Division of Labour: March 2006 Archives
March 31, 2006
Radical solution for airlines?
Michael O'Leary, Chief Executive of Ireland's Ryanair (Research), Europe's most profitable airline, wants to make air travel free. Not free as in free from regulation, but free as in zero cost. By the end of the decade, he promises, "more than half of our passengers will fly free."
The story suggests that the airlines might eventually charge for everything except the ticket. An interesting departure from the standard air-travel bundle we generally purchase here in the states.
It sounds like it might be hard to implement with unionization.
The Tax Man Cometh (later than he did)
State Tax Notes provides a (2004) discussion of the OTHER things that have happened on April 15. This seemed interesting to me because I am sitting down this weekend to "do" my taxes.
This was news to me - tax day was March 15th until 1955.
Congratulations to Randy Holcombe
On being elected to the presidency of the Public Choice Society for 2006-08.
After War: The Political Economy of Exporting Democracy
Chris Coyne of Hampden-Sydney College presented Chapter 1 of his forthcoming book After War: The Political Economy of Exporting Democracy at WVU last week. (A copy of Chapter 1 can be found here). After hearing his presentation, I cannot wait for his book to come out. Chris has has applied some basic microeconomics to the problem of exporting democracy and makes a strong case that the best way to export democracy is through trade. While his work demonstrates a remarkable ability to synthesize literature across many disciplines, Chris is clearly an economist in his perspective and his important work in this area is a testament to the type of training that students can receive at George Mason.
A Libertarian Perspective on Suicide
I was clearing things off my hard drive while getting ready for APEE and I came across this essay I wrote some time ago on suicide. I wrote it for an essay contest and so was severly limited on space and what exactly I could say (hence the random book mention). I am not sure how much I am persuaded by the arguments I put forth, but I thought I'd share it regardless. I've put the essay below the fold.
Read More »
Suicide, Assisted and Otherwise
The principle of equal freedom – the notion that every woman has the freedom to do as she likes provided she does not infringe upon the equal rights of others – is the basis of our constitutional republic. As explained by Roger Pilon in David Boaz’s The Libertarian Reader: Classic and Contemporary Readings from Lao-Tzu to Milton Friedman, this fundamental principle is embedded in our unalienable rights to life, liberty, and the pursuit of happiness. It is from this fundamental principle that all concomitant rights specified in the United States Constitution flow. Those rights flowing from the principle of equal freedom not specifically mentioned in the Constitution are generally protected by the Ninth Amendment, which gives the presumption of liberty and equal freedom. These unalienable rights
These natural rights are not absolute. Rights can and do come into conflict with one another. For example, individuals are not allowed to yell fire in a crowded theatre as their right to free speech infringes upon the right of others to be secure in their persons. Rights can also conflict with the governmental powers as enumerated in the Constitution.
From this perspective, the question of whether or not a person has the right to end her own life therefore appears to be an easy one. As an individual taking their own life does not infringe upon the rights of others, there appears to be no role for government intervention. This seems to conform to the principle at the heart of a free society, the idea that we are free to live our own lives regardless of how others may view feel about our choices.
At the same time, the right to do as one pleases as long as it harms no one else has generally not included the right to sell oneself into slavery. Certain rights are considered inalienable, meaning that an individual cannot transfer or give them up in a voluntary exchange. In the case of voluntary slavery, the paternalistic concern is that an individual consenting to a slavery contract at time t might regret having done so at time t +1. Since she has relinquished her unalienable rights, however, she cannot legally exit the contract and thus her past self has constrained her future self in an irrevocable manner.
The same paternalistic concern arises when considering whether an individual has the right to take their own life. Assuming that an individual does not suffer from any mental illness, it is clear that an individual committing suicide is doing so voluntarily and thus is merely exercising their basic right to act as they deem appropriate. While their actions do not infringe upon the freedoms of any individuals at that point in time, it is clear that they irrevocably infringe upon equal freedom of their future selves. Thus there appears to be a case for government declaring that the right to life is an inalienable right and thus suicide should be illegal.
As a practical matter, however, there is little that government can do to prevent individuals from taking their own life. Thus the primary effect of declaring the right to life an inalienable right will be that it makes assisted suicide illegal, as an individual will be unable to give another individual permission to legally violate their right to life. And unlike an unassisted suicide, an assisted suicide leaves someone who can be punished, thus making it possible for government to deter assisted suicide.
The practical application of the perspective that the right to life is an inalienable right will therefore have a different effect on individuals, depending upon whether or not they are able to take their own life. From a policy standpoint, this makes sense because the primary concern is deterring individuals from constraining their future selves should they change their mind. In the case of assisted suicide, there is no assurance that the individual did not changer her mind after giving consent. Due to the irrevocable nature of the act, the presumption should be that all such contracts are invalid, just as voluntary slavery contracts would be.
« Close It
A milestone in the world of cricket
One of the modern greats, Sri Lankan batting star Sanath Jayasuriya, has announced his retirement from test matches. He will continue to play one-day internationals, where his aggressive batting style is more valuable, and hopes to play in the 2007 World Cup in the West Indies.
Test cricket, where matches last five days, is notoriously dull. A batsman need be in no hurry to score runs. I once saw England’s Nasser Hussain score only one run from the first 30 deliveries he faced. The one-day game is more exciting, and Jayasuriya has helped make it so.
Jayasuriya’s lasting contribution was to be one of the first batsmen to recognize that in the one-day game, with the batting team limited to 50 overs (at 6 deliveries per over, that’s 300 deliveries from the other team’s bowlers), it pays to score rapidly. More teams lose by scoring too few runs from their 50 overs than by using up all their outs, so go for a high number of runs per over, even at a greater risk of making an out. In a 1996 match against Pakistan, Jayasuriya scored 76 runs off of just 28 balls, an astounding run rate. The most common result from a batted ball is one run; hitting it beyond the boundary scores four (or six if it clears the boundary on the fly). Jayasuriya's performance that day was like a baseball player hitting five home runs in a game.
APEE Las Vegas!
The DoL crew will be well-represented at the upcoming APEE meeting in Las Vegas. Josh, Frank, Larry, Ed and I will be there. Our loyal readers can find us in the bar (which bar I don't know but definitely some bar.)
A good number of Liberty and Power bloggers will be there too.
In addition to the academic fun, I'm planning to hike LaMadre Mountain near Las Vegas on Saturday and do a rim-river-rim dayhike (South Kaibab Trail down and Bright Angel Trail up) in the Grand Canyon on Wednesday. All work and no play and all that...
Chief Executive Boards International
Last night I gave a brief after dinner talk to the National Summit of Chief Executive Boards International, a group of small/medium sized business CEOs. It went really well and they were a very good audience. The title of my talk was "The Outlook for American Businesses in an Age of Customization and Globalization."
My (draft) remarks are below the fold.
Read More »
After dinner remarks by Robert A. Lawson at the Chief Executive National Summit of the Chief Executive Boards International. Blackwell Hotel and Conference Center, Thursday, March 30.
Let me begin by telling you what I am not going to say. I am not the kind of economist that pretends to know more (or for that matter anything at all) about your line of business. (I hope that that won’t stop you from hiring me as a consultant however!) As an academic living in the last bastion of feudalism on earth, the American university, I am sure that I have a lot more to learn from you about the particulars of doing business in America. In addition, I don’t know much about the regional outlook for manufacturing or services or construction or whatever. Likewise, I don’t know what to expect on the job front over the course of the next few quarters. I imagine there are other economists who know (or claim to know) about such matters, but I am not one of them.
I want to talk to you about two much broader trends facing business in America. Trends that, at any point in time, are easy to ignore, but represent important on-going shifts in the competitive landscape facing your business. They are globalization and customization. The former of course has had no shortage of ink spilled about it in the last few years. The latter, however, customization, has not received as much attention but I will argue is every bit as important as globalization. And the two trend are linked.
Customization. Let me begin with a story about one of my favorite professors at Ohio University. He had been teaching economics for 30 years and was accustomed to given the same multiple-choice exam year after year after year to his freshman economics classes. He went through elaborate steps to count each exam given to the students to be sure he got the same number back. He kept the exams under lock and key in his office. Why do all this? If even one exam leaked out to the students then he’d have to set a new exam. In the days before computers, he would have had to make up exam questions or cut and paste from the ones provided by the textbook publisher. This is a laborious process and would take several hours. Today, when I want to set an exam, I hop on my computer and pull questions from a database with over 10,000 questions. I can randomize the order of the questions and the order of the answers. In total it takes me about 10 minutes to create and printout an exam. And each exam I give to each class each semester is completely customized and unique.
This story highlights the importance of the computer in changing the way we go about our business. In the era before computers (and related technologies such as robotics) the American economy thrived and became the envy of the world by producing large quantities of goods. Lots of cars, lots of clothes, lots of food. The variety of the items was sometimes limited but we had a lot of it. You can have a car in any color as long as it’s black, right? Obviously overtime, more variety was introduced. But the variety was still mass produced variety. We had Chevy, Buick, and Oldsmobile selling slight different but essentially the same cars. The technology of the day was well suited to turning out large quantities but still of a very similar product.
Enter the PC. Increasingly if you want to buy a car, a computer, a window, or a set of kitchen cabinets, or whatever, you don’t go to the store to pick from a set of mass produced products, instead you hope on dell.com and select the exact computer you want. It is then made specifically for you and delivered. This kind of customization was always possible, but the difference is that today you can get this level of customization for essentially the same price (in terms of money and time) as the old standardized product. I recently purchase custom dimension windows and was amazed to find that the price was basically the same as the stock windows of similar quality available at the store.
An interesting side note is that this customization revolution has had little impact on the GDP measure for the U.S. A hundred standardized windows selling for $300 each contributes the same to GDP as a hundred customized windows selling for $300 each. We’re better off as consumers with the customized product, but our measured GDP is unchanged. For this reason, it is my belief and that of many other economists that the GDP of the U.S. has dramatically understated the productivity gains generated by computer technology.
Ok. What does this mean to you? First, it means that your business, if it produces a relatively standardized product, is going to face increasing competitive pressure from your domestic competitors who offer customizable products to customers. Second, your business is going to face competition from foreign producers who are now able to produce large quantities of standardized products cheaper than we can here. The bottom line is that American businesses must offer customizable products. The days of being able to churn out millions of identical widgets are gone.
This brings me to the second theme, globalization. The United States is a “capital rich but labor poor” country. That is, in we have more capital than labor in relation to other countries. In layman’s terms, workers are relatively scarce in the U.S. In contrast, developing nations are “labor rich and capital poor”. Poor nations have a lot of workers but less in the way of capital.
Generally being “capital rich/labor poor” like the U.S. is a good thing. It means we have high productivity per person and therefore high wages and a high standard of living. It is also a problem as some products require relatively large amounts of labor (relative to capital) to produce. In the U.S. this means that these items will be very expensive or we may even have to do without some things altogether. Hiring domestic servants for example has all but disappeared in the U.S. because of the scarcity of workers and the high wages needed to hire them. Similarly, gas station attendants, movie theatre users, etc are essentially extinct. In other labor intensive areas like health care and education that are harder to do without, it means prices are rising very fast.
In recent years, the dramatic reductions in transportation costs, tariffs, and other costs of trading between nations have opened up trade with a host of labor rich (i.e., low wage) nations. Overall this is a good thing for America. It means that we will once again have access to products at reasonable prices that are labor-intensive to produce. Of course, it does mean than some labor-intensive American industries have been driven mostly out of business. While this process began with textiles and certain types of manufacturing (especially assembly processes), it has recently expanded, because of the computer, to include even services. It is now possible to get a set of architectural plans or a computer program written by an architect or programmer in India instead of having to hire an expensive American.
From the standpoint of your business, what does this mean? It means than the most successful American businesses will be those offering products for sale that are capital intensive and require relatively little labor. If you produce a labor-intensive product, you will not be able to compete effectively with firms operating in labor rich nations. And those of you in the business of providing services are not immune from this trend as the recent “outsourcing” issue has illustrated.
Customization, the drive to create unique products and services for customers, and globalization, the ability of consumers to buy low from producers around the world, are two of the biggest trends facing American businesses. While both of these trends will make your jobs harder, and some of your firms will, I am afraid to say, fail, both trends will usher in great improvements for the well being of Americans as a whole. I have tremendous faith that American businesses, operating on one of the freest and most dynamic economies in the world, will weather these storms well, and that our economy will continue to produce a high quality standard of living for us all.
« Close It
In the news: A barber and his dog
CANAL FULTON - When the clippers begin buzzing and anxious children start fidgeting before a hair cut at Matt’s Barber Shop, that’s Franklin’s cue. The 3-year-old, 65-pound basset hound is at Matt Schwendiman’s Walnut Street barber shop to put children at ease. Ohio law bars pets from barber or beauty shops. An inspector from the Ohio State Barber Board spotted Franklin in the shop on Feb. 7. Schwendiman was given a violation notice and told to remove the dog, which he did. Another violation would bring a fine. A third would mean the longtime barber could lose his barber’s license.
Sheesh. $#$%&@^* nanny-state do-good pansy uh grrrrrrrrr. (I must take my libertarian blood pressure medication soon.)
We were treated to a nice statement on the rule of law from the state inspector:
Warner said the state board’s job isn’t to change laws but to enforce them. With more than 9,000 licensed barbers and 3,200 shops, Warner said the board can’t make exceptions.
When people go off about the importance of the rule of law, I like to remind them that the rule of law is nice, but it's even better if the law itself is good. Bad laws that are strictly and evenly enforced are still bad laws. Heck half the world would starve to death if they had rule of law and enforced all the stupid laws they have. This isn't to say I think having the rule of law is unimportant, but we should spend at least as much time thinking about the wisdom of the laws themselves too.
BTW, my grandfather Art Lowry was the town barber in Canal Fulton, Oh for over 40 years and sold his shop to Matt Schwendiman upon retirement. I have many fond memories of grandpa's barbershop. So that explains why I'm so peeved for Matt and his dog.
Public utility follies in Maryland
Hoo-boy! First the Maryland General Assembly directs Wal-Mart to follow its wishes as to employee health benefits, now it's getting into the business of merger "review." Yesterday the Legislature passed a bill designed to derail the proposed merger of Constellation Energy and FPL Group. Constellation is, among other things, the parent of Baltimore Gas & Electric (BGE). According to the Washington Times, the merger "does not figure in BGE's 72 percent rate increase, which is expected to jolt the utility's 1.1 million customers beginning July 1.
But lawmakers, most of whom are seeking re-election, have threatened to delay the merger to persuade utility executives to lower the increase. The bill would establish a special counsel who would review utility mergers and report to lawmakers, thereby delaying the merger by at least a year."
The governor is considering whether to veto the bill.
The combined Constellation-FPL, according to the firms' press release, would have annual revenues of $27 billion, $57 billion in total assets, and a market cap (based on current market values) of $28 billion -- "the nation's largest competitive energy supplier and its second-largest electric utility portfolio." The reach of the new company would extend well beyond Maryland and Florida customers. Specifically:
"Its competitive wholesale and retail businesses will serve thousands of commercial, industrial and utility customers, including 72 of the FORTUNE 100 companies. Its generation portfolio will be the nation's largest, exceeding 45,000 megawatts of capacity. It will be the third-largest nuclear plant operator in the United States, owning and operating seven nuclear power stations with eleven units, including FPL Group's pending acquisition of the Duane Arnold nuclear station."
So what we have here is a state legislature attempting to sink a merger that would have a clearly significant national impact. Whether you call it extortion or simply hardball is up to you, but I don't think you can deny that it is state parochialism in either case.
March 30, 2006
"Markets for Everything?" or "Am I paying for that?"
From Ad Age Daily
Nicole Miller-designed robes. Concierges. In-room computers with high-speed Internet access. Manicures.The story insists that affluent patients pay for these amenities, but how long until what is a luxury transforms into a Constitutional right?
Free entry in journalism, and...?
I'm as delighted as the next press critic or blogger to catch journalists making things up, plagiarizing, taking bribes or giving them, deliberately libeling people, blackmailing people, lying to sources, or forging documents. I approve when newspapers and broadcasters assign internal reports or external investigations to get to the root cause of the perfidy. But I think the profession needlessly exhausts itself trying to figure out why journalists misbehave. You might as well as ask why people cheat and steal.
So let me see if I got this right. We can't regulate morality, but instead must let people make their own mistakes, while we rely on competition, reputational capital, and consumer discretion to monitor quality of public discourse. Sounds pretty good. So a humble question: is what's good for journalism good for the rest of private society?
March 29, 2006
Good Bye Mike's Beer Barn
FSU alumni mourn the loss of an institution.
Hoist a beer in a farewell toast: Mike's Beer Barn has closed.
For you gamers out there comes this article from Wired,
Economics is loosely defined as choice under scarcity. After all, in the real world, there's only so much to go around. You can't always get what you want, and unfulfilled desires give rise to markets. But in a game world, there's no inherent reason for scarcity. Game designers have given us plenty of utopias where we can have all the mithril we want, to buy whatever we want whenever we want it. Problem is, those worlds turn out to be dull.
HT: Dave Reed
Cato Institute is hiring
The Cato Institute is looking for "economists (or political scientists and lawyers with economic training) to fill two policy staff positions."
"The ideal candidates would be trained in applied microeconomics with specialization in industrial organization, finance, labor, health, transportation, housing, urban, insurance, law and economics, public finance, or public choice. The ideal candidate would have a proven record of publication that demonstrates policy interests as well as economic skills, but newly minted Ph.Ds with the same skills and interests will be considered.
"Successful candidates would be expected to conduct their own research and publication program with papers and perhaps books as products. They would also write opinion pieces on policy controversies in their area of expertise. Successful candidates also would commission authors outside Cato to write papers and books on topics outside the candidates’ specific expertise but within the candidates’ general field of interest. Finally, successful candidates would assist non-economists within Cato with technical economic questions as they arise."
The contact person is Peter Van Doren; the deadline is April 10.
What's in a name?
Today's Star-Telegram points to one of the most bizarre naming-rights issues I have seen in quite a while:
Under a proposal, Dallas-based Methodist Health System would pay $150,000 a year for two years and then $25,000 a year for eight years to name the facility Methodist Mansfield Stadium. The $21.7 million, 11,000-seat facility on Texas 360 and East Broad St. would be open in time for the 2006-07 school year.
Most evidence I have seen suggests that, outside of NASCAR, naming rights do little for the purchaser. Perhaps if Ms. Ryals knew that naming rights don't provide the big boost that everyone expects she would be less concerned?
March 28, 2006
Latest GM app
Common Property Cars?
There have been lots of failed common property bike experiments (e.g., here, here, and here), so what's a frustrated utopian to do? Try common property cars of course. From the April issue of Fast Company (p. 39; sub req):
The idea is to situate rows of cars at subway or bus stops or other high-volume spots. You would remove the first car from the stack and drive it to your destination. You could keep it as long as you wanted, then return it to another stack elsewhere in the city to recharge for the next commuter.
A photo of the stackable cars is here.
Note that this stackable car program is fundamentally different from existing car share programs (e.g., this one) because those programs register users. Registration of users creates a responsibility on the part of users to exercise care while driving and to return the cars. This linkage would be missing in the stackable car program.
HT: John G
Why the United States is a wonderful country
Some people will be aghast by this information, others will be envious, others comforted. I don't spend a lot of time worrying about Bill Gates, his money, his consumption, but when I came across this information, it did make my eyebrows go up.
Here is an accumulation of Bill Gates's stock sales since April 2004. I haven't converted things into real dollars - would it really matter?
I haven't spent too much time thinking about this, however a few thoughts come to mind. First, Bill sells shares (primarily Microsoft) on a regular time table, basically every quarter (blind trust? tax purposes? legislation?). Why not cash in when the price of Microsoft hits a peak? Hmmm, interesting principal-agent problems there. However, there is a second, and (to me) important question: would such an accumulation of stock sales be possible by a private citizen in any other country?
Read More »
Over the past two years, Bill has cashed in stocks of greater value than the (twice the annual) GDP of approximately 70 countries?
From the CIA World Factbook:
Rank Name GDP (millions)
« Close It
March 27, 2006
Markets in everything: British titles of nobility
A scandal has erupted in the UK over revelations that Tony Blair’s Labour party has been selling lordships and knighthoods in exchange for 'loans' to the party. The Sunday Times reports (in an article that doesn't appear to be available online) that “of the 40 donors who have handed more than £50,000 to Labour since 2001 … 23 received honours made up of four peerages, 10 knighthoods, four OBEs and five CBEs."
Here’s the average price list, as reported in The Sunday Times:
Nationalized health care doesn’t abolish the problem of scarcity
I’m in Belfast, Northern Ireland, UK for my spring break week, teaching a course to MA finance students at Queen’s University. It’s something I’ve done every year for twelve years, but it almost didn’t happen this year. The UK’s National Health Service almost kept me out.
As I’ve mentioned here before, I'm awaiting a kidney transplant. I started hemodialysis (mechanical blood filtering) three weeks ago, on the standard schedule of three sessions of a week, three-plus hours per session. To travel within the US now (e.g. to Las Vegas for the APEE meetings in April), I first have to reserve a session at a local dialysis clinic in the destination city. Not really a problem: the US is filled with for-profit clinics that are happy to accommodate extra clients. My health insurer has a handy web engine for locating, near any destination, the closest clinics that it certifies and will pay for “in-network”. There’s also a handy clinic finder at www.dialysisfinder.com.
The UK’s National Health Service, however, isn’t for-profit. It has waiting lists for many of its services to UK citizens, possibly including dialysis. So what incentive does it have to take on foreign travelers as clients? My initial inquiries were coldly received. I’m not sure why the dialysis clinic at Belfast City Hospital did finally find me a space in their late shift (7-11pm), but presumably the inquiries from my contacts at Queen’s didn’t hurt. (By the way, the NHS is charging me handsomely.) Why aren’t there also for-profit clinics here that would serve travelers, you ask? They’re illegal in the UK.
CORRECTION: That last sentence was in error; private dialysis clinics (and private hospitals more generally -- thanks to reader Andrew McGuinness for the correction) are not illegal in the UK, merely rare (private dialysis made up about 5% of the market in the UK, versus 77% in the US, according to Fig. 1 of this study). Since the NHS charges less, the private clinics' clients appear to be mostly people who switch to NHS service once they get off the NHS waiting list. There are two private dialysis clinics in London, according to this list, dated 2000; at that time there apparently weren't any others in the UK.
On the NHS rationing front, the front page of The Sunday Times yesterday carried the following headline: “Doctors call premature babies ‘bed blockers’”. Reads the text of the article:
As the NHS faces an increasing financial crisis, with beds being closed and jobs axed, it says these very premature babies are ‘blocking’ much-needed intensive care cots, sometimes forcing healthier infants to be transported by ambulance to other hospitals. ...
Why not let parents spend their own funds (including private insurance) to build additional facilities for saving premature babies? The possibility is not even mentioned in the article. That would be illegal in the UK. CORRECTION: Not illegal; private insurance is merely rare.
Greatest Ever Run to Final Four
Writing for ESPN.com, Andy Katz has this to say about the Patriots of George Mason:
But even if George Mason was a single-digit seed instead of a No. 11, that probably wouldn't matter for historical purposes. This was the greatest run ever to the Final Four. End of discussion.
I wasn't lucky enough to be there in person like Pete Boettke, who reported by email to have sat 10 rows behind the GMU bench, and Alex Tabarrok, who was ecstatic on MR. But I was lucky to have watched with Ed Stringham, Ben Powell, and an ecstatic contingent of eight crowding around the t.v. in Ben's living room. As a fan of the Spurs, Cowboys and Aggies, I never thought it would be GMU that would amaze me the most in sports. All five starters were players of the game. Best of luck to Coach Larranaga and his epitome of a team. I hope they win it all!
March 25, 2006
January issue of Public Choice
The most recent issue of Public Choice has some interesting work in it.
A paper by Gary Wagner and Russell Sobel underscores the importance of details with institutional design. From campaign finance to public finance, there's more to a reform than whatever catchy name they dream up for it, and there's usually a pig somewhere beneath the lipstick and wig it's dressed up in. In this case, many states began adopting rainy day funds in the early 1980s, ostensibly to stabilize revenue and spending during economic cycles. From the paper's introduction:
And from a few pages later:
Gary and Russ categorize the states based on how stringently policymakers are constrained (by TEL or other) regarding budget surpluses. In a 1945-1996 panel, they estimate states' adoption decisions. Results show that stricter restraints increase the likelihood of adoption. Recession variables matter, too, but less so. Interestingly, the stricter restraints are best at explaining adoption by statute (i.e. by policymakers). The evidence suggests that rainy day funds were more about policymaker discretion than macro smoothing. At the very least, the paper undermines the standard wisdom that rainy day funds were public interest responses to the 1980-82 business cycle.
On a side note, Russ was out here to SJSU a couple of weeks ago. He presented a very cool paper (with Brian Osoba) on youth gangs as pseudo governments that are caused by, rather than causing, violence.
Craig and his UTA colleague Courtney Lafountain have an article in the same issue that is noteworthy in that it examines corruption at the U.S. state level. More corrupt state, lower bond rating, higher interest rate for taxpayer debt. No bueno.
On a dubious note, an article appears as such:
(open URL here) And no, it's not studying those who cut loose but those who lose out.
March 24, 2006
Life Imitates Film--A Day Without a Mexican
ATLANTA -- Members of the Latino community plan to protest against new state legislation aimed at illegal immigrants in Georgia.
Protesters say they will neither spend money nor report to work Friday. An estimated 800,000 Hispanics are expected to take part in Georgia's "Day For Latino Dignity."
March 23, 2006
On the Inefficiency of Non-Price Rationing
This summer, I'm hoping to hike Mt. Whitney (14,505'), the tallest peak in the lower 48 states. The U.S. Forest Service rations the number of people allowed onto the main Whitney trail during the summer to 60 overnighters and 100 dayhikers per day. This I don't mind. Part of the value of hiking is the solitude and without rationing Whitney would be overrun with hikers some of whom probably shouldn't be trying a serious hike like this anyway. Similarly I don't mind that concert organizers limit the number of people into the concert to the number of seats available.
What I object to is the rationing method the forest service uses.
Starting on February 15 they conduct a lottery. Here's what they say on their website right now.
As of March 10, processing of the more than 4,500 Mt Whitney applications received for the 2006 lottery is about half done! Every application in the lottery will be pulled out and we will attempt to make a reservation based on the remaining space available for the entry dates you requested. Letters are being mailed out daily, so people should be receiving their letter in the next few weeks.Please note we cannot search for, change, intercept or report on the status of your individual application at this time. All applications will be answered by mail. As soon as the last lottery application is pulled out and processed, this page will be updated to show what dates still have space left after the lottery. We appreciate people not interrupting so we can complete the work as quickly as possible.
My hiking partner writes "I bet we have a higher willingness to pay than most of the freakin' hippies winning the lottery! And I'm not surprized that our Govt is slow at even this simple task."
Why Yes, Demand Curves are Downward Sloping
From the abstract of a new paper:
This paper considers the effects of union-bargained minimum wages on transitions into and out of employment in the hotels and catering industry over the period 1979–99. This industry is characterised by a high fraction of unskilled labour input, high worker turnover and binding minimum wages. The empirical approach identifies workers affected by real minimum wage increases and decreases, respectively. Job separations and accessions for the treatment groups are then contrasted to the outcomes for control groups, ... According to the results, job separations tend to increase with rising minimum wages ...
Ivy League education?
Today's Chronicle of Higher Education links to a study of undergraduate classes in the College of Arts and Sciences at Penn. The results suggest that only 40% of all undergraduate classes are taught by tenured/tenure track professors. I agree with the dean that the numbers might be a little skewed by the English classes, but I wouldn't be surprised if this number was similar across any number of high quality institutions.
With more press like this, we will all be on four-four teaching loads sooner than later.
Markets in Everything--Porn Star Wine
NEW YORK (Reuters) - It seemed like the perfect gimmick: a celebrity porn star would launch her own wine, with her alluring picture on the label.
Savanna Samson did just that, ...
"I never wanted to just do gimmick. That would just happen with me being a porn star, me having a photographer shoot the label, how risque could I get on the label -- all those things," Samson, the stage name for 31-year-old Natalie Oliveros, said in an interview.
The seriousness of the idea was lining up a respected wine maker. So she convinced Italy's Robert Cipresso ....
Samson went to Tuscany and tasted dozens of Cipresso's Italian-grown varieties, then she selected a mix of 70 percent Cesanese, 20 percent Sangiovese and 10 percent Montepulciano. She ordered over 400 cases.
Hints of blackberry and licorice, aftertaste of ... Kidding aside, wine guru Robert Parker gave the wine a score of 90.
HT to MR for the markets in everything concept.
Lessons from Studying Abroad
One of my students is currently studying for a semester in England. He sent me an e-mail the other day and I quote here with permission.
I've found that "liberal" can be a dirty word in Europe. The students here from Europe surely love their welfare states. I am trying to point out that the French and German versions are crumbling, but I'm not making much headway. Everything in general seems to be more politicized in general as well. Fair trade merchandise is everywhere; global warming talk (that takes global warming to be a presupposed bad) is a constant hum in the background, and I shouldn't dare to buy eggs from caged chickens in public lest I risk communal shame.
March 22, 2006
Is there hiring discrimination against black economists?
It seems to me that there is a very simple way to test whether Prof. Gregory Price is correct in his view that “the near total absence of blacks on the economics faculty at our nation's leading universities ‘reflects deliberate racial exclusion’,” rather than reflecting a dearth of candidates. Likewise it would test whether Prof. William A. Darity, Jr., is correct in his view that economics hiring committees presume that black candidates are relatively deficient. (Hat tip: co-blogger Craig, below.)
Here's the test: are black economists paid more or less than non-black economists, holding publication record constant? One way to approximate holding publication record constant would be to look only at salaries of newly minted assistant professors coming from similarly ranked Ph.D. programs. Casual empiricism tells me that in the market for econ assistant professors, the few black candidates each year get more interviews and more fly-outs on average. The reason is simple: many economics departments hiring committees are given incentives by their deans to hire black faculty. (I have been on hiring committees so incentivized.) So I would expect that black candidates are getting higher salary offers, the reverse of being discriminated against. Is there evidence to the contrary?
Three female runners finished third, fourth, and fifth in the Dubai marathon in the United Arab Emirates even after faulty directions forced them to run an extra 2.5 miles on the 26.2-mile course. The mistake cost the runners about 15 minutes—about what they lost by. [Story.]
This isn't as strange as you would imagine. Elite runners often find themselves running alone. And small races often have fewer volunteers, signs and fans on the course. It's not hard to zig when you should have zagged.
In fact, closer to home, a large group of runners at last weekend's Cherry Blossom Marathon in Macon, GA ran an extra 1.3 miles or so.
This came to me from a friend running his first marathon,
My overall time was just under 3:41. *BUT*, and I'm sure nobody but you will believe me when I tell them this, a bunch of us added on an extra ten minutes or so of running. We were supposed to go down this little side road and turn at the aid station. Unfortunately, there was nobody manning the station telling us to turn, so we all went all the way to the end of the road. When we came back, a ton of slow people were in front of us. And, then I saw what I didn't want to see: mile marker 7 and a 1:04 time o n my watch! I should've been on pace for a 54 time at mile 7!!!
This from another person I know, who besides being a great runner, is also a race organizer himself,
The organization for the Cherry Blossom Marathon has gone downhill. I was running seventh during the mishap, but rallied to fourth. The lead car did not know the course, and blew by the turnaround in this neighborhood. Runners coming back out of the neighborhood were telling people to turn around at a stop sign. When I got to the stop sign --- there wasn't any markings so I guessed there may be a problem. I hit the seven mile marker and knew there was a problem as that mile I was around 15:30. I calculated that it cost me an extra 8:45 --- which given my pace at the time 6:45 per mile --- would mean we ran an extra 1.3 miles. I calculated I should have run a 2:55 if we had run the course right. Oh well. They did correct it at some point. I had friends who ran 3:55 --- and they said --- a police car zipped ahead, and turned around runners at the correct point. Only the leaders (at least the first 50 in the race) had to run the extra distance.
March 21, 2006
Google Finance - it's pretty slick. I especially like the "events" - now everybody can perform "event studies" on single stocks!!
When is a mountain just a mole hill?
In hiking mountains it's not always the highest mountain that is best. Many of the Colorado 14ers are fairly unimpressive peaks simply because they rise only a couple thousand feet from the nearby ridge (or saddle) leading to the next peak.
So mountains end up being defined in terms of something called prominence more than height. There's quite an elaborate science behind determining a mountain's prominence.
Prominence is a term that represents the elevation of a summit relative to the surrounding terrain. It is defined as the elevation of a summit relative to the highest point to which one must descend before reascending to a higher summit.
I've hiked up one, 56 to go.
Supply or demand? And does it matter?
This article describes the lack of black economists at the nation's top colleges.
It seems that the author of the article has little clue about the academic job market for economists:
The dearth of black economists teaching at the nation's highest-ranked colleges and universities may not be explained by the fact that there are no qualified African Americans. About 20 blacks each year win a Ph.D. in economics.
I thought Ph.D's were "earned" not "won," but I digress. The May 2005 AER reports that there were 505 degrees awarded from July 2003-June 2004 (p. 524). Therefore 20 black PhDs per year would represent approximately 4% of all degrees awarded. The article admits to undercounting the number of black economists at the top schools (how convenient) and also admits that many black economists head to the government and private sector. The same issue of the AER (p. 503) reports that there were 1,472 new academic jobs advertised in the Job Openings for Economists. There is no indication how many of these jobs were for junior faculty, but let's assume all jobs were for junior faculty, all PhDs are treated equally, and jobs are equally distributed across all schools. If ten to fifteen black economists entered the academic labor pool, they would account for between .6%-1.02% of all potential jobs. If 1.6% or so faculty slots at the top 30 schools are filled by black economists, is this evidence of statistical discrimination?
However, the whole discussion avoids the nature of the academic economics market. Not all Ph.D.s are created equal. Period. Paragraph. Let's face it, there are no University of Georgia Ph.D.s teaching at Harvard - none, zip, nada. Is this evidence of regionalism or the fact that my alma mater doesn't train economists as well as, say, Cal-Berkely? The question is not how many black economists there are, but how many graduated from the top ten programs, from which the top thirty schools select their junior faculty.
After the admission of the rather thin supply of black economists, we are then presented with what has become the sine qua non of any debate that includes race:
Professor Gregory Price of Jackson State University says that in his view the near total absence of blacks on the economics faculty at our nation's leading universities "reflects deliberate racial exclusion." Professor Price told JBHE that the exclusion of blacks from academic economics "is absurd given that most institutions in our society have at least given some lip service to the ideals of affirmative action."That's constructive.
Therefore any quality-quantity tradeoff is per se evidence of racism? This bad logic is, unfortunately, offered support:
Professor William A. Darity Jr., a highly published economist at the University of North Carolina at Chapel Hill, says there are two main reasons for the small numbers of black faculty in economics departments. "First, the presumption remains stronger among economists than other social scientists that blacks are genetically or culturally deficient..."I cannot speak for the entire field, although Prof. Darity, et al., evidently feel obligated and capable of doing so (Darity and colleagues recently posited that any statistical analysis that fails to find evidence of discrimination is de facto racist.). However, after ten years in my department I haven't heard the first word about "genetic" or "cultural" deficiency. I have heard the term "poorly trained" attributed to job applicants, but by definition we don't know (and cannot inquire) about the race of job applicants. I am not at a top thirty program, so maybe there is a cabal at those schools. However, here at the middle of the mountain I don't see a cabal at work.
Repeat After Uncle Miltie
Russ Roberts recently blogged on Nestor Kirchner's call for Argentines to slow their beef consumption to curb inflation.
There are also some folks closer to home who are having difficulty remembering Milton Friedman's lesson. Here's an exchange from NPR's "Morning Edition" (3/16):
[Renee ] MONTAGNE [host]: So what, David, could cause inflation to take off?
Mr. [David] WESSEL [WSJ writer]: Well, any number of things could go wrong. We could have another spike in energy prices, unemployment rates could fall to the level where workers could finally begin to get some significant raises.
MONTAGNE: And what would determine, though, the point which inflation would become a problem?
Mr. WESSEL: Right now, inflation's running at roughly, by the official measure, at 2.5 percent a year, and that's in the manageable range. What would determine if it got worse would be worker productivity--the amount of output we make for every hour we work on the job--might not rise as much as it has been. That would mean that wage increases would be more likely to translate into price increases.
Another thing might be some declines in competition among businesses, perhaps because of trade barriers, perhaps because of mergers, any number of things. And finally, it really matters what people expect in terms of inflation. Price stability can become a self-fulfilling prophecy if everybody believes that prices are going to be stable.
All together now--inflation is always and everywhere a monetary phenomenon.
HT: Wilson Mixon
March 20, 2006
Better to Feel Good Than to Do Good
From a slate.com article on Whole Foods:
In the produce section of Whole Foods' flagship New York City store, shoppers browse under a big banner that lists "Reasons To Buy Organic." On the banner, the first heading is "Save Energy." The accompanying text explains how organic farmers, who use natural fertilizers like manure and compost, avoid the energy waste involved in the manufacture of synthetic fertilizers. It's a technical point that probably barely registers with most shoppers but contributes to a vague sense of virtue.
Fair enough. But here's another technical point that Whole Foods fails to mention and that highlights what has gone wrong with the organic-food movement in the last couple of decades. Let's say you live in New York City and want to buy a pound of tomatoes in season. Say you can choose between conventionally grown New Jersey tomatoes or organic ones grown in Chile. Of course, the New Jersey tomatoes will be cheaper. They will also almost certainly be fresher, having traveled a fraction of the distance. But which is the more eco-conscious choice? In terms of energy savings, there's no contest: Just think of the fossil fuels expended getting those organic tomatoes from Chile.
Uncommon sense c. 1906
With a few more letters to the editor like this, us economists might be out of a job. From the March 20, 1906 NYT:
I have read with interest letters of two "Interested Observers" on the subject of the increase in living expenses. True it is that the cost of necessities is less now than in the '80s, but on the other hand luxuries introduced since have become necessities to most people.This is essentially the gist of Cox and Alm's "The Myth of Rich and Poor."
Consider the price of basic automobile transportation. A plain vanilla car might cost $14,000 today, which would be the equivalent of $4,800 in 1978. In 1978, a Ford Mustang II (my first car, and trust me it was a heap, but it was cheap) cost about $3,500 brand new. For that, the 'stang had no power windows, no remote entry, no airbags, a 4 speed transmission, a four cylinder engine with 88 horse power, and an "air conditioner" that never (ever) worked. Compare that with today's $14,000 special - say a Chevy HHR or some such. Even as the nominal price has increased, it is easy to argue that the real price for a plain-vanilla car has dropped considerably as the same number of real dollars will purchase a heck of a lot more car today. If more people buy $30,000-$50,000 cars, does that represent an increase in the cost of living?
In the same NYT, there is a display ad for the Pope-Hartfield Model F. The car had a drop top, a 25 horsepower four cylinder engine, and claimed to carry 5 people up to 50 miles per hour. Price? $2,500 in 1906 or $53,000 in CPI adjusted 2004 dollars!
Is College Still Worth the Cost?
This was the title of a conference at AEI this morning. The video of the event is already online, here. (Since I've just begun watching it, I can't give away the ending.)
Update: You'll probably want to skip the first two speakers. Just not much there. The third speaker, Susan Dynarski, is a Harvard economist and is actually addressing the topic.
No Child Left Behind
As a piece of rhetoric, No Child Left Behind might be effective. As policy, however, I have my (many) doubts. For one thing it is not clear to me that failure, by itself, is a bad thing. As Thomas Sowell pointed out once, we all drop out of school at some point. The efficient level of output of bads is generally not zero and some failure is optimal.
An interesting paper on No Child Left Behind is "Can No Child Left Behind Close the Gaps in Pass Rates on Standardized Tests?" in the January 2006 issue of Contemporary Economic Policy. The authors, Claus Hoerandner (an undergraduate!) and Robert Lemke, decompse the effects of student achievement into controllable (manipulable through policy) and uncontrollable factors. They find that most of the gap in passage rates between schools is due to uncontrollable factors and thus NCLB should not be expected to close achievement gaps. The really cool thing about the paper is that they calculate elasticities for each of the variables with respect to pass rates. For example, they find that the elasticity of pass rates with respect to local tax revenue is inelastic (0.597).
Posted by Joshua Hall at 09:45 AM
March 19, 2006
Moore's Law for Razors?
So hypothesizes The Economist. I prefer three blades to one, but I am not sure I need a 5(+1) blade razor. You hear little about the price of replacement blades for these new-fangled razors, but if this article is correct, that might change.
Raghuram Rajan, free-trader
Raghuram Rajan is the chief economist for the IMF. Like his former U Chicago colleague and co-author Randy Kroszner, Rajan is in his early 40s and a professed classical liberal. Rajan recently gave a speech criticizing US moves to block foreign direct investment in the US, while defending the IMF as a liberalizing force. Kroszner chaired the session but did not comment.
Here’s an interesting interview with Rajan on how to reform economic policy in India. Money quote:
What the Left is against is monopoly capital. That is also what the liberals — people like me — are against. We are against monopoly. But we argue the statist economy almost invariably creates monopoly capital. The licence raj creates privileged industrialists, who occupy the commanding heights of the economy along with the public sector. It creates privileged workers who occupy privileged positions while the real work is done by the unorganised labour. So the point is, privilege is created by restrictions on competition. What we are striving for is a far more competitive structure which creates opportunity. So what you want is to strive for equality of access — to the market, education, capital.
ADDENDUM: Rajan certaintly seems prone to wishful thinking about the results of dirigiste policies than, say, the young Stanley Fischer. But will having a free-marketeer as the IMF's chief economist actually turn the IMF from a negative to a positive force for economic freedom? I'm skeptical.
March 18, 2006
Perverse Political Equilibria
Earlier this week, Tyler Cowen quoted Rajan and Zingales on the question of why poor institutions persist when we know that they are an impediment to growth. The answer, according to R&Z, is that there might be pervese political equilibria favoring existing lousy institutions over reforms that would enhance economic growth.
Yesterday's WSJ has an article ("In India, the Path to Growth Hits Roadblock: Slums," p. A1; no link) illustrating the point. Some excerpts:
They [millions of poor Indians] have the power to derail the best-laid plans of investors and government with votes, protests and the courts. India desperately needs to fix its archaic infrastructure--potholed roads, rundown airports, and decrepit power plants--if it wants to seriously compete with China for investment. Yet getting it done often runs counter to the interests of those just beginning to share in the new prosperity....
In Mumbai ... the paupers have real political clout. Slum-dwellers constitute half of Mumbai's 12 million citizens, and they are faithful voters....
The Mumbai airport ... needs to expand but is surrounded by 90,000 slum households that illegally occupy 160 acres fo airport land that would otherwise be tarmac and hangars....
But change comes slowly in Mumbai. It took more than five years to shift some 10,000 shanty families away from the railway line that runs down Mumbai's spine. The shanties had so crowded the line that trains had to slow down, delaying service. The chief problem with moving the slums is that they're filled with people whose votes keep politicians in power.
By the way, it appears that much of the demand for shanty/squatter housing is created by misguided government policy:
Slums provide the drivers, maids and mechanics that keep Mumbai running. The tough part is housing them all. Rent control and strict building codes make low-cost housing a high-risk, low-return business.
HT: Boing Boing
Backstop Technology c. 1906
File this in the drawer marked "how little things change." In the March 18, 1906 NYT there is an article discussing the increase in the price of gasoline, local consternation about the price increases, and what to do about increasing the number of alternatives to gasoline for automobiles and cooking.
The wholesale price of gasoline had "increased" to 14.5 cents per gallon for high-grade and 12.5 cents for lower grade gasoline in the U.S. The retail price in the U.S. was reported as between 14.5 and 20 cents per gallon (in 2004 CPI adjusted dollars between $3.03 and $4.18 per gallon), depending on how much gasoline you purchased at a time. Likely most gasoline users were paying closer to the 20 cents per gallon. Unfortunately, there was no mention of how much the price had increased. However, in England, the story reported a 4 cent increase in the price per gallon over the "past several months' (approximately $0.84 in 2004 CPI adjusted dollars). If the increase in England was similar to the increase in the U.S., this would represent an increase in price of approximately 20-25%.
The increase in price motivated the Automobile Club of America to offer an X-prize type reward for an alternative fuel to gasoline - in essence asking for advancement in a backstop technology. Sound familiar? The primary difference between then and now was the lack of government dollars being thrown (wasted) on the problem.
The primary candidate in 1906 was alcohol. (One hundred years later our government still focuses on alcohol-like substitutes for gasoline!!) Just like today, unfortunately, there were difficulties in making efficient alcohol-burning engines. However, the problem wasn't just the engines.
As the article points out:
No serious attempt has ever been made in this country to show a large number of motor users just what can be accomplished by the use of alcohol as fuel. One great drawback has been the high internal revenue tax which has made no discrimination between the highest grades of alcohol and the lower or denatured grades. A bill is now before Congress to remove the tax from grain alcohol used for industrial purposes, and although little public attention has been paid to it, the progress of the bill has been watched with care by autoists and farmers alike. [emphasis added]
One hundred years ago, our government's tax policy might have dissuaded the development of alcohol as an alternative fuel. Could today's tax policy, namely the heavy subsidization of ethanol, dissuade the development of some non-government-inspired alternative?
Perhaps today's market for a viable alternative fuel, even if it isn't the government-preferred version, is so large that government subsidies/taxes have less power to alter the evolution of the market compared to 1906?
March 17, 2006
Death and Taxes
Death and Taxes: A visual look at where your tax dollars go
More here. I think it is an interesting attempt to display the spending of the United States Federal Government, but when did the Department of Defense become separate from Congressional funding? It seems the artist thinks the DoD is a separate branch of government. Also, what about the money spent by Congress and the Federal Court system?
HT: Boing Boing
Moral Hazard Solution c. 1906
From a letter to the editor in the March 17, 1906 NYT:
It is especially desirable for the driver to sit on the left in an automobile, because, in case of collision, under the present custom, it is the passenger who is liable to be hurt, and this passenger is usually a woman.
This sounds like a quasi-Peltzman solution to bad driving. For those not familiar, here is one explanation from fellow DOLer Michael Munger and one that is less sympathetic.
The basic idea is that if a bad driver imposes potential negative externalities on the rest of us, then seat belts and other safety measures, while laudable in as much as they protect the innocent, have the potential downside in encouraging even more risky (and dangerous) behavior by the bad driver. If a bad driver bore the entire cost of his bad behavior, then it is possible his driving would change. Whether the benefits of safety legislation outweigh the negatives is, of course, an empirical question.
What I find neat about little statements like the one from the NYT is that people were thinking like economists long before we economists came along.
The Fed is more powerful than we all thought
But I'm confused, and I'm hoping a science-savvy reader out there can fill me in. The story says
By the faint cosmic glow of the oldest known light, physicists say they have found evidence that the universe grew to astounding proportions in less than the blink of an eye. In that trillionth of a second after the big bang, the universe expanded from the size of a marble to a volume larger than all of observable space through a process known as inflation.
Now, wikipedia says that the speed of light is roughly 300,000 km per second, or 0.003 meters per trillionth of a second. In the time of the inflation, then, light would travel only 0.003 meters yet the universe grew to the size of observable space so the universe is expanding much faster than the speed of light. How is it possible that we could observe a faint cosmic glow? Would it not be traveling away from us at a faster rate than the light would be traveling back to us to observe it?
If you drive your car 70 mph and pass point A, wait a second, then throw a baseball 50mph out the back window, the baseball will never return to point A.
And, my faint grasp of relatively theory is that something traveling near the speed of light doesn't experience time. If the universe was expanding so much faster than light, wouldn't the particles on the expanding edge still retain the same properties as the first marble? They wouldn't age at all, no?
What am I missing here? Besides even a bachelor's degree in science.
More evidence for private- or home-schooling
If you needed more evidence on where to send your kids, there is this story from CNN.com today. For a fee and to maintain their teaching licenses, some Miami-Dade teachers paid to get credit for courses they never took. The scammer "pleaded guilty to fraud in November, admitting he did little more than sell transcripts, requiring no tests, homework or other academic work." Hmm, some of my students put in the same amount of effort.
But this was the best:
On Wednesday, dozens of students and parents defended the teachers who lost their jobs, saying that removing them in the middle of the school year would be too disruptive. Board member Evelyn Greer, who voted against the firings, agreed. "It baffles me, just baffles me, to have disruptions at the class level," Greer said.
So you would rather your child, or the children in your district, be taught by a fraud? Aside from teachers' unions, government monopolies, and poor teachers' colleges, part of the problem with public schools (and the reason why I transferred to a Catholic high school my junior year) are the fellow students, their parents, teachers, and administrators more interested in pep rallies than college prep.
Becoming an "Economic Naturalist"
Very few students that take economic classes will go on to be "economists." Everyone will practice political economy, however, thus the importance getting students to understand some very basic economic principles. Robert H. Frank has a good article in the American Economic Review called "The Economic Naturalist: Teaching Introductory Students How to Speak Economics." In the article, Frank puts forth the proposition that a few basic principles do all the heavy lifting in economics and that introductory classes should focus on conveying those basic principles over and over through active learning. He then briefly discusses his "economic naturalist" writing assignment, which is somewhat similar to the "armchair economist" approach of Steven Landsburg put into a class writing assignment. Frank further outlines this approach in a Journal of Economic Education article called "The Economic Naturalist Writing Assignment."
I agree that some basic principles do all of the heavy lifting in introductory classes. That is one reason why I like Gwartney, Stroup, Sobel, and Macpherson text because of their "eight guideposts to economic thinking" that continually get reinforced in the text.
Integrating the basic principles approach with active learning has been a focus of my research. My article "Homer Economicus: Using The Simpsons to Teach Economics" (email me at johall-at-mail-dot-wvu-dot-edu for a copy) which appeared in Journal of Private Enterprise in 2005 was my first attempt at doing so. Bob Lawson and I are working on a paper called "From ABBA to Zeppelin, Led: Using Music to Teach Economics" that we will be presenting at APEE in two weeks.
March 16, 2006
Thanks Microsoft - now give me money!
From the New York Daily News:
Virtually anybody who bought a personal computer using most Microsoft software - basically any computer other than an Apple - between 1994 and 2004 is eligible to get a $12 coupon for each computer.Not participating forgoes a certain amount of money - say $36 or so and likely leaves more money in the pockets of some lawyers. However, the morality of participating in a settlement of a class-action suit when Microsoft has not been found guilty?
Surprise!! Non-profit Venture Yields Negative Profit
From today's Chronicle of Higher Education:
A nonprofit venture by the University of Oxford, and Stanford and Yale Universities to provide online noncredit courses to the public has closed, citing financial woes.A couple of immediate thoughts. First, a nonprofit venture is likely to NOT yield a profit, by definition. Perhaps the venture should have been specifically "zero profit," in which case it would have broken even?
This particular program offered only non-credit courses, which, as the story points out, was likely one of the major reasons for its demise. On the other hand, I have always questioned whether watching video and listening to MP3 recordings is a good way for students to learn. Perhaps the failure to find enough people willing to pay to access the non-credit course material reveals the answer.
I do wonder about the soft elitism embodied in the statement "the cost of offering top-quality enrichment courses at affordable prices was not sustainable over time." What exactly does that mean. All affordable enrichment courses are not top-quality? Yale, Oxford, and Stanford are, implicitly, not affordable?
The story claims that the venture generated $2.5 million in revenue in 2004-2005 but incurred expenses of $3.28 million. That is more revenue than I would have expected. On the other hand, what about on-line delivery of coursework should ultimately cost $3.3 million?
As a non-profit venture the program was a success.
A Normal Country?
In the Winter 2005 issue of the Journal of Economic Perspectives, Andrei Shleifer and Daniel Treisman have an article on Russia called "A Normal Country: Russia After Communism." They compare Russia to other middle-income countries and find that that Russia is normal, at least compared to other middle income countries such as Argentina and Mexico. The argue that while things in Russia are far from perfect, its defects are consistent with the defects of other middle income countries.
When I first read this essay I found the argument very compelling. While I still find much of what they say to be correct, my perspective has changed considerably after reading "Comparing Apples: Russia, Normalcy, and the Remaining Post-Socialist World." William Trumbull and Peter Leeson suggest that the relevant comparison is not other middle-income countries, but other post-socialist transition countries. They find that compared to that cohort, Russia is not "normal."
March 15, 2006
The Iron Lady vs. the mandarins
Philip Booth's op-ed in today's Telegraph (UK) recalls the time when 364 British economists signed a letter to the Times bashing Margaret Thatcher's economic policies, asserting that they had "no basis in economic theory or supporting evidence," and the like. An excerpt:
"The whole of the academic establishment - including some luminaries of today - stood against the government. The 364 included Third-Way guru Anthony Giddens; the current Governor of the Bank of England; Monetary Policy Committee member Stephen Nickell; and former and future Nobel Prize winners. Only a brave few stood out against them. Indeed, it is said that Mrs Thatcher was asked in heated debate in the Commons whether she could even name two economists who agreed with her. She replied that she could: Patrick Minford and Alan Walters. As the story goes on, her civil servant said when she returned to Downing Street: 'It is a good job he did not ask you to name three.'"
You can download Booth's new 76-page monograph, Can 364 economists all be wrong?, as a PDF file here.
Health care nirvana declared -- Chilean edition
Quoting from the AP story:
"Newly inaugurated President Michelle Bachelet said Monday that all Chileans older than 60 will immediately begin receiving free care at public hospitals.
'This will become effective immediately,' the Socialist physician said at a news conference. 'This is possible because it does not require a law.'"
Is College Worth It?
So asks Rich Karlgaard of Forbes (reg req):
Do you suspect that this asset class--a four-year-college degree--might be overpriced? I do, for three reasons:
# Search engines such as Google have ushered in the era of open-source learning. Society is rapidly progressing to the point where any Googler is on equal footing with a Widener Library pass-holder.
# Most of today’s higher-paying jobs go to those who exhibit a combination of adaptable intelligence, numeracy, communications skills and a strong work ethic, as opposed to evidence of specific knowledge.
# Which leads to a third, and no doubt controversial, point. Society once counted on universities to imbue students with the traits named in the paragraph above. It was once assumed, for instance, that a liberal arts degree holder was numerate and literate and knew how to draw lessons from history, weigh evidence, think, write, speak, debate and learn. Or so Larry Summers, the ex-Harvard president, innocently imagined. He thought undergrads should learn about the math-and-science-driven world they’d be entering as adults. This belief conflicted with the postmodern professoriat that prefers cutting rap records to teaching--or, if forced to teach, teaches liberation theology over the American Revolution. Summers lost the battle.
HT: George Leef
"Cops" Moment c. 1906
From the March 15, 1906 NYT:
CLEVELAND - A man whose rolling gait was justified by his sailor costume, strolled into the sixteen-story Williamson Building...this afternoon and boarding an elevator rode to the top floor. Then he took to the stairway that runs through the cupola, and unobserved, reached the roof.
One of the policemen actually lassos one of the fellow's feet and they drag him off the flagpole to the cheers of the staring crowd below.
"Who are you?" the police asked.
Profiles in courage: Dr. Wafa Sultan on Islam and modernity
In an interview on Al Jazeera last month, which has reportedly been downloaded more than a million times, the Syrian-born psychiatrist (now living in California) condemned radical Islam for its barbarism:
Only the Muslims defend their beliefs by burning down churches, killing people and destroying embassies. This path will not yield any results. The Muslims must ask themselves what they can do for humankind, before they demand that humankind respect them. …
Dr. Sultan has since received numerous death threats.
Hat tip: NKB.
March 14, 2006
The Follies of Central Planning--Chinese Heat Edition
Today's WSJ has an article ("China's Winter of Discontent," p. B1; sorry no link) that demonstrates the folly of using central planning to produce and allocate goods and services. An excerpt:
Heating systems are one of the last areas that remain under China's former centrally planned economy, with government regulators still setting the thermostat for homes, classrooms and offices across the country. Under the policy, which dates back to Mao Zedong in the 1950s, the government provides heat in the northern half of China, and, to save money, it provides no heat in the southern half. As a result, northerners often wilt in steaming apartments, while those in southern provinces shiver through the winter.
"Commercial Virtue, Romantic Ecstasy"
GMU's Francis Buckley delivered this "Bradley Lecture" at AEI yesterday. It's already available on the website -- in both print and video. In view of Buckley's inimitable style, I suggest reading and watching it. Here's the abstract:
"Antiliberals left and right lay two complaints at the door of free markets. The first is that is that markets are self-defeating because they subvert the virtues that sustain them. The second is that markets succeed all too well. In the process, however, they dry up other sources of joy. Getting and spending, we lose the power to appreciate beauty and the bonds of solidarity which unite us to each other. Neither of these complaints is compelling. The commercial virtues that sustain markets flourish in market regimes, nor is there much reason to think that life is more joyous in illiberal regimes."
Why we have little to worry about
The static view of the world and the state of technology, which in turn would suggest that the price of oil will forever increase and we will all be riding llamas in a few years, would be funny if it wasn't so prevalent amongst those who are in control of my tax bill.
Many economists claim that we have little to worry about, and while in the short run things might become a little more or less expensive, in the long run I am also confident. Why? There are a lot of advancements and ingenious methods for capturing the wasted energy in the world, from speed bumps that depress (just a little) when a car drives over them, which in turn provides energy that can be stored in batteries or sold back to the grid (more here), to advancements in auto and truck technology that predict fifty-plus miles per gallon within the next twenty years.
One place some folks are looking at is the use of carbon nanotubes. Carbon nanotubes can be molded to any shape/specification and can be made several times stronger than conventional steel quarter panels while weighing a fraction of today's car frame/body. Imagine how little power we will need when the cars we drive are the size of an H2 (if we wish) but weigh the same as a LeCar or old Beetle!
Nevertheless, there are advancements in conventional internal combustion engines, including this 6 stroke engine concept. What are the best aspects of the idea? It is cool, it could work, and it is most decidedly non-government-inspired.
An Economic Argument for Summer Vacation
Last Friday our seminar speaker in the West Virginia economics department was William Fischel. Bill is a longtime professor of economics at Dartmouth College and a great local public finance and urban economics scholar. He is the author of three major books and dozens of articles in journal like such as the Journal of Political Economy, Journal of Urban Economics, and the National Tax Journal. It is because of his book The Homevoter Hypothesis that I chose urban and regional economics as one of my primary fields. Needless to say, I was ecstatic when Bill said he would make the long trip to WVU from UC Santa Barbara (where he is on sabattical).
The paper he presented was “Will I See You in September? An Economic Explanation for the Standard School Calendar,” which is forthcoming in the Journal of Urban Economics. To me, this article is indicative of much of Bill’s work. It shows how far basic economic institution and hard work can take you. As he recounted to the seminar, he was reading a book on the history of education that noted in the nineteenth century schools had two terms: winter and summer. Children were needed on the farm to plant in the spring and harvest in the fall, thus having summers off is not a leftover from our agrarian past. In Fischel’s story, summer vacation spontaneously evolved to deal with the coordination problem of having graded school systems and a mobile population.
My short synopsis here does not do the paper justice. I highly recommend reading the whole thing as well as Bill's other works on the economics of zoning, regulatory takings, and school finance reform.
... Georgia intends to write Kia Motors Corp. a fat incentive check — some $400 million — including about $200 million in state and local tax breaks, cheap dirt in Troup County and a $40 million state grant.
With 2,500 jobs inside the plant, Georgia will pay Kia roughly $160,000 per job, a sweeter deal than rival Southern states offered carmakers like Nissan, Honda or BMW. And it's more than the $320 million, or $96,000 per job, state and local officials promised in the state's failed bid to lure DaimlerChrysler in 2002.
Incentives were just one reason Kia picked the Peach State, but for an automaker looking for a deal, Kia may have found the perfect partner in Georgia, observers said.
The state had a governor facing voters in the fall, was suddenly leaking thousands of jobs from car plant closures, airline layoffs and corporate buyouts, and had missed the boat on six auto plants that had come South since 1993.
All those factors helped open the state's wallet, said Mark Vitner, senior economist at Wachovia Corp. "Manufacturing jobs are the big elephant ... and states are very competitive," he said. And car plants are big political trophies: "Once you get one, you're a hero."
Look what happened to former Gov. Roy Barnes, "who had one slip away," Vitner said.
So every Georgia taxpayer, regardless of whether he wants Perdue to be reelected or not, has just ponied up a hefty campaign contribution to ole Sonny. The $400m works out to more than $40 for every person living in GA. And the $162k per job works out to more than three years of pay for the workers who are estimated to earn $50k per year. I don't see anything heroic here--only another taxpayer fleecing.
The day is coming when carriers will require special fees even to check a bag, experts say.
That sounds like what happened when the state of Ohio regulated the price of all intra-state railroad passenger traffic in 1906 to 2 cents per mile. The result, as I mentioned here was that the railroads were planning to charge "extra" for baggage :
Passenger travel (whether rail or air) customarily includes at least some baggage. However, the travel-baggage combination is actually a bundle of two distinct, but highly correlated, services - most people travelling also have baggage to relocate from point A to point B. Charging one price for the two services can be considered a form of second degree price discrimination, i.e., bundling. It is possible that such bundling reduces consumer surplus in the process of increasing revenues, yet it is also possible that such bundling increases profits and consumer surplus, perhaps through a transactions cost argument.
If the two services are unbundled, it is not apparent that the traveller with baggage will necessarily pay more than they do for the current bundle. On the other hand, those without baggage may well pay a lower price for travel.
The Reuters story also discusses how Northwest Airlines wants to start charging a premium for aisle seats. Conceptually the airlines want to extract a portion of the extra consumer surplus a passenger enjoys from sitting on the aisle. However, there are all sorts of potential problems with this idea. For example, what if the person doesn't "want" to sit on the aisle but the aisle seat is the only one available? At this point, the airline is penalizing late reservations rather than extracting surplus for the benefit of sitting on the aisle. Furthermore, if there are physical reasons the aisle is preferred (perhaps the person is 7 foot tall, or whatever) would such pricing violate the ADA or some other dragnet regulation?
The missus brings up a couple of additional points. First, families are "penalized" for wanting to sit together in the same row. She also wonders if there is actually all that much extra surplus from sitting on the aisle. Upon reflection I tend to agree - sitting on the aisle with a 3-2 or 1-2 seat configuration can be okay. You get a little extra leg room (for one leg) without a lot of hassle from your fellow passengers. However, I have been on the aisle when two or three people to the left (or right) of me decided that they had to go to the loo, all at different times during the flight. That can actually be very annoying and reduce (my) surplus.
My point is that it is far from obvious that Northwest will be able to successfully charge a higher price for the aisle seat, especially given the limited capacity of the plane.
What is interesting, of course, are the howls of protest that pour forth when a firm announces that it might charge a separate price for what consumers already pay in a less obvious manner.
After all, baggage is free. Right? Right?!?
Micheal DeBow, a professor at Samford's Cumberland School of Law, is our newest partner in crime. He'll continue posting at Southern Appeal and he'll continue to maintain his fantastic page of law and economics links. Welcome, Mike!
An oldie but a goodie.
From Milton Friedman's Capitalism and Freedom,
I believe strongly that the color of a man’s skin or the religion of his parents is, by itself, no reason to treat him differently; that a man should be judged by what he is and what he does and not by these external characteristics. I deplore what seem to me the prejudice and narrowness of outlook of those whose tastes differ from mine in this respect and I think the less of them for it. But in a society based on free discussion, the appropriate recourse is for me to seek to persuade them that their tastes are bad and that they should change their views and their behavior, not to use coercive power to enforce my tastes and attitudes on others (111).
HT: Will Luther
A tasty new ballpark treat from a minor league baseball team:
The Grizzlies and Krispy Kreme Doughnuts have teamed up to create “Baseball’s Best Burger.” The burger, which was debuted at the Grizzlies' December 10th sale, consists of a thick and juicy burger topped with sharp cheddar cheese and two slices of bacon. The burger is then placed in between each side of a Krispy Kreme Original Glazed doughnut.
The team owner must be a cardiologist.
HT: Mini Me
Ignorance Revealed: A Student Perspective
Hello Dr. Lawson,
March 13, 2006
Trust Busting c. 1906
From the March 13, 1906 NYT:
An investigation of the American Ice Company, generally known as the Ice Trust, is proposed in a bill introduced to-night in the Assembly...The Governor is authorized to appoint three Commissioners who shall investigate the ice crop of the State, the facilities for, and methods of storage of ice, the importation of ice, the price of ice, and establish what companies are engaged in the ice business in the State.Why all the fuss? As I mentioned over at Heavy Lifting last week, the winter of 1905-1906 was very mild, thereby reducing the amount of ice that formed on the Hudson and other rivers. The president of the American Ice Company was rather clear as to why the price of ice was higher in March 1906 than any time in the recent past. The article was also fairly honest as to why the price of ice was likely to increase throughout the summer of 1906 - the supply of ice was short at the same time that the demand for ice was increasing.
Remember that at this time the ice-box was the only means of refrigeration.
The calls for government investigation of a necessary good whose price has increased through what many would perceive to be a conspiracy is, evidently, not new.
Gold Medal in Spin
In a passing comment in a story about Oregon trying to make some money of the 2010 Vancouver games:
The U.S. Olympic Committee reported that the state of Utah fielded a $2.8 billion boost in economic output from the 2002 Games.
What? I admit to two things: a) being unaware of the USOC study and b) not being able to find the study (if someone does, flash me an email). However, the number seems incredible - especially when the entire Gross State Product of Utah in 2002 was estimated by BEA to be about $73.38B. This would make the Winter Olympics worth 3.8% of GSP? Hmmmm...that sounds fishy.
Greenspan cashes in
Penguin Press has won the bidding war for the rights to publish Alan Greenspan’s memoirs, with the winning price reported to be around $8.5 million. Publication of the as-yet-untitled book is projected for 2007.
For a single speech, Greenspan is reportedly getting “six figures”.
If our monetary system were governed by the rule of law, rather then the rule of men, these prices would be a lot lower.
New website for the Muffins
The Ohio Village Muffins Vintage Base Ball Club, the 1860 rules teams that Josh and I play for, has a cool new website.
Here's a pic of me taking a mighty swing. (Take note of how far the ball went!)
UPDATE: link above won't work. Here's the pic:
Potato Chip of the Month Club?
Anchor O'Reilly has tasted each and every one of his products. That's the nom de crisp and fictional alter ego of Ned Coyle, a Toledo-based web entrepreneur who founded the Chip of the Month Club with his wife Therese in 1999.*
* Laura Taxel, "Hometown Chips," Ohio Magazine, March 2006.
The article briefly mentions the founding of the Ohio Potato Chip Institute in Cleveland in 1931 which eventually became the National Potato Chip Institute in 1937, and then the Snack Food Association in 1978. I wonder what sort of interest-group activity they were involved in?
Internalities and the Economics of Self Control
I just read a nifty little Cato Institute article by Glen Whitman (CSU-Northridge) titled "Against the New Paternalism: Internalities and the Economics of Self Control". Here's the ex. sum:
Economists have long argued that government intervention makes most sense in situations that involve externalities. Externalities are costs or benefits that spill over onto third parties. When individuals bear the full costs and receive the full benefits of their own actions, the justification for government involvement is much weaker. But a new generation of economists contends that paternalistic intervention can be justified to correct problems of self-control. If people don't fully consider the costs their choices impose on their own future selves, the theory goes, those choices impose within-person externalities dubbed "internalities." The internalities approach provides a novel argument in favor of paternalistic government policies such as sin taxes (including fat taxes), marketing restrictions, mandatory savings plans, and so on.
The War of Ideas
Do you remember the powerful impact the first time you read The Wealth of Nations, or Human Action, or The Law? Now imagine the impact of spreading these to the world's 200 million plus native speakers of Arabic. Jonathan Rauch's March 6 column tells the fascinating tale of the anonymous Shiite translator from southern Iraq who, with the help of Tom Palmer at Cato, is working secretly to produce first-time translations into Arabic of great works in liberty.
Odd though it may sound, somewhere in Baghdad a man is working in secrecy to edit new Arabic versions of Liberalism, by the Austrian economist Ludwig von Mises, and In Defense of Global Capitalism, by the Swedish economist Johan Norberg. He is doing this at some risk of kidnap, beating, and death, because he hopes that a new Arabic-language Web site, called LampofLiberty.org—MisbahAlHurriyya.org in Arabic—can change the world by publishing liberal classics.
Continue reading here for much more on this important, extremely long term project.
HT and major props to Virginia Postrel, who recently donated a kidney to a friend.
March 11, 2006
Genius bank robbers
Tarrant County, Texas (home to Arlington and Ft. Worth, among other cities) has experienced a large increase in bank robberies since October of 2005. Today's Star-Telegram has a front page story that discusses the recent spike in bank robberies and the possible reasons why. Not totally in defiance of setting marginal benefit equal to marginal cost, our local experts claim that a) most bank robberies are spur-of-the-moment deals, b) many folks robbing banks are drug users in need of some quick cash, c) bank robbers know that bank tellers are trained to cooperate and "hand over the cash," but that d) bank robbers think they are going to get away with it.
Part (d) is where most bank robbers are seriously mistaken as 73% of all bank robberies in Tarrant County are cleared.
Why such a high clearance rate? The surveillance cameras are very good at taking clear pictures of bank robbers, which are then run, say, on the front page of the Star-Telegram!! The print paper had a collage of twelve bank robbers looking just as pretty as you please. The on-line version of the story provides the pictures but not in the nice collage (check out the pictures from the link within the story).
March 09, 2006
A must see
HT: CFG Blog
Follow up on "Ignorance Revealed"
I agree with Robert Lawson's argument for studying economics rather than "business." I too never took a business course. This was partly because a) I didn't have the grades to transfer into the Terry business school at U Ga and b) I wanted to study economics and the BA in economics allowed me to take more economics courses and apply my math credits rather than taking accounting, etc.
At the risk of completely revealing my sarcastic side, I offer my description of non-economics majors in the B'school. I admit that I feel especially qualified to do so because I have never taken any of their courses.
On the economic impacts of sporting events (once again)
Economic impact studies are typically discussed in the context of multi-hundred million dollar stadiums or mega-events like the Super Bowl. Economists have generally concluded that most studies grossly overstate the potential benefits and understate the actual costs of an event/arena, thereby ensuring an unreasonably high net economic benefit for the local economy. Economists have been poking holes (big, "you sunk my battleship" holes) in the sides of these studies for years. However, the inertia of the "economic impact study" seems to trump what economists have to say.
While the big studies understandably attract the attention of economists, I am growing a bit more sensitive to the smaller claims, which, although less dramatic, might actually do more damage. The local claims of $X million being generated by the local watermelon-spitting tournament are much more numerous (by definition) than the studies of a local Super Bowl. Perhaps economists should focus some attention to these more numerous smaller claims because they seem to add to a mythology.
Case in point, the Red Diamond Vulcan Cup soccer tournament in Birmingham, Alabama. Local tourism officials estimate the "soccer tournament will have an economic impact of more than $4 million."
Perhaps, but I doubt it. The article points out that the tournament is expected to bring 6,000 people to Birmingham. The tournament entails 232 teams (from all over), which would require only 26 people from out of town for each team. Let's say that ten percent of the teams are from Birmingham (I don't know for sure, but this is how it worked when I played club soccer), then if all 6,000 people were to come from out of town (thereby avoiding substitute spending issues), each team would only need to bring 29 people. This number is reasonable and therefore the claim of 6,000 visitors may not too be far from the truth.
What is less likely is that the 6,000 people would, in two days, create $4 million in economic impact. Let's take the easy approach first. Without any so-called multiplier effect, 6,000 people spending $4m in two days would require $333 in per-capita per-diem spending. This level of spending is unrealistic, especially when you consider that some of the visitors are little brothers and sisters who do not require such expenditures. [Aside: I claim it would be difficult to spend this amount of money per day in Birmingham if you wanted to - but I am originally from Chattanooga, so I can make fun of Birmingham (he he).]
I have written elsewhere that evidence suggests per-capita per-diem tourist spending is closer to $100-$125. Thus, the 6,000 visitors might generate closer to $1.2m - $1.5m over the two days. I haven't seen the study the Birmingham folks used, but I am sure they used some form of "multiplier effect" to determine the total impact of the soccer tournament.
The easily abused multiplier effect is a simple scaling of the direct spending assuming no leakages from the local economy. Blame Keynes (?). The standard approach is to take the direct spending $D, "select" an "appropriate" multiplier, m, and calculate the total economic impact as $D(1+m). Obviously, the total impact is very sensitive to the multiplier chosen.
In our example at hand, if the direct spending is $1.2m-$1.5m and the total impact is $4m, this implies a multiplier of 2.33 - 1.66. Both are probably a bit high, but not as high as I have seen in some studies (many times multipliers are "chosen" as high as 4 or 5!!).
Econometric estimates of multipliers, accounting for leakages, substitution, etc., suggest a multiplier closer to .7, which in the case of the B'ham tournament would lead to total economic impacts in the range of $2.04m-$2.55m (all based on the assumption of 6,000 out-of-town visitors spending between $100-$125 per day for two days).
Granted, the overall economy is ultimately comprised of any number of .014% contributions (about 7,142 of them ;-), but the local McDonald franchises likely have a bigger economic impact than a soccer tournament but don't get the credit they deserve. This must be because there isn't a local Fast Food Bureau.
My peeve is not with tourism and convention bureaus, per se. Rather the manner in which they justify their existence. Instead of being satisfied (or thinking the public would be satisfied) with securing conventions, tournaments, and so forth for their own sake, local tourism folks feel obligated (perhaps it is CYA, perhaps SOP) to point to some mystical economic benefits that a) probably aren't measured correctly, or b) are so minuscule that it almost belittles the event when put in context.
Some links for your students
My lecture on converting nominal dollar values to reals begins with a review of the top-grossing movies of all time in the US, where students always notice that recent crappy movies beat out older good movies. Maybe it's ironic, but my favorite movie of all time, The Exorcist, is 64 while Ghostbusters, arguably a crappy movie, is 43.
CNNMoney.com posted an article recently on the effects of inflation in movies. How much would Sam Spade's daily detective work fee of $25 plus expenses cost today? More recently, you can ask students why it's funny that, in the first Austin Powers movie, Dr. Evil demands the world pay him "One million dollars!"
If your students aren't motivated enough to go to that Money article, you can have them read this USA Today opinion column from a high school English teacher. Why do US students do so poorly compared to students from other countries? I doubt the NEA will say this, but this English teacher says it's the students' own lack of discipline and motivation. I posted the article on my Principles class' webpage, with the note that "Success is a reward, not a right."
Kite Aerial Photography
I've heard of kite surfing, but kite aerial photography was new to me.
Kite aerial photographers, KAPpers for short, are hobbyist/artists who rig kites with suspended cameras that can be remotely operated from the ground. Hovering kites can be guided into spots that a helicopter or plane could never go (at least not legally). Using a variety of lenses, panning devices and other homemade gadgets, good KAPpers take some downright amazing pictures.
Full story including links to great pics here.
MPS Essay Contest
The Board of Directors of the Mont Pelerin Society Announces Friedrich A. Hayek Fellowships for the 2006 GENERAL MEETING OF THE MONT PELERIN SOCIETY (Guatemala City, Guatemala – November 5-10, 2006)
In Studies in Philosophy, Politics and Economics(1), Hayek states:
The idea that the rules of conduct pertaining to trade are independent of both particular and common purposes leads one to reflect on how and under what conditions a “universal peaceful order of the world” might, one day, be achieved. Hayek here extends the more intuitive view of the classical liberals, who also believed that trade encouraged peaceful, civilized behaviour, but did not deepen their reflection, leaving current generations to discard the idea as being naive. However, Hayek did not pursue this topic, leaving it to the current generation of younger scholars to explore (for his reasons, see The Constitution of Liberty, p. 263). As the current generation of younger scholars, you are to respond to Hayek’s statement.
First prize: $2500 cash award + travel grant*
The contest is open to all students (full or part-time) and faculty members 35 years of age or younger. Entrants write a 5,000 word (max) essay. Deadline or receipt of papers is June 15, 2006. Prizes are given to the top three essays and include a Hayek Fellow cash award plus a travel grant* to our Society’s next General Meeting in Guatemala City in November 5-10 2006. In honour of the location and of all that our friends in the Spanish-speaking part of the world have done, and are doing, to promote classical liberalism, we are inviting papers in Spanish as well as in English. The essays will be judged by an international panel of three senior members of the Society.
*Travel grant includes coach class airfare, registration fee, and some meals. Hotel, food, and other expenses will be the responsibility of the attendee.
(1) F.A. von HAYEK, Studies in Philosophy, Politics and Economics, Chicago University Press, 1967, p. 168.
March 07, 2006
NAEP and Teacher Pay
In the Feb 27 WSJ, Chester Finn and Diane Ravitch had an op-ed reporting wide gaps between state claims of student proficiency and student proficiency as measured by the NAEP. For example, Georgia reports that 87% of its fourth graders are rated as proficient in reading by the state's test while only 26% are rated as proficient by the NAEP. Finn and Ravitch argue that the gap is attributable to states such as GA "dumbing down" or using low thresholds for proficiency on their state tests.
I decided to have a bit of fun with the data underlying the Finn/Ravitch piece. First, I tracked down the NAEP scores for fourth and eighth grade reading and math. (Link here; scroll down to pp. 20-23.) Next I paid a visit to the website of the kind folks at the John Locke Foundation; they publish a report of teacher salaries adjusted for state cost of living differentials and other factors. (Report here; scroll down to Table 1.)
Armed with data, my fun began. I was curious about a simple question: Is there any correlation between teacher pay and student performance on the NAEP? There sure is--it's negative. Specifically, the correlations between real teacher pay and student performance on the math and reading NAEP for fourth and eighth grades ranges from -0.226 to -0.30. (The correlations are for 48 states; ME and NH do not have real teacher pay data available.) It sure looks like better paid teachers are not associated with better student performance. Needless to say, caveats about possible omitted variables apply.
Readers wanting to add to my first pass (perhaps by adding state demographic data or a measure of the extent of teacher unionization), should just drop me an email. I'll be happy to forward a spreadsheet with the data I've compiled. Maybe we'll even end up with a paper--it's been done before.
Too Much Outback
Believing toilet seats are no longer able to handle our growing love handles, Standards Australia has begun a review and expects to make changes including "an increase in the strength of toilet seats to accommodate the increasing size of humans".
It's expected the new standard will cater for a 150kg person – of which there are more and more every day.
A member of the Standards Australia review committee, Steve Cummings, head of research and development for toilet maker Caroma Dorf, said toilet seats currently only had to withstand 45kg.
Incentives Matter--Aussie Driving Edition
RISING fuel costs have forced Australians to change their driving habits, an international survey shows.
The AC Nielsen Online Consumer Opinion survey, which questioned 500 Australians as part of a survey of more than 23,000 people in 42 countries, found 84 per cent of Aussies have felt a hit to the hip pocket because of escalating fuel prices.
More than half of Australian drivers, or 61 per cent of those polled, said they were opting to use their vehicles less, while 57 per cent were trying harder to combine trips, it found.
Unintended Consequences in Action--Maryland Lending Law Edition
From the Washington Times (with a HT to Mike DeBow):
Montgomery County residents in the process of buying, selling or refinancing a home are finding themselves in a tight spot as at least 50 mortgage lenders have pulled their services out of the county as a result of a discriminatory lending law scheduled to go into effect tomorrow.
Jonathan Turgel of Germantown was refinancing his home when he received a call from his mortgage broker Feb. 24 informing him that the prospective lending company, Credit Suisse, a Wall Street investment banking firm and wholesale lender, had stopped funding mortgages in the county effective that afternoon.
"I said, 'Well, what's going on?' " said Mr. Turgel, a 40-year-old business owner. Unfamiliar with the law, he did some research and soon was e-mailing County Council members.
"I'm not a person who's in the bad credit, low credit or no credit category and it's affecting me," said Mr. Turgel, who has a strong credit rating of 785. "We were planning to refinance and take the kids to Disney World."
Mr. Turgel said he is considering moving his wife and their seven children to Frederick County.
"God help you if you have to refinance your house right now. I don't care if you have great credit -- you're not going to get the loan you could have gotten three weeks ago," he said.
Mr. Turgel is one of dozens of homeowners, brokers, lenders and real estate agents calling on County Council members to repeal or revise the ordinance, said Brian Jones, spokesman for council member Michael Knapp, Germantown Democrat, who has called for the law to be repealed.
The ordinance, which was passed by a vote of 7-2 and bans discriminatory lending on the basis of national origin, race or sex, increases the maximum fine from $5,000 to $500,000. Mortgage lenders have limited or suspended their loan businesses in the county rather than risk being punished for violations such as "abusive prepayment penalties" or "excessive points and fees."
Politics c. 1906
An interesting tidbit from the March 7, 1906 NYT:
FRANKFORT, KY - Representative Simmons of Kenton County today called attention to the fact that the original and all printed copies of his bill to suppress poolrooms have been stolen from the records of the State Senate.
Today one of my students (a business major) e-mailed to ask me some technical question about accounting or marketing or some such thing. I had to reveal to him that I didn't know the answer because I had never in my life studied these subjects. I went on to explain:
Business students need to study economics in the same way that engineering students need to study physics. This is because economics (physics) is the theoretical underpinning for business (engineering). But the reverse is not true. Economics students don’t need to study business any more than physics students need to study engineering. Economists (physicists) don’t need to know how to run businesses (build buildings) to understand the theory of an economy.
At least that's my story and I'm sticking with it.
March 06, 2006
Ideas, David Friedman's blog
David Friedman has a pretty new blog, called simply Ideas, which spans a breadth of legal and current affairs topics (including literature, I'm looking forward to reading David's new fantasy novel Harald) through a number of interesting thought puzzles. Here is one example.
An Athenian Puzzle:
David was nice enough to come guest lecture at my Law and Econ seminar last week, and one of my students nailed the answer. Have a look at Ideas for answer(s) and discussion. Another puzzle I found interesting is on the Foreign Intelligence Surveillance Act.
Time inconsistency and my Italian vacation
My silence of the last week is explained by the fact that I was in Italy for a week (Capital's spring break comes really early). 3 days in Rome, 1 day in Assisi, 2 in Florence. Great fun; you should go; et cetera, et cetera, et cetera. I took my mother who had never traveled anywhere requiring a passport before in her life. Just the two of us...
Here's the story: Three years ago, she was battling Stage IV throat cancer (squamous cell carcinoma). Her odds of survival, though difficult to calculate, were quite low.* As she was being battered by a dizzying array of procedures including two different types of radiation treatment and major surgery, I promised her that I'd take her to Italy if she kept on fighting.
Honestly, I figured that this was a promise I wouldn't have to keep. But darned if she didn't pull through with a full "recovery". Since I didn't want to fall victim to the time inconsistency problem, there was nothing left to do except honor my promise.
A possible explanation for why Hollywood revenues are down?
I watched the majority of last night's award show, although I have not been to a movie for about two years. The only 2005 release I saw all the way through was "40 Year Old Virgin" and I actually picked up a book midway through that DVD.
I am a fan of hip hop (especially old school), but the song awarded Best Song might provide some insight as to why revenues are down at the box office? Uncensored lyrics here
Another thing that struck me was how little I had heard about the nominees for best picture. I am out of the market for movies, but I still have two ears and I still read. Perhaps this explains why I hadn't heard anything about these movies:
The box office totals from Boxofficemojo.com:
Wedding Crashers $209,255,921 Release date: 7/15/2005 ($29.89m/month)
Nominees for Best Movie:
Total Revenue of Nominees for Best Movie: $235,568,359
There is no particular reason for the best movies to be the most profitable or most successful at the box office. However, while Munich and Brokeback were comparable in monthly earnings to The Wedding Crashers, I wonder if either of the two nominees has the staying power (in terms of weeks run in theater) as The Wedding Crashers (another movie I turned off in the first five minutes). The other nominees were watched by a little less than one million people per month. Obviously the movies didn't have the draw of Harry Potter or Star Wars, and while revenue isn't a gauge of quality, shouldn't it be correlated in the long run?
Paglia on Summers
In today's NYT Camille Paglia offers her take on Larry Summers leaving Harvard; an excerpt:
Over the last three decades of trendy poststructuralism and
Markets in Everything--Burial Sites Near Rosa Parks
The price to get some spots in Detroit's Woodlawn cemetery has jumped thousands of dollars since civil rights icon Rosa Parks was entombed there last fall, angering some relatives who say it cheapens her legacy.
The spaces in the Rosa L. Parks Freedom Chapel were priced at $17,000 before the cemetery gave spots, for free, to Parks, her husband and her mother. Now, the spaces cost $24,275, and possibly as much as $65,000 for the slots nearest to Parks' crypt.
Ht to MR for the markets in everything concept.
This just has to be something from the Onion--even the most ardent nanny-staters couldn't be this self-parodying:
BRIDGEPORT, Conn. -- The City Council is considering a local law to require coat hooks in all public bathrooms.
The council's Ordinance Committee has endorsed a proposal from City Councilman Keith Rodgerson requiring restaurants, gas stations, stores and other public accommodations in the city to have coat hooks.
The full story is here; apparently it is real.
March 05, 2006
The Oscars: Paragon of Democratic Efficiency
I have read offline that the Academy Awards use a ballot that allows/requires voters to rank candidates. If there's a tie of first-place votes, the tie breaker is decided by an "instant runoff" counting the number of second-place votes. The NCAA uses a Borda count, also a ranked ballot, to determine national champions in football and basketball (go Aggies). Here's a concise discussion of common ranked ballot rules.
This is interesting because ranked ballot voting rules (like instant-runoff and Borda count) almost always aggregate voters' preferences better than the plurality voting rule (first-past-the-post) that we use to elect political office holders. A simple illustration: suppose I like Perot the best, then Bush, then Clinton. I know Perot has no chance of winning, and more importantly I don't want to increase Clinton's chance against Bush. So I vote for Bush. Add the electoral college to this tension, and you get vote trading between Naderites in heavily blue states (where a vote for Nader doesn't matter to Gore vs. Bush) and Goredites in swing states. All that is avoided under a ranked ballot rule. I would simply list Perot, Bush, and Clinton in 1-2-3 order.
Because of aggregating voters' preferences better, rank ballot voting averts many weird outcomes we get with the plurality rule. Biggest example, the 2000 presidential election by Supreme Court would have been avoided. Possibly, too, the 1800 deadlock between Jefferson and Aaron Burr that Bruce Ackerman writes about in his nice new book, The Failure of the Founding Fathers. And for good measure, throw in the 1860 presidential election, about which Alex Tabarrok and Lee Spector write in their provocatively titled 1999 paper, "Would the Borda Count Have Avoided the Civil War?"
Obviously, support for ranked ballot voting is greatest among groups outside the two major parties. Opponents argue that rank ballots are too confusing to voters. Some embarrased Florida voters in 2000 support that point. Proponents argue that if it's simple enough for sports writers and movie stars, it should be simple enough for citizen voters. But when sports writers elect national champions, and movie stars hand out Oscars, they're voting on issues in their area of specialization. So who knows?
Australia, that's who. Their 150-seat lower house is elected using the instant-runoff rule. Several smaller countries use various forms of ranked ballots as well. Wikipedia has a nice entry on IRV, including its use in Australia and support for adoption in the U.S.
So as I pull for Capote, Reese Witherspoon, and the Corpse's Bride tonight, I'll be thinking: "Would I bother to vote if I could rank candidates?"
March 04, 2006
The Best Half-Sentence I've Read Today
Being a chairman is a lot like a full lobotomy (except the scars last forever)...
Did Dale Earnhard Save Lives?
Steven Levitt and Stephen Dubner think so. No NASCAR drivers have died the last five years, that's for sure.
An interesting question is if the safety regulations have made NASCAR drivers more reckless. The research of Russell Sobel and Todd Nesbit seems to indicate that it does.
From the abstract:
When safety regulation makes automobiles safer, drivers may drive more recklessly, creating partially or completely offsetting effects on the overall level of safety. Evidence of these offsetting effects has been hard to find, however, primarily because of the aggregate nature of accident data. In this paper we explore how changes in the safety of automobiles used in NASCAR has altered the incentive of drivers to drive recklessly. This unique data set allows more accurate and objective measurement of the necessary variables to test for these effects at a micro-level. Our results strongly support the presence of these offsetting behavioral effects.
IMHO, a very cool way to test "Tullock's Spike."
Something to think about
I'm working my way through a few older books sitting on my shelf and came across this little gem, from Chapter 6 "Imperialism" in The Trouble with Marx by David McCord Wright (1967):
Successful democracy is not just a matter of nose counting. One does not automatically save a nation by holding elections. For the political ballot technique to work with reasonable wisdom and success, the voters must have a whole set of attitudes and a knowledge of political history and experience that cannot be acquired overnight. The wealth and the democracy of Western Europe and the United States are, alike, the product of a thousand years of slowly maturing political experience. We can certainly help this knowledge develop if we pass on a realistic appraisal of our own. But it is no sign of exploitation, imperialism, or colonialism if primitive peoples are not instantly granted the economy, wealth, and self government, such as they are, of London, Paris or New York.
March 03, 2006
Blogosphere: Revolution or Reinforcment?
Matt Welch, the outgoing associate editor at Reason magazine, has an insightful (and fun) column in the April print edition (pp.16-7, not yet available online). The set up: in the early days of blogs (post-9/11), Welch expected blogs to democratise public discourse and improve quality. Quoting his own earlier essay, Welch writes:
"'What do warbloggers have in common, that most pundits do not?' I enthused. 'I'd say a yen for critical thinking, a sense of humor that actually translates into people laughing out loud, a willingness to engage (and encourage) readers, a hostility to the Culture War and other artifacts of the professionalized left-right split of the 1990s...a readiness to admit error [and] a sense of collegial yet brutal peer review.'
Laugh out loud, all right.
Welch goes on to describe how blogs have become powerful tools for the most partisan of opinion dishing and mutual bashing not to be bohthered with standards of logic, fact checking, or grammatical competence. He continues:
So what's wrong with a bunch of human beings using technology to organize themselves into political groupings? Absolutely nothing. The purpose of enhanced freedom is to enhance people's ability [sic] act freely in the ways of their choosing, and we shouldn't be surprised when they choose to do the same stuff they were doing before, only more efficiently."
Indeed. I think it's without controversy to say that current events blogs have democratised American (and world) debate, moving it outside the major media outlets, AND reinforced whatever status quo, partisan-based polarization existed (and exists) in American debate, AND much more. Blog on.
Consumer use tax
I am curious how many other states levy this tax. For those in better states, the use tax in Louisiana is a 8% tax on out-of-state taxable purchases that is paid when you submit your state income tax return. For most, this affects internet purchases. Why do we have this law?
This law ensures that Louisiana businesses are not at a competitive disadvandate with out-of-state companies who are not required to collect sales tax.
Hmm, and why are those businesses at a competitive disadvantage? Because of a lack of entreprenurial ability? Cajuns aren't efficient? Nah, just another example of politicians thinking they can tax us into prosperity.
This is about as close to an unjust law as I think I've encountered. Taxes are paid to fund public services, no? If I drive to Target, I use public roads and I understand that I pay sales and gas taxes to fund those public services. If I buy something from Amazon.com, can anyone tell me what government service I am burderning? Ok, the UPS truck delivering my Amazon purchase uses the road just as I did, but the UPS truck pays gas tax itself.
I'll let you know when I get audited.
Enron-like fraud? c. 1906
Maybe the Enron analogy is inappropriate, but from the March 3, 1906 NYT:
Jeremiah Smith, receiver, today received from E. L. Pride, an expert accountant, a report on the examination of books of N.B. Goodnow & Co., a stock brokerage firm which failed recently. The liabilities are $539,595, assets $5,818. There is $504,037 due customers for stocks carried on margin.
In 2004, $539,595.00 from 1906 is worth:
$11,287,727.85 using the Consumer Price Index
In 2004, $5,818.00 from 1906 is worth:
Ouch. Those margin calls can be painful.
Economics book review c. 1906
From the March 3, 1906 NYT:
ESSAYS ON ECONOMICS by H. Stanley Jevons.
If All Men Were Unitas...
Alexander Hamilton wrote in Federalist 51 that if men were angels, no government would be necessary.
Call the following Plummer's Quandry: if all men were Unitas, coaches would not be necessary.
As Malcolm Gladwell puts it:
Speaking of which, how fascinating was the Plummer meltdown in the Pittsburgh game? People have been beating up on Plummer, saying that his true colors emerged in that game. I prefer to look at it the other way. Shanahan managed to put in place an offensive system so brilliant and so precisely tailored to his quarterback that he could make Plummer -- Plummer! -- look like a great quarterback for 17 consecutive games. That's pretty remarkable. The Plummer story is not about the frailty of individuals. It's about the redemptive power of environments.
Read the whole interview. It's excellent.
March 02, 2006
Wealth Gap Fuzzy Math?
Today's WSJ contained an article on the findings of the Fed's latest Survey of Consumer Finances; an excerpt:
So, is the wealthiest tenth getting an ever-bigger share?
Yes, but only by a slight margin. The Fed says the top tenth held 69.5% of household net worth in 2004, up from 67.4% in 1989.
Two important caveats: One, we're generalizing about the merely rich here, not the super-rich. The Fed survey explicitly excludes folks on the Forbes 400 list of the very wealthiest Americans, and the Fed hasn't yet broken out the latest numbers on the richest one million families, the 1% upper crust. Past Fed surveys find that that top 1% holds about one-third of the wealth and the next 9% hold another third.
And, two, as New York University economist Edward Wolff observes, the Fed doesn't count defined-benefit pension plans, money that, in a sense, belongs to the workers to whom pensions have been promised. Recent atrophying of these pension promises hurts the middle and upper-middle class more than the very top; ignoring that may understate the increasing concentration of wealth at the top.
I must be missing something--I don't see how the "atrophying" of something the Fed doesn't count (defined-benefit pensions) in the first place can cause the SCF to understate the increasing concentration of wealth at the top. It seems to me that if the Fed had been ignoring pensions that flow to the "middle and upper-middle class more than the very top" that the SCF has historically been biased in a way that exaggerates the wealth gap. If so, the atrophying of pensions that the SCF ignores should actually make the SCF's results more accurate rather than less.
Markets in Everything--Gorilla Names
But the idea of planting your name somewhere, permanently, has spread throughout society like cultural kudzu — not just for companies, but for individuals. In Stephen King's new No. 1 best-seller, "Cell," one of the characters, Ray Huizenga, is named after a real person. His sister Pam bought the rights in an eBay auction last year. (It cost her $21,000, and proceeds went to the First Amendment Project.)
Hey Ray, meet Macy Baby. Macy, a new gorilla at Zoo Atlanta (and granddaughter of Willie B.), is named for the Macy's department store chain, which won naming rights in an auction last year for between $10,000 and $20,000.
HT to MR for the markets in everything concept.
The cost of cars c. 1906
The March 2, 1906 NYT reports on "increasing imports" in early 1906. The major areas of increased imports (at least at the Port of New York) were precious stones and automobiles. As for the latter, the Port of New York reported that there had been 191 automobiles imported since January 1, 1906 valued at $625,000 or $3727 per car average value.
In 2004 dollars, this would be
In 2004, $3,272.00 from 1906 is worth:
$68,446.60 using the Consumer Price Index
I am not sure which of these measures is best. However, it doesn't really matter. Today's automobiles are much safer, cleaner, and technologically advanced and we are spending perhaps $20k-$30 (some more, some less) but nowhere near the $68k the CPI suggests the 1906 car would cost today. Of course, it is possible to spend $68k on a 2006 car, but you don't have to in order to obtain decent transportation. While a mint 1906 car would be worth a couple of million dollars today, this would be caused by its rarity not by its endearing qualities. Another example of how prices for certain goods fall over time, even after adjusting for quality.
“Post-autistic” economics: what a dreadful label
I have a somewhat more basic objection than Craig to “post-autistic” economics.
Autism is a neurological disorder. It is not a methodological approach, an attitude, or a worldview. It is not a variety of solipsism. Denouncing mainstream neoclassical economics as “autistic,” as the “post-autistic economics” movement does, is therefore an egregious abuse of the language. I can’t decide whether it is more unfair to neoclassical economists, or to people with autism. It’s no more appropriate than would be calling the anti-neoclassical movement “post-mentally-retarded economics” or “post-brain-damaged economics”. Implying that the position of one's intellectual opponent is attributable to a neurological disorder is a pathetic debating tactic.
If someone would like to defend the label, I have opened comments.
Orthodoxy in Heterodoxy
The Post-Autistic Economics Network, publishers of the Post-Autistic Economics Review, recently held their "Greatest Twentieth-Century Economists Poll":
Who were the greatest economists of the 20th-Century?
The PAEN is essentially a group of economists, mainly a lot of European (and some American) graduate students, who don't like the mathematical/modelling approach that modern economics uses. Rather than the current paradigm, these economists use descriptive and normative arguments against free markets and neo-classical/econometrics. There is nothing wrong with a different paradigm, in and of itself, but it has to withstand the test of actual data.
Do you need math to be a good economist? No. Do you need math to publish in the AER? Yes. Can you be bitter about that? Yes. Does the math requirement to publish in the AER suggest that economics is less valuable? No.
With this in mind, here are the top ten vote receivers in the poll in which 1,249 subscribers voted:
1. John Maynard Keynes 3,253
JMK is the economist "who most added to our understanding of economic phenomena"? To me, this doesn't say "heterodox" as much as big-government liberal. Adding JKG, Sen, and Robinson to that list almost seals the deal in my mind. I am surprised (and pleased - I don't know yet) that Hayek made the top ten. It seems that the heterodox movement has a pretty strong opinion on the economists who helped "make economic phenomena understandable," at least for them.
Economists don't put a lot of faith in surveys, nevertheless I grabbed all of the data that were made available and threw it into STATA. Here's a Lorenz Curve (a concentration curve) of vote totals:
The Lorenz curve suggests a highly concentrated opinion about "who is the most influential" economist, as can be somewhat inferred by the top ten vote totals. I would have thought the heterodox movement would be considerably more "democratic" in its opinion of who is considered "great." It must be admitted, however, that without a comparison survey of non-heterodox economists, we can't say much about the concentration curve. The heterodox group may be considerably more democratic than the rest of us.
There were a total of 587 "greatest economists" nominated. I created a dummy variable for whether the economist had won the Nobel Prize, whether the Nobel was shared with another economist and ran a few gimmick "regressions" to see how orthodox the heterodox actually is.
Here's vote total on NOBEL and SHARED:
Source | SS df MS Number of obs = 587
A few things come to mind here. The nobel prize explains very little of the overall variation in votes received, which might suggest that the heterodox movement is truly heterodox. On the other hand, the nobel dummy variable is reasonably significant (at the 6.5% level) and positive. Those economists who have won a nobel received approximately 71 more votes than non-nobel winners. Does this suggests that the readers of PAER and who selected into the survey might be more "orthodox" than claimed/believed?
Here's a Rank-Size regression to test the Pareto type distribution (and Zipf's special case):
Source | SS df MS Number of obs = 586The coefficient on LNVOTES is significantly different from -1, refuting the Zipf rank-size distribution commonly found in city size, etc. This suggests that the distribution of vote totals is not random. If votes reflect true opinions about who is "great," then the heterodoxy has an orthodoxy (or a semblence thereof). Moreover, the fact that the parameter on LNVOTES is less than one in absolute value suggest that the Pareto distribution of votes is concentrated, which simply confirms the Lorenz curve above.
What I plan to do in my "spare" time is gather the number of Google hits for each name in the database (this might take a while). My gut tells me that the vote total will be correlated with the presence on the web, however I have gathered data on 65 random names from the survey and the Google hits-to-votes correlation is only 0.037 (hopefully this will improve, or it's going to be an even bigger waste of time).
Act Now to Keep Internet Political Discussion Unregulated
Word is that H.R. 1606, the On Line Free Speech Act, will brought to the House for a vote next Thursday.
This bill preserves an exemption for most internet communications - including group blogs such as this one - from regulation under the McCain-Feingold campaign finance bill. The exemption was originally adopted by the Federal Election Commission after McCain-Feingold passed four years ago, but last fall a federal judge, at Senator McCain's urging, held that this was an impermissible interpretation of the statute, and ordered the FEC to write new rules regulating the internet. So all H.R. 1606 attempts to do is preserve the status quo from efforts to regulate more (yeah, that's the problem with politics today - too many people blogging and sending emails around!).
Last fall the bill came before the House and got a majority of the votes, 225-182, but because it was brought up under a special rule, it needed a two-thirds majority to pass. This time, a bare majority will do, the "reformers" are working overtime to kill it, with a variety of misrepresentations, as former FEC lawyer Allison Hayward notes here. If it passes the House, it looks good in the Senate - both Harry Reid and Bill Frist have endorsed it.
This bill deserves the support of anyone and everyone who cares about free political speech on the web. But a major scare campaign is underway from the campaign finance "reform" community (to which I respond here). Congressmen and Senators need to hear from folks - especially here in Ohio. Last time out, six Ohio Republicans voted against the bill: Hobson, Schmitt, LaTourette, Turner, Regula and Gilmore. Only 35 Republicans voted no overall.
More Wal-Mart Harassment
A return to one of my favorite topics--Wal-Mart.
1. If only busybodies were as entrepreneurial in creating useful things as they are in finding new ways to harass Wal-Mart. A case in point from the Detroit News:
LANSING -- State Attorney General Mike Cox said Wednesday he is taking legal action against Wal-Mart after an investigation at five of the retailer's stores found up to 80 percent of the merchandise didn't carry price tags.
Nearly 100% of the merchandise in my local Wal-Mart doesn't have price tags so what's the rub? Michigan has an item pricing law mandating that merchandise have old-fashioned price tags. So-called consumer advocates bleat about mispricing from scanners and barcodes, but the law is most likely a make-work sop to unionists. The Michigan AG is now using the law to beat up Wal-Mart--I'd bet dollars to donuts that it's either outright false or a case of selective enforcement.
BTW, Emory's Paul Rubin has a paper (with co-authors) examining the effects of item pricing laws. The money line:
We find consistent evidence across products, product categories, stores, chains, states, and sampling periods, that the prices at stores facing item-pricing laws are higher than the prices at stores not facing the item-pricing laws by about 25 cents or 9.6% per item.
2. Alan Reynolds had a nifty op-ed on Maryland's Wal-Mart bill; an excerpt:
Maryland's mandate does not compel Wal-Mart to spend a dollar more on employee compensation. All it demands is that Wal-Mart pays no more than 92 percent of compensation as wages (or non-health benefits). Compelling Wal-Mart employees to accept a larger fraction of their pay in the form of health insurance rather than cash is a particularly bad deal for housewives and students, who are usually covered under Dad's family plan. It is also a bad deal for seniors covered by Medicare.
3. A recent WSJ article ("Savior or Villain?" Feb 24, p. B1; no link) reports:
Ms. Adami, who is 47 years old, began working in a hinge factory straight out of high school, when manufacturing jobs were considered a secure stepping stone to a comfortable life .... When she was offered the Wal-Mart job [at a new distribution center in Sterling IL], the interviewer asked if the $13 per hour starting pay was appealing. She had to catch herself, she says.
"I wanted to tell them, 'Heck, that's more than I've made working 29 years,'" she says. Her last job paid $11 an hour, the most she ever earned working in a factory....
A Wal-Mart spokesman says some 6,000 people have applied for the 675 jobs ...
So much for any notion of always low wages.
March 01, 2006
The 2006 Homer Jones Memorial Lecture
For any Division of Labour reader who will be within driving distance of St. Louis next Wednesday: come to the 2006 Homer Jones Memorial Lecture to be given by Dr. Jerry Jordan. The lecture will take place at the Millennium Student Center on the campus of the University of Missouri—St. Louis on March 8, 2006 at 4:30 PM. The lecture is free and open to the public. An open reception (free food and drink!) follows.
Jordan is the past president of the Federal Reserve Bank of Cleveland and a former Director of Economic Research at the Federal Reserve Bank of St. Louis. He is a highly engaging speaker with provocative ideas. (He was one of the most free-market thinkers in the Federal Reserve System, I think it would be fair to say.) His topic will be "Money and Monetary Policy in the 21st Century." It won’t be highly technical!
Homer Jones (1906-1986), in case you were wondering, was research director and later senior vice president at the St. Louis Fed, playing a major role in developing the Bank's well-known monetarist research program.
Rent protection c. 1906
From the March 1, 1906 NYT is an article about New York doctors expressing desperate concern over the practitioners of osteopathy (which today is "respectable" (HT: Mike Ward) but at the time, from what I can tell, seemed essentially to be chiropractics with various levels of quakery involved).
Evidently the formal doctors figured that said practitioners needed to gain sanction from an "examining board under the Regents." As some doctors pointed out, those who practiced osteopathy did not "require a study of toxicology, and a practitioner might not be able to find out if a patient had a stomach ache, whether he was suffering from poison or appendicitis." Yep, and he/she probably wouldn't be qualified to determine if the patient had cancer either, but in 1906 did osteopathy advertise itself as a detector of appendicitis? If so, then such claims might cause a negative externality (at least for the person with appendicitis), but that is not made obvious by the article.
To me, this sounds like a classic rent-protection scheme. General practitioners feel encroached upon by the non-regulated, non-certified upstarts. The answer, unfortunately, is to appeal to the government in the name of public safety and erect barriers to entry to protect the encroached. Perhaps such barriers are justified on social welfare grounds, but it is difficult to prove/disprove such a claim.
In a great quote, the story states:
Dr. Jacobi said he had no objection to osteopathy in itself, but demanded that a person practicing it be first a graduate physician, as required by hydropaths and homeopaths. He thought all practitioners relying on a one-remedy system should be weeded out.In other words, as long as you are a member of the club I have no problem with you performing your version of medicine. If you are not a member of the club, then you should not be able to practice anything. I think we should all be happy that a philosophy that specialization needs to be "weeded out" never seemed to catch on here in the States.
Creative destruction c. 1906
From the March 1, 1906 NYT:
Through the death of a valuable ram from Vermont, on the ranch of M.G. Brownell of Durango, Colorado is to have a rubber industry.
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
Our BloggersJoshua Hall
E. Frank Stephenson
Michael C. Munger
Lawrence H. White
Edward J. Lopez
By Author:Joshua Hall
E. Frank Stephenson
Michael C. Munger
Lawrence H. White
Ralph R. Frasca
Edward J. Lopez
By Month:May 2013
Site design by