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.”

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)
Bronx: 2000 - 1,332,650          2003 - 1,363,198 (2.3% growth)
Brooklyn: 2000 - 2,465,326        2003 - 2,472,523 (0.3% growth)
Queens: 2000 - 2,229,379       2003 - 2,225,48 (-0.2% growth)
Staten Island : 2000 - 443,728    2003 - 459,737 (3.6% 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?

From Townhall.com via The Club for Growth's Blog:

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.

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.

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.

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?
1) Kelo v. New London. Okay, a terrible ruling, but did any of you seriously foresee the large backlash among average Americans against this ruling? A CNN.com quickvote the day after showed a large majority disagreeing with the ruling. 9 judges made the wrong decision, but I'd argue several million properly understand why the decision was wrong, which is heartening to proponents of private property rights.
2) Hurricanes. Okay, lots of damage and horrible behavior by a very small subset of society. As with 9-11, though, the number of volunteers outweighed by huge magnitudes the number of victims. Donors were turned away at shelters because they couldn't handle the quantity of donations.
3) Rosa Parks. Someone should have told her that times are bad now and waited to see how many minutes she laughed.
4) After my hockey game last night, I'm down to 170 pounds.
Of course, the problems associated with items 1-3 are arguably due to government meddling or manipulation. SCOTUS, FEMA, Jim Crow. Do I feel pessimistic about the future because of the private sector? New Coke? Hollywood's lame choices of new movies to present to us? Perhaps, but then again I am not forced to abide by private sector blunders.

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.

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.

“Why Democracy is Overrated”
Michael C. Munger
Professor and Department Chair, Political Science
Duke University
Monday, November 7, 2005
5:30 p.m., Bridge of Learning (LC 260)
Map

Suggested popular writings by Michael C. Munger:
Everybody Loves Mikey
The Thing Itself
Democracy is a Means Not an End
Tragedy of the Malecon: Is Cuba “Domestic” Politics?

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.)

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        Max

-------------+--------------------------------------------------------

        year |        28      1990.5    8.225975       1977       2004

  oilprofits |        28    22.96429    11.28179        7.9       42.6

federaltaxes |        28    19.03214    6.350506          8       27.1

  statetaxes |        28    28.93571    4.344278       20.6       34.2

  totaltaxes |        28    47.97143    10.42546       28.6       60.3

The 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.

(STATA Data file)

I'm the first "Tim Shaughnessy" that pops up in Google.
It seems I've beaten out a state senator for the top spot; better beef up the advertising budget before the next election. He's a Dem from Kentucky. Also a Catholic, born in 1957 whereas I was born in 1975.
Another Tim Shaughnessy is an English professor, and wrote this paper on "White, Stereotypes of Indians." Not sure what the comma is for. White of Indians?

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.

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).

[Link]

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.

A fascinating archive of WWI pictures (some are somewhat graphic). The comments are also interesting.

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.

If colleges failed to comply with their plans after two years, they would be put on "affordability alert status" and could face an audit by the Education Department's inspector general. Their accrediting agencies would be notified of their failure, and a detailed accounting of their costs and expenditures would be made public.

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.

Good Intentions End Next 666 Feet

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

● Executive director of the Bradenton Area Convention & Visitors Bureau

● 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 poster guy for child support reform

● 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.

Hi Frank:

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!

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.

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.

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.

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.

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?

The Residential Finance Survey: 2001 from the Census is now available.

The Census Bureau has conducted the Residential Finance Survey (RFS) every 10 years since 1951 and yet many analysts are unaware of it. For a sample of properties (68,000 addresses in 2001), the Census Bureau collects data on housing financial arrangements from three sources - homeowners, owners of rental properties, and lenders. In 2001, for example, there were 83.5 million properties. Almost 50.6 million were mortgaged. Almost 37.6 million had a fixed-rate, level payment mortgage; 2.3 million had a short-term mortgage with a balloon payment; 11,000 had a reverse mortgage; and 6.5 million had an adjustable rate mortgage (ARM).

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.

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.

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.

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.

Congrats JC.

Here's an image of the seating chart at U.S. Cellular Field in Chicago:

A sample from Nettickets.com:

SEC: 518 ROW: 15
World Series Home Game 1
Only $11,395.00 each

SEC: 142 ROW: 3
1ST ROW OVER THE DUGOUT!
Only $6,400.00 each

Are 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).*

Mark Cuban on scalping

Craig Depken on scalping laws

Stephen K. Happel and Marianne M. Jennings on scalping laws

Jim Caple from ESPN on scalping laws

* "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").

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

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.

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.

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.

"When you get up into winds in excess of 155 mph you have enough damage," Simpson said in a 1999 interview with the National Weather Log, a publication of the National Oceanic and Atmospheric Administration.

"If that extreme wind sustains itself for as much as six seconds on a building it's going to cause rupturing damages that are serious no matter how well it's engineered. So I think that it's immaterial what will happen with winds stronger than 156 miles per hour. That's the reason why we didn't try to go any higher than that," Simpson said

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 »

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
--median household income in Naples=$65,641
--percent in New Orleans below the poverty line=27.9
--percent in Naples below the poverty line=5.9

If Wilma causes damage in Florida, what sins are the people of Naples committing? Oh, right, now I know.

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.

From the AJC:

Pricey gas has buses on a roll
Public transit ridership soars

I like Google, but this kind of appreciation seems to be a little bit too much.

See
Google KAI is the name of our SON

Story here: A Baby Named Google

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.

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:
Colorado 36.8% (45th highest increase among the states)
Georgia 56.2% (33rd highest)
All states 60%

Increase in total undergraduate cost at 4 yr publics:
Colorado 48.3% (35th highest)
Georgia 72.8% (6th highest--I bet this is partly capturing the subsidy from HOPE via higher charges for room and board)
All states 54.4%

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.

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.

…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.

He said the new management team was committed to the target of phasing out importation of the naira by the end of 2006, adding: “It will certainly be another index of our sovereignty that Nigeria prints all of her currency notes within her shores.”