska bridges that had been tucked into the recent highway bill. Coburn wanted to redirect the money to the Interstate 10 bridge across Lake Pontchartrain, a major thoroughfare that was severely damaged during Hurricane Katrina.
Sen. Ted Stevens, the veteran Alaska Republican, was dramatic in his response. "I don't kid people," Stevens roared. "If the Senate decides to discriminate against our state . . . I will resign from this body."
Of course, there'd just be some other porker elected to replace him; only 15 senators supported Coburn's proposal.
BTW, the bridge to nowhere costs some $4m for each of the 50 residents of the Alaskan island it would serve. Before building the bridge, let's offer them $1m to move. I bet most would take it and we taxpayers would save some $150m.
October 20, 2005
Cash for change
Sounds like Yogi Berra, but it is the name of this site. However, if this is not a scam - do "legitimate" web sites have spelling/grammatical errurs? - it does have some entrepreneurial spunk, but perhaps not as much as this guy.
What made me suspicious? Oh, that was the last line that encourages you to "Click the large orange button". I advise against it.
Ordinal vs. Cardinal scales
This article at Live Science (HT: Drudge) discusses whether there is a need for a Category 6 on the Saffir-Simpson scale of hurricanes. Other than another bin in which to sort storms, I don't see why we need another category. Beyond the scientific interest in wind speeds, barometric pressures, etc. (which the scientists already have access to), what purpose would the higher category serve for the general public? If folks don't get out of the way of a Cat 5 storm, will a Cat 6 do the trick? If folks use the scale to measure how far the storm will move inland, perhaps there needs to be a different scale, not just an extension of the current scale.
The categorization system was designed to convey to the public, and ostensibly public officials if they choose to dial in, expected storm intensity at landfall (and resultant damage). Therefore, once the wind/storm surge reaches the intensity of "absolute destruction/death" what point to say the storm is more intense? A Category 5 will destroy your house in thirty seconds but a Category 6 will destroy your house in twenty seconds?
Indeed, Simpson himself justified the scale in much the same way - the damage from 190 mph wind will look the same as the damage from 165 mph wind:
First, it was designed to measure the amount of damage inflicted by a hurricane's winds, and beyond 156 mph, the damage begins to look about the same, according to Simpson.
If we did include the sixth category, however, it would be easier to "rationalize" how bad storms are today relative to last century (along with subsequent flogging of Republicans and SUVs). After all there were no Category 6 storms back then...
Read More »
As an aside, I wonder how often writers intentionally include "misleading" statements versus common/simple mistakes. Take, for instance, this statement from the original article:
And hurricanes are getting stronger, apparently fueled by global warming.
If you follow the link associated with the words "getting stronger" in the statement above, you find this story with the following statement:
"We're not saying that global warming is causing there to be more intense hurricanes," study author Peter Webster of Georgia Tech told LiveScience. "What we're saying is that sea surface temperatures are rising, and the intensity of hurricanes is associated with that. The warmer the sea surface temperature, the more intense the hurricanes."
Hmmm. Am I missing something?
« Close It
Why do Americans Work So Much More than Europeans?
Edward Prescott says the answer is taxes (.pdf).
I'm in Chattanooga right now along with Prescott to give a short reaction to a his speech that draws heavily from this article.
Let's hope that Florida dodges a bullet and Hurricane Wilma passes by with minimal damage. Does anyone question that if Naples, Florida (the predicted target) is not so lucky, in the dominant news coverage afterwards there will be far less concern for the victims of this hurricane than for Katrina? This hypothesis rests on the following:
--median household income in New Orleans=$27,133
Scott Colley, Berry's President, is retiring June 30, 2006 and there is a search underway for his successor. If you know someone who would be a good president of our fair college, drop me an email (I'm on the search committee) or use the nomination link here.
Interested in being my colleague? Berry is also recruiting for a tenure track economics position to replace my retiring colleague Wilson Mixon. The position is rank open. Applied micro folks--Wilson teaches environmental, econometrics, and micro principles--are especially encouraged to apply. The ad, mailing address, etc. are here.
The Price System at Work: Atlanta Transit Editon (Part 2)
Pricey gas has buses on a roll
Goo Goo Google
I like Google, but this kind of appreciation seems to be a little bit too much.
Story here: A Baby Named Google
The Visible Hand
The International Labour Organization has posted the Working Time Database.
The working time database is a searchable database providing information on the working time laws of more than 100 countries around the world. It covers laws that protect the heath and well-being of workers; facilitate a balance between work and family life; ensure workers have adequate time to devote to their other responsibilities and interests; and prevent discrimination against part-time workers.The database provides summaries of the primary working time laws in each country.
Without big government, how would we know when to stop working? We might just all work ourselves to death.
October 19, 2005
TABOR and Colorado Higher Ed Funding
I recently testified in favor of a tax-expenditure limitation (TEL) at a Georgia legislative hearing. Since much of the discussion about what effects a TEL might have in Georgia has focused on the wonders or evils of Colorado's TABOR, I did a bit of research on the Colorado higher ed funding post-TABOR.
I started with the notion that if TABOR had starved Colorado's colleges (public four year), then they would have had to raise tuition, room, board, etc. I then made my way to the Digest of Education Statistics and calculated the change in Colorado vs the national average change. My findings:
Increase in average undergraduate tuition and fees at 4 year publics:
Increase in total undergraduate cost at 4 yr publics:
I also found this quote in the Denver Post (9/26/2005):
Colorado ranks 49th among the states in the amount it spends on higher education per full-time student, according to the National Center for Higher Education Management Systems. Colorado spent $3,202 per full-time college student in 2004, compared with the national average of $5,721. The state ranked 47th a decade ago with $3,137.
Seems like Colorado was funding higher ed at a low level around the time TABOR was implemented and that TABOR isn't to blame if people think higher ed funding in CO is too low. I, of course, have no beef with low higher ed funding; subsidies for public colleges are largely a transfer from lower income people to higher income people. Perhaps more seriously, I suspect they dilute the quality of higher ed.
Gas Prices & Georgia's Tax Moratorium
In the wake of Katrina, Georgia suspended its gas tax for the month of September. Hmmm ... what a nifty "natural experiment" for studying tax incidence. I've written a short paper comparing Georgia's gas price to the price in neighboring states during the moratorium period. The findings--about 12.8 cents of the suspended 15 cents per gallon tax reached consumers in the form of lower prices. An op-ed version of the paper ran in yesterday's AJC and in today's Rome News-Tribune (I wish this one were online b/c the editor didn't chop it up as badly as the AJC).
Regular readers of DOL and MR will recall Bob and Alex posting that the tax might not be passed along to consumers because the short run, post-Katrina, supply of gas might not be very elastic. Although I find that, on average over the monthlong moratorium, most of the tax suspension did benefit drivers, I also find that the price gap between GA and its neighboring states grew as September progressed (and presumably supply became more elastic). Bob and Alex were onto something--elasticity of supply also matters.
Every country should have its own airline, steel mill -- and banknote printing operation
…because sovereignty is more important than efficiency, as this official from Nigeria explains:
Mr. Ehi’ Emmanuel Okoyomon, two weeks ago said the mint had increased production of the nation’s currency, the naira, by 30 per cent.
Cha-Ching (Part II)
From a report by the College Board titled "Education Pays: An Update" is this graphic:
From Amusement Business comes this little snippet, which I haven't seen or heard locally:
Under a 1988 agreement that staved off a White Sox move to St. Petersburg, Fla., the team does not have to share ticket revenue, concessions, merchandise sales and parking during postseason play with the Illinois Sports Facilities Authority, according to the newspaper.
I am no fan of the publicly built stadium, but if the public does pay at least the local authorities could negotiate a little better. Of course, that assumes that the local authorities are more interested in retiring the public debt and less interested in rubbing elbows with team owners.
Now that St. Petersburg has a "team," perhaps the ISFA can renegotiate - where the Sox going to threaten to relocate to this time? Perhaps Las Vegas, Portland, Charlotte?
October 18, 2005
Health Care Rationing in Canada
The Fraser Institute has released its annual analysis of waiting times in the Canadian health care system. [Link.]
Total waiting time between referral from a general practitioner and treatment, averaged across all 12 specialties and 10 provinces surveyed, fell from 17.9 weeks in 2004 back to the 17.7 weeks last seen in 2003.
Btw, Mike Walker, co-author of the report and the founder of the Fraser Institute and its long time executive director, has recently stepped down from that post and will be focusing more on research and other activities. You may have seen Thursday's editorial in the WSJ about his career. [Sorry no link available.]
Transparency International Chief Talks About Corruption In CIS
Russia, Ukraine, Belarus, and the Central Asian countries rank among the worst in a new survey of perceived global corruption by the nongovernmental group Transparency International. [Link.]
My eyes are burning!!
The numbers are too huge - both for logistical and philosophical reasons. However, the Treasury Department admitted to the following numbers for the fiscal year ending September 30, 2005:
SUMMARYFor the love of Pete please do something about the "receipts" and the "outlays"!! I know, Tom DeLay suggests that the outlays have been trimmed to the bone. Sure.
More information (if you want to ruin your day) available here.
October 17, 2005
Vertical disintegration: Money-losing GM may sell off money-making GMAC
Interesting financial news:
General Motors Corp., facing ever greater losses, told investors Monday that it is thinking hard about selling a majority stake in GMAC, its giant and profitable financial unit.
Actually, it’s not immediately obvious how selling GMAC for cash would bolster GM’s credit rating. GM’s lousy credit rating reflects the fact that it is currently losing billions per year. Without the profitable GMAC, parent GM’s annual losses would be even greater. Selling off GMAC would seem only to convert a positive cash flow into its present-value equivalent, so where’s the gain in that? Isn't it merely a wash?
Here’s where I think the potential gain lies. As part of the same corporation, GMAC shares the same default risk and therefore has the same lousy credit rating as GM, which handicaps GMAC when it borrows wholesale to finance its car loans and home mortgages. After a sell-off, GMAC’s credit rating would vastly improve. GMAC would therefore become more profitable than it is now. Thus the market value of an independent GMAC, with an anticipated good credit rating, would be greater than the equivalent of its cash flow as part of GM.
Putting it another way: there’s a deadweight triangle lost by GMAC having to pay a needlessly high price for its inputs (it has to borrow at GM’s interest rate). Selling off GMAC would eliminate that inefficiency.
Price discrimination c. 1905
Firms have long used advanced pricing techniques to extract greater revenue from their market. Forms of price discrimination have been outlawed in the U.S. and the EU, although many instances of price discrimination tend to go unpunished.
Two key elements required for succesful price discrimination are a) ability to limit arbitrage and b) ability to differentiate demanders (more specifically, different demand elasticities) on an easily comfirmable characteristic. Age and gender are typical textbook examples of the easy-to-confrim characteristic. However, age might not always work - in which case there needs to be another characteristics upon which to distinguish.
From the Oct. 16, 1905 NYT:
The Swiss railroad booking clerks have just been provided with machines for measuring the height of children traveling over their roads, and have been told that all children over three feet tall must pay full fare.
October 16, 2005
Trying to not be repetitive
My last post was a little hard on a wacky Christian Senator (I still laugh at the second picture). I guess I'm still on the same topic.
A Catholic high school principal cancelled the prom. The reason? The story, the principal, and the headline all seem to indicate that the drugs, sex, and alcohol were getting out of control. But, the real reason was:
"It is not primarily the sex/booze/drugs that surround this event, as problematic as they might be; it is rather the flaunting of affluence, assuming exaggerated expenses, a pursuit of vanity for vanity's sake -- in a word, financial decadence," Hoagland said, fed up with what he called the "bacchanalian aspects."
So a Catholic Church, reeling from sex abuse scandals, doesn't really see the main problem with prom being drunken orgies amongst its students. No, the real problem is Veblenian. And here I thought liberation theology was passe.
Seriously, I usually tell people I will refuse to send my kids through public schools, but if these are typical antics of Catholic school principals, I guess I'll have to homeschool. This story grates on both my somewhat orthodox beliefs on Catholic social thought and on my libertarianism.
BTW, Bob and fellow marathoners, I've sort of gotten into this guy's exercise mentality. He calls that sort of running LSD-long slow distance. Doesn't have much good to say about it.
Top Ten Reasons Not to Run Marathons
Aside from the obvious reason not to run a marathon (it hurts!), economist Art De Vany goes through the not-so-pleasant medical research.
My take: Some of this I knew about and some I didn't. Much of it is transitory in nature and not likely to cause long term problems. Much of it is manageable if you know the contributory risk factors (such as not overusing NSAIDS like Advil). And much of it is not settled science. Still, there's no doubt long distance running carries risks.
Today I ran the Columbus Marathon. I was trying to qualify for the Boston Marathon and needed a 3:15 time. The good news is that I'll save a bunch of money not going to Boston in April. That's also the bad news.
I was on a solid 7:15/mile pace through about 20 miles but then started having bad quad cramps in both legs. I ended up limping in for a 3:19:23 final time. Still I can't complain.
World's worst job interview
As mentioned below, I was in Chicago to interview job candidates. One fellow on our list had bounced around at a few jobs and I was already a bit leery of him before he sat down at our table. We asked him to tell us about himself and here's roughly what he said:
Well I'm definitely leaving my current position sometime. Maybe not this year but soon. The pay stinks and the teaching load is too high. "What I really want is more money for less effort." (This is a direct quote.) ... I basically can teach whatever but am looking for a paycheck you know? I mean as the saying goes, I'd rather be fishing after all....
You gotta admire the honesty I guess, but he'll be working for less effort somewhere else.
I was in Chicago late last week to attend the Financial Management Association meeting (we were interviewing finance job candidates). On Thursday evening an economist friend of mine and I walked over to the Art Institute of Chicago as Thursday is the one late evening that they're open. (Question: why are art museum hours so crappy around the world?)
Anyway, when we got there the teller told us that the usual $12 fee was optional since there was only about a hour left before the museum closed. Now what would the standard economics text book say we would have done in such a situation? Of course, we would have paid nothing right? After all, he told us that they would let us in whether we paid or not. Nope the textbook is wrong. After chuckling about what a bad idea it is to let two economists choose their own price, we both nevertheless forked over $7 each.
Now I'm not saying public goods can be provided "efficiently" (whatever that is) but this notion that we're all free riders whenever we get the chance is patent silliness.
October 15, 2005
The benefits of advertising c. 1905
From the Oct. 14, 1905 NYT:
During the last year, the advertising banks in Pittsburg, Penn., gained 22 per cent in deposits while the non-advertising banks lost 7 per cent in deposits.
Indeed, the past 100 years has shown us what advertising can accomplish. We also know a lot more about the economics of advertising - when it is beneficial and when it is harmful to welfare/efficiency.
October 14, 2005
Inflation rears its ugly head
Alan Greenspan steps down in January. His successor has his or her work cut out: inflation is now well above the 2 to 3 percent range that Greenspan managed for many years. September’s CPI was up 4.7% over a year ago – the biggest year-over-year rise since 1991 – and up 1.2% over a month ago – the biggest month-over-month rise since 1980. That monthly rate compounds to an annual rate of 15%.
The inflation surge makes it all the more critical that Bush name a credible inflation hawk as Greenspan’s successor, to keep inflation-rate expectations from getting out of hand. A crony appointment (like Jimmy Carter’s appointment of G. William Miller to head the Fed) just won’t do.
If Fed monetary policy were bound by a credible rule, the personnel decision wouldn’t be so important. In our discretionary regime – where monetary policy is set by men rather than laws – it unfortunately does matter who gets the job.
From the guys at the Tax Foundation:
It's not that reducing taxes would necessarily reduce gasoline prices. What gets me is that Leviathan continues to feed on inelastic demand while at the same time insisting on windfall profit taxes and claiming outrage that private companies (okay, public - truly public - firms that are beholden to their shareholders and actually face competition and accountability) might earn a profit in the gasoline market.
Aside from the unintended irony that the classical historian Arnold Toynbee himself was not always “adroit,” but wrong in most of his determinist conclusions, and that such criticism comes from a high official of an administration that witnessed on its watch the Iranian-hostage debacle, the disastrous rescue mission, the tragicomic odyssey of the terminally ill shah, the first and last Western Olympic boycott, oil hikes even higher in real dollars than the present spikes, Communist infiltration into Central America, the Soviet invasion of Afghanistan, the Cambodian holocaust, a gloomy acceptance that perpetual parity with the Soviet Union was the hope of the day, the realism that cemented our ties with corrupt autocracies in the Middle East (Orwellian sales of F-15 warplanes to the Saudis minus their extras), and the hard-to-achieve simultaneous high unemployment, high inflation, and high interest rates, Mr. Brzezinski is at least a valuable barometer of the current pessimism over events such as September 11.
Nude Disco in London
News item (via Drudge):
HUNDREDS of clubbers are descending on the country's only nude disco every Saturday night.
The craze for letting it all hang out on the dancefloor is pulling in punters to South Central in Kennington Lane.
Exercising is the Source of the Obesity?
Our nation's obesity "problem" - some countries would love to be so cursed - has caused a number of navel-gazers to suggest all sorts of public policies ranging from "fat taxes" to compulsory physical education for the overweight.
This little nugget came across my desk today:
73 percent of residential kitchens contain over a million calories of food.
If true, all you can say is Wow. However, I'm not sure if I am buying into this one.
The average adult needs about 2000 or so calories a day to comfortably survive. Let's let the average household have three such people in total. If the 73% figure is to be believed, these kitchens have enough food to feed three adults for 166 days!?!
With so many calories sitting around the kitchen (even if the estimate is off by twenty or thirty percent) it is likely that food spoilage is a common, almost continuous, problem. Food spoilage represents the expiration of an option - the option to ingest the food/calories.
In our kitchen food options expire continuously - perhaps to the detriment of our bank account but not to our waistline - but there is no reason to assume this would be the case in other kitchens. Obesity may be an unintended aggregated consequence of the wrong exercise?
Iraqi Nose Jobs
[NPR Report Deborah] AMOS: And how should her body be? Just like those singers in the videos. Cosmetic surgery is now a booming business in Baghdad, tummies tucked, noses reshaped. And Wafa Mohammed is not alone.
Ms. MOHAMMED: (Through Translator) The married are encouraged by their husbands and the unmarried that have money, they are encouraged by their family.
AMOS: At the Ferdoz Hospital(ph) in Baghdad, Dr. Riad El Badri(ph), a 34-year-old surgeon, schedules about three cosmetic surgeries a day, a 100 percent increase since before the war. Dr. Badri says Iraqis know just what they want.
Dr. RIAD EL BADRI: Singer or Arab singer, yeah, yeah, like in Nancy Ajram. They come to us and say, `I want the nose of this singer.'
AMOS: Before the war, only the most privileged in Saddam's circles could afford cosmetic surgery. Now it is a middle class luxury, says Dr. Badri. Iraqi salaries are much higher than before the war. The cost of cosmetic surgery is so low, patients from Jordan and Syria risk their lives to come to Baghdad for the service. But Dr. Badri believes Iraqis need it most, the women and the men.
Glass half full: these folks are prosperous enough to afford surgery and apparently not too worried about bombing. Glass half empty: having the motivation for a nose job come from a music video.
Listen to full story here. HT: Wilson Mixon
Legal Entrepreneurship--Sales Tax Lawsuit Edition
CHICAGO -- Like many shoppers, attorney Stephen Diamond buys lots of stuff online. But unlike other consumers, he sues retailers that don't charge him state and local sales taxes -- and is making a profit doing it.
Using a state whistle-blower law, Mr. Diamond since 2002 has filed about 95 suits in Cook County court here against retailers that failed to charge him taxes on Internet sales, alleging that they broke the law. In cases where the state of Illinois joins the suits and prevails, he is entitled to up to 25% of the financial damages, with the rest going to state coffers.
Hit-and-run victim ends up in a PC trap for calling driver fat
A news item:
AN injured pedestrian has complained that she was ticked off by a police officer for using the word “fat” to describe a hit-and-run motorist.
Mary Magilton, 54, said she was simply trying to give the officer an accurate description of the female driver whose car mounted the pavement and hit her at a busy road junction.
Instead of the officer taking a note of her description, he paused and told her she could not use such language to describe an alleged offender.
HT: Wilson Mixon
October 13, 2005
Are DOLers shooting themselves in the foot?
Well, just the untenured ones?
You don't have to be a David Horowitz follower to know that speech isn't all that free on university campuses. This is usually due to speech codes, but apparently the wrong ideas can also have tenure implications.
My only complaint about my school, which I suppose could hurt my tenure chances, is that the Dean's office has FAR too few days of free cake in the break room. I know, I know, free riding and all.
I'll leave comments open; I'm curious if blogging has similar effects in other industries.
Drug War Follies--Operation Meth Merchant
In June, police agencies in NW Georgia staged Operation Meth Merchant and arrested some 49 people for selling meth ingredients. It turns out that some of the arrests are suspect:
Federal charges against a Whitfield County man arrested during Operation Meth Merchant have been dropped.
Ringgold attorney Ken Poston said his client Sidhharath Patel was wrongly identified.
Patel was among 49 people and 16 corporations charged in the operation, which targeted businesses in Catoosa, Chattooga, Floyd, Whitfield, Walker and Dade counties allegedly selling ingredients used to make methamphetamine.
The 20-year-old American citizen was arrested at an airport in New Jersey on July 18, 2005, as he returned from his wedding in his native India, and he was held for 12 days in various facilities in New Jersey, Oklahoma and Georgia, Poston said.
Poston said his client was working in a sandwich shop in Hicksville, N.Y., on July 23, 2004, when government agents claimed he was in a Varnell, Ga., store selling matches, Coleman fuel and other items used to manufacture meth.
This is not the first misidentification in the operation.
Charges against Malvika Patel (no relation to Sidhharath) also were dropped when she was incorrectly identified as selling meth-making materials in a Fort Oglethorpe store. Her attorneys produced evidence she was picking up her child from daycare at the time. Poston also represented Malvika Patel.
This makes the third citizen of Indian heritage misidentified by the same undercover informant, said Poston, who said Malvika’s husband Chirag “Chris” Patel also was falsely accused.
Hmmm ... seems the keystone kops should have called it Operation Indian Merchant since that seems to have been their target. Jay Bookman of the AJC sure thinks so.
Incentives Matter--Dutch Witch Edition
Oct. 11 (Bloomberg) -- Margarita Rongen, who teaches spells and potions to witches in the Dutch village of Appelscha, says a court ruling that gave her trainees a tax break brought in hundreds of potential new recruits.
Rongen, 56, who offers the Netherlands' only program that certifies witches, is getting applications from as far off as Australia and Dubai, she said. The court, in the Dutch town of Leeuwaarden, ruled on Sept. 26 that the 1,830-euro ($2,208) cost of her course is tax deductible.
Source here. I owe someone a hat tip but I can't recall where I saw this yesterday. My apologies.
Letter to WSJ
My latest dispatch to the WSJ:
In his Oct. 12 Letter to the Editor, “Working Full Time but Mired in Poverty,” Matthew J. Moehr takes issue with Charles Murray’s claim that personal choices rather than labor market conditions are primarily responsible for the increase in the number of people below the poverty line. Mr. Moehr’s “version of statistical reality” ignores the fact that, because of how it is calculated, changes in the poverty rate can be not just affected by, but entirely attributable to, personal decisions rather than labor markets.
Consider a family of four in which each of the adults works full-time at the minimum wage. This family’s income of $20,600 would place it above the $19,157 poverty line (in 2004) for a family of four. Now suppose the adults have the same labor market circumstances but maintain separate households, either by never marrying or by obtaining a divorce. The spouse without custody of the children earns $10,300 which is above the poverty line of $9,060 for a single individual. The spouse with the children also earns $10,300 but this amount is less than the $15,219 poverty threshold for a single earner with two kids thereby classifying the parent as a full-time worker below the poverty line. We see from this example that personal choices alone can affect the poverty rate.
How important is the effect of personal choices on the poverty rate? A recent NBER Working Paper examines why “robust growth in real per capita GDP over the last three decades [but] the U.S. poverty rate has changed very little” and concludes that “changes in female labor supply should have reduced poverty, but [were] counteracted by an increase in the rate of female [household] headship.”
E. Frank Stephenson
Note: An abstract of the NBER paper is here.
ADDENDUM: As if on cue, today's AJC:
Nearly four in 10 babies in Georgia are born out of wedlock in a decades-long shift away from the traditional family, according to an analysis of a new census report released today.
Other Southern states reported even higher rates, making the region the single-mother hub of the nation.
In Mississippi, 46 percent of women giving birth were single; in Louisiana, 40 percent, according to the analysis of marriage and fertility data by the U.S. Census Bureau — based on information collected between 2000 and 2003.
ADDENDUM 2: For even scarier numbers consider this exchange between Brian Lamb and Alabama Congressman Artur Davis on CSPAN's Q&A:
LAMB: Go on, say that again.
DAVIS: Sixty percent of the children born in Greene County, born to moms between the ages of 15 and 17.
LAMB: How – were they married?
DAVIS: The majority of them were not married, something like 80 percent were not married, and perhaps even closer to 90 percent were not married.
October 12, 2005
Zig when the media says zag?
Now that the media has generated sufficient hype that we will ALL be starving this winter because our heating costs will have increased by 80-100%, Drudge links to a story reporting:
Government forecasters on Wednesday predicted a warmer than normal winter, offering hope to much of the Midwest and West as concern grows about the rising costs of heating during cold-weather.
So what's it going to be? As cold as last year, and heating costs increase by 90%. Or will it not be as cold as last year and therefore my heating costs will not increase by 90%.
The scare over heating oil/natural gas prices seems a lot like last year's flu vaccine "shortage." The media generates a lot of anxiety about heating oil/natural gas prices going through the roof, individuals make decisions and change their behavior because of said misinformation and in the end there is a "poof" as the shortage/disaster/tragedy disappears and is replaced by another shortage/disaster/tragedy.
Personally, I figure my heating prices will not increase by 90%. Why? Simply because every single media figure from Brian Williams to the local paper delivery boy claims that is what will happen. If so many people "predict" without having purchased natural gas futures, etc., then perhaps it is wiser to heavily discount the projections.
Granted, at least here in Texas, the warnings/projections are coming from the natural gas distributors, who are hedging against the possibility that their primary input will become even more costly. Local natural gas distributors are appealing to state officials for the ability to increase prices (which, of course, are regulated). Therefore the tail is, perhaps, wagging the dog.
As for flu vaccines, here in the DFW area, health officials are expressing concern that NOT ENOUGH people are in line to get the flu vaccine this year. One official expressed a tounge-in-cheek desire for the media to claim there was a shortage so that the at-risk population would move the flu vaccine higher on the priority list. Perhaps she hit closer to the truth of what the media can/is doing than she intended?
Committing Crime to Get Healthcare
From the Macon Telegraph:
PERRY - If rising health-care expenses have made it too cost-prohibitive for some Middle Georgians to purchase their Prozac prescriptions, there's always one place they can get them for free - in jail.
In fact, medical care at Houston County's detention center is so comprehensive that some inmates actually seek it out, even committing crimes for access to services the jail provides, said Maj. Charles Holt, who oversees day-to-day operations at the facility.
HT: Andrew Roth of Club for Growth blog.
The Orwellian World of Antitrust
Microsoft Corp. and RealNetworks Inc. ended their acrimonious antitrust battle Tuesday and announced plans to join forces against Apple Computer Inc. [Story.]
Multicar teams in NASCAR
NASCAR has suggested that multi-car teams will be limited in the future. My gut is that the reason for limiting the number of cars per team is to try limit the success that can come about by having multiple cars in a single race. While there is considerable horse trading between (differently owned) teams during a race, such as indications of which groove is the smoothest, who will draft whom, how long will the collusion last, etc., there are certain bits of information that simply will not be traded across differently owned teams.
During the course of a four hundred lap race there might be four to ten pit stops, depending on the track and the number of yellow flags. Therefore there are only so many chances for a team to tweak its car - including things such as air pressure in the tires, the wedge, toe in/out, and so forth. It is likely that a team with multiple, very similar cars, can "diversify" by experimenting with different car configurations - and, importantly, can share the information across cars/drivers. The more cars, the more experiments and, ostensibly, the better the results for one or more drivers on the team.
I haven't gathered all the data needed to test the hypothesis of learning-by-doing during a race, but using season total wins and season average points earned by each team there does seem to be a positive relationship between the number of cars on a team and the number of wins on the team and the average points scored per car.
Here's the scatter plot of team wins vs. number of cars, along with the fitted linear relationship (data from 1996 through 2004)
In the first picture there are a lot of zeroes - estimating the relationship between the number of cars and total wins using simple Tobit models suggests that the optimal number of cars to have on a team is three - at least if one wants to maximize total team wins (I initially thought three was too low, but if you think about this for a second it actually makes sense). Simple panel GLS quadratic models suggest that the number of cars on a team that will maximize average points per car is about 2.9. The average number of cars per team during the 1996-2004 period was 1.2, with a minimum of one and a maximum of four cars.
While the GLS models control for owner heterogeneities, the analysis so far doesn't control for driver heterogeneities, which are obviously important but omitted variables. Will including driver characteristics substantially change the results? I don't think so, but it might push the optimal number of cars closer to two. There are considerable obstacles to overcome before a definitive answer to the impact of the multi-car team is obtained.
Why is the France family making a big deal of this now? Maybe its simply a nip-it-in-the-bud scenario. In 1996, 48 of 52 teams were single car teams, only 4 teams had two cars. By 2004, there were 51 single car teams, 8 two car teams, 3 three car teams, and 1 four car team. I am sure there is a fear that too many multi-car teams will lead to a reduction in competitive balance, with subsequent revenue declines.
Read More »
Note that I haven't controlled for the cost side of the team's profit relation. We don't have good data on team expenditures, but quality-adjusted spending (where quality of driver, crew chief, and crew are taken into account) likely doesn't exhibit too much in the way of scale economies.
Cars, crews, transportation, and race entry fees are basically the same from car to car and thus would reflect constant returns to scale. Adding an additional car is therefore profit enhancing as long as the additional revenue generated to the team (as a whole) exceeds the additional car's marginal cost to the team.
There is a possibility that concentrated profits can help teams win more (see Peter von Allmen's paper in the Feb 2001 Journal of Sports Economics), however, the France family is likely much more concerned about the revenues to the sport as a whole, rather than the revenues/profits to any particular team.
« Close It
October 11, 2005
Ig Nobel Award In Economics
We take pride at DOL in being ahead of the curve. Earlier this year we recognized the critical importance of Clocky. Clocky has received the 2005 Ig Nobel Award in Economics.
WHO ATTENDED THE IG NOBEL CEREMONY: Gauri Nanda
One of my university's students is featured in Cosmo magazine as "Mr. Wyoming". Problem: he's never been to the state of Wyoming in his life. I would've thought that was a requirement. Go figure.
October 10, 2005
Should an airline be allowed to hire only young and pretty flight attendants?
An Anti-Discrimination Tribunal in Queensland, Australia, yesterday ruled in favor of eight former Ansett Airlines flight attendants, all over 35 years of age, who said that the new airline Virgin Blue had refused to hire them “because they were not young or attractive enough”. Compensation awards remain to be determined. Virgin Blue's job assessment guidelines did not explicitly specify age, but did call for attendants to have "a desire to create a memorable, positive experience for customers. The ability to have fun, making it fun for the customer".
Goodness knows I would never choose an airline based on the youth or attractiveness of its flight attendants, but should it really be illegal for an airline to cater to those shallow cads who would? This is not purely a hypothetical: witness Hooters Air, which would presumably have to fold if the Queensland ruling were applied in the US.
Hurricane coverage c. 1905
How many resources are being expended on the 24 hour tragedy television to which the four major cable news networks have evolved? Here in Texas, we have the TXCN, the Texas Cable News Network, which is 24 hour tragedy television at the state level. If the marginal cost of providing another story is effectively zero, is the marginal benefit of the story also equal to zero?
What if Katrina/Rita coverage went something like this snippet from the Oct. 10, 1905 NYT?
Positive v. Normative Medicine
Medicine is primarily a "positive" science of the "what is". That is, medical science can tell us that smoking a pack of cigarettes a day will increase your chance of lung cancer by x% over your lifetime. Or medical science can tell us that SUVs pose a greater risk to pedestrians when hit than do cars.
Similarly, economics is primarily a "positive" science of "what is." Economics can tell us that increasing the minimum wage will cost some teenagers their jobs (though how many is unclear) . Or economics can tell us that taxing gasoline will increase the price of gasoline and reduce its consumption.
What neither medical science nor economics can tell us is what we should do. That is should we ban smoking or SUVs in the name of health and safety? Should we abolish the minimum wage or tax gasoline? These questions involve value judgements that science qua science is simply unequipped to answer. That is they are "normative" questions.
Economists do a pretty good (though admittedly imperfect) job of separating the positive side of economics from the normative side--at least in journals. Doctors alas do not.
Consider this news entry about SUV dangers to pedestrians:
In an editorial in the British Medical Journal, Simms and Desmond O'Neill, a professor of medical gerontology at Trinity College, called for warnings on SUVs to inform buyers of the increased risk the vehicles pose to pedestrians.
They also recommended a higher road tax and called for all SUVs involved in accidents to be documented.
Reality vs. Hype
October 09, 2005
NASCAR may break up multi-car teams
An excerpt from today's AJC:
KANSAS CITY, Kan. — Two years into his reign as chairman of NASCAR, Brian France had taken on an ambitious agenda that will change the sport far more than his Chase for the Nextel Cup "playoff" format has changed the points race.
Foremost among France's plans is his desire to break up the multi-car teams that are dominating the Nextel Cup Series.
Speaking to a group of reporters Saturday at Kansas Speedway, the site of Sunday's Banquet 400, France said NASCAR wants to take away some of the advantages enjoyed by powerhouses like Roush Racing (five teams, all in the Chase) and Hendrick Motorsports (four teams with one in the Chase).
He said limiting the big multi-car teams to as few as three entries will make it possible for new team owners to enter the sport.
I don't know much about NASCAR so I'll refrain from commenting, but co-blogger Craig or some of the folks at The Sports Economist might weigh in on the matter.
World Grilled Cheese-Eating Championship
LITTLE ROCK, Ark. — Ed "Cookie" Jarvis of Long Island, N.Y., clearly won the grilled cheese-eating championship at the Arkansas State Fair on Saturday, stuffing down 19 sandwiches in the 10-minute contest.
Patrick Philbin of Moonachie, N.J., came in second, scarfing down a sandwich-and-a-half less than champion Jarvis.
All six contestants finished without getting sick, said Michael Castellano of the International Federation of Competitive Eating.
Little Rock was the 11th city on the 15-city circuit of the GoldenPalace.com World Grilled Cheese-Eating Championship. GoldenPalace.com, an online casino, and the federation are sponsoring the event.
I think I gave my heart to San Francisco
I previously reported on the case of Robert Colavito. Victor M. Serby, who will argue the case for Plaintiff-Appellant COLAVITO before a federal appeals court, has sent me the following in announcement.
This case is discussed in this article from the Long Island Press. The article also reports on organ networks. (The Colavito case does not involve an organ network. The Colavito organ was donated to a family friend.) If you are a member of an organ network, you organs must first go to another member of the network. Only when there is no match within the network, can it go to someone outside the network. One might argue that this is a quid pro quo and, therefore, is in fact a negotiated exchange (sale?) of body parts. The market is restricted to individuals in need of organs and only barter is allowed. The fair price is determined by the rules of exchange. In return for an expected organ from another member, I direct my organs at death to the other members.
The ability to direct your organs to specific individuals implies a property right that the courts have so far refused to recognize. Similarly, the courts have recognized a mother’s right to terminate a fetus, but have not recognized her right to sell the dead fetus. I have no idea how property rights in stem cells are established. I assume that one establishes a property right in human cells when there is sufficient private investment in the production of the resource. See Pierson v. Post
Let us hope that the courts take at least this small step toward the establishment of directed rights in organs. With proper safeguards, transferable rights can create a more efficient allocation of this scarce resource and save lives.
October 08, 2005
Leviathan Feeds c. 1905
From the Oct. 8, 1905 NYT:
If there had been more breweries scattered throughout the country perhaps this tax would have been less likely to pass?
October 07, 2005
Economic damages and MLB
This story suggests that firms stand to lose considerable wages from the MLB playoffs:
The New York-based outplacement firm said the loss would come from wages paid to workers who will spend an "inordinate" amount of time tracking their team's progress. Employers in the eight cities with teams in the playoffs could lose a combined $225 million in lost wages from their employees spending just 30 minutes a day tracking their team, the firm estimates.Hmmm...this sounds like a story looking for a study.
If there really were economic damages to the extent claimed, short of transaction costs (which are not that high these days), would not a class action suit be forthcoming against MLB and/or Fox for showing the games during the working hours for most employees? The law firm of Cheatham & Fleesum would round the damages up to $500m and then tack on another $500m for good measure, bringing the suit to $1B or so. MLB/Fox might settle for $300m, the law firm takes $100m, distributes the remainder to, say, 2000 firms in the class - ultimate payout per firm is $100,000 per firm.
Furthermore, spending 30 minutes "tracking" a team might be a bit of an overstatement, unless the company's web traffic flows through an old 56K modem. Now, standing around the coffee pot predicting how bad Wakefield will get shelled tonight - boy, that could take up hours (admission: this DOLer is not a Red Sox fan!).
Lynne Kiesling on Rebuilding New Orleans
Lynne Kiesling was one of the bloggers for an Econoblog on rebuilding New Orleans. Not only is Lynne an excellent read but her thoughts are great prep for my upcoming talk at GA State on Katrina's aftermath. Thanks Lynne.
Sexual Theme Park Coming to London
LONDON — Move over, Eros. Developers announced plans Friday to open a multimillion dollar sexual "theme park" near London's Piccadilly Circus, home to the much-photographed statue of the Greek god of love.
Backers say the London Academy of Sex and Relationships, due to open next spring, will not be a sleazy sex museum, but an educational multimedia attraction that will teach visitors to become better lovers and provide valuable information about disease and sexual problems.
Located within the Trocadero entertainment center — just around the corner from Soho, London's red-light district — the $8.3 million project will feature unspecified "high tech and interactive exhibits."
Story here. Readers can decide for themselves if a theme park of sex makes London more attractive or less attractive as a tourist destination.
Ig Nobel in Economics
From last night's Ig Nobel Prize awards, as described in the Chronicle of Higher Education (reg req'd):
Economics: Gauri Nanda, who was a master's student at the Massachusetts Institute of Technology when she invented Clocky, an alarm clock that scurries around the room as it rings, forcing the person it awakens to get out of bed and chase it. "My goal with Clocky was to approach technology in a playful way," wrote Ms. Nanda in an e-mail message.Some other awards:
As the most anarcho blogger here: Hopefully this will NOT change soon.
From the CIA World Factbook's entry on Iraq, last updated on Sept. 25, 2005:
Government type: none
UPDATE: See also, Somalia
Government type: no permanent national government
October 06, 2005
Hopefully this will change soon
From the CIA World Factbook's entry on Iraq, last updated on Sept. 25, 2005:
Government type: none
Yeah, about that.
New argument for a stadium
This story reports:
AC Milan executive Adriano Galliani says most soccer stadiums in Europe are obsolete and that his club could leave its famous San Siro home and build a new venue in the city.
Hmmm. Is it politically more palatable to lump your own crappy stadium in with all the others? Perhaps. But wait a second. Didn't Italy host the World Cup in 1990? Surely hosting the World Cup motivated the government to spend millions or billions on new stadiums that would only be fifteen years old, approaching mid life but surely not completely depreciated. Unfortunately, that's what the government did:
Although the World Cup allowed huge investment in stadiums across Italy, Galliani, who is also president of the Italian Football League, said it was not spent wisely.
Great. The answer to bad expenditures is to get more expenditures.
I hope the translation is correct and that AC Milan is volunteering to build its own stadium with private money, but I somehow doubt it. Threatening relocation is typically used to extort a new stadium from public dollars, at least here in the States. AC Milan is currently valued at approximately $900 million and Inter Milan (that shares AC Milan's stadium) is valued at $600m by Forbes, numbers 3 and 7 IN THE WORLD, respectively. It would be refreshing if AC Milan would go and build their own stadium, after all the Jets and Giants of the NFL can build an $800+ million stadium with private funds.
(Easily and flippantly dispensed) Advice to the city of Milan: If the teams demand public dollars, call their bluff (unless you can get the French to pay for it - he he).
Finance 'n' Roses, or is it Guns 'n' Finance?
Duff McKagan, bassist for Guns 'n' Roses and Velvet Revolver, used his down time between bands to pursue a finance degree at Seattle University.
This just sounds very refreshing:
So I bought a house in Seattle and got into Seattle University, which was pretty good for someone who didn't graduate high school. I went for almost four years. I was a quarter away from getting my bachelor's degree, but then this band started. But I learned a lot. I have an accounting minor, and I learned the meat and potatoes of what you've got to know to get around in this business, and a lot more about my personal finances. I'm real happy with the knowledge I gained for my own sake.
I don't think I'll see him one day on "Behind the Music" saying he's flat broke.
Giving a new meaning to "stealing home"
Not only is baseball boring (this from a soccer player, who knows something about boring sports), but it's succumbing to eminent domain abuse:
The District [of Columbia] will begin using eminent domain to acquire parcels of land at the site of the Washington Nationals' ballpark by the end of this month, after unsuccessful negotiations with nearly half of the landowners.
The people who unfortunately decided years or decades ago to live on what would be the wrong plot of land will have until the end of the year to move. You have to love how the alternative to an "unsuccessful negotiation" is to basically kick you off your land at gunpoint.
My favorite Washington Nationals moment: concluding an NPR story on the team a few months ago, the host says "Go Nats!"
Ig Nobel Prizes
Ig Nobel tonight!
Demand Curves are Downward Sloping!!
From Drudge is this story:
New data from the Energy Department show that fuel consumption over the past month declined by almost 3 percent compared with last year. Analysts attributed the trend to soaring pump prices and a slowdown in economic activity, particularly among Gulf Coast states that were affected by Hurricanes Katrina and Rita.
Many economists would take exception to much of the language in the story, however the point is generally correct. Whew.
Asbestos Compensation Fund
Congress is about to establish a victim compensation fund for asbestos injuries.
This follows victim compensation funds for 9/11. Katrina and Rita. Apparently, Congress has stumbled on a new way for giving away our money to buy votes. They get two votes for each victim compensated, one from the victim and one from the company relieved of liability.
October 05, 2005
Spam stocks are dogs?
Go figure, but it seems that most stocks mentioned in spam are dogs. Spamstocktrader.com presents the "results" of ficticious trades based on the sage and unsolicited advice. The experiment is completed, and while the information provided is not the most complete, the basic results are telling. Stocks pushed in spam messages yielded significant negative returns - relative to the market at the time the stocks were dogs or lemons.
I know that folks in finance do not favor this type of "experiment" but for working purposes it probably gets the point across: Unsolicited advice in the form of a randomly sent email is likely to be worthless or worth less (at least to the recipient) than other forms of information.
Some adages come to mind concerning unsolicited stock tips:
"You get what you pay for."
(Update: Colleague Mike Ward indicates that Alex Tabarrok mentioned the same site over at Marginal Revolution.)
It's now a bit dated, but the Jan. 17, 2003 Chronicle of Higher Ed contains an analysis of football players majors at several universities. Sports management, sociology, and liberal studies are popular at several universities. Interestingly 11% of the football players at Ward Churchill U. (aka Colorado) are majoring in economics.
HT: Gary Roseman
Rafael Palmeiro - Anecdote Spinner
The FDA contemplates banning the use of celebrity spokespeople for pharmaceutical drugs.
“Such approaches plainly do not reflect a data-oriented approach to promotion and may not be recognized by consumers as anecdotes,” the agency wrote. “FDA is interested in whether and how techniques mislead consumers about the risk-benefit tradeoffs of prescription or restricted medical products.”
Hmmm....Every industry has a "data-oriented approach to promotion." Market research "data" show beer ads with lizards and frogs sell beer, and car ads with beautiful women ogling an aging, balding, bulging man driving a convertible sells more convertibles. The drug companies are using similar data to orient their promotion.
I know, "data-oriented approach" really means that Direct to Consumer (DTC) advertisements are supposed to be rooted in the science of the drug and not the glamour, such as it is, of the drug spokesperson. How many Madison Avenue geniuses can make the science of IBS (irritable bowel syndrome) come across in a way that doesn't make everyone sick? None. Which is why Kelsey Grammer tells us about IBS - heck it's Frasier, and if he can get someone to look up IBS on WebMD or some other site, then so much the better.
The FDA doesn't seem worried about celebrity spokespeople for over-the-counter drugs, so what gives? Discussion with colleague Mike Ward brought out a couple of points/questions. First, are doctors and health care activists behind the move to ban celebrity spokespeople? Perhaps doctors are tired of consumers demanding this drug or asking about that drug, and therefore the docs lobby the government to ban DTC advertising and problem will go way. Right? Not likely, but why would docs be allowed this avoidance of consumer interaction but not tire, car, or electronics dealers? This would explain why OTC spokespeople are off the hook - you don't need a doctor to purchase/use/misuse an OTC drug.
Second, competition between drugs will motivate drug makers to provide information about quality/risks to consumers. DTC ads often discuss relative success rates compared to other drugs, and reveal sometimes vivid warnings (the Cialis warning comes to mind) just like car manufacturers tell us about 5 star crash ratings (but alas not too often about 1 star crash ratings) and that four-out-of-five dentists (but never economists) agree. How much competition must there be for this information to be forthcoming? I bet it only takes two or three players in a given drug market, but I haven't seen direct evidence on this point.
I wonder how many people go to their doctor and demand the "purple pill" without having any clue about what the drug is for, it's intended effects, it's potential side effects, etc? I am sure there are a few, but I bet it is a minority. The increased information/knowledge on the consumer's part might prove frustrating and time consuming for the docs, but I have littlle sympathy. I would much rather discuss econometrics with a student who has at least read the book, searched Google, or done anything to try to understand what is going on.
On a different front, it is a shame that needy celebrity drug spokespeople, such as Rob Lowe, Dorothy Hamill, B.B. King, Wilfrid Bromley, Kelsey Grammer, Rafeal Palmeiro and Bob Dole might have to find other ways to make money. How will these people put their children through college?
October 04, 2005
The think tank balance of trade
I worry about a persistent deficit in the balance of trade. No, not in the current account between the US economy and the rest of the world’s economies; that will sort itself out. I mean between the Cato Institute and some other DC institutions. I just got a flier for Cato’s annual monetary conference, scheduled for November 3. Participants include economists from the Fed, the IMF, and the Institute for International Economics (a center-left think tank). Previous conferences have included speakers affiliated with the centrist Brookings Institution. Yet I never see any of these institutions inviting Cato-affiliated speakers to their conferences.
For example, the IIE held a conference on IMF reform ten days ago. The IMF, the AEI, and several central banks were represented on the program, but nobody from Cato.
Searching via Google on [conference site:federalreserve.gov] turns up plenty of Fed conferences. Adding [Cato] to the search turns up many presentations by Fed officials at Cato, but zero cases of a Cato affiliate presenting on a panel at a Fed conference. Ditto for the IMF. Ditto for Brookings (although I did find one instance of a Cato person in a large roundtable discussion at Brookings in 1999.) If I’ve overlooked some pertinent cases, please let me know: comments are open.
The American Enterprise Institute, to its credit, has had Cato speakers at its conference on pension reform and a couple of others in the past few years. So trade between those two institutions seems to be more or less balanced.
Cato might want to think about how much longer it wants to give a platform to institutions that don’t reciprocate.
What are you doing with your life?
The local fish wrap reports that Rangers GM John Hart has stepped down and that Jon Daniels is taking over.
ARLINGTON — Rangers owner Tom Hicks wants to win a World Series.
A young GM seems to have worked in Boston. Perhaps it can work here in Arlington - heck, it can't get much worse. At 28, I was happy to have a tenure track job and was still waiting for my first paper to come out.
What we teach: if resource prices increase, supply decreases. Evidence from Delta Airlines.
The Pig is Back
During the Carter administration the government ran an advertisement featuring a man in a pig mask. He was supposed to represent the typical U.S. consumer, who was acting like a pig because he was consuming too much energy.
I thought it was offensive that a government could think of its citizens as pigs who were to be told how they should spend their earned income. Well, the Bush administration is starting to look and possibly think a lot more like the Carter regime. The pig is back.
The "dastardly spokes- villain" Energy Hog will soon appear in ads peering out from a hot shower while a resident shaves or standing in front of a house where "the fireplace flue is just like a 7-Eleven store; it never closes."
Administration officials flinch at suggestions that their energy-saving tips are reminiscent of the policies of former President Carter, whose administration Republicans have long characterized as inept.
Counterfeit $10 Bills?
I am out of my comparative advantage here, but this little nugget is interesting on a number of different fronts.
From Page 1 of the Oct. 4, 1905 NYT:
New $10 Counterfeit - It appears in this city - longer than the genuine note
Longer notes would be seem easy to catch, however, this site claims that "[i]n 1929, sizing of the bills was standardized." I could see standardization being a blessing and a curse when it comes to combating counterfeiting.
I am not up on this portion of economic history/literature, I will open comments for a day or so for suggested readings.
(Contemporaneously, the U.S. $10 bill is being redesigned.)
Drought law? What drought law?
From Page 16 of the Oct. 4, 1905 NYT, "How to Get a Drink at the Hotel Gotham":
The law stated no alcohol could be sold in the area of the hotel, not that liquor couldn't be consumed. The story goes on to describe the baskets and boxes that young boys carry back and forth from the hotel and the "base of supplies." The boys were chosen for their appearance and behavior (Dan Hamermesh is onto something!) so that "[t]here is nothing to suggest a drink in the appearance of the boys, and the baskets and boxes they carry are innocent enough, to all outward seeming to be bound for Sunday school picnics or the homes of fashion."
Does Paul Krugman Write for the AJC?
The first evidence appeared Monday that the hurricanes of 2005, already documented to have caused massive losses in wealth and jobs, might also be producing positive economic ripples.
Manufacturing production, new orders and exports jumped in September, while hiring picked up modestly as well, according to a monthly survey by the Institute for Supply Management.
The good news was directly related to the hurricanes, said Dean Baker, co-director of the Center for Economic and Policy Research.
"A lot of this is the post-Katrina bounce," he said.
In fairness, the article does include some recognition that the storms were harmful:
Hurricane Katrina slammed into the Gulf Coast in the final days of August, while Hurricane Rita, a less-severe storm, crashed into the land less than four weeks later. Besides the human suffering, the hurricanes carried an enormous economic charge — destroying billions in property, obliterating jobs by the hundreds of thousands and choking off energy resources.
October 03, 2005
Statism and Environmentalism
Pictures from Chernobyl [56K warning!] There are some "before" pictures on page two of the comments. There are more eerie pictures here. Part of New Orlean's recent experience can be laid at the feet of a statist philosophy. Hopefully the city will experience a different ultimate fate than that of Chernobyl (adjusted for the magnitude of the disaster).
Even with almost twenty years of decay and neglect, one can imagine what the buildings/infrastructure of Chernobyl looked like. Both seem a far cry from what I remember in the United States growing up in the 1980s. Hopefully we won't see similar pictures of NO in twenty years.
Chernobyl is a glaring example of how statism and environmentalism simply don't mix. Notwithstanding all of the things for which Pres. Bush can be faulted, he did have one good statement in the 2000 debates when he said, in essence, "if it's your land, every day is Earth Day."
Suggested reading: A great book on the other environmental disasters in the former Soviet Union: Ecocide in the U.S.S.R. by Murray Feshbach and Alftan Friendly, Jr.
Adam Smith College
Excerpts from an article by Richard Ebeling of FEE:
Two merged colleges located in Kirkcaldy, Adam Smith’s birthplace in eastern Scotland, were recently renamed after the town's most famous figure. But the new name, Adam Smith College, has not sat well with 30 radical students who refused to call their campus club the Adam Smith Students’ Association. According to the Sunday edition of The Scotsman, as far as these student activists are concerned, “Adam Smith’s name is linked to exploitation and greed” and with “socioeconomic policies that work against the people.”
Instead of honoring Adam Smith, these students in Kirkcaldy have chosen to call their group the Jennie Lee Students’ Association. Who is Jennie Lee? She was a notorious socialist born near Kirkcaldy in 1904; she died in 1988. As a teenager she enthusiastically supported the Bolshevik Revolution in Russia, and participated with the socialist agitators who worked to see that the British government did nothing to undermine the budding “worker’s state” being built by Lenin. After graduating from Edinburgh University, she stood for Parliament in 1929, becoming the youngest member of the House of Commons and the first woman Labor Party member elected.
Though she was defeated for reelection in 1935, Jennie Lee worked with those pushing for the Popular Front movement against fascism under the global leadership of Comrade Stalin in the Soviet Union. After the war she was again elected to Parliament; in the 1960s she served as the minister of arts in a Labor government and was responsible for setting up the Open University, a hotbed of socialist radicalism.
HT: Wilson Mixon
A Tax-Expenditure Limitation for Georgia
The Georgia legislature is considering putting a constitutional amendment limiting government spending on the ballot in November 2006. I have written a paper (drawing heavily on the work of Bob, Josh, and their co-authors' study for an Ohio TEL--thanks guys) supporting the iniative for the Georgia Public Policy Foundation. A shorter version of the study has appeared in several Georgia papers including yesteday's AJC (albeit with some chopping and editing). I'll be presenting my paper and some additional material at a legislative hearing next week.
Common Property Bicycles--Won't They Ever Learn?
From the St. Cloud Times:
Despite a 2004 trial run at St. Cloud State University that didn't produce great results, the yellow bike program is back this year.
Out of about 20 donated bikes intended for students to use for free to commute locally and on campus, only four survived the last academic year. And those were in rough shape at year's end.
The program takes its name from the bright color the donated bikes are painted before being randomly parked around campus for students to use.
Failure of the program can be credited to students' lack of respect for the bikes and disregard for the program's potential benefits, said Grant Schnell, student manager at St. Cloud State's Outdoor Endeavors office.
Schnell and Outdoor Endeavors head the yellow bike program.
"It didn't work out very well. Basically they all just got ruined," Schnell said. "In one instance we found a rim wrapped around the entire front fork of a bike." Other bikes disappeared, he said.
Hmmm ... sounds like a certain Berry Bike program.
Ht: Club for Growth blog and Market Power blog
The Price System in Action
More bicycles than cars have been sold in the United States over the past 12 months, with rising gas prices prompting commuters to opt for two wheels instead of four.
Not since the oil crisis of 1973 have bicycles sold in such big numbers, according to Tim Blumenthal, executive director of Bikes Belong, an industry association.
Full story here.
ADDENDUM: The article also notes another factor driving bike sales:
The superstar status of cycling champion Lance Armstrong, who has won the Tour de France seven times, has also helped spark interest in the sport.
Another Eminent Domain Abuse
From the Washington Times:
Florida's Riviera Beach is a poor, predominantly black, coastal community that intends to revitalize its economy by using eminent domain, if necessary, to displace about 6,000 local residents and build a billion-dollar waterfront yachting and housing complex.
HT: Wilson Mixon
October 01, 2005
Space Beagle Blog
I'm in Thailand right now for a conference and hope to blog about this later. But for now I thought I'd pass along a plug for a new blog written by a fellow I just met at the conference.
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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