Division of Labour: December 2005 Archives
December 31, 2005
2005 Running Year in Review
Yellow = individual runs
Mario Draghi named new Governor of the Bank of Italy
Italy’s prime minister has named Draghi to replace Antonio Fazio, who resigned his lifetime appointment under criminal investigation for bank merger favoritism. The law was changed last week; the new Governor will serve a renewable six-year term.
On the plus side: as an Italian banking regulator, Draghi is committed to opening the market to inter-European competition.
Mr Draghi spent 10 years from 1991 as director-general of the Italian treasury, where he piloted Europe's biggest privatisation programme.
On the minus side: as a voting member of the European Central Bank monetary policy committee, he’s not an inflation hawk.
The new Bank of Italy governor will also replace Fazio as a member of the European Central Bank's governing council and have a say in setting interest rate policy in the 12 euro nations. Fazio was considered a hawk on rates, willing to quickly raise lending costs to fight inflation, said Lorenzo Codogno, co-head of European economics at Bank of America in London.
Germany’s recently named candidate to replace the outgoing ECB council member Otmar Issing, Bundesbank Vice-President Juergen Stark, by contrast, has solid inflation-hawk credentials.
Ripe for an event study: did the Draghi appointment raise the prices of Italian bank shares? Did it depress the value of the euro?
New Year's Celebration c. 1905
New Year's Eve 1905 was, evidently, one of the first to be celebrated in and around Times Square. From the Dec. 31, 1905 NYT:
On the stroke of 12 to-night the figures "1906" will be flashed from the tower of the Times Building in letters of fire that will be visible several miles away...Election night, with its vast and merry crowds, showed conclusively that the center of up-town activity had moved north to Times Square, and there is no doubt, therefore, that the biggest outpouring in the city's history will see the birth of the new year from the streets and avenues immediately surrounding the Times Building.The last bit sounds like a Dick Clark sound bite.
In another article we learn that they could party hard in 1905:
The customary New Year's Eve celebration, for which practically all of New York turns out, was pushed more than a day ahead this season, and began practically soon after noon yesterday, when the offices downtown closed for the last time in the old year...The old custom of giving away New Year's wishes in quart bottles was revived with a vengeance. Some years ago the Retail Liquor Dealer's Association, by resolution, put a stop to this form of gifts to patrons, but the saloon keepers objected, insisting that they lost business by adhering to the rule. This year there was no attempt to restrict the gifts.
Presidential pursuits c. 1905
This being the last day of 2005, I would be remiss if I didn't convey some of the information in the Dec. 31, 1905 NYT. My habit of reading the paper from 100 years ago has provided me with a much greater history lesson than I initially anticipated - I haven't been told to stop, so I will continue to post interesting tidbits in 2006.
Today's (2005) FW Start-Telegarm had an article about Pres. Bush's brush-clearing at his ranch down the road in Crawford. And the J-walk blog seems to poke fun at the president's habit of taking a machete to ever-encroaching nature. However, things could be considerably worse.
From the Dec. 31, 1905 NYT is an article about President T. Roosevelt's pursuits:
The President enjoyed a fine hunt this morning at Pine Know...His bag as (sic) the close of the expedition was one wild turkey, half a dozen quail, two rabbits, and some snow birds. Surgeon General Rixey, Kermit, and Archie when in a direction different from that taken by the President and were not nearly so successful.
How more sensitive, both politically and culturally, we are today. It isn't too hard to imagine the outrage if Pres. Bush shot a deer or a wild turkey on his property.
News flash: Dick Clark has finally gotten old
The once-ageless Clark, now 76, had a stroke last year, but he’s back – at least to some extent. He’ll be co-hosting “New Year's Rockin' Eve” tonight with Ryan Seacrest. Reports the NY Times:
"I don't think he is 100 percent," Mr. Seacrest told Associated Press radio this week, "but he will not be in a wheelchair on the telecast."
Well, that’s reassuring.
December 29, 2005
Stock market advice c. 1905
In the Dec. 29, 1905 NYT is a discussion about the apparent disparity in money market conditions between New York City and London. In the process, the author offers this sage advice:
When the hooligans of the stock market make a football of security prices there is no especial occasion for excitement. Nobody has to venture in the stock market, and nobody who chooses to venture has any right to complain if his most valuable gain is in experience. There are even cases - as in the painful markets of 1903 - when the movement of the stock market as a whole fails to reflect values, and misleads those who are solicitous regarding values while indifferent regarding prices.
That is better than anything I hear on the talking-head shows.
December 28, 2005
Noise pollution c. 1905
From the Dec. 28, 1905 NYT is a story about Francis Hamilton, then solicitor to the Collector of the Port (of New York), who intended to prosecute boat captains for "unnecessary" whistle blowing. The statute enforced was U.S. Revised Statutes section 4.450 which provided for punishment of steamboat Captains for "misbehavior, negligence, or unskillfulness."
The basic idea was that the noise associated with the shipping traffic along the waterfronts of NYC was too great and was causing heath problems and even death amongst the citizens of NYC. Similar to today's "new study," the whistles-cause-death hypothesis had support:
From a health viewpoint, Dr. John H. Girdner, who has made a special study of the effects of noises on the brain and the general condition of the human anatomy, testified that he believed that death has frequently resulted from the terrific wear and tear on the brain and the nerves by noises [emphasis added].I'll grant that loud, sudden noises are not the best things for hospital patients, but manhole covers cause death? It seems that the noise-causes-death hypothesis rests on unsustained "studies," but was there a more practical reason for cutting down the amount of whistle blowing?
"Has the increase in the night noises from the river front hurt property on the upper west side?" he [George Carrol, a real estate man] was asked by Mr. Hamilton.This makes sense - a compensating differential must be paid to the tenant for bearing the costs of noise, much like property values are lower near airports.
Now, don't get me wrong. I'm sure that the noise of the big city is annoying, but this is why I don't live in a big city. I would have thought there are a number of different compensating differentials that accompany living with noise, beyond the obvious issue of lower rent. Are there higher wages, more "culture," and other quality of life issues such as the ability to get Chinese takeout at 4am? Nevertheless, the concern about noise affecting quality of life and health has not completely disappeared.
The EU has introduced noise abatement regulations for member-country cities, with fines on the way, especially for those pesky bagpipes.
The last Wednesday in April is International Noise Awareness Day, although this seems focused on hearing loss/damage rather than death.
While there are plenty of ways to reduce noise and maintain economic activity, I wonder if the anti-noise activists understand this? What grabbed me when reading the 1905 story was how, in many cases, the activists of the twenty-first century are not as sophisticated/progressive/avante garde as they first appear.
A picture of the new Honda Gold Wing - beyond the airbag, the bike has foot warmers, nav system, and an 80 watt sound system. Given some of the video clips of motorcylce wrecks rolling around the net, it is not clear that the airbag will help much.
If it wasn't Honda, I would have thought it a joke.
The next Y2k+ bug
Coming back from an enjoyable week unplugged has one downside - having to wade through an overflowing email box. This little nugget was sent my way - which might make it old news/new news to some.
The next big concern amongst the computer jocks is the Y2k+38 bug (that's 2038) where C+ programs will possibly crash. This is just a bit earlier than the Y2k bug was advertised, which makes me suspect.
The Y2k bug was either a grand example of markets correcting a potential calamity before it happened or a grand example of over-hype. I tend to go with the latter, but I am willing to be persuaded.
December 27, 2005
Illarionov quits as Putin's advisor
From the WaPo:
One of Vladimir Putin's senior aides said Tuesday he has tendered his resignation as presidential economic adviser, days after he charged in a news conference that Russia "is no longer a democratic country."
From the FT:
Andrei Illarionov, President Vladimir Putin’s chief economic adviser but also an acerbic critic of the Kremlin’s grab for economic power, offered his resignation on Tuesday, saying Russia was “no longer free”.
One step closer to the coinless economy
As of last week, reports the San Francisco Chronicle,
San Francisco's 23,000 parking meters began accepting prepaid cards this week as part of a pilot program that allows drivers to replace the process of depositing coins with the quick swipe of plastic. […]
Small detail: Translink cards are not debit cards in the usual sense, i.e. they don’t draw funds from an ordinary bank account. (Although I suppose it's a matter of degree: you could argue that your Translink card balance, which is centrally tracked and cleared, is tantamount to a special-purpose bank account balance, with the Translink consortium playing the role of the issuing bank.) They are better described as prepaid cards.
The coolest feature of Translink cards is that they allow “contactless” interface: you can pay by waving the card past a sensor rather than swiping or dipping it. Technical details for payment technology geeks here.
Favorite Christmas Songs
I am a pretty big fan of Christmas songs. A search for Christmas in my music library brings up 249 songs, so I have a fairly large collection. Here are five of my favorite Christmas songs. Some are fairly well known, some are not.
1. "Little Drummer Boy/Peace on Earth" - Bing Crosby and David Bowie.
Recommendations desired, especially lesser-known songs by well-known artists. Comments are open.
10 Things I Am Thankful For This Christmas
1. A spouse that not only consented to letting me pursue my dreams, but went along with the sixty percent reduction in living standards without ever making me feel bad about it.
2. My son.
3. That my better half who knows me well enough to know that I would love these excellent t-shirts from the Mises Institute for Christmas. I would have been ecstatic with any of the six, but she knows me well enough to choose the excellent Hayek and Rothbard ones.
4. My in-laws, who undertook considerable effort and expense to watch my son during finals week when my wife was traveling so I could finish out the semester strong.
5. The opportunity to work under Russ Sobel.
6. Mike Munger, for writing this little piece on publishing your work (see also here). It serves as a constant reminder for me of the approach I want to take with research and is directly responsible for a journal acceptance I received last week. His advice ranks right behind James Buchanan’s “keep the ass to the chair” in terms of important advice for any aspiring academic. So far I think I’m following the advice pretty well – six conference presentations of which four have been published and two are currently under review.
7. Our wonderful department chair, for his tremendous support for graduate student conference presentations. To have a chairman who will support multiple conference presentations from a second-year student is amazing and is but one of the many reasons I have never regretted my decision to come to West Virginia.
8. My fellow students (especially MG) because what they say about learning more from your fellow students than from your classes is pretty on the mark.
9. The Earhart Foundation and the Institute for Humane Studies for their fellowships. I would never have been able to write five papers this semester if I had to be a teaching assistant.
10. Glenfiddich (and great friends to drink it with).
December 26, 2005
Durkdurkistan President celebrates 20th anniversary in power
Sorry, I meant Turkmenistan, the ex-Soviet state just north of Iran, where President-for-life (so declared since 1999) Saparmurat Niyazov rivals North Korea’s Kim Jong-Il for megalomania and iron-fisted control. It would be comic if it weren’t so real. The Washington Post reported last week:
Festivities to mark his two decades in power began Tuesday in Niyazov's home Akhal region where citizens were offered shows, concerts, sports competitions and food. […]
The BBC reported a few years ago that he had his likeness woven into “what is probably the world's largest handmade carpet.” It also noted that “the most spectacular of [his statues] is the 12-metre revolving image of him atop a 23-metre high tower in the city's central square.” Meanwhile, “Schoolchildren have to recite oaths of allegiance to their leader every day.”
His current banknote portrait (the same on every denomination) can be seen here. A new design (different portrait) can be seen here on the Turkmenistan government’s official site. Note that the 50 manat may be the world's only currency showing a horse's ass on both sides of the note! Coin portrait here.
Niyazov calls himself “Turkmenbashi,” leader of all Turkmens. Some other evidence for what is politely called his “personality cult”:
The town of Turkmenbashi is named in his honor. At least one district in all Turkmen regions is also named for the leader, and there is a street bearing his name in virtually every settlement.
That’s right, he renamed a month of the calendar after himself.
Markets in Everything--Uncle Tom's Cabin
ROCKVILLE, Md. -- In the brisk Washington real estate market, the white colonial was an easy sale _ three bedrooms, easy access to a major commuting route and an acre of land, a rarity in the tightly packed suburbs. However, the 18th-century house had one thing the McMansions could never claim _ the original Uncle Tom's cabin.
Attached to the side is a small, one-room building, its walls made of graying split oak beams. A massive stone chimney rises at the back, above the large hearth where slaves once tended meals for a plantation owner.
Among the farm's slaves was Josiah Henson, the man whom Harriet Beecher Stowe used as a model for the Uncle Tom character in her 1852 novel on slavery, "Uncle Tom's Cabin."
Less than a month after being put on the market for about $1 million, the cabin and the house are being purchased by Montgomery County.
HT to MR for the markets in everything concept.
December 25, 2005
Bollywood 2005 in review
Where most Bollywood films feature 5 or so songs, two of the top four films for 2005 (Black, Sarkar) had zero songs. An anomaly or a trend? Perhaps a bit of each. Film songs are so deeply embedded in Bollywood film culture and marketing – the soundtrack is typically released about a month in advance to generate publicity for the film opening – that songless films will continue to be rare. But with the successes of Black and Sarkar, perhaps less rare in the future. Sarkar was directed by India’s most stylish director, Ramgopal Varma, who has gone songless before (Bhoot). Black was directed by the very mainstream Sanjay Leela Bhansali, whose previous hit Devdas relied heavily on songs.
It was an okay year for my favorite Bollywood subgenre, the underworld flick, led by Sarkar. Also worth watching: D. I’m looking forward to Apaharan, a movie about the kidnapping racket in Bihar, which recently opened strongly. It stars Nana Patekar, the most consistently compelling actor working in Bollywood today, star of my 2004 favorite Ab Tak Chappan. I haven’t seen Mumbai Godfather; it got bad reviews.
December 24, 2005
Sowell interview to air today
This afternoon at 5pm Eastern, 4pm Central, Fox News will rebroadcast its hour-long special interview with economist Thomas Sowell, 75. Count on large doses of Sowell’s acerbic wit.
I have a personal interest in watching this one: 25 years ago, I had the good fortune to take the last graduate course Sowell taught at UCLA before moving to the Hoover Institution at Stanford. It was a thoughtfully designed and rigorous survey of topics in the history of economic thought. Three students started the course; I was the only one to finish it. The man has never suffered fools gladly -- and his readers have been the beneficiaries.
December 23, 2005
Adam Smith, the original Intelligent Design advocate? Huh?
James K. Galbraith writes,
Like Intelligent Design, the idea of the Invisible Hand stubbornly persists in the face of overwhelming evidence
JKG argues that Smith was unscientific (i.e., religious) to believe in a natural harmony between individual interests (under certain conditions) and societal interests. He believed in the "god" of natural law.
My quick rebuttal: For Smith to believe that human beings are guided by systematic rules of behavior is no more faith-based than when natural scientists claim the same about the rules governing the physical universe.
Read the whole silly thing here.
Ian Vasquez on Arab Economic Freedom
From yeserday's Washington Times:
MUSCAT, Oman. -- The idea [that] economic freedom is essential to human progress catches on in the Arab world. At a gala dinner here attended by hundreds of Arab diplomats and other prominent guests, a new Omani organization, the International Research Foundation, released an "Economic Freedom of the Arab World" report showing how big differences in policies in the region can produce big differences in economic outcomes.
[Link worth clicking on just to see the hotties selling conservative t-shirts.]
Google will eat itself
We generate money by serving Google text advertisments on a network of hidden Websites. With this money we automatically buy Google shares.
Only 3.4 billion years to go...
December 22, 2005
Eastern European Flat Taxes
Daniel Mitchell has a good article on the spread of the flat tax across eastern Europe in today's WaPo.
HT: Wilson Mixon
Reporters in Need of "The Diff"
From today's WSJ "Best of the Web Today":
Something is wrong with the arithmetic in this dispatch from Reuters:
President George W. Bush ranks as the least popular and most bellicose of the last ten U.S. presidents, according to a new survey.
Only nine percent of the 662 people polled picked Bush as their favorite among the last 10 presidents. John F. Kennedy topped that part of the survey, with 26 percent, closely followed by Bill Clinton (25 percent) and Ronald Reagan (23 percent).
So let's see if we have this straight: these four presidents combined account for 26% (JFK) plus 23% (Reagan) plus 25% (Clinton) plus 9% (Bush). That's a total of 83%.
Therefore a total of 17% of those surveyed picked one of the remaining six presidents--or, to put it another way, those six presidents scored an average of 2.83%. It's conceivable that one of the six bested Bush's 9%--but no more than one of them could have, which means Bush is at least the fifth most popular of the 10 most recent presidents.
For more on The Diff click here.
Haven’t got the balls to play cricket?
In Zimbabwe, it’s a crime to import them without permission from the central bank.
Reported earlier this month on TV's ICC Cricket World and here:
Two more senior Zimbabwe cricket officials have been arrested for allegedly violating the country's strict exchange control regulations, a newspaper reported Wednesday. […]
Earlier in the same week another official and two players had been arrested for exchange- control violations.
The Herald said charges against Chingoka and Bvute involved their alleged payment of foreign currency to suppliers outside the country without permission from Zimbabwe's central bank.
The exchange controllers may seem a tad zealous here, but it’s the principle of the thing: if you allow the criminal importation of cricket balls, who knows what might be next? Zimbabweans might start wantonly importing things they actually need to survive.
College Students Need "The Diff" Too
Bonus coverage: The student in the left-hand photo (apparently taken at UNC-CH with the "Old Well" in the background) needs a spellchecker.
HT: Jon Sanders
December 21, 2005
Back in college, we thought he looked more like John Denver
In Time Magazine’s cover story on “The Year of Charitainment”, James Poniewozik asks:
More interesting than why celebrities take up causes--and tougher to answer--is why the rest of us pay attention to them. Granted, there is the rare celeb, like Bono, who becomes a bona fide expert, but why should I turn to him for advice on solving poverty any more than I'd buy a ticket to watch global-poverty guru Jeffrey Sachs sing I Will Follow?
The unstated premise being that you should turn to Jeffrey Sachs for advice on solving poverty? You might want instead to turn to economists whose view of what to do relies less on wishful thinking about the consequences of US taxpayers funding third-world governments and multinational bureaucracies.
For example, William Easterly, who has previously juxtaposed Bono with Sachs and explained here just where Sachs goes off the rails. In a nutshell: "Sachs pays surprisingly little attention to the history of aid approaches and results."
Bradbury & Sauer on WSJ Econoblog
JC Bradbury of Sabernomics and Skip Sauer of The Sports Economist tackle this year's baseball free agent market and other topics in the latest WSJ Econoblog. An excellent exchange chock full of neat economics!
Blogging is...addictive, or seductive?
A "friend" of mine noticed that I had broken my (never credible) promise to eschew blogging back on M.E. Last week I posted this....
Thanks, man. I think.
Some people claim that blogging is addictive. Maybe I just want to put it more romantically, but I think that blogging is seductive.
Check this post, and the comments, for some insights....
December 20, 2005
Cause or Effect?
Google Zeitgeist has posted its 2005 report. The graphs are very interesting and if the raw data were available, there could be some interesting empirical research in combining Google search terms and what's being aired/printed in the mass media.
For example, here is the graph on Avian Bird Flu. Are the searches the cause of the increased media awareness and alarm or are the searches the effect? The king-maker version of the MSM suggests that the searches are the effect of the media hype, but I wonder.
How about this one dealing with WMD or Weapons of Mass Destruction? Does this mean the topic wasn't important after the election or that the matter had been settled (which might explain why those who keep arguing "there were not WMDs" don't seem to get a lot of traction)?
A minor complaint: The vertical axes have no scale (which is likely done on purpose to protect Google's information) so the best we can glean from the graphs are relative changes.
Little blogging by me over the next week.
Someone Who Needs "The Diff"
The WSJ's "Best of the Web Today" reprints this post from the left-wing fever swamp DemocraticUnderground (I won't provide a link):
I would dare to assume that most of us here are in the upper 1%-20% of the population intelligence-wise. We must come to the realization that the majority of the population is in the lower 80% to 99% percent of the bell-curve. WE are not the norm. The Republicans understand that the average American is not very bright. They cater and pander to the masses. The Democratic Party tries to appeal to the population about "issues" that these people just don't understand.
The poster must be the target audience for The Diff.
NB: Expect little, if any, blogging from me over the next 2-3 weeks. After hosting my parents, siblings, etc this weekend, I'm off to spend next week in northern Michigan with the in-laws. (This thin-blooded Southerner will be planted close to the fireplace reading The Undercover Economist.) Then it's on the AEA meetings in Boston. Merry Christmas/Happy Holidays to all readers and co-bloggers.
Shipping the Good Bananas Out
Interesting NYTimes article from Dec. 16, by Tim Harford.
AT this week's ministerial meeting of the World Trade Organization in Hong Kong, negotiators have once again hit an impasse over how and when to open the rich world's agricultural markets to farmers in the poorest countries. What few people have realized, however, is that poor countries don't have to wait for the World Trade Organization. There is plenty that they can and should do to help their own farmers to trade.
Imagine a dream scenario in which the trade ministers emerge from their negotiations this weekend holding hands and proclaiming an end to all agricultural protectionism. What then?
For, say, a banana picker in the Central African Republic, not a lot. The trade barriers at the borders of the rich world may have disappeared, but if our picker wants to sell his bananas abroad he first has to get them onto a ship bound for America or Europe. That takes 116 days, and an incredible 38 signatures - each one an opportunity for some official to collect a bribe. Something is rotten here, and not just the bananas.
Sub-Saharan African exporters face, on average, delays of nearly 50 days for each shipment. They must get roughly 20 signatures on eight or nine separate customs forms. (These figures are all documented in "Doing Business in 2006: Creating Jobs," a report released in September by the World Bank. A disclosure: I was an adviser to the report team.)
Part of the problem, of course, is that landlocked African countries are linked to the outside world by long, decrepit roads and underdeveloped ports in neighboring countries. But determined growers can move bananas along even lousy roads. The real problem is elsewhere: three-quarters of delays are the result of red tape, not port handling or inland transport. These delays, caused by senseless bureaucracy, unnecessary forms and archaic inspection practices, can often be eliminated with a stroke of a pen by a country's chief executive. Even the more sophisticated reforms, like introducing electronic filing, or using software to guide sensible risk-based customs inspections, require only small outlays. What's more, such reforms increase the interception of smuggled goods and discourage corrupt customs officials.
Always tempting to think that improving trade and reducing transactions costs will help poor countries immediately. But....what if they don't want to be helped, or act like they don't? Bureaucratic jobs confer status, and a chance to extort money. Hard to negotiate around that, when the claim that "we will find you another job" rings hollow. So, customs "officials" kill trade, and prevent wealth, in spite of the best intentions.
(nod to Katie at CV)
The World is Flat
Last night I finished reading Thomas Friedman's The World is Flat. I liked it much more than I expected, but that's not a very high threshold. A one sentence summary: Friedman explains how techonological innovation has influenced business practices and increased international economic integration.
There's lots to like about Friedman's book. He recognizes that the rapid technological changes of the last decade have improved people's lives. He recognizes that the world is not zero-sum and that international trade is mutually beneficial. (At one point, he even refers to anti-globalization folks as the "Coalition to Keep Poor People Poor.") He recognizes that productivity is at least as important cheap labor in determining where goods and services are produced. And he recognizes the importance of institutions in economic development. This is much more than I expected from a pillar of the MSM establishment, especially one who calls the NYT editorial page home. (Tierney excepted.)
One of the highlights was his discussions of Wal-Mart's and UPS's use of technology in production and inventory management. These sections of the book ought to be required reading in business school operations management classes.
There are also a few things to dislike. He embraces a more activitist role for government than I think is warranted. He drops in some cheap political shots and takes a swipe at Wal-Mart's health insurance policies. He's a world class name dropper--"my friend ____" [fill in the blank with a CEO such as Gates or Whitman or a prominent government leader]. And he's a bit sloppy with some facts (we invaded Iraq in March 2003 not 2002; Moussauoi is thought to be the 20th hijacker not the 19th).
Overall, though, a surprisingly good effort.
They are apparently a real problem this year.
One Santa was stopped by police for driving 150 kph (90 mph) on a northern German motorway, 50 kph over the speed limit.
"He said he was in a rush because he still had packages to deliver," said a spokesman for the police. They gave Santa a fine and took away his license.
A different excerpt, my favorite:
In Britain, police said they were looking for a Santa acting suspiciously -- a flasher who exposed himself to women.
Hey, Santa: That package is too small to deliver! And why don't you wrap it?
Cultural globalization personified
Seen recently on AZN-TV’s Showbiz India Extreme: DeLon Jayasingha, an LA-based Sri Lankan – American performer whose music mixes hip-hop, salsa, and reggae, with lyrics in English, Spanish, and Sinhalese …
"The Central Role of Economic Freedom in Democracy"
By Ian Vásquez, director of the Cato Institute’s Project on Global Economic Liberty, and a term member, Council on Foreign Relations
Of the cherished liberties of a free society—economic, political, and civil—economic freedom holds a special place. It is not only an end in itself; economic freedom gives sustenance to the other freedoms. When personal choice, voluntary exchange, and the protection of private property are not secure, it is difficult to imagine how political freedom or civil liberties can meaningfully be exercised.
A cartel by any other name c. 1905
Industrial Organization economists have long recognized the potential for anti-trust enforcement and other regulation, especially in the area of price, to help enforce or foster collusion.
From the Dec. 20, 1905 NYT, after the Interstate Commerce Commission Act of 1887 and the Sherman Antitrust Act of 1890, but before a laundry-list of illegal acts was enumerated in the Clayton Act of 1914, is a story concerning so-called "rebating," or what we economists call price discrimination, on railroads:
CHICAGO - Executive officials of all Western railroads at a meeting here to-day entered into an agreement with a view to compelling a strict adherence to the provisions of the inter-State commerce laws. Every road bound itself to inform the Inter-State Commerce Commission of any illegal acts on the part of any road.That's a wonderful formula for collusion in a "don't throw me in that brier patch" kind of way.
In an example of letting the inmates run the asylum, and yet more potential for collusion to take place, it was proposed to create yet another "committee" to investigate and root out any illegal behavior amongst the railroads. Was this a state or federal commmittee? Please.
In order to keep in close touch with the situation, it was agreed that the roads would appoint a committee to represent variuos Western freight associations and to canvass the situation from time to time and report violations of the law. It will be the duty of this committee to furnish evidence in the event of an investigation.
The railroads to the federal government: "don't call us, we'll call you."
The railroad men admit that
[i]t was the general opinion at the meeting that since the law had abrogated the penitentiary clause and substituted a fine against railroads violating the law, railroad men should no longer feel any delicacy in giving information regarding infractions of the law.
Becker suggested that monetary fines could be more efficient forms of punishment than jail time, but I read his main point being that putting productive individuals in jail imposed a dead weight loss on society that was inefficient.
Perhaps an extension of the monetary fine vs. jail time comparison (if it hasn't already been considered) would be that "friends don't like sending friends to jail" but don't mind if "friends have to pay a fine with other people's (shareholders) money." In other words, a group of individuals may turn a blind eye to enforcement if going to jail is more likely - this sounds like Congressmen and ethics complaints, "there will be no crime if the honorable gentleman must do time."
But I digress, Becker did suggest that the greater the odds of detection/conviction the lower the incidence of criminal/illegal behavior, on the margin. These railroad executives seem to buy into this logic. If jail-time is off the table, railroad men are more likely to rat their neighbors out, which, in turn, should reduce criminal behavior (in this case price discrimination). The reward to society for such noble enforcement efforts? Likely, higher prices.
All of this stemming from the practice of price discrimination which, while not universally welfare enhancing, is far from unambiguosly welfare reducing.
December 19, 2005
But Apple is so much better!!
So goes the Apple vs. PC Clone debate which seems to be maintained mainly by Apple fans. I played with Apple's in middle school, but my first machine was a Tandy Model 4, and eventually an IBM XT. By the time I left high school to go to UGA in 1987, I had a new Northgate (now Gateway?) machine with a monochrome (amber) monitor and a 10MB hard drive.
The market spoke and Apple and the other competitors at the time lost (at least the first few rounds). This article gives a nice history of the PC, and includes this interesting graph:
HT: J-Walk blog
Macro effects of a pandemic?
This CBO document showed up in my e-mail today. It is a description of the possible macroeconomic (and other) effects of the Avian flu H5N1 mutating to either a serious or a mild pandemic.
From the article:
The first, and more severe, scenario is roughly similar to the 1918-1919 Spanish flu outbreak. In the severe-pandemic scenario, roughly 90 million people become sick and 2 million people die in the United States, and in CBO’s estimation, real GDP would be about 5 percent lower over the subsequent year than it would have been had the pandemic not taken place.That estimate of the effect on GDP is comparable to the effect of a typical business-cycle recession in the United States during the period since World War II [emphasis added] .
In the mild-pandemic scenario, which resembles the 1957 and 1968 pandemics, about 75 million people are infected in the United States and about 100,000 of them die. In that scenario, the pandemic reduces real GDP by a modest amount, about 1.5 percent relative to what would have happened without a pandemic, but probably would not cause a recession and might not be distinguishable from the normal variation in economic activity.
The pundits and talking heads describe a pandemic is Katrina x 1000 or so. From the CBO estimates, the major impacts will be felt in the transportation and entertainment industries. I suppse this makes sense as these are two major sectors where people congregate amongst strangers, and in the case of a pandemic would be natural places to avoid.
The document is something to consider, I suppose, but I wonder if this analysis is reasonable - I am no macroeconomist.
Insurgency c. 1905
In today's environment, the term "insurgency" is thrown around in dire terms - to the point, it seems, that some want us out of Iraq now because we cannot win. Perhaps some perspective (always in short supply it seems) would be useful?
During the Fall of 1905 there has been considerable unrest in Russia, which has spilled over into Poland and now into the Baltic republics. In what lays the seeds for the 1917 revolution, the Czar has been trying to both placate the revolutionists/insurgents while at the same time maintaining power.
From the Dec. 19, 1905 NYT is the following description of an insurgency that was "winning" (at least at the time):
MITAU - The troops, in order to avoid annihilation at the hands of the insurgents, have been forced to abandon the country districts and to concentrate at Riga, Mitau, and Libau, where they actually are standing on the defensive, unable to make head against the insurgents.In another story from the same issue:
ST. PETERSBURG - The War Department is concentrating two army corps to suppress the revolt in the Baltic provinces. According to the Government's information 60,000 Letts are under arms...The insurgents of Livonia derailed on Dec. 14, near Stockmansof, a military train which was carrying reinforcements from Vilna to Riga. They then attacked the survivors of the wreck...Half the troops on board the train surrendered to the insurgents...the remainder of the troops held out for four days. Their position when last heard from was desperate.
Perhaps some would claim this description partly fits what the U.S. military is experiencing in the Iraqi insurgence, but I don't see it that way. If our military did face potential "annihilation" we would be out of there faster than even most anti-war folks could imagine.
On the other hand, perhaps the Iraqi insurgency of today is, in some loosely defined "real terms," as bad as what happened in the Baltics/Russia in 1905.
[An aside: There are numerous reports of thousands of Jews being killed across Russia. These reports have been met with millions of dollars of private relief, especially in the form of evacuation, from around the world. There have also been a few private offers of arms with which the Jewish minority could defend themselves. The descriptions of massacres are stomach-turning in today's world, but were evidently not enough to terribly excite the national governments of the world. One gets the feeling that the world in 1905 was used to strife, killing, and political/social turmoil that is, today, not something the Western world is comfortable/experienced with (that is just my impression, however).]
Can we imagine this today?
From the Dec. 19, 1905 NYT:
Washington [D.C.] to-day celebrate[s] the centennial of the establishment of the public schools of the District of Columbia...the President [Teddy Roosevelt] said: "It has been my good fortune that all of my children have received, or are receiving, a portion of their education in the public schools of this District, in this city, and I feel that the advantage to them is incalculable.
I don't have any statistics, but I wonder how many Senators, Representatives, Presidents, and Justices, are sending their children to DC public schools for the "incalculable" advantage. I think I remember the number today being in the single digits, but I can't remember when/where I heard this (perhaps during one of the presidential campaigns - 2000 maybe?).
Primer on Health Savings Accounts
Mike DeBow has written a nifty primer on health savings accounts for North Carolina's John Locke Foundation.
What Took Them So Long to Figure It Out?
The title of my posting on July 13:
The Sexiest Discipline Known to Mankind
The headline of a Dec 26 article in Newsweek:
Economics: Sexiest Trade Alive
As I did in July, the Newsweek article also quotes Vanderbilt's John Siegfried on the 40% increase in economics majors.
Scandal-tainted Bank of Italy head finally resigns
Bank of Italy Governor Antonio Fazio, the only euro-zone central banker appointed for life, resigned amid a criminal probe into his oversight of bank takeovers in Italy.
Fazio was implicated in a scandal months ago, showing favoritism in approving an Italian friend’s bank merger proposal over an outsider’s takeover bid. He has been Governor since 1993. Although Italy’s premier has been calling for his resignation for months, the government could not force him to resign.
Lesson: maybe there’s such a thing as too much central bank independence. Especially when the central bank, like the Bank of Italy, is no longer responsible for monetary policy, but only acts as a bank regulator.
December 18, 2005
Decreasing Returns to Scale in Typing c. 1905
From the Dec. 18, 1905 NYT:
FORT WORTH, Texas, Dec. 17 -Alexander M. Mood, deputy Clerk to the Court of Civil Appeals, yesterday broke the world's typewriting record.I am a pretty fast (and fairly accurate - on a good day) typist, but 5,000 words in an hour? Wow.
Such a record evidently wasn't worth much more than a mention in the paper. A Google search of "alexander mood"+"typing" yielded 8 hits, none of which deal with this particular feat.
[Update: Readers Brandon B. and Steven H. email to point out that the 1905 record was approximately 90 words per minute, which would not be considered extremely fast on today's computers. I appreciate the point.
I have two responses. First, Mr. Mood did the 90 wpm for an entire hour, although he evidently flagged a little in the second half-hour, hence the title of the post.
Second, as guessed by Brandon, I failed to mention in the original post that my reference was an old manual typewriter that didn't have automatic carriage return, on-the-fly spelling correctors (which I often need), and more ergonomic keyboards (ah, memories of touch-typing class in pre-widespread-PC 1983).
Speaking of keyboards, I wonder which layout he was using - QWERTY is pretty good, and I know there are arguments against it, but the QWERTY keyboard didn't exist in 1905 did it?
Thanks for the comments!]
Especially if it's broke, don't fix it?
From the Dec. 18, 1905 NYT, a letter to the editor that could have been written today:
We have had one contested Presidential election. It menaced the Republic with the renewal of civil war. It was settled by means which every one recognized to be extra-Constitutional, and which great numbers of American people regarded as unconstitutional, and as bringing about an illegal and unjust result. Only eight years later we had a Presidential election turning on a plurality in this State which the change of a few hundred votes would have destroyed...Those classes which, heretofore, have been relied on to maintain and defend these [democratic] principles are, at the present moment, demoralized by recent exposures. Other exposures may await us and a greater demoralization.
In December 1905 there is a contested mayoral election outcome in New York City, and there are several allegations of election fraud, ballot confusion, and so forth. Perhaps it is not possible to truly "fix" the problem of elections - the human element will always befuddle reform efforts - however, our sophistication and technology haven't brought us too far from what this letter writer has to say.
December 17, 2005
Private vs. Public Education c. 1905
In a small article from the Dec. 17, 1905 NYT:
The Committee on High Schools of the Jersey City Board of Education has notified Mgr. Shepard, Vicar General of the Newark Diocese, that rectors of the Catholic churches will be heard this week...on their petition for admission of parochial school graduates, on certificate, to the City High School [emphasis added].
Rather than fighting to keep students in the public education system, as they do today, it seems that in the early 1900s the public education system fought to keep church-educated students out.
In an equally bizarre twist, the church educators wanted to get students into the public education system in the early 1900s but today want to get students out of the public education system.
One would have thought that students appealing to get into the public education establishment would not have been denied, if only because more students in the public schools would increase the political/economic power of the public education establishment (which would yield more rents). Perhaps at this time church education wasn't on par with the government education. which would have increased the work burden of public school teachers and therefore provided an incentive to deny the students access? Hmmm....
December 16, 2005
Taking advantage of drunks?
From Yahoo! News is a story concerning bundling - in this case liquor and gems:
The Ruby Red is a tangy mix of vodka, champagne, cognac, pomegranate liqueur and orange juice.
Is there a responsibility on the part of the bar to NOT sell this to an intoxicated individual, or at least to let the party concerned out of paying the full bill?
Perhaps a little late
SmartStuff is a pretty cool website with interesting and clever products. Kinda like Sharper Image but perhaps higher quality?
Perhaps a little late for this Christmas season, although for a price perhaps anything can be delivered?
Saber rattling in professional sports c. 2005
It seems that we are heading into yet another round of threatened franchise relocations if cities and states don't start planning for the next orgy of spending on sports venues. In the past few weeks: the Florida Marlins are in discussion with San Antonio because Miami won't build a new stadium, the Saints are talking with San Antonio and (shhh) Los Angeles because New Orleans will need a new/renovated stadium (current bill $200m) but the city has lost much of its population base, the Pittsburgh Penguins are threatening to relocate to Kansas City(?!), the Milwaukee Bucks are threatening that they might have to leave if they don't get a new arena, and now the owner of the Seattle Supersonics is threatening the same.
All of this saber rattling is interesting. Exactly where do the owners of the Bucks and Sonics think they will go? What city big enough to host an NBA team doesn't have one already? I can think of a few that might fit the bill, but beware the New Orleans/Charlotte syndrome - strong demand in the first two years and then boredom and disaster thereafter. Perhaps the following cities are on the list: Nashville, Las Vegas (pro sports in Vegas?), Jacksonville, Columbus (OH), Cincinnati, and St. Louis? Hmmm...those might work for basketball, but where are the Penguins going to relocate if the KC deal falls through?
San Antonio is actually a good place for either a baseball/football team (perhaps both) - the San Antonio/Austin area is well over a million people and there are plenty of folks with money.
Other than that, it seems that the threats of relocation are even more empty than in the past. Perhaps the leagues have done this to themselves through "too much" expansion - at least too much to make extortion practical.
One for Neal Boortz
The abstract of a new NBER working paper:
This paper compares marginal and average tax rates on working and saving under our current federal tax system with those that would arise under a federal retail sales tax, specifically the FairTax. The FairTax would replace the personal income, corporate income, payroll, and estate and gift taxes with a 23 percent effective retail sales tax plus a progressive rebate. The 23 percent rate generates more revenue than the taxes it replaces, but the rebate’s cost necessitates scaling back non-Social Security expenditures to their 2000 share of GDP. The FairTax’s effective marginal tax on labor supply is 23 percent. Its effective marginal tax on saving is zero. In contrast, for the stylized working households considered here, current effective marginal labor taxes are higher or much higher than 23 percent. Take our stylized 45 year-old, married couple earning $35,000 per year with two children. Given their federal tax bracket, the claw-back of the Earned Income Tax Credit, and the FICA tax, their marginal tax is 47.6 percent. The FairTax imposes a zero marginal tax on saving meaning that reducing this year’s consumption by a dollar permits one to increase the present value of future consumption by a dollar. In contrast, the existing federal tax system imposes very high marginal taxes on future consumption. For our stylized working households foregoing a dollar’s consumption this year to uniformly raise consumption in all future years raises the present value of future consumption by only 45.8 to 77.4 cents, i.e., the effective marginal tax rates on uniformly raising future consumption via saving facing our households ranges from 22.6 percent to 54.2 percent. The FairTax also reduces most of our stylized households’ remaining average lifetime tax rates and, often, by a lot. Consider our stylized 30 year-old, single household earning $50,000. The household’s average remaining lifetime tax rate under the current system is 21.1 percent. It’s 16.2 percent under the FairTax.
Boortz, of course, is the author of The Fair Tax Book.
The Low Value of Teacher Ed Programs
The abstract of a new NBER working paper:
We are in the midst of what amounts to a national experiment in how best to attract, prepare, and retain teachers, particularly for high poverty urban schools. Using data on students and teachers in grades three through eight, this study assesses the effects of pathways into teaching in New York City on the teacher workforce and on student achievement. We ask whether teachers who enter through new routes, with reduced coursework prior to teaching, are more or less effective at improving student achievement than other teachers and whether the presence of these alternative pathways affects the composition of the teaching workforce. Results indicate that in some instances the new routes provide teachers with higher student achievement gains than temporary license teachers, though more typically there is no difference. When compared to teachers who completed a university-based teacher education program, teachers with reduced course work prior to entry often provide smaller initial gains in both mathematics and English language arts. Most differences disappear as the cohort matures and many of the differences are not large in magnitude, typically 2 to 5 percent of a standard deviation. The variation in effectiveness within pathways is far greater than the average differences between pathways.
Of course, some readers will be surprised that the effect of teacher ed on student achievement is not negative.
Incentives Matter: Secret Grades Edition
From Business Week:
Students at some top-ranked B-schools have a secret. It's something they can't share even if it means losing a job offer. It's one some have worked hard for and should be proud of, but instead they keep it to themselves. The secret is their grades.
At four of the nation's 10 most elite B-schools -- including Harvard, Stanford, and Chicago -- students have adopted policies that prohibit them or their schools from disclosing grades to recruiters. The idea is to reduce competitiveness and eliminate the risk associated with taking difficult courses. But critics say the only thing nondisclosure reduces is one of the most important lessons B-schools should teach: accountability.
It's a debate that's flaring up on B-school campuses across the country. And nowhere is it more intense than at University of Pennsylvania's Wharton School, where students, faculty, and administrators have locked horns over a school-initiated proposal that would effectively end a decade of grade secrecy at BusinessWeek's No. 3-ranked B-school. It wouldn't undo disclosure rules but would recognize the top 25% of each class -- in effect outing everyone else. It was motivated, says Vice-Dean Anjani Jain in a recent Wharton Journal article, by the "disincentivizing effects" of grade nondisclosure, which he says faculty blame for lackluster academic performance and student disengagement.
Just how contentious are things at Wharton? In cross-listed classes, Jain wrote, undergrads outperform MBAs, and the gap is widening.
Does PETA Have a Tokyo Chapter?
A news headline (via Drudge):
30 decapitated dog heads found in Tokyo moat
Gruesome details here; no apparent link to PETA.
While we're on PETA, the two PETA workers who were killing and dumping kitties in the rural NC county where I grew up have now been charged with 25 felony counts:
WINTON, N.C. — The cats and dogs two PETA employees have been charged with euthanizing and dumping in an Ahoskie garbage bin were killed by injections of pentobarbital, a barbiturate commonly used to put down animals, according to new warrants issued and served on Friday.
Additionally, the two employees were charged with three felony counts of obtaining property by false pretenses. The charges allege that they euthanized three cats from an Ahoskie veterinarian after promising to find the animals new homes, according to the new warrants.
PETA employees Andrew B. Cook, 24, of Virginia Beach, and Adria J. Hinkle, 27, of Norfolk, were served with warrants on 22 felony charges of animal cruelty and the three felony charges of obtaining property by false pretense in court on Friday.
Illiteracy and Innumeracy
George Leef links to a study finding that literacy among Americans continues to decline.
Americans might also be struggling with numeracy. Case in point--the new scoreboard at the Cleveland Cavaliers' arena. From a recent news article:
On the scoreboard at The Q, the Cavs' score was on the left, the New Orleans/Oklahoma City Hornets' score was on the right, and beneath it was "The Diff." As in Cavs 109, Hornets 87, The Diff +22.
Lance Armstrong sued for libel
ROME Dec 15, 2005 — Lance Armstrong has been ordered to stand trial in Italy on charges of defaming cyclist Filippo Simeoni.
Lance apparently called him a "liar". OOOOOO.
I guess there's no Italian phrase for "sticks and stones may break my bones but word will never hurt me."
Markets in Everything: Christmas Light Hanging
Four years ago, when he was just getting started in the Christmas light-hanging game, Dennis Broughton decked out the Juneau County home of a building contractor.
He strung thumb-size bulbs along the roofline of the steep, two-story house, and it looked so good, so professional, that before long a neighbor was talking to Broughton about doing his home, too.
Then another neighbor asked. And another. And another - until after a few years, Broughton was decorating six other nearby houses, including the home of a car dealer who called with a mild complaint and a confession that his do-it-yourself approach wasn't cutting it anymore.
"He said, 'You're embarrassing me,' " Broughton recalled Tuesday, taking a break from a holiday decorating business that this year, propelled largely by commercial work in Wisconsin Dells, will rack up more than $500,000 in sales.
As always, a HT to MR for the Markets in Everything concept.
December 15, 2005
The young Stanley Fischer problem
I’ve been mulling over a statement by Stanley Fischer that I quoted the other day, describing how he used to think while an important decision-maker at the World Bank:
...protectionism is the obvious way for people who haven't been trained to think. So as I started, I found all that very persuasive. […] I was not fully convinced of the virtues of [a] more market-[driven] approach when I was in the World Bank in the late '80s. [But] the more I saw of what countries were doing to themselves and to their citizens, the more I moved in the direction of markets.
Here’s the practical problem: how do we minimize the damage done by well-meaning but naïve dirigiste economists in positions of power, for example at the World Bank and IMF, before experience finally teaches them that markets work better than top-down schemes? Let's call it “the young Stanley Fischer problem”. (I don’t mean to ridicule Fischer; in fact, I’m saluting his candor in admitting that experience has shown him the folly of his earlier protectionist-dirigiste views. No, really.)
P. J. O’Rourke recently identified the general problem more humorously than I can, in a comment on a speech by British Conservative Party leader David Cameron:
Cameron appeared on Today and answered the usual question about what he was going to do about some terrible social problem with: "We're going to bring the best minds to solve this one." That was the moment when he lost me. The guy obviously doesn't understand the fundamental truth about politics, which is that the best minds only produce disasters. Scientists, for example, are famously idiots when it comes to politics. I agree with Friedrich Hayek, who said in The Road to Serfdom that the "worst imaginable world would be one in which the leading expert in each field had total control over it".
One approach to mitigating the YSF problem would be: reform our graduate training in economics. Teach some actual case studies of government failure, not just hypothetical cases of how to correct market failure. That wouldn’t hurt, and I’m all for it, but it runs headfirst against all the professional incentives for professors and grad students in a world where the World Bank and IMF hire hundreds of full-time economists and consultants. The staffs of the World Bank and IMF have vested interests in inventing clever new missions for their agencies. Research demonstrating the agencies’ failings is not the ticket onto their professional gravy train. (Susan Anderson and Peter Boettke have documented the dirigiste leanings of research sponsored by the agencies here.)
So is there any way to really solve the YSF problem, short of liquidating the World Bank and the IMF?
Jim Hamilton on "the gold standard"
Jim Hamilton, a thoughtful and well-informed macroeconomist, makes an important point about one type of gold standard, the type under which “the government would stand ready to trade dollars for gold at a fixed rate”. Namely, the government's commitment may lack credibility and the system may therefore be fragile. Under such a system:
the dollar is only as good as the government's credibility to stick with the standard. If a government can go on a gold standard, it can go off, and historically countries have done exactly that all the time. The fact that speculators know this means that any currency adhering to a gold standard (or, in more modern times, a fixed exchange rate) may be subject to a speculative attack.
What Hamilton fails to note is that, as any student of monetary economics should know, what he describes isn’t the only type of gold standard. Gold standards vary along at least three dimensions: the standard form of gold (specie standard, bullion standard, gold-exchange standard), who issues money redeemable in it (competing commercial banks, government monopoly central bank), and the rules for backing (contractual, mandatory 100% reserves, discretionary).
The lack of credibility in a government discretionary gold standard does not carry over to all types of gold standards. There can be and have been gold standard regimes without government being the main source of gold-redeemable dollars. Precisely because of Hamilton’s concern – the government’s inability to credibly commit is a weak link that can bring the regime down -- George Selgin and I have argued in more than one place (see here and here) that a vital measure for making currency credible is to allow private competitive currency issue. Our point applies to other fixed exchange-rate regimes (e.g. dollarization) as well as to a gold standard.
Private bank issue makes it possible to sue an issuer for violating the gold-redemption contract; competition forces issuers to behave prudently (minimizing the probability of a violation happening) to attract customers. The gold standard became historically fragile precisely when and where governments nationalized the issue of gold-redeemable currency. The weakness of government monopoly issue should not be attributed to the gold standard.
Moral Authority c. 1905
File this in the "we've come a long way" category. From the Dec. 15, 1905 NYT is this little story on Page 1:
WASHINGTON, Dec. 14 - Representative Adams had a conference with the President to-day at the White House on his bill providing for the erection of the whipping post in the District of Columbia for wife beaters [emphasis added]. He told the President that he desired very much to have his moral support, and believed that Mr. Roosevelt could create a sentiment that would pass the bill this session.
Churches Save, Restaurants Kill
"Environmentalism is collectivism in drag"
So says George Will in his column today. Actually, I think he's a bit wrong. I fail to see the "in drag" part--environmentalism is flat out collectivism. An excerpt from Will's column:
Few opponents of energy development in what they call "pristine" ANWR have visited it. Those who have and who think it is "pristine" must have visited during the 56 days a year when it is without sunlight. They missed the roads, stores, houses, military installations, airstrip and school. They did not miss seeing the trees in area 1002. There are no trees.
Opponents worry that the caribou will be disconsolate about, and their reproduction disrupted by, this intrusion by man. The same was said 30 years ago by opponents of the Trans-Alaska Pipeline, which brings heated oil south from Prudhoe Bay. Since the oil began flowing, the caribou have increased from 5,000 to 31,000. Perhaps the pipeline's heat makes them amorous.
Ice roads and helicopter pads, which will melt each spring, will minimize man's footprint, which will be on a 2,000-acre plot about one-fifth the size of Dulles Airport. Nevertheless, opponents say the environmental cost is too high for what the ineffable John Kerry calls "a few drops of oil." Some drops. The estimated 10.4 billion barrels of recoverable oil -- such estimates frequently underestimate actual yields -- could supply all the oil needs of Kerry's Massachusetts for 75 years.
Two thousand acres is roughly one-fourteenth the size of my college's campus and a postage stamp size parcel in the vastness of ANWR. Supposing that enviros are correct that drilling would trash the 2,000 acres, this seems like a minor cost relative to the millions of barrels of oil.
Markets in Everything--Proposal Gals
Today's AJC has good news for the romantically-challenged:
They draw red hearts out of rose petals. They light aromatherapy candles, chill champagne and sprinkle chocolates around the room.
They set the mood — for someone else.
Staffers at Château Élan don't actually pop the question, but they sometimes get close to getting down on one knee.
"Once, we text-messaged, 'Your bubble bath is ready,' " said Château Élan guest "experience" coordinator Jamie Shelton, also known as one of the "Proposal Gals." "We were in the hallway during the proposal. We never get to be in the room."
Increasingly, men are calling upon professionals to give their proposal a bit of bling. Long considered private and low-key, megawatt proposals are spawning a new industry of advisers — they choose rings, pluck flowers, release doves and even schedule the timing of the engagement.
HT to MR for the Markets in Everything concept.
Water for rural Bolivia at what price?
Five years ago in Cochabamba, Bolivia, the New York Times reports, local leftists ran an American monopoly franchise (Bechtel) out of town for trying to raise water rates. A victory for the people!
One small catch: today, because the local public utility has kept the old low rates, they can’t cover the cost of keeping the pipes filled, let alone extending them. Half the population still has no piped water service (they rely on wells and freelance water trucks), while even for the lucky households the taps run only a few hours of the day. Maybe not such a victory for all of the people.
Reporter Juan Forero of The Times doesn’t consider whether there might be a conflict of interest between the lucky households (water at low rates) and unlucky households (no water at those low rates). Might the currently unlucky households have been willing to pay enough above the old rates to get pipes, but the side wanting continued low rates was better organized?
In somewhat loaded language Forero cites the case as an example of how
country after country in Latin America has either discarded or is questioning much of the conventional wisdom about relying more on market forces - known as the "Washington consensus" - from the privatization of utilities to the slashing of social spending to unfettered trade.
Conspicuously missing: any mention of Chile’s free-market reforms, their positive results for Chilean living standards, or their not being discarded.
December 14, 2005
Incentives matter: Cigarette Edition
From Yahoo is this story about a proposal to increase the California state per-pack cigarette tax BY $2.60$!! The resultant state sales tax on a pack of cigarettes would be $3.47. I wonder what side of the Laffer curve the state would be on in this case?
Revenue from the higher tax would be directed to various health programs, including cancer screening, prevention and research, low-cost children's insurance, and tobacco education and cessation.
Okay. So the tax costs $159 million to the early childhood education programs - tax the smokers to pay for pre-kindergarten? - and cost valuable law enforcement efforts (these folks have little understanding of the concept of opportunity cost).
What's the benefit of the tax? The last paragraph brings in the kicker:
The tax is projected to raise $2.7 billion annually if cigarette sales remain at the current level, but the higher price is expected to cut sales by about 8 percent a year, supporters said.Hmmm. In 2004 the wholesale price of a pack of cigarettes was around $2.40, and federal tax per pack was at $0.39. This would put the retail price in California somewhere in the neighborhood of $2.40+$0.39+$0.87= $3.66 or so (add a little bit for the convenience store owner's profit). Let's round this up to $3.75.
[The proposed California state tax would therefore be more than the wholesale price of a pack of cigarettes!! Perhaps RJR and friends should just cede the property rights of cigarettes to the states and force the government's hand.
The proposed tax increase would put the price of cigarettes in California somewhere in the neighborhood of $6.35 per pack, a whopping 64% increase in price. If proponents expect the quantity demanded to drop only by 8 percent, that would put the price elasticity of cigarettes somewhere in the neighborhood of -1/8 or -0.125. Perhaps this is true in the short run (several studies of cigarette demand find short-run elasticities in this area), however such a dramatic increase in the price might easily create a more dramatic reduction in demand (or quantity demanded) as the previous estimates of price elasticity focus on a very small portion of the pertinent demand curve.
The efficient bureaucrat? c. 1905
From the Dec. 14, 1905 NYT is a little story about one Frank L. Evans who had served as the disbursement officer for the Department of Agriculture for ten years. Evidently Mr. Evans was in ill health and was being granted an indefinite leave of absence.
Like all good bureaucrats, Mr. Evans asked for a "thorough examination" of his books.
"A force of Treasury experts was sent to the department and went over every figure in the accounts of the ten years.
Wow. Granted, it was only $4.1 million per year that Mr. Evens had to keep up with, that's a drop in the Katrina relief bucket. Kudos to Mr. Evans, and today's efficient bureaucrat, if she exists. I wonder if the efficient bureaucrat can survive in today's local/state/federal monstrosity.
Incentives Matter: Driving Habits Edition
Headline from Yahoo News:
High gas prices alter driving habits
HT: Mike DeBow
If Only He Was Serious
Recently, Oregon Rep Earl Blumenauer remarked, "It has drug millions of Americans into a tax that was never, never, never intended to apply to them." (Source here.)
Now this sounds like a Democrat I might just like. He must, after all, have been talking about the monstrosity known as the federal income tax. The U.S. income tax was enacted in 1913, had marginal rates ranging from 1 to 7 percent, and had large enough personal exemptions that returns amounted to less than 0.5% of the population. (Data source: Slemrod and Bakija, Taxing Ourselves, pp. 23-24) If any tax has "drug millions of Americans into a tax that was never, never, never intended to apply to them" it is the federal income tax.
Alas, a Dummycrat could never say such a thing about leviathan's cash cow. Instead, Blumenauer was referring to the alternative minimum tax which blue-staters have suddenly come to dislike because it will mostly whack their citizens. Of course the inept Republicans are not shrewd enough to leverage the Dems' dislike of the AMT into a deal to, say, permanently reduce dividend and capital gains rates.
Everything is connected
Deconstructing Adam Smith
For some time, the statist left has been trying to co-opt Adam Smith by saying he wasn't really the supporter of free markets that some claim he was. Granted Smith was no anarcho-capitalist, but to associate Smith's name with the anti-trade, pro-union, left (e.g., Ohio Congressman Sherrod Brown) is truly sickening.
APEE 2006 -- Last Call
I think just about the entire DoL crew is going to APEE 2006 in Las Vegas. This is my favorite academic conference of the year. If you're interested in presenting a paper or just attending, please see the information below.
The Association of Private Enterprise Education 2006 Annual Meeting -- Call for Papers
The Association of Private Enterprise Education (APEE) invites the submission of papers for its 31st International Convention in Las Vegas, Nevada, April 2-4, 2006. The association is composed of scholars from economics, political science, philosophy, and other disciplines as well as policy analysts, business executives, and other educators. APEE’s annual meeting explores topics related to private enterprise in an atmosphere that respects market approaches. Presentations reflect the latest research in fields such as regulation, public choice, microeconomics, and Austrian economics, as well as instructional techniques.
APEE invites papers on any topic, however, a number of sessions will be devoted to this year's theme: Private Solutions to Market Failures. The theme provides an opportunity to organize sessions that illustrate the advantages of private enterprise.
As Harold Demsetz pointed out, many advocates of government intervention think of a potential problem and then assume that the state has the capability and incentive to solve it. This “Nirvana approach” to public policy usually ignores potential shortcomings of government and it usually fails to consider potential market solutions. In reality government solutions often have unintended consequences worse than the problem they were meant to fix. Private enterprise, on the other hand, often sees profit opportunities where needs exist and has an incentive to do things right. The private sector has found ways to privately provide many goods including: education, healthcare, relief for the poor, environmental amenities, roads, money, security, and much more.
Among the topics that presenters may wish to address are the role of economic institutions and the rule of law, analysis of private versus public regulation, the role of markets and property rights, the state of the economics profession, public choice, and political philosophy. Papers accepted for presentation are eligible to be reviewed for publication in The Journal of Private Enterprise.
Those wishing to submit papers should send the paper itself or a 600-word abstract to: APEE Vice President Edward Stringham, c/o J. R. Clark, APEE Secretary/Treasurer, Probasco Chair of Free Enterprise, The University of Tennessee at Chattanooga, 313 Fletcher Hall, Dept. 6106, 615 McCallie Avenue, Chattanooga, TN 37403-2598. Phone: (423) 425-4118, FAX: (423) 425-5218, e-mail: J-Clark@utc.edu. Deadline for paper submission is December 1, 2005.
To learn more about APEE, please contact: J. R. Clark, APEE Secretary/Treasurer, at the above address or visit APEE’s website at http://www.apee.org. If you have questions about paper topics or session panels, feel free to contact Edward Stringham at email@example.com.
"It's all so tawdry"
Jonah Goldberg's argument that "American conservatism is overdue for a reformation" is spot on. I especially liked these paragraphs:
But abdication of constitutional responsibilities is the order of the day. State attorneys general, led by New York's Elliot Spitzer, form unconstitutional compacts between the states without the required consent of Congress. Congress passes laws without a moment's concern about their constitutionality, on the novel but deeply held popular conviction that if the Supreme Court doesn't object, it must be OK. Once upon a time, whole bills were thrown out because some senator or congressmen objected that the proposed legislation, however well-intentioned, simply exceeded constitutional authority. Today we legislate by curveball, write whatever laws we like in the hope that the squinty-eyed umpires of the court don't call a strike.
Presidents have been just as bad, including George W. Bush. He campaigned against the proposed McCain-Feingold campaign finance "reform" in the 2000 election. At the time Bush argued, rightly, that the legislation violated numerous constitutional principles. When the bill wound up his desk, however, in a more egregious form than the earlier versions, Bush signed it. If his erstwhile "serious constitutional concerns" had been justified, the president explained, then, heck, "the courts will resolve these legitimate legal questions." But when the law went before the Supreme Court, Bush's Justice Department defended it and the justices in turn upheld it, out of deference to the "government." It's all so tawdry.
December 13, 2005
Shouldn't This Be "Wage Gouging"?
From the New Orleans Times Picayune (scroll down):
A cutthroat, post-hurricane labor market has sent wages skyrocketing in the fast-food industry and prompted some of the New Orleans region's biggest chains to offer workers thousands of dollars in signing bonuses, perks typically associated with higher-paying white-collar jobs.
Burger King recruiters have been visiting federal disaster recovery centers and newly reopened high schools offering a $6,000 bonus, paid in monthly installments, to anyone promising to work full-time at a metropolitan New Orleans restaurant for at least a year. New part-time workers are being offered $3,000 bonuses.
Popeyes Chicken & Biscuits has increased hourly pay for cashiers and cooks from just over the federal minimum wage of $5.15 to more than $8, a jump of more than 50 percent.
"I've been in the (fast-food restaurant) business for 30 years, and I've never seen anything like this," said Glen Helton, president and chief operating officer of Strategic Restaurant Acquisition Corp., the California company that owns the 54 Burger King stores in metropolitan New Orleans.
Strategic Restaurant has reopened about half of its stores and is ready to open 13 more, but it can't until it hires about 500 more workers, Helton said.
Almost overnight, Hurricane Katrina transformed the bottom reaches of the region's economy from an employer's market where low-wage earners had few options for advancement to a worker's market where job opportunities, and higher pay, abound.
A natural disaster has caused suppliers of labor to charge more for an hour of work than they did before the disaster. If this were gas--or even the Burger King that is hiring the now more expensive workers--there would be howls of "price gouging." If charging $5 for a gallon of gas is "unbridled greed" then isn't demanding a $6,000 signing bonus? That many people view these scenarios differently indicates the real issue here is anti-capitalist animus.
December 12, 2005
Okay, so I'm going through security on the way to go visit the DoL mother ship at Capital University.
And I noticed the guy at the x-ray machine sort of move his head forward, then shake his head, and then start to point. He called over another guy from TSA, and they both pointed and whispered to each other about what was on the screen.
I was thinking, jeez, some moron is trying to bring on some scissors. What an idiot. And aren't these rules stupid? Who cares about scissors?
Then, a bag comes out of the x-ray machine, and it's my laptop case. They ask, "Is this yours, sir?"
And my spider sense started to tingle a bit. At least, I think it was my spider sense. Isn't that where you urinate down your own pants leg? I'm pretty sure that's what spider sense is.
Because I remembered that I had left my pocket knife in my laptop case. I had been book review editor for Public Choice for quite a while, and occasionally I would use the knife to open boxes of books. When I moved from BR Editor to ROW Editor (that's "Rest of World", by the way, outside of Europe), I had slipped the knife in my laptop case.
And then carried it around for two weeks, never reaching down into the front pocket enough to notice it and take it out.
Here's the thing: this is not a small knife. It is not even a medium size knife. It is the John Holmes of pocket knives. Folded, it is nearly 7 inches long. The blade is six inches long, easy.
Anyway, by this time, TSA guys have their gloves on, and a group of about five of them are standing around the computer bag. One of them pulls out the knife, in its little sheath. "Damn! You were right!" the puller yells over his shoulder to the x-rayer.
At this point, I figure I am going to be on television that night, at least locally. "Moron tries to take sword onto plane; TSA vigilance saves lives. Moron killed with automatic gunfire." At a minimum, I expect some rude questions, a sginficant fine, and a delay long enough to miss my flight.
But the head TSA guy comes over to me, and explains (in a voice like you would speak to a child, but a child you liked), "Sir, you can't take this onto an airplane. It's against the rules."
I literally just stare at him, speechless. My spider sense, by this time, has started to make a pool around my left foot.
"Now, sir, you have some options. You can take this down and put it into your checked baggage, or you can mail it to yourself...."
I start yelling, and waving my arms as if surrounded by invisible flying bees. "Take it, throw it away, I don't want it, no, I don't want it!"
TSA guy just smiles and says, "Okay, sir, it will be destroyed. Please be careful next time."
Anyway, I made it to Columbus. Really great to see the guys from Econ at WVU, who came over to do some other work, and hung around for the talk and for dinner. (How scary is this picture? Russ...decaf, man, decaf). Great times.
(Thanks to Bob L, by the way, for posting the streaming version. I thought it said "screaming Munger" at first, and it struck me that was redundant...)
Smith v. McCain
An edited version of Brad Smith's lecture that he gave for my campus lecture series is now on-line at Reasonfor free. Still you'll need to go to the print/pay version to see that deliciously nasty picture of John McCain.
Smith is a former Federal Election Commission and current law prof at Capital University. (And I'm lobbying him hard to join DoL as a blogger.)
It's going to be expensive keeping warm this winter!
I got to wondering if current natural gas prices are the highest ever (or at least since 1967 when my data begin) in real, inflation-adjusted, terms. Answer: Yes.
Can you imagine?
At one time the New York subway system had no maps in the stations? So indicates a letter to the editor of the Dec. 12, 1905 NYT:
Allow me to suggest that it would be well if the management of the Subway were to place in a conspicuous position at the entrance of each station a map of New York showing the route of the Subway, its branches, and the different stations at which the trains halt.
Randolph Brandt writes:
Dear Osama, Tell you what, we'll go back to being the last, best hope of earth - leading by example rather than force - and you can go back to living in a ruined system from the 14th century, and we'll see who wins in the long run.
It’s for your sake, not for the sake of your beliefs
In the name of seeking “the speedy recovery of ailing Bollywood superstar Amitabh Bachchan” (the world’s most popular actor, whose recent hospitalization we noted here), members of the political Samjwadi Party sacrificed two buffaloes in a temple in Assam, India.
Irony: Bachchan is an ambassador for People for Ethical Treatment of Animals (PETA).
From one of Drudge's links about the fuel depot explosion in England was this snippet:
More than 60 billion gallons of fuel erupted in a ball of flames hundreds of feet in the sky, creating an acrid cloud of smoke which is stretching for miles and moving south-eastwards. [emphasis added]
60 billion gallons? The U.S. uses 320,500,000 gallons per day (at least according to this site), so the 60 billion number would be about 180 or so days of U.S. consumption - a fuel depot that big in England? I've been there - I'm not sure there's anything that big in England.
Another story claims "[i]n total, 20 petrol tanks were involved, each said to hold three million gallons of fuel." That sounds a little more reasonable.
Oh well, millions or billions - what's the diff?
December 11, 2005
Mike Munger's talk, "Why Democracy is Overrated," that he gave at my shop last month is now on-line (mp3 format, 68 MB) and available for your listening pleasure.
The interesting odysseys of Stanley Fischer
Formerly: MIT economics professor, US citizen. Now: Governor of the Bank of Israel, Israeli citizen. (In between: World Bank vice-president, IMF director, Citibank vice-chairman. Connections: member of Council on Foreign Relations, Trilateral Commission, Bilderberg Group.) Bio here.
Formerly: Keynesian, monetary policy discretionist. Now: Still Keynesian, but committed to a 1-3% target for the inflation rate.
Formerly: thought larger government needed to correct rampant market imperfections. Now: advocates free-market reforms, recognizes that government intervention is captured by protectionists and leads to stagnation. He tells a 2001 interviewer about the evolution of his views here.
… protectionism is the obvious way for people who haven't been trained to think. So as I started, I found all that very persuasive. […] I was not fully convinced of the virtues of [a] more market-[driven] approach when I was in the World Bank in the late '80s. [But] the more I saw of what countries were doing to themselves and to their citizens, the more I moved in the direction of markets.
December 10, 2005
A plug: the perfect stocking stuffer
Ripping surf-instro music CD out now: The Space Cossacks, "Never Mind The Bolsheviks: The Best of". Compiles the most intense and melodic recordings of the celebrated ‘90s band fronted by ace guitarist and Hillsdale College economics professor Ivan Pongracic, Jr. (The only band that compares is his current band, The Madeira.) Added bonus: liner notes by yours truly! Order here.
It's the most wonderful time of the academic year...
I have an e-stack of 75 term papers that I'm avoiding like Vince Young does tacklers. But I am reminded that reading term papers is a privilege. Below is from a friend who teaches at a large state university (not SJSU).
"Climate conditions are extremely venerable to tipping the production
"We will experience the effects threw our physical health becoming
"Recycling one aluminum can will save 95% of energy rather than
Useful quips c. 1905
From the Dec. 10, 1905 NYT:
Watch me pull a rabbit out my hat – but no looking into the hat
Those who paid $100 a seat to attend the University of Chicago's 2006 Business Forecast lunch got their money’s worth in the form of a dramatic clash between Randy Kroszner and Michael Mussa. Kroszner (who, little did I know, has now become a forecaster) predicted that 2006 will see 3.5% real growth with 2.5% inflation, while Mussa predicted – get this –3.0% real growth with 3.0% inflation!!
Well, at least they agree that nominal income (the sum of the two) will grow 6.0%.
The equation of exchange, MV = Py, tells us that growth in nominal income (Py) can be decomposed either (as above) into inflation (growth in P) plus real growth (in y), or decomposed into growth in the money stock (M) plus growth in the velocity of money (V). The Fed controls M, so logically any forecast of Py implies a forecast of what the Fed will do. But Kroszner refused to say explicitly what he expects the Fed to do. Why? Reuters offers a hint:
Kroszner, thought to be on the short list to fill one of two open seats on the Federal Reserve Board, served on the White House Council of Economic Advisers from November 2001 until July 2003.
Can we infer that Kroszner would like to appointed to the Board, and doesn’t want to say anything that might harm his chances?
December 09, 2005
Jeff Spiccoli, Public Choice Scholar
Sorry for being a few days behind, but in reply to Bob's What are your favorite missing quotes?, I think the list should have stuck to slapstick. The genre is much more conducive to one liners (think Airplane!, The Three Amigos, Cheech&Chong--although the latter may more appropriately be called smokestick). All this aside, we have to bow to Jeff Spiccoli, public choice scholar.
"So this Jefferson dude was like, 'Look, the reason we left this England place is 'cause it was so bogus. So if we don't get some primo rules ourselves--pronto--then we're just gonna be bogus, too."
Postmodern currency notes?
To my eye, Switzerland’s current banknote designs (viewable here) are already a bit garish. (Of course, my currency-aesthetics eye has no doubt been blunted by US Federal Reserve notes, which are about the world’s dullest.) The Swiss National Bank is now considering a new set of designs that would up the boldness factor even more. The SNB held a contest, and the winning design set was chosen by a jury headed by a modern art museum type. Reports Bloomberg:
The winning design was chosen because of its "semantic expressiveness'' and the way it links the front and the back of the notes, said [jury head] Ammann, the art historian.
Sound attractive? Well, here they are (click on "new banknotes project" and then "1st prize"): judge for yourself. Ordinary Swiss folks who are their potential users are reportedly less than keen on this sort of semantic expressiveness. Bloomberg’s headline: “Embryos, Blood Cells on Banknotes Horrify Swiss”.
Blogging is good for your career
Exhibit B: Frank and I wrote up a short note and it has just come out in the Atlantic Economic Journal.
December 08, 2005
How to bring down a government?
Make false hotel reservations? So says a CIA "handbook" for destabilizing the Nicaraguan government. Flickr archive here. I don't know, this seems a little far-fetched - nevertheless, it is somewhat humourous.
Would falsely made hotel reservations really bring down a Marxist government?
The newest variety of Coke
December 07, 2005
Which is more demeaning?
The Native American mascot, such as The Fighting Sioux or The Fighting Illini, or the Native American-themed amusement park?
The polling around here, even though the University closed at 1:30 because of the threat of snow (no laughing if you are above the Mason-Dixon!), overwhelmingly supports the Native American-themed amusement park.
Is this an example of "De Gustibus" or "Cui Bono"?
On Police Uniforms c. 1905
The Dec. 7, 1905 NYT has a letter to the editor titled "Value of Police Uniforms":
Which is the more important function of a police officer, the apprehension of wrong-doers in the act, or the prevention of crime and disorder? We must admit it to be the latter, if there is anything in the old adage, "An ounce of prevention is worth a pound of cure;" and of the deterrent effect of a uniformed representative of the law in any public place there should be little doubt. Ask the policeman under which condition he finds the maintenance of his authority easier, and his answer, if honestly given, will be "in uniform."
This is an interesting question. Would plainclothes police do better to deter crime? This is akin to the concealed carry debate - do concealed carry permits, where it is not apparent who is armed and who is not, deter criminal behavior?
Two events show that the uniform, or lack thereof, is not a guarantee either way. Last week in Dallas, a plain-clothes detective, working undercover, was shot during a mugging/robbery after the assailant saw the detective's badge. Also last week, a Fort Worth officer was shot and later died when he tried to serve a warrant against a local man - the shooter claims that he did not know that the man knocking on the door was a police officer. This despite the police wearing uniforms.
As a signal of who exactly is the "authority," the police uniform provides value to society and likely helps the police do their job. However, the uniform can also provide a valuable check on the actions of the police. When a beating, shooting, or some other event occurs and those engaged are wearing police uniforms, the community outcry is immediate and loud. This, in turn, likely deters bad behavior on the part of the police. The value of the police uniform is likely more than the letter-writer suggests; the uniform helps keep the "bad guys" as well as the "good guys" in check.
Some other thoughts: Having police wear uniforms deters vigilante law enforcement. Why is impersonating a police officer a crime? Could it be because the police want to protect their "reputation" as much as possible; letting any hayseed put on a uniform and bust heads is likely not good for the rest of the force. On the cynical side, keeping the hayseeds from impersonating an officer protects the extortion monopoly (think "Gangs of New York").
December 06, 2005
How about Joan Jett for 24 hours?
Larry's post (below) reminded me of a rock station in Chattanooga during the 80s (Rock 105), who thought it would be clever to play Joan Jett's I Love Rock And Roll without commercial interruption for its first 24 hours. After about the fourth time in a row the station was turned off.
Like a bad liquor experience, my Pavolvian response to "I Love Rock and Roll" is to recoil in horror.
Where is the FCC when we need them?
I’m being forced to reconsider my view that the FCC shouldn’t restrict broadcast content. Why? Because while I’ve been driving around town Christmas shopping, KEZK-FM in St. Louis has subjected me to Josh Groban’s version of “O Holy Night” three times in 24 hours. There ought to be a rule! (Specifically: Groban no more than once per day; if the station wants to play that song again, play Eric Cartman’s version.)
Sure, I could always turn the radio off or avoid the channels I don't want to hear -- but as FCC Chairman Kevin Martin asked about offensive cable TV, why should I have to?
Markets at work
When a local McDonald's goes out of business, or when one of the gas stations at the four-corners goes belly-up, there is little outrage and concern. However, let a professional sports franchise threaten to relocate and one would think the host city itself is threatened with extinction.
Such seems to be the hew and cry over the Marlins possible relocation. I have been advocating a Marlins relocation for a number of years, especially in lieu of folding a team such as Minnesota.
It seems the Marlins are in discussion with San Antonio, which is probably large enough to host the team - especially if they locate the stadium somewhere North of town, i.e., closer to Austin.
Major League Baseball faces no major competition, and therefore has no competing league to provide "free" market research. Instead, MLB has to expand to test markets, such as Phoenix and Colorado (both successes) and Tampa and Miami (both failures). Rather than discontinuing some other franchise when expansion has proven unprofitable, most firms (or cartels) would cut back the failed expansion. In the past, MLB has suggested doing exactly the opposite. Perhaps Commissioner Selig recognizes that Minnesota is a viable franchise and Miami is not, and yet the politics might dictate that Minnesota be put on the chopping block every year?
In the end, Miami-Dade County residents will survive just fine without baseball. Although their team won two World Series in their first ten years of existence, in comparison to the sights and sounds of Miami, WS rings are a yawner. In this sense, if the good folks of Miami don't care one way or the other if the Marlins are in town, why should the rest of us?
San Antonians might well support a major league team, although this might push the Austin minor league team out of business. While some will complain about the injustice of the Marlins relocating, and perhaps Miami business/political leaders start lobbying for a new stadium and a new team (once again), a Marlins relocation should be viewed as a positive sign that MLB is waking up to market realities.
Immigration concerns c. 1905
In what would have likely shown on C-SPAN 3 or some such channel, in the December 6, 1905 NYT, is a story about the
first National conference held in this country, beginning today in the Concert Hall of Madison Square Garden. The sessions will continue through to-morrow and Friday. The conference was arranged for by the Civid Federation, and its purpose is to find out whether immigration at the present rate is a benefit or a menace to the prosperity of the country [emphasis added].
The more things change, the more they stay the same. I think we can safely state that there was a net benefit to the immigration waves of the early 1900s, even if assimilation didn't happen overnight. Today's wave of immigration evokes similar concerns about quick assimilatoin and the future of our prosperity. However, one hundred years it is likely that we will have a similar conclusion as we do today.
Favorite Quotes from Drop Dead Gorgeous
One of the movies I consider to be underated is the mockumentary Drop Dead Gorgeous. Take this with a grain of salt because the only non-animated movies and shows I own are mockumentaries, so to me underated means "not as well liked as Spinal Tap." Anyway, the movie has a very good cast (for a variety of reasons) including Kirsten Dunst and Denise Richards - need I say much more? In my mind, a perfect piece of fluff to have on when you're doing something that doesn't require your entire attention.
From the Amazon.com editorial review:
Subtle is not the word to describe Drop Dead Gorgeous, a mock documentary purporting to cover the Sarah Rose Cosmetics Teen America Beauty Pageant in Mount Rose, Minnesota. Ellen Barkin (Sea of Love) and Kirsten Dunst (Interview with a Vampire, Dick) are perfectly cast as a mother and daughter whose only ambition is to use the pageant to get out of their claustrophobic small-town lives. Opposing them are Denise Richards (Wild Things, Starship Troopers) and her mother, Kirstie Alley (Look Who's Talking), who just happens to be the pageant's organizer. The plot, which centers on contestants being murdered (mostly by flaming explosions), is clearly secondary to the backstage shenanigans and satirical portrayals of vanity, small-town corruption, and family dysfunction.
Here are some of my favorite quotes from the movie:
Kirsten Dunst's character: My mom never hid the fact that my dad chose his career over us. What was it she always said?
[Pagent contestant in response to "If you were a tree, what kind of tree would you be?"]
I'd have good strong roots in a town like Mt. Rose, a solid Christian trunk, and long, leafy branches for handicapped children to use as shelter.
The previous year's beauty contest winner, talking about her path to success:
With two weeks until the pageant, I was practicing my talent, finishing my costume, brushing up on current events, and running 18 miles a day on about 400 calories. I was ready.
Becky Ann Leeman died on a giant swan float her dad purchased from Mexico. At her funeral, the pastor said:
And so, dear Lord, it is with deep sadness that we turn over to you this young woman, whose dream to ride on a giant swan resulted in her death. Maybe it is your way of telling us to buy American.
Posted by Joshua Hall at 09:00 AM
Wal Mart: Schumpeterian and Kirznerian Entrepreneur
When I was in grad school at George Mason in the mid 90s, a common topic of conversation was comparing and contrasting Schumpeter’s and Kirzner’s views of entrepreneurship. At least a few dissertations fizzled out on the topic. Deep down, in the building blocks of the two theories, there is fundamental agreement. But in some surface ways, the two entrepreneurs “look” different. Schumpeter’s is a consummate innovator—hence the term “creative destruction.” Kirzner’s entrepreneur is also an opportunist but more so in a pure arbitrage sense—he buys low and sells high.
I’ve been hearing more and more about Wal-Mart lately (BTW, I’m no Wal-Mart fan or shill). Russ Sobel and student Andrea Dean presented a nice paper on a session I organized at the SEA meetings last month. They show that as more Wal-Mart stores open in a given state, aggregate small business activity in that state is unaffected or even enhanced. That’s not so much destruction.
Also, an October 2001 study on the “new economy” by the McKinsey Global Institute talks a lot about the details of WM’s distribution network and how that creates economies of scale. The McKinsey study breaks down aggregate productivity growth for the U.S. economy into sector-by-sector contributions. Some large percent of the macro productivity growth is due to the retail sector (and five other sectors). Within retail, the study finds that WM innovated common distribution and marketing processes using simple technologies like warehouse logistics/purchasing, electronic data interchange, and wireless bar code scanning. This forced the entire industry to become more efficient, and these innovations are now standard for any retail operation of significant scale. The study also discusses how these innovations migrated vertically to wholesalers as well, especially in pharmaceuticals. All of this improved productive efficiency in the retail sector, which has had macroeconomic effects. That’s creative destruction.
Here’s my hunch. Wal-Mart’s innovations increased the minimum efficient scale for businesses that market and distribute finished retail items. So mom-n-pop can’t compete in hardware, electronics, clothing, groceries, etc. But a WM opening creates the opportunity for firms with small MES to open--little shops like ice cream parlors, indoor climbing gyms, law firms, barber shops, and others that Sobel and Dean mention briefly. This opportunity creation could occur partly through effects of WM on downtown small scale commercial real estate. Without WM, little shops would have to compete with hardware, grocery, electronic, clothing, and other stores for downtown space. With a big box out on the bypass, there’s much more opportunity for little shops to open on Main Street. That’s truly the market process in action, allowing resources to move toward their highest valued uses.
Wal-Mart is also famous (or infamous) for buying low and selling high(er), which also leads to allocative efficiency, which brings me full circle to my opening point. Wal-Mart may be the consummate Schumpeterian-Kirznerian entrepreneur. Theories reconciled.
December 05, 2005
Worker's Paradise - AFL-CIO style
Andrew Roth over at The Club for Growth links to a somewhat interesting site affiliated with the AFL-CIO called Job Tracker. The site ostensibly provides (biased?) data on the number of firms the unions determine are a) exporting jobs; b) laying off workers; c) violating safety and health regulations; and d) violating labor laws.
At first glance, the data seem relatively easy to confirm/refute. Yet, I wonder. For instance the description of the safety/health violations data is as follows:
violations of safety and health regulations, or have workplace fatalities or catastrophic incidents, or have high rates of workplace illness and injury since 2000.Hmmm....high rates of workplace illness? Okay, we go to the labor law violations:
found with cases involving violations of workers' rights under the National Labor Relations Act since 2000.I suppose this means that a law suit alone is enough to prove guilt.
It gets better, however, when the trade and jobs relationship is described. For the layoffs data, the AFL-CIO states:
laying off workers in your area because of the impact of trade on their business.I suppose we won't point any possible finger at the impact of unions on wages and the ability to compete in a global marketplace? How is it that layoffs are more detrimental when they occur because of trade with Venezuela rather than trade, say, with South Carolina? Why is trade only detrimental to jobs?
Never mind, I suppose. Seeing as I had nothing to do as the Eagles went down in flames to the Seahawks, I grabbed the data from the website and combined it with various and sundry other variables (more over at Heavy Lifting). Here's an interesting teaser.
The state averages (sans DC) for the four jobs-related data the site provides:
. sum exporting layoffs safety laborlaw
Now, even though the data are in their levels (and not in percentage terms), if we compare to the District of Columbia? In DC there are ZERO companies exporting jobs, 1 company is laying off workers because of trade, 21 companies are violating safety/health codes, and 13 companies are in violation of labor law.
Now, I have no doubt that there is no single firm exporting jobs from DC, at least from the AFL-CIO's point of view. Likewise, I have litte doubt that only one firm is laying off workers because of trade issues. On the other hand, I find it hard to believe that only 13 companies are violating safety/health codes and only 13 companies have been accused of violating labor laws.
It seems that the best friend of the unions is the government and that the best place for (union) jobs is in Washington DC (and North Dakota) - although in DC union membership is only a little above the national average (14.6% vs. 11.6%). If the government ran the entire economy, or rather, if the entire economy resembled Washington, DC, i.e., it was characterized by protectionism, seemingly unlimited revenue (i.e., tax funding), little accountability to shareholders/stakeholders, and rampant inefficiencies with no outside market pressures to force their elimination, well, evidently we would be in the workers' paradise so-long promised.
I will have more over at Heavy Lifting.
Doughnut-style holes featured in Turin medals
The new medal design was unveiled by Turin organizers Wednesday at the close of a two-day visit by International Olympic Committee officials.
The holes represent the Italian piazza - or city square or plaza - that is at the heart of the image designs for the Feb. 10-26 Olympics.
P.S. Expect light/intermittent blogging from me this week--this week is the convergence of final exams, a search in my department, and a presidential search. As for quotes that didn't make the top 100 list, the inordinately large amount of time I spend in meetings these days makes me partial to this one:
"A good plan today is better than a perfect plan tomorrow." (Wag the Dog)
More Missing Movie Quotes
Me, I’m disappointed that the AFI list of 100 movie quotes failed to include any of these memorable lines from Pulp Fiction:
JULES: They don't call it a Quarter Pounder with Cheese?
"Who are these guys?"
"Who are these guys?"
And my personal favorite:
"You just keep thinkin' Butch. That's what you're good at."
What are your favorite missing quotes?
The Division of Labor is Limited by the Extent of the....Roster?
The tallest player in the NFL is 6'9''. Why no 7-footers in football?
Here's my point. The Dallas Cowboys have lost their five games so far this season by an average of four points. Get one more blocked field goal & PAT per game, and they're maybe undefeated. But unlike punters and kickers, there is no such position as "kick-blocker". Why not?
One simple explanation is that 7-footers have pretty high opportunity costs of playing football; i.e., they play basketball instead, and they play it at an early age.
A less obvious possible reason is the league roster cap. A 7-footer isn't likely to have the center of gravity and agility required for doing other things on the football field. With a 40-man roster, owners/coaches probably can't devote a position to such a specialized task. If only there were a 7-footer out there who could punt the ball 60 yards. Alas, it seems the extent of the roster limits the division of labor in pro football.
Still, it's especially puzzling when you consider that football does import athletes from another sport: soccer players as kickers. So I leave open, as another possible reason, the possibility that I am a football genius and no professional coaches have yet thought of recruiting basketballers as kick blockers. Anybody have Parcells' phone number?
David Friedman, Legal System Traveler
Hi, folks. Ed Lopez here. Long time reader first time blogger. Thanks to Frank for the introduction.
As noted, I'm at San Jose State now. My colleagues Ben Powell and Ed Stringham host an informal but serious discussion group called the Saturday Night Anarchy Club. At last night's meeting, David Friedman gave a talk called "Legal Systems Very Different From Ours," covering fascinating aspects of any non-U.S. legal system worth mentioning. As one example, you have your private criminal law in Saga Iceland (see David's well-known work on this), but also you have its polar opposite in Imperial China, which had only government prosecution even for torts. He told some neat stories about Athenian, Cheyenne, 18th C. English, and especially Gypsy law, too.
A challenging question that occurs to me after David's talk is: what makes a successful legal system? Certainly we can talk about minimizing rent seeking. More broadly, I wonder if it is too simplistic to say that a successful legal system is one that creates (or allows) opportunities for positive sum interaction. If so, I wonder how the modern U.S. tort system would stack up? Also, we can talk about what kinds of evidence shows that a legal system is successful. Is it merely longevity? If the society dies does that mean its law failed? Can a system even last a long time if it generally creates negative sum interaction? Big questions.
David said that the material for the talk is based on a class he teaches (at the Santa Clara law school). As he digs deeper into the various systems and develops a framework for comparing/contrasting, he plans to put it together as a book. I, for one, look forward to it.
December 04, 2005
Thoughts from the plane back from FSU
Just returned from an excellent workshop on teaching the principles courses. I'm less convinced of the benefits of pure specialization since Jim Gwartney excels in both teaching and research. William Wood's presentation was great; he said he didn't mind others "borrowing" his ideas for teaching, so here's a link.
I don't think it's online yet, but Reason magazine has a great article by Brad Smith, former head of the FEC, where he lays into the logic of Our Savior John McCain. Look for it in a week or two, or be a Luddite and grab the paper version like I did.
From Bob's earlier post; I like this quote from the voicemail:
"...our Representatives in Congress are more concerned with stopping those corruption investigations than helping people with limited incomes like us."
What a meaningless statement. In one sense, even the income of the bum on the street is unlimited. I like my job, but if I wanted to I could work 5 hours per week at the Wendy's down the street. Or 6. But, well, maybe the concerned caller means that everyone's income is limited by scarcity. I could work here at school, then work all other hours at Wendy's, forgoing sleep. My income would thus be limited by the number of hours. Bill Gates' income is limited too then for the same reason, but I'm sure the caller doesn't think he's "like us."
Someone should estimate how quickly diminishing returns sets in when an argument made to the average Entertainment Tonight viewer increases in the number of words. "People with limited incomes" fits nicely on a bumper sticker, but a history of per capita incomes from the Census showing the opposite, or trying to explain that people could easily afford heating oil if they forgo other purchases, doesn't.
The implosion of the tallest building in South Dakota didn't come off quite as planned. The job will be finished by the wrecking ball.
Look to the real and not the nominal price of gold
A basic cornerstone of economic literacy is the distinction between nominal prices (in dollars) and real (relative) prices. Those writing recent headlines about the price of gold clearly don’t get it:
● Forbes: “Gold price reaches 23-yr high”
● Scotsman: “Gold sets the standard in 23-year high”
● LA Times: “Gold Closes at 22-Year High of $502.50”
These headlines misleadingly suggest that $500 today is a price as high in some relevant way as $500 in 1987. It isn’t: as I noted on Wednesday, the dollar is worth quite a bit less today. Consumer prices have risen 75% since 1987; the dollar has lost 43% of its purchasing power.
What we should be paying attention to is not the nominal, but the real price of gold. And though the real price isn’t yet unusually high by historical standards, it has – as Raymond Weklar rightly points out -- nearly doubled in the last four years. That movement is worth pondering.
Since the last remnants of the gold standard were removed in 1971, investors have looked to gold as an inflation hedge. The real price of gold peaked as the inflation rate peaked around 1980 (useful graph here; hat tip to Newmark’s Door). It ebbed 1980-2001 as central banks seemed to have learned to keep their inflationary tendencies under control. The upsurge in gold over the last four years suggests that that investor confidence may be slipping again – and not without good reason. As Bloomberg reports:
So far this year, consumer prices are rising at a 4.9 percent annual rate compared with a 3.7 percent increase at the same time last year.
December 03, 2005
Anti-smoking c. 1905
In March 1905, Indiana made it illegal to sell cigarettes or the paper used to make cigarettes, and also made it illegal to possess cigarettes. There was, evidently, a concerted effort to ban cigarette smoking across the country, a movement that 100 years later is still going strong.
In the Dec. 3, 1905 NYT is a short article suggesting that the son of William B. Leeds of New York was fined $25 and court costs for violating the new law. Supposedly the offense was committed "at a recent social function." It sounds like the young Mr. Leeds pushed somebody's button and when he lit up, said somebody called the PoPo.
From an April 25, 1905 letter to the editor about anti-smoking laws, we find some rational words (still applicable today):
In the old days we, as a people, were content to have the Government let us alone, and the more severely it did so the better we weer pleased. Now we rush to the Government for everything. IF we want "prosperity" we ask it of the Government, or if we want women to be well mannered enough to take off their huge hats in the theaters, we ask the "Government" to compel them to do so. In other words, if now we want something, instead of getting it for ourselves, as our forefathers were content to do, we rush to the "Government," whether it be city, state, or national, and ask that it be given to us.
The letter writer goes on to say:
...while the use, or if you will, the abuse, of tobacco, liquor, etc., is exceedingly harmful and will in many cases cause great misery to the individual, more harm will be done to us as a whole people by acquiring the habit of dependence on the Government than good will be achieved by such legislation as that of which Indiana has given us the most recent specimen.
In what would be evidence today that Hades had frozen over, the Times stated in an April, 18th editorial:
For the prejudice against the cigarette there is absolutely no intelligent basis. If one opposes the use of tobacco his position is perfectly intelligible and to a great extent defensible. If he tolerates it or approves it, but denounces cigarette smoking as a vice, he is not necessarily a fool, but he certainly displays an ignorance of the elements of chemistry and hygiene of which a man of average intelligence should be ashamed.
This in itself is good enough, but the very next paragraph reminds us that there was a time when even the NYT was a champion of freedom:
The Indiana cigarette law is an outrage in its invasion of personal liberty and its interference with legitimate trade. It cannot for a moment be defended upon any ground that the suppression of the cigarette comes within the police powers of a State. If it could, precisely the same argument would apply with greater force to other forms of tobacco and with equal force to the sale and use of tea and coffee, which probably do a much greater amount of harm than results from tobacco.
December 02, 2005
Good Idea: Let's Replace A Cartel With A Monopoly
HOUSTON (AP) -- Calling the Bowl Championship Series "deeply flawed," the chairman of a congressional committee has called a hearing on the controversial system used to determine college football's national champion.
Posted by Joshua Hall at 10:15 PM
Intrinsically useless no more
To contrast it with commodity monies like silver and gold, monetary theorists often describe the fiat money we have today as “intrinsically useless”. Henceforth that’s no longer completely true: an Indian firm has just developed a process for recycling worn paper currency into plywood-like sheets of material that can be used to make furniture and doors.
World’s most popular actor hospitalized
Amitabh Bachchan, 63, is recovering in Mumbai from surgery Wednesday evening to repair intestinal perforation due to diverticulitis.
Who? If you’re not a fan of Bollywood you probably haven’t heard of The Big B, but the tall baritone-voiced actor has been far and away the industry’s leading star since 1975. There is no doubt that world-wide his movies have sold more tickets than those of any other actor -- from any country -- over those 30 years. (Revenue product is another question: Bollywood films sell about as many tickets but do about 1/20 the real box office of Hollywood because tickets in India go for the equivalent of 50 cents rather than $10.)
Bachchan co-starred in the greatest Hindi film of all time, Sholay, in 1975. He has appeared in four hits so far this year: Bunty Aur Babli, Black, Sarkar, and Waqt , respectively 1st, 2nd, 4th, and 8th in adjusted All-Indian net box office for 2005. If you want to sample his recent work, the best of these films overall is Sarkar (an Indianized version of The Godfather from Bollywood's best current director, Ram Gopal Varma), but Bachchan’s acting impressed me even more in Black (an Indianized version of The Miracle Worker), where my ability to appreciate his talents was helped by the fact that his character speaks about 80% in English.
Although he now plays patriarchs rather than the “angry young man” roles that made him famous, Bachchan continues to work steadily. Two new Bachchan films are due out this month. Reports the Deccan Herald:
According to industry sources here, Bachchan is starring in at least a dozen films which are scheduled to be completed next year. He has also signed on for various commercials which were to be shot this month and early next year.
AB also hosts India’s most popular television show, “Kaun Banega Crorepati?,” the Indian version of “Who Wants to Be a Millionaire?” Bachchan was recently in New York to promote the show, and was interviewed about it last week on Showbiz India (a US program on cable's International Channel). Filming for the revamped KBC-2 will now have to be suspended. Bachchan is expected to be out of action for a month while recuperating.
With a title like that
The Dec. 2, 1905 NYT hypes a new book on "Easy Mathematics" by one Sir Oliver Lodge that went by the title:
Now that's a title to titillate the mathematically curious.
More on Oliver Lodge:
Lileks on Astrology
"What’s astrology, daddy?" "It’s a system of belief for people who cannot handle the intellectual demands of Scientology." [Link.]
December 01, 2005
Incentive problem? What incentive problem?
From the Dec. 1, 1905 NYT:
ANNAPOLIS, Md., Nov 30 - The midshipmen who will start for Princeton on Saturday morning will take with them $6,000, which they raised and which they desire to place on the navy eleven in the game with West Point. Word has been received that the army supporters can take only a part of the amount, so representatives of the navy have wired to the army post at For Myer, near Washington, D.C., and Leavenworth, Kan., to get the remainder covered. The army men, however, want odds of 5 to 4. The navy thinks it should be even money.
Overt gambling on college football, especially on the part of student bodies, is today frowned upon. Of course, the conferences/teams gamble every weekend on receiving a big payout in terms of a lucrative bowl game - especially a BCS berth...no irony there.
What is not described in the NYT article is how the proceeds of a Navy win would be distributed - would the players receive a portion, even if they hadn't contributed to the pool? The midshipmen seem to assume that the Navy players want to win for the sake of sticking it to Army, and therefore there is no moral hazard problem. However, if Army offered side payments to the Navy players?
A friend passes along this funny little piece of junk voice mail (.wav audio).
Is it just me or do I detect an Asian accent? They wouldn't have outsourced this recording would they?
When to buy a new car?
This working paper by ADAM M. COPELAND, WENDY E. DUNN, and GEORGE J. HALL documents the decline in prices during the first model year of a new car. Not surprisingly, prices start high and decline over time. How much do prices fall? On average approx. 9.2% over the course of the first model year. Here is a great picture from the paper:
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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