Division of Labour: April 2006 Archives
April 30, 2006
Relief lesson c. 1906
From the April 30, 1906 NYT:
The surprise of San Francisco at receiving only $300,000 in cash out of the $2,500,000 appropriated by Congress for its relief has created only astonishment here, and the question on every side to-day is, "What did San Francisco expect? Did she think Congress meant to hand out dollars to her people?"
Later in the story, the government's actions post-SF quake are put in historical perspective:
Congress has never before done anything like what it has done for the relief of San Francisco. On a small scale it has made appropriations to cover the issue of tentage and rations by the army for sufferers by floods in the Mississippi and Ohio River Valleys, but even that had been stopped, and nothing had been appropriated for that purpose during the last eight years.
Another Job for the Congressional Price Gouging Caucus
The first dog on the auction block was a blond Pekingese male, 5 to 10 years old, hunky by Pekingese standards: mashed face, hair like a thatched hut. He sold for $100.
After that, prices soared as if dogs were gasoline and the auction was run by Exxon. The second breed on the block, a female Maltese — which the auctioneer announced "is obviously in need of a bath"— sold for $240.
That's the way it went Saturday morning at the dog auction in the parking lot of the Bartow County Animal Shelter near Cartersville.
More than 250 people showed up hoping to buy pedigree dogs — Chihauhaus, Maltese, Yorkshire terriers, Pomeranians, Pekingese and dachshunds — for rock-bottom prices. Instead, they got a dose of dog-price inflation, spurred by animal rescue groups trying to save the canines from breeders.
The animal rescue groups vowed to buy the dogs, get them medical treatment, have them neutered and find them homes.
Guy Bilyeu, 46, executive director of Chattanooga-based Humane Educational Society, , showed up with a group of supporters and $16,000. He bought more than 60 dogs.
Patricia Duncan, 27, was among the people lamenting the dog inflation. She said she used to work for Culberson's Hillview Kennels.
"It's ridiculous," she said. "These rescue people are outbidding everybody. They just bought a Maltese that has no teeth for $800."
Fido, Rover, and their furry friends better hope the "rescue people" aren't from PETA.
ADDENDUM: Today was Berry's graduation and the speaker was the U.S. Rep for this part of GA. He gave a decent speech--at least considering that he's a member of the U.S. Congress and that commencement speeches are generally awful compilations of cliches and platitudes. He made a few references to liberty which would be great if there were some evidence he consistently votes to increase freedom. From the new drug entitlement to bloated federal spending, however, his actions seem at odds with his rhetoric. The sad thing is that his Dummycrat opponents in the recent elections have been even worse.
April 28, 2006
Stanley Fischer watch
Stanley Fischer has now completed his first year as Governor of the Bank of Israel. His track record: Consumer price inflation at an annual rate was 1% (May 2005), now 3.6% (April 2006). The overnight interest rate was 3.5%, now 5.25%. Perhaps the inflationary forces were already in the pipeline when he took office, but he'll have to turn the trend around if he wants to continue to be credited with bringing "credibility" to Bank of Israel monetary policy.
During my break between what will turn out to be two interesting seminars today (more on Thaler's presentation later tonight), I wanted to point out Ronald Coase's lead article in the current issue of the Journal of Economic Management and Strategy (sub. req'd). The article is basically an explanation of how the famous Fisher Body and GM merger example that potential hold-ups are a justification for vertical integration is based upon misinterpreted and missing information. For those who are interested in the case, the article is rather illuminating (but not much moreso than has already been done by other authors).
What Coase does suggest is that the Fisher-GM story provides a prime example of what is wrong with much economic research. I quote a few choice statements from the last few pages:
The fact of the matter is that economists commonly obtain their theories in the study of industrial organization (and probably elsewhere) as a result, not of examining what actually happened but about thinking about it...This is not to say that spectacular results cannot be obtained by pure thought. We all know of Isaac Newton and Albert Einstein. But few of us can come close to matching their achievements. If progress is to be made in any science, it must be possible to use the talents of more ordinary people and by more ordinary means. [emphasis added]
I especially like this paragraph:
As I see it, progress in understanding the working of the economic system will come from an interplay between theory and empirical work. The theory suggests what empirical work might be fruitful, the subsequent empirical work suggests what modification in the theory or rethinking is needed, which in turn leads to new empirical work. If rightly done, scientific research is a never-ending process, but one that leads to greater understanding at each stage. In scientific research, we may win battles but not the war.
The final few sentences of the article:
What is needed is a change in the way economics is conducted. If our discussions are to have any value, our theories must have an empirical basis. As it is, the investigations by the economics profession of the relations of Fisher Body and GM stand as a glaring example of how economic research should not be conducted.
13mm vs. 1/2 in. plus epsilon c. 1906
From the April 28, 1906 NYT:
WASHINGTON - The House Committee on Coinage, Weights, and Measures to-day voted down a motion to report the Littauer bill establishing the metric system of weights and measurement.
Eminent domain concerns c. 1906
A few days ago (in 1906), the NYT editorial page contained an opinion about Standard Oil using its own pipeline to move its product across long distances at significantly reduced costs relative to the cost of its competitors that used railroads. The editorial basically said, "so be it," in essence granting Standard Oil its lower costs relative to its competitors.
The April 28, 1906 NYT contains a letter to the editor with some insightful comments pertaining to the Standard's pipeline - words that resonate with those of us who disdain the use of government to earn profits:
Your editorial on "The Guilt of Standard Oil" raises two questions:
My only gripe with the letter is the first six words of the last sentence.
April 27, 2006
What's the cure to cancer worth?
Forthcoming in the next issue of the Journal of Political Economy, Kevin Murphy and Robert Topel put the value at $50 Trillion. A one percent decline in mortality in the United States is worth a paltry $500 billion.
Just in time for this weekend's NFL draft and the scrambling by teams to trade up or down to get the "best" pick, Richard Thaler will be talking tomorrow morning at SMU. The paper he is presenting is "Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft" and here's the abstract:
A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many “real world” settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the “right to choose” in the draft – non-regressive predictions, overconfidence, the winner’s curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.
Full paper available here.
As usual, the paper is well done and interesting. I will try to report on Thaler's presentation along with Vanderbilt's Luke Froeb's presentation of "Post-Merger Product Repositioning" at our (UTA) seminar series in the afternoon.
Wow - a fun day of listening to interesting economics (interrupted by an hour and a half or so of driving).
[UPDATE: Co-blogger Frank Stephenson emails to point out that the Thaler paper has been floating around for at least a year and that he had some good comments here. Such is the nature of economics publishing - a good paper might take three years or more to be published (this after two years or more of gathering data!) whereas a relatively low quality paper can be in print in less than a year.]
Few topics seem to addle the collective brain of Washington like high gas prices. Politicians who raise this issue can generally be assumed to be partisan, cynical, demagogic, and dishonest. But one must not discount the possibility that something about the subject actually makes them stupid.
Weisberg is spot on--at least for this part of his column. The standards for pols are appropriately low, but nothing brings out their foolishness like high gas prices.
Interesting ranking of U.S. Business Schools
Social Science Research Network (sub. req'd?) releases a beta version of a Business School Ranking which considers the number of authors, papers, and downloads that are associated with a particular school. The approach is somewhat unique. Rather than measuring the quality of a program based on the ex post interest of a paper as reflected in where it is published, these rankings focus on ex ante interest.
The ranking might be biased (which ranking is not?) but it does place UT Arlington at 138 (which sounds reasonable), right around Wichita State and Kansas State. That sounds about right. Other schools of business are perhaps overrated or underrated.
Here are the top 15:
Here are those around UT-Arlington:
132 Utah State University - College of Business
What might prove interesting is the correlation between the pre-publication rankings and the post-publication rankings. It seems to me that I saw a business school ranking paper authored at UT-Dallas. I will have to search around for it, and if I find it, I might report back.
Krugman on foreign debt
There’s a puzzling statement in Paul Krugman’s most recent column (available online by subscription only):
And America’s foreign debt, including the value of foreign-owned businesses, is at least $1 trillion more than the official numbers say.
What sense does it make to include the value of foreign-owned businesses as part of America’s foreign debt? Debt means an obligation to fork over specified amounts of cash at specified future dates. If I sell my pizzeria to a Canadian, that doesn’t oblige me or any other American to fork over cash on future dates.
Adding the value of foreign-owned businesses to the value of foreign-owned debt makes for a bigger and scarier number, I suppose, but it’s a bogus number.
April 26, 2006
The Reciprocal Nature of the Problem
Members of the [Vermont] House were debating a bill that would make seed manufacturers, not farmers, liable if the seeds cause damage to someone else's land. (See more).
Here the genetically modified farmers are presumed to be doing the damage. However, Coase pointed out the reciprocal nature of these types of problems. After all, there wouldn't be a problem if the organic farmer weren't there.
The real question is what are the transactions costs of agreeing to a solution? Apparently more than the costs of lobbying.
Posted by Joshua Hall at 04:26 PM
Disaster aid fraud c. 1906
From the April 26, 1906 NYT:
Wholesale grabbing of supplies by elements of the people, while others are in want, has caused the military authorities to order a new system in the distribution of food. Beginning tomorrow kitchens and mess rooms will be established, where meals will be supplied to all who apply, but no food will be given out to be carried away...
Hmmm...items of value without well defined property rights tend to be accumulated by the unscrupulous or the "powerful." Sounds about right.
In the case of disassociated children, similar to what happened in the aftermath of Katrina, there are kids travelling with complete strangers in the aftermath of SF:
SALEM, Ore - Gov. Chamberlain sent this telegram to Gov. Pardee of California today:
The ad compares a TEL with a little boy's toys being taken away. Whatever merits Petro's attack on the TEL idea may have (full disclosure: I've written in favor of TELs here), it is a noxious metaphor to use. We citizens are not children receiving toys from the all powerful parental government. We are adults who contract for and pay for services from government. If Jim Petro's view of the relationship between a government and the citizenry is that of a parent-child then he's not fit to govern.
The solution to soaring textbook prices?
The Wall Street Journal has an article describing the increase in textbook prices - there was also a recent GAO report about the issue as well - which points out that many states have passed or are considering legislation placing limits on the price of textbooks.
Professors are almost always blissfully unaware of the price of the assigned books, after all we don't buy the book so why should we care about the price? However, in many fields there are reasonably priced substitutes for the well known and expensive textbooks. What is the hitch? Most professors are unaware of these low-cost substitutes for any number of reasons.
My favorite set of potential substitutes at the principles level (biased opinion of course) is McGraw-Hill's Demystified series, to which I contributed Microeconomics Demystified. The Demystified series weigh in at $20 MSRP and can be purchased for less on Amazon and other book sites.
Microeconomics Demystified is 13 chapters. Ranging from comparative advantage and production, through supply and demand, household and firm theory, the primary market structures of competition, monopoly, monopolistic competition, factor markets, and public goods, the book is streamlined for a sixteen week introductory class. There is little math, the analysis is primarily graphical and about the only downside from the point of view of some professors is the lack of test banks, overheads, instructors manuals, etc. However, for those who have been teaching a course for a while these additional tools are not absolutely necessary are they?
There is also a Macroeconomics Demystified, and the Demystified series covers biology, statistics, calculus, physics, finance, and so forth. All are reasonably good introductory textbooks and all are one fifth to one eighth of the price of the bigger textbooks but convey (for the most part) the same information.
News flash to state legislatures: the market is responding to higher priced textbooks. Perhaps slower than desired, but it is responding nonetheless.
April 25, 2006
Ridiculing gas price hysteria
On a day when President Bush followed the leading Congressional members of his party in pandering to gas pump hysteria and know-nothingism, Division of Labour readers might need a little cheering up on the subject. I recommend Mac Johnson's "The O'Reilly Fiction." (Audio version available.) An excerpt:
Of course, these newfangled “futures” contracts that Mr. O’Reilly has uncovered aren’t just bets made by “Vegas-style” people removed from reality. They are binding contracts and the buyers of these contracts agree to buy oil at the high prices that we bemoan. They lose their butts if they just bid up the paper price for no reason. I would encourage Mr. O’Reilly to enter the futures market and bet against these crazy Vegas-type speculators with his amazing insights into cabals and paper and so-called markets.
Johnson's website is worth a look, too.
(Cross-posted on Southern Appeal.)
The origin of the fleet car?
It has been my argument that the fleet car contributed to the demise of the Big Three auto makers. While it was not, in and of itself, a principle cause of their decline the Big Three were able to sell hundreds of thousands of automobiles to local, state, and federal governments. Meanwhile the Japanese and the Germans were not guaranteed such sales and therefore had to produce cars that attracted the disposal income of private customers rather than the expropriated income of the various levels of government.
The result was that the Big Three continued to produce automobiles as ugly and low quality as the K-car (among others) while the Japanese beat the Big Three in the consumer market. There are benefits to signing on with the government contract - ensured sales, etc. - but there are also potential costs.
The thing that I found interesting during the 1990s (while I was a budding young economist) was that public fleet cars were always American made, notwithstanding the fact everyone knew that they were of low quality, low efficiency, and so forth. The "Buy American" idea can justify this outcome, but I have never been fully satisfied with that argument - as a tax payer I care about the local bureaucrat in Arlington, Texas, driving a Ford Taurus, say, made in Atlanta? That is preferred to my city purchasing a more efficient and higher quality (for roughly the same price) Honda Civic or Toyota Tercel/Camry?
All that said, the April 25, 1906 NYT has an article in which the Board of Alderman in New York City have regulated the city automobile purchases - which arguably would have been one of the first instances of the government creating the fleet car:
Only American makes of automobiles may hereafter be purchased by the city under a resolution adopted by the Board of Alderman yesterday. Furthermore, the city departments must not pay more than $4,000 each for the machines they use.
There are, of course, reasonable arguments for the fleet concept - all cars are the same and are therefore easier to fix/maintain (the Southwest Airline model), the local content of the automobiles (whether directly in the city/state/region or at the national level) might contribute to local employment, and perhaps there is some political cost to having foreign cars in the fleet. On the other hand, those companies who are guaranteed a certain revenue flow from government contracts (perhaps outside of arms manufacturers) seem to have little incentive for quality control, innovation, etc. The Soviet system was plagued by such agency problems and ultimately, IMHO, these problems contributed to the system's demise.
It seems that the Big Three have rediscovered the American Consumer and are trying to make cars that appeal to the private-sector rather than the public-sector customer. Good for them.
Post-disaster aid c. 1906
Two other articles from the April 25, NYT offer an interesting comparison between the reaction to the need for aid after the 1906 SF earthquake and the need for aid after the 2005 NO/MS/AL hurricanes. For instance, without a large Federal Aid apparatus, private donations are the primary source of aid for the city. Without the federal government's apparatus, cities and states vie for the "honor" of having contributed the most.
The first article contains paragraph after paragraph of the amounts of money and in-kind contributions raised in cities across the northeast. This is somewhat similar to what we saw after Katrina - people delivering food, diapers, and clothes to the local Salvation Army post - but I don't recall seeing the same "running tally" for cities.
Could we expect to see such a statement in 2006?
Adolphus Busch of St. Louis, who gave $100,000 for the relief of San Francisco, declares that his city must toe the mark in better shape in the matter of financial assistance to the sufferers.Now, we point the finger at the folks in Washington, DC, and yell "Stingy! Stingy!" as the federal government has substituted their largess for what was once primarily privately funded. The political economy of this redirection of scorn is interesting.
The second article has the following headlines:
The not so subtle inter-city rivalry displayed in the headline was almost completely absent during the Katrina aftermath. The 14 million is approximately $293 million in 2004 dollars - and this is less than one week after the event!
The article actually lists the names and amounts of contributions by individuals, companies, and associations. These numbers, if accurate, might provide for an interesting empirical piece. I have my TA coding the data, but here is a small snippet:
The incentives such reporting provide for those who want to see their name listed in the paper, or who might fear repercussions from those who DO NOT see their name in the paper, is also interesting.
One Week Post-disaster c. 1906
On April 18, 1906 a massive earthquake hit San Francisco. The April 25, 1906 NYT has several articles about the aftermath of the quake and the state of the city and its citizens.
There is a decidedly different slant towards the aftermath of the disaster relative to the anticipated/expected response by the state and federal governments after Katrina and (to a lesser extent) Rita. Without the DHS and FEMA and the entire welfare/disaster relief apparatus erected in the United States over the past sixty years, individual citizens, politicians, and local associations were left with the task of cleaning up their city and, more importantly, taking care of those who had been displaced. Moreover, there seems to be a similar diaspora from both SF and NO.
Katrina's aftermath was clearly a bit different because the flooding of the city made it nearly impossible for trucks/buses to get into the city. However, the question remains whether the expectation of relief from outside ultimately caused a lack of action on the inside.
In a famous article, Hayek writes,
Assume that somewhere in the world a new opportunity for the use of some raw material, say, tin, has arisen, or that one of the sources of supply of tin has been eliminated. It does not matter for our purpose—and it is very significant that it does not matter—which of these two causes has made tin more scarce. All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere and that, in consequence, they must economize tin. There is no need for the great majority of them even to know where the more urgent need has arisen, or in favor of what other needs they ought to husband the supply. If only some of them know directly of the new demand, and switch resources over to it, and if the people who are aware of the new gap thus created in turn fill it from still other sources, the effect will rapidly spread throughout the whole economic system and influence not only all the uses of tin but also those of its substitutes and the substitutes of these substitutes, the supply of all the things made of tin, and their substitutes, and so on; and all his without the great majority of those instrumental in bringing about these substitutions knowing anything at all about the original cause of these changes.
An article in the weekend WSJ (sorry no link; sub req) reads like Hayek writing from beyond the grave; the first two paragraphs:
Soaring energy prices have yet to take a big bite out of economic growth, but already, the high cost of energy is changing corporate behavior.
In industries from airlines to glassmaking, companies are curbing usage, revamping machinery and shifting production schedules to offset energy costs. Family-run brick maker Pinehall Brick Co., for example, has started putting slightly larger holes in its bricks because lighter bricks take less power to produce.
ATSRTWT--there are several other nifty examples such as UPS adjusting preventive maintenance of its delivery fleet to Summitville Tiles (of OH) shifting its production schedule from winter months to summer (when natural gas demand is lower and natural gas prices decrease).
A Bridge Too Many?
The St. Louis Post-Dispatch reported yesterday on the recent national trend toward new toll roads and bridges. The local interest comes from a dispute between the Missouri and Illinois state governments over how to pay for a proposed new bridge across the Mississippi near downtown St. Louis. The Illinois legislature wants a toll-free bridge, financed by Illinois taxpayers and Missouri taxpayers. The Missouri legislature wants a toll-financed bridge, because the rest of the state isn’t keen to pay more taxes purely to benefit the St. Louis area. The Illinois counterargument is precious:
Illinois has set aside money for construction and contends that tolls would be unfair for Illinois motorists because its drivers would already have paid taxes that went toward the cost of the bridge.
Here’s a simple solution to this ethical dilemma: if Illinois will agree to tolls, it can abstain from taxing its citizens for the bridge in the first place. Then paying the tolls won’t be “unfair” to Illinois drivers. More importantly, a toll-financed bridge avoids the unfairness of taxing the many Illinois citizens who don’t live across the river from St. Louis and who may never use the bridge.
Here’s an even more radical thought: how do we know whether a new bridge is worth building? We know it only if toll collections (revealing drivers’ willingness to pay) are sufficient to cover the construction and operating costs. Without willingness-to-pay demonstrated by tolls, estimates of the size of benefits to drivers are pure speculation. If the bridge is worth building, it can be financed by tolls. And if it can be financed by tolls, there’s no reason for the state governments to mandate that the bridge be built. (I’m assuming that any spillover benefits – from relieving congestion on existing bridges – are transitory and negligible.) Private enterprise will step up to build the bridge – or two or three bridges – in order to collect the toll revenue, if the bridge is worth building. If no firm thinks that the bridge will earn the normal return on capital, than building the bridge is a waste.
More Fish, Less Crime?
Most prisons are notorious for the quality of their cuisine (pretty poor) and the behavior of their residents (pretty violent). They are therefore ideal locations to test a novel hypothesis: that violent aggression is largely a product of poor nutrition. Toward that end, researchers are studying whether inmates become less violent when put on a diet rich in vitamins and in the fatty acids found in seafood.
Could a salmon steak and a side of spinach really help curb violence, not just in prison but everywhere? In 2001, Dr. Joseph Hibbeln, a senior clinical investigator at the National Institutes of Health, published a study, provocatively titled "Seafood Consumption and Homicide Mortality," that found a correlation between a higher intake of omega-3 fatty acids (most often obtained from fish) and lower murder rates.
Of course, seeing a correlation between fatty acids and nonviolence doesn't necessarily prove that fatty acids inhibit violence. Bernard Gesch, a senior research scientist at Oxford University, set out to show that better nutrition does, in fact, decrease violence. He enrolled 231 volunteers at a British prison in his study; one-half received a placebo, while the other half received fatty acids and other supplements. Over time, the antisocial behavior (as measured by assaults and other violations) of the inmates who had been given the supplements dropped by more than a third relative to their previous records. The control group showed little change. Gesch published his results in 2002 and plans to start a larger study later this year. Similar trials are already under way in Holland and Norway.
Police Arrest Nude Man Stuck in Chimney
HAYWARD, Calif. — A man who spent five hours naked and stuck in the chimney of his stepmother's home was arrested on suspicion of being under the influence of drugs, police said.
Police say Michael Urbano, 23, locked himself out of the house early Saturday morning and decided to get in on a cable TV wire through the chimney.
But the wire broke and Urbano fell, getting stuck about three-quarters of the way down. He was freed when a firefighter pushed him to safety.
More Tinkering with the BCS
The new BCS format is a move mandated by the university presidents in order to expand opportunities to the smaller, non-BCS conferences.
The four original BCS bowls — Orange, Sugar, Rose, Fiesta — will remain the same. Added to that group will be a stand-alone BCS national championship game. Rather than add a fifth bowl city to the rotation, each year one of the bowls will host two games — its regular bowl and then the BCS championship game.
The Fiesta Bowl gets the first shot at executing college football's grand new experiment. On Jan. 1 it will host the Tostitos Fiesta Bowl in the brand new $455 million Cardinal Stadium in nearby Glendale. On Jan. 8 the same organization will host the BCS championship game.
Don't like this version? Don't worry the BCS will probably change again next year.
Better to Feel Good than to Do Good--Charitable Parachuting Edition
Tyler Cowen of MR alerts us to this abstract:
Of 174 patients with injuries of varying severity, 94% were first-time charity-parachutists. The injury rate in charity-parachutists was 11% at an average cost of £3751 per casualty. Sixty-three percent of casualties who were charity-parachutists required hospital admission, representing a serious injury rate of 7%, at an average cost of £5781 per patient. The amount raised per person for charity was £30. Each pound raised for charity cost the NHS £13.75 in return.
Parachuting for charity costs more money than it raises, carries a high risk of serious personal injury and places a significant burden on health resources.
Charity parachuting--wtf? Given the high rate of injury, perhaps I should have called this post "Better to Feel Bad than to Do Good."
This loss associated with charity brings to mind Smith's famous quote, "I have never known much good done by those who affected to trade for the publick good." The comments to Tyler's post contain several other examples of negative gain arising from charity.
David Gordon on Charles Murray on the welfare state
David Gordon has a well deserved repuation as a first-rate reviewer of books. Here he is on Charles Murray's sweeping plan to replace the U.S. welfare system, In Our Hands, just out from AEI.
An excerpt shows the unfavorable gist of Gordon's review.
Murray rejects the libertarian approach because it is unacceptable to the American public. Are we then to regard his guaranteed income plan as a compromise with political reality? Unfortunately for this suggestion, Murray also thinks that his own plan exceeds the bounds of political possibility: "The ladder I am describing to you would work if it existed, but today's American politicians will not build it. I must ask you to suspend belief and play along." (p.xv) He cannot then imagine himself a Milton Friedman and say, e.g., "Ideally government should play no role in education. But the public will not accept this. Instead, educational vouchers are the closest to the free market that we can in practice attain." Friedman thought that his proposals were realistic; and however much one may disagree with them — would not vouchers lead to more government control, rather than less? — one can grant that he had a case worth presenting. Not so Murray — what is the point of a detailed account of an inferior plan that cannot be realized?
Gas prices: Chin up, Americans!
Throughout the parts of Finland I saw last week, gasoline was between 1.35 and 1.40 euros/litre. By current exchange rates, that's $6.50 per gallon. Asking around during the conference I was at, that price is fairly typical for other parts of Europe. In the U.K. it's moving higher. On my transfer at Heathrow I saw several newspapers with headlines about petrol hitting 5 pounds per gallon. That's $9/gallon. Average in the U.S. is currently $2.78, with a new higher price expected in tomorrow's weekly report.
Here is a comparison of average prices in many countries. Though dated, I've seen earlier versions of the same comparison, and the rankings--in particular the U.S. relative ranking--are fairly stable.
Overall, we have it pretty good here in the U.S. But today we have this from our government:
"Bush aims to boost ratings and halt gas price rise"
Full story here.
April 24, 2006
Who's gonna be knocked off?
From the Chronicle of Higher Education is a lengthy article about how the new president at the University of Kentucky wants the university to be in the top 20 research institutions in the country. The article mentions how Clemson and Va Tech want to acheive top 30 and top 20 status, respectively, as well. I have heard about Old Dominion and the University of Oklahoma throwing out the same goals.
The top twenty are likely well established and hard to knock off. How about the more realistic goal of top 50 or top 60? Alas, appearances of "top 30" trump realistic goals.
Tin ear at Royal Philips
From AdAge Daily:
A recent Royal Philips Electronics patent application that would prevent viewers from switching channels during commercials whipped TV watchers and media pundits into a frenzy yesterday, forcing the marketer to issue a statement to allay consumers' concerns.
On a different note, I wanted to offer a public nuptial congrats to my sister, Cynthia Depken, now Cynthia Jackson.
Putting the Freedom in Free Enterprise
For years, liberals have urged corporations to be "socially responsible," meaning, "do what we want with your shareholders money." Over the past couple of decades, "socially responsible" mutual funds have become a popular option with TIAA/Cref and other bodies. Coupled with union pension funds, these institutional investors are becoming a growing force to push corporations to promote anti-market, pro-big government initiatives.
Now, along comes the Free Enterprise Action Fund, which has, among its investment objectives, "promote the American system of free enterprise." The Fund made a splash in the Wall Street Journal last month when it showed up at the annual shareholders' meeting for Goldman Sachs, and took its CEO to task for indulging his pet environmental causes with shareholders money. They've also been whacking at BP, for devoting about $100 million to an ad campaign on the dangers of global warming, rather than spending the money to maintain its facilities.
This is not investment advice. But if you're into the idea of investing for a cause, you may want to check it out.
April 23, 2006
Lott vs. Levitt
If you haven’t heard, economist John Lott (More Guns, Less Crime) is suing economist Steve Levitt (Freakonomics) for “defamation”. The Chronicle of Higher Education describes the case here. (Hat tip: Alex at Marginal Revolution.) Basically, Lott charges that Levitt maliciously lied about Lott’s work in Freakonomics and in a private email.
I consider John Lott a friend (we overlapped at UCLA). His work has been unfairly attacked by several gun-control advocates. He’s a scrupulous scholar whom I normally give the benefit of the doubt in a controversy. But in this case I fear he’s suffered a lapse in strategic judgment. Lawsuits threaten to poison the well of academic criticism. Arguing back, not suing, is the way to respond to criticism, no matter how unfair.
April 22, 2006
European Public Choice Meetings
Greetings from Finland, where I am attending the European Public Choice Society meetings.
Why did I come? Well, I've always been curious and I figured the exposure would be good.
Was it worth the trip? In a nutshell: YES! It's a decent sized group (about 200 with 175 papers presented). There is lots of youth. And some of the established guys (e.g., Jakob de Haan, Lars Feld, Bruno Frey, Frans van Winden) are doing truly interesting empirical work (think Virginia, not social choice math-sturbation). Some of it has implications for U.S. Quick example. One paper empirically estimated the impact of independent policy auditing agencies in Swiss cantons/localities. Where there is genuine auditing, taxes and spending are lower by 18-20% and that's controlling for public good attributes (quality). It's a substantive binding constraint on policymaker waste, something I think would be great for our Department of Homeland Security (just to name one big example).
Why am I bloggin about it? Next year there will be a "world congress" of the Euro, Japanese, and US societies in.....drum roll please.....: Amsterdam. I encourage anyone interested in applied political economy (empirical Virginia public choice) to think seriously about attending and presenting. I had a great time with these guys, especially the grad student crew from Groningen. They're friendly, young, energetic, smart, and have a way different perspective. You should go next year. It will be worth it. (Plus, these Europeans need more free market arguments put in front of them....)
April 21, 2006
Geography of Government Abuse
Curious about eminent domain abuse in your state? IJ's CastleCoalition.org has merged its database of eminent domain abuses with Google maps to create a nifty, though dismal, map of eminent domain abuses. View the entire U.S. or zoom into a specific state.
Better to Feel Good than to Do Good--Prius Edition
And yet like fat-free desserts, which sound healthy but can still make you fat, the hybrid car can make people feel as if they're doing something good, even when they're doing nothing special at all. As consumers and governments at every level climb onto the hybrid bandwagon, there is the very real danger of elevating the technology at the expense of the intended outcome — saving gas.
But just because a car has so-called hybrid technology doesn't mean it's doing more to help the environment or to reduce the country's dependence on imported oil any more than a nonhybrid car. The truth is, it depends on the hybrid and the nonhybrid cars you are comparing, as well as on how you use the vehicles. There are good hybrids and bad ones. Fuel-efficient conventional cars are often better than hybrid S.U.V.'s — just look at how many miles per gallon the vehicle gets.
The car that started the hybrid craze, the Toyota Prius, is lauded for squeezing 40 or more miles out of a gallon of gas, and it really can. But only when it's being driven around town, where its electric motor does its best and most active work. On a cross-country excursion in a Prius, the staff of Automobile Magazine discovered mileage plummeted on the Interstate. In fact, the car's computer, which controls the engine and the motor, allowing them to run together or separately, was programmed to direct the Prius to spend most of its highway time running on gasoline because at higher speeds the batteries quickly get exhausted. Indeed, the gasoline engine worked so hard that we calculated we might have used less fuel on our journey if we had been driving Toyota's conventionally powered, similarly sized Corolla — which costs thousands less. For the owner who does the majority of her driving on the highway, the Prius's potential for fuel economy will never be realized and its price premium never recovered.
For years, most of the world's big car makers have shied away from building hybrids because while they are technologically intriguing, they are also an inelegant engineering solution — the use of two energy sources assures extra weight, extra complexity and extra expense (as much as $6,000 more per car.) The hybrid car's electric battery packs rob space from passengers and cargo and although they can be recycled, not every owner can be counted on to do the right thing at the end of their vehicle's service life. And an unrecycled hybrid battery pack, which weighs more than 100 pounds, poses a major environmental hazard.
Bow Tie Blog
Here (scroll down) is a picture of Pee Wee wearing one of Bill's bows. I think it was the first time that my wife left me and the little guy home alone.
If only Bill would create the Adam Smith bowtie. Or maybe the supply-and-demand bow tie.
Ht: Mini Me
April 20, 2006
Corruption and credit ratings?
New working paper - comments always appreciated.
Laffer Intuition c. 1906
From an April 20, 1906 NYT article discussing the proposed federal inheritance tax:
It is like the tariff on diamonds, undoubtedly a proper tariff on mere luxuries. Only it is accepted that if you put the duty so high as to make it worth while to smuggle them, you will get less revenue than if you make the duty so moderate that the probable gain from smuggling will not compensate, with most importers, the risk of detection and punishment.
April 19, 2006
Thanks, Mike and Congratulations, John
Thanks to co-blogger Mike DeBow for speaking at Berry's ODE induction and awards dinner last week.
Congratulations to my grad school colleague John Dawson for earning promotion and tenure at Appalachian State. Well deserved!
The Income Tax Debate - Solidified in 1906?
As I mentioned earlier, in April 1906, Pres. Roosevelt had floated a proposed inheritance tax. This opinion from the Buffalo Evening Times, printed in the April 19, 1906 NYT, suggests that today's "sides" in the "debate" over the income tax were solidified long ago (so much for free will?):
It [the tax] will not be indorsed (sic) by the leaders of the Republican Party, who are bent to the will of the multi-millionaire heads of the giant trusts. But the common people who are suffering in order that the trusts may accumulate more dishonest millions for their proprietors will regard it with favor.
More immigration opinion c. 1906
From the April 19, 1906 NYT:
[T]he slightest knowledge of conditions at this port ought to convince anyone that the inspection service is hopelessly undermanned. The officers are working from twelve to fourteen hours a day, and are not able to keep near up with their task. Some sixteen thousand immigrant passengers slept aboard ship on Tuesday night awaiting attention; some of them had already been detained two days, and were not likely to pass for two more...It ought to be plain to Congress that the enforcement and administration of the present system should be made as perfect as possible before we proceed to change it, and especially before we extend it.
San Francisco Earthquake c. 1906
As many now know, on April 18, 1906, a terrific earthquake hit San Francisco and the surrounding area. In terms of destruction, it rivals Katrina and might more resemble Galveston, and in terms of total fatalities it rivals 9/11. The NYT of April 19, 1906 is naturally filled with stories from the stricken city, and all sorts of interesting tidbits that are eerily analogous to the Federal government's response to Katrina.
To the mayor:
"I share with all our people the horror felt at the catastrophe that has befallen San Francisco, and the most earnest sympathy with your citizens. IF there is anything that the Federal Government can do to aid you it will be done."
Although water has been secured to the firemen in many sections, the fire is by no means under control. It is raging around Pine and Montgomery Streets, and the Western Union Building has been abandoned to its fate. At the Oakland ferry house, where the company [WU] has established an office, it is difficult to obtain information concerning current events.
This entry will likely evolve as I make my way through the numerous articles from this important event.
April 18, 2006
On Tax Policy c. 1906
In April 1906, President Roosevelt introduced a radical idea to impose a nationwide inheritance tax on the theory that concentrated wealth in the hands of a few families was dangerous to the economic future of the country. The proposal, of course, had many supporters and just as many detractors. The thinking about taxation before our current culture of taxation is interesting to read.
For example, the April 18, 1906 NYT reprints the following opinion of the Boston Transcript:
But when the arm of the laws steps in to prescribe the terms under which a man may present a house to his daughter, we shall have gone a long distance on the down grade road that leads to the Socialistic state.
And this opinion from the Richmond Times-Dispatch:
No long-haired politician of the wild and woolly West ever preached doctrine more Populistic. Put a limit upon the amount of money a man may accumulate, or dispose of by will, and you will have put a limit upon human endeavor. What man would exert himself beyond his lawful accumulation if he knew that the excess was to be confiscated?
In other tax news, the Texas State legislature is proposing to reduce property taxes by one third and replace the revenue with a business franchise tax and a $1 additional tax on cigarettes. The money is to be used to fund our state public education system as the current property tax regime has been deemed unconstitutional (Texas does not have a state income tax and the current funding system is dangerously close to such a tax).
I find it interesting that the 20-25% of the folks who smoke are going to be asked to pay for education. Such faith that everyone will continue to smoke, or at least continue to buy cigarettes, seems a bit misplaced. After all, just twenty years ago a larger proportion of the population smoked than today, and in the not too distant future an even smaller percentage of the population will smoke. The upshot? I predict the additional taxes will not finance public education, at least as envisioned, and therefore property taxes will have to increase, or the state will implement a state income tax.
The theory of "don't tax me, tax the guy behind the tree" works well when the forest is full of trees, but we are quickly running out of minorities of the population that can be fleeced for the benefit of the majority. The biggest minority left is the "super rich," who are exactly the people TR was targeting with his inheritance tax.
Will Atlas eventually shrug? Does anyone care?
April 17, 2006
Request for advice
I picked up Jeff Madrick's 1995 book "The End of Affluence." I only paid a $1 and after the first ten pages I think I might have been ripped off. The book essentially starts off on the idea that economic growth in the United States between 1973-1993 had been a full point lower than the historical norm from 1866-1972. This, in turn, reduced the total amount of output through compounding so that, ostensibly, the Federal Debt could have been retired by 1994 if we had only had the extra point in growth all the years between 1973-1993.
I Googled the book and it turns out it received glowing reviews when it was published - fortunately (?) I was writing a dissertation at the time and therefore was not aware of the book's existence. It is not surprising that there was an author in 1995 who predicted doom and gloom for the United States's future. Such "prediction non-fiction" is a staple of the publishing industry. Moreover, plenty of authors have been incredibly wrong, from Ehrlich ("Population Bomb") to Ravi Batra ("The Great Depression of 1990"), and therefore one more "wrong" author is not something to sweat about.
My question to those who have read the book, is the rest of the book worth reading or is it more of the same bad economic reasoning? I am somewhat interested in reading the book to learn how to write for the common man (or fellow ideologue?) but I am afraid I won't be able to lest I tear out what's left of my hair.
Perhaps there is room for an ex post book review?
Comments open and appreciated.
Index of Globalization
Looking for an index of globalization? Look no further.
Racing to the Top: How Global Competititon Disciplines Public Policy
The new annual report of the Dallas Federal Reserve Bank is out.
April 16, 2006
Immigration concerns c. 1906
From the April 17, 1906 NYT:
Certainly the two facts here alluded to are of immense importance in connection with the question of immigration - the need of the country for increased population of the right sort and the marked, the marvelous advance in the character of the second generation after immigration. These are not the only facts to be considered, but they can never safely be forgotten in acting on the matter. Another point of extreme importance is the obvious necessity of enforcing thoroughly and intelligently the restrictions now placed on immigration before we proceed to increase them. Neither the amount nor kind of provision for enforcement is adequate. We should have a larger and better organized system of inspection at our ports, and we should extend that system more widely and make it more efficient abroad, before we undertake radically to change the conditions of admission to the country [emphasis added].
This falls in the "more things change" category, which is either reassuring - in the sense that if things haven't changed in 100 years, perhaps they don't need to change - or potentially troubling given the recent shift in geopolitics and the nature of war.
April 14, 2006
Can Sports Arbitrage Software Make You Easy Money?: Comment
Co-blogger Frank Stephenson yesterday linked to a piece on why we shouldn’t expect to make easy money from software that purports to identify arbitrage profit opportunities in the discrepancies between the betting lines at different casinos on a sporting event. In that piece Mike Moffatt of “Your Guide to Economics” at About.com makes the following arbitrage argument:
There's a more fundamental reason why I believe such software is not likely to work. If someone has discovered a system where they can make a lot of money easily by betting on sporting events, why would they tell you about it? Sure, they make money from selling the software. But by letting the world know about their system, they'd end up killing the golden goose. […] If these pieces of software truly worked, the writers of such software would have to make an awful lot of money by selling the software, because by doing so, they're making it a lot more difficult to use the software for themselves to make easy money.
This argument proves too much: it suggests that no product that could make you a profit will ever be released. Moffatt seems to be assuming that only one person has developed such software. Such a monopolist does face the choice between profits from selling the software and profits from being the only one to use it himself. But that’s not the usual case. If three rivals have developed similar software, each one’s choice is between profits from selling the software and (negligible) profits from using it in competition with his rivals’ software customers. Might as well sell the software.
Embedded in Moffatt’s argument, though, is a more durable arbitrage argument: People using the software to arbitrage a discrepancy between odds at different casinos would move the odds together, eliminating the discrepancy. (That’s why releasing the software to hundreds of users “kills the golden goose”.) If you can buy and use the software, so can others, and you’ll be competing with them in using it.
In equilibrium, expect to earn (only) the normal rate of return from your investment in sports betting-line arbitrage software.
NPR on Wednesday night reported on the expectation that NASDAQ will buy a majority stake in the London Stock Exchange. It purchased 15% of the LSE (oops, not to be confused with London School of Economics. Forgot who my audience is) on Tuesday. The wrinkle? Worries that the Securities and Exchange Commission may decide that it needs to regulate the US-owned trading company in London. I for one feel that worry is unfounded; governments usually don't look for situations to expand their power and control...
They quote a woman from a British stock broker's trade association; who knew even stockbrokers had lobbyists? The reporter claims that the US has more burdensome trading regulations than most European countries. I guess the standard deviation is larger in Europe along the free-market/command economy distribution.
Let's see. Curvature of heavenly bodies inspires Newton's calculus in 1687. Fast forward 320 years, and curvature of heavenly bodies inspires this:
A team of British academics has developed a mathematical formula to determine just how perfect your posterior is.
Two comments. First, hat tip to tenure. Second, does the formula work? Dare I say, this could tantalize even an a priorist to do empirical work...
April 13, 2006
Can Sports Arbitrage Software Make You Easy Money?
Probably not; explanation here.
HT: Wilson Mixon
In August 2000, Nicholas Markowitz, 15, was kidnapped in a Los Angeles suburb, held for several days, and then murdered by a group of men who had grown up with Markowitz' older brother. The larger motives for this crime remain murky, with allegations of prior drug dealing, drug debts, and attempted insurance fraud on the part of the older men still unresolved. It is clear that the young victim was innocent. What is clear as well is that the de facto absence of a death penalty in California led to the decision to murder the teenager.
After one of alleged killers, Jesse James Hollywood -- no, I am not making that up -- "called his lawyer and learned the severe penalty for kidnapping, police say, the young men decided they had to kill Nicholas" (Los Angeles Times, August 26, 2001). In other words, since the penalty for kidnapping effectively was a life sentence or something close to it, and since the perceived probability that the kidnappers would be apprehended and convicted was high, the marginal (or "extra") penalty for murdering Markowitz was perceived to be low or zero, in that the likelihood of actual subjection to capital punishment in California is trivial -- California has executed ten individuals since 1976. And it's a punishment that, in any event, is delayed one or two decades by the appeals process. Accordingly, the prospective act of murder, even upon arrest and conviction, would yield the same life sentence already looming. So why not get rid of the central witness to the kidnapping?
April 12, 2006
A rose by any other name c. 1906
From the April 13, 1906 NYT is an advertisement by Anheuser-Busch :
A beverage made of barley-malt which is flavored with hops, induces restful sleep and yields placid nerves? Hmmm...that sounds something like - BEER!! Okay, perhaps it wasn't fermented beer, that is, it was alcohol free, but are we sure about that?
After all, according to my knowledge of brewing (some say I have a knack for the science), it isn't the hops that provides for a restful sleep.
Such interesting advertisements populate the old papers. My understanding of truth in advertising and consumer protection laws, such as food labelling, etc., is that they stemed from ads like this. Mothers (or fathers, or both) were "tricked" into thinking that drinking "predigested food" (that probably looked, smelled, and perhaps tasted a lot like beer - even if it wasn't technically beer) was preferred to, say, eating some broccoli and drinking some milk.
Well, perhaps some folks need/needed to be protected from big beer and themselves, as well as Nigerian e-mailers.
Read More »
In the spirit of the c. 1906 posts I contribute - hopefully to someone's entertainment/edification - I found the 1902 Sears, Roebuck and Company blog, where interesting tidbits from that year's catalog will hopefully be posted on a regular basis.
From the April 11 post:
I was planning to do this with the 1908 SR catalog, but instead, perhaps I will start offering more display ads (like I did here).
« Close It
Why Kenya's central bank governor is a political appointee
How can a corrupt central bank line the pockets of state-connected businessmen? A report from AllAfrica.com counts the ways the Kenya Central Bank has done it:
1. Printing extra cash for the government to disburse.
Can a medievalist head a modern central bank?
Several weeks ago the government of Turkey, ruled by the Islamic-fundamentalist-oriented AK Party, nominated Adnan Buyukdeniz to head the nation’s central bank. As the Observer reports, there's a slight problem:
For the past 21 years, Buyukdeniz has been employed by Albaraka Turk, a partially Saudi-funded bank that adheres to Sharia law and bans all forms of interest. The suggestion that he should head an institution whose main task is to set interest rates was greeted with thinly veiled shock. President Ahmet Necdet Sezer, a staunch secularist, promptly vetoed the choice.
A replacement candidate has yet to be approved. I regard the notion of banning interest as a bit of medieval silliness. (Wishing it so won't eliminate the excess demand for loanable funds that prevails at a zero interest rate. So the only real result of trying to ban interest is to invent new names for interest and to increase the transactions costs of legally enforcing financial contracts that incorporate some functional equivalent of interest.) The brouhaha is more evidence that Turkey is split between modern secularist Turks, who are eager to have Turkey join the EU, and medieval Islamicist Turks, who are not so eager.
Oprah on Wealth
Winfrey, 52, who is reportedly worth more than $1 billion, said she doesn't feel guilty about her wealth. "I was coming back from Africa on one of my trips," she said. "I had taken one of my wealthy friends with me. She said, 'Don't you just feel guilty? Don't you just feel terrible?' I said, 'No, I don't. I do not know how me being destitute is going to help them.' Then I said when we got home, 'I'm going home to sleep on my Pratesi sheets right now and I'll feel good about it.' "
The talk-show host also discussed an academy for girls that she's building in South Africa. "I want to offer opportunities to girls who have nothing but the will to learn," she said. "I'm going to be opening my school on January 2, and it will be one of the great days of my life to see 450 girls, most of them orphans who would not have had the opportunity for education in their lives, come to school."
Comments are open.
Missed Opportunity c. 1906
From the April 12, 1906 NYT:
ALBANY - The Barber Board of Examiners is now but one stage removed from extinction. Only the Governor's approval of the Brackett bill legislating the commission out of office is needed. The measure passed the House to-day - 104 to 8.Of course, barbers & beauticians are still regulated - can't have unregulated manicures provided in the land of the free. Here's a list of the appropriate agencies in the various states.
New York, specifically, still regulates barbers (of course!) in the guise of the " Division of Licensing Services." The first link from a search of "barber" at the NY Department of State yields the decision of the "DIVISION OF LICENSING SERVICES -against- DAVID RYLES" in which Mr. Ryles violated the law and was ordered to pay a $300 fine for hiring more than one apprentice in his barber shop. In an economy supposedly full of jobs Americans aren't willing to do, the irony of fining an employer for giving young budding barbers a job is sweet.
Admittedly, it isn't clear whether the Barber Board was ultimately discontinued in 1906 and the bureaucrats and laws simply shifted to another part of the state government - similar to the "killing" of the Interstate Commerce Commission back in the mid 1990s. Future reports might confirm the "Barber Board is Dead!! Long live the Barber Board!!" but my cynical side recommends against holding one's breath. Was killing off Leviathan any easier one hundred years ago?
Yet, it is the aggregation of missed opportunities such as this that, IMHO, contributes to a "culture of regulation" which eventually leads to a "culture of corruption," whether that is 1906 USA, 2006 USA, or 1984 USSR.
April 11, 2006
Markets in Everything: Muhammad Ali's Name
A news item:
NEW YORK (AP) - Muhammad Ali, one of the world's most recognized people, has sold 80 percent of the marketing rights to his name and likeness to a firm for $50 million.
HT to MR for the markets in everything concept.
The first two paragraphs of "Wal-Mart stoppers mob hearings" in today's Washington Times paint an ugly picture:
A stream of officials from the banking industry, unions and consumer groups -- allies for once -- urged federal regulators yesterday to reject a bid by Wal-Mart Stores Inc. to expand its empire into the banking business.
Now that's a relief, eh?
Free market rhetoric c. 1906
Such language is sorely missing from today's talking head shows and (most) op-ed pages, but the April 11, 1906 NYT provides this:
Nothing leads so quickly and inevitably to Government ownership as to commence to prescribe railway rates. You may "regulate" the railways to almost any extent, and they will go on in private hands, but when once you interfere with the revenues of the property, when you lay violent hands on the strong box, private enterprise is paralyzed. Men will not long conduct at their own risk a business that they cannot control. If the merchant cannot fix the price of his own wares he will in no long time pull in the shingle and shut up shop. The railway cannot do that, so it will make its peace with the superior power by selling out to it. That is what the experience of railways everywhere teaches us.
This was written before the income tax system. Now that the government regularly lays "violent hands" on the strong box of corporations and individuals, perhaps the rhetoric seems a bit strong. We now know that Atlas will eventually shrug, but not immediately and not necessarily at the first sign of government intervention/regulation.
April 10, 2006
Sloppy economics at the Pew Research Center
This story reports on a survey by the Pew Research Center concerning moral and immoral practices. The story goes on to make the following observations:
The problem is that straight percentages of those who rank a particular activity as moral or immoral doesn't really get at preferences or "it's worse" because the survey didn't ask pairwise preferences or relative moral status.
The article admits to this, sort of, but then ignores the problem and goes along making the same bad comparisons. For example,
The survey did not measure intensity of feelings. It's possible, therefore, that the difference between the 79% who say it's morally wrong to cheat on one's taxes and the 88% who say the same about cheating on one's spouse is greater (or smaller) than those numbers indicate. Judgments about right-and-wrong are by nature profound, and - in real life - often nuanced and situational. By contrast, this survey questionnaire is a blunt instrument.So why make the relative comparisons at all? Why not just stick with the what's considered moral or not at the absolute level? Such stories start out with an interesting insight and end up leaving everything muddled.
Cash for me but not for thee
Economist David Levine reports that he sought out a New England Journal of Medicine article entitled "Medals, Not Money, Recommended for Organ Donors" so that he could “learn the ethical rationale why doctors, hospitals, private corporations, etc. should profit from organ donations, while the owners of the organs should not.” Guess what he discovered? The NEJM wants $10 to read the article online.
I’m guessing that they wouldn’t accept a medal.
Kroszner Watch: Speech against bank protectionism
In his second speech as Fed governor, Randy Kroszner last week lived up to his free-market reputation by urging the EU not to block cross-border bank mergers for protectionist reasons.
Meanwhile, Bloomberg reports numbers from Kroszner’s and Kevin Warsh’s mandatory financial disclosure statements.
Jobs Englishmen Won't Do c. 1906
From the April 10, 1906 NYT:
From the Creamery Journal, England - From many parts of the country it is reported that there is great and increasing difficulty in getting farmhands who can or will milk the cows, and the problem of mechanical milking will have to be faced as a much more serious affair in the future than it has been in the past.
Economic Development Bulletin
The latest Economic Development Bulletin has been released by the Cato Institute. The Path to Development: When Does the Legal Environment Become Critical? (.pdf) was written by Jim Gwartney and me. A quick quote:
People who live in countries where property rights are insecure, contracts poorly enforced, and legal and regulatory verdicts auctioned off to the highest bidder will not be integrated into the worldwide market network. Without rule of law, the benefits from trade will be limited to those derived from personalized exchange, trade among family members and persons in the local neighborhood or village who know each other or at least know about each other. Here, trade is based on personal knowledge, and contract enforcement is achieved through family ties and social pressures. However, the benefits derived from personalized exchange will be small compared with those available through a depersonalized market network based on enforceable contracts and rule of law.
Subscribe (free) to the Economic Development Bulletin here.
April 08, 2006
First Nixon, now Reagan goes to China
From the looks of this op-ed in today's state-controlled Oriental Morning Post, a debate over "rationality" vs. "intuition" in China's national economic policymaking might have accidentally introduced Reaganomics to idea set.
Mr. Yan commits the error of Taking Down Mr. Zhang's "aloof rationality" and replacing it with his own "intuition," and for this he cites the Reagan economic policies of the 1980s as an illustration. According to Mr. Yan, Reagan depended completely on his own "intuition" to draw up and carry out his economic policies, and he obtained successful results.
Certainly makes one go hmm. Another interesting passage:
As Mr. Yan points out, Reagan's economic policy was a product of democracy. On this point, I agree with him - an economist may be an expert on economic theory, but national economic policy needs to pass through the democratic process. A democratic system is not limited to politics, but includes economic policy as well.
HT: Watching America
Musings of the Gentle Cynic c. 1906
From the April 8, 1906 NYT:
* My personal favorites.
April 07, 2006
A worthy cause c. 1906
Co-blogger Frank Stephenson enjoys the view of one of the most beautiful campuses in the world at Berry College. Berry has one of the largest endowments in all of U.S. higher education, but such was not always the case.
An article in the April 8, 1906 NYT describes what was to become Berry College:
Miss Martha Berry, founder and Director of the Boys' Industrial School at Rome, Ga., is seeking aid in the North for her school. Many persons interested in the education of the poor whites of the South are helping her...The school has no endowment fund, and as each...boy is boarded, clothed, taught a trade for $50 a year, the necessity of asking financial aid is obvious.
Applying solid ex post analysis, I would say that Martha Berry's cause was worthwhile, but who knew in 1906?
Everyday Arbitrage: Starbucks
Me, at a St. Louis airport Starbucks: “I’d like a ‘venti’ sized Tazo® iced tea, please.”
Note: according to the menu board, Starbucks will also sell you “shaken” iced tea for an extra dollar. Why would anyone pay an extra buck just to have his iced tea shaken? Comments are open.
At least he’s not proud of it
Greg Mankiw discloses that he’s never read the most important economics book of the 20th century. And he’s right – you’d never get to know this book from grad school reading lists.
Congrats to Lynn and Todd
Somewhat belatedly I'd like to congratulate two of my best undergraduate students, Lynn MacDonald and Todd Nesbit. They both graduated from Capital in 2002. Lynn is nearing completion of her Ph.D. at my alma mater FSU and has accepted a tenure-track job at St. Cloud State University. Todd finished his Ph.D. last year at West Virginia University and has just accepted a tenure-track job at Penn State-Erie.
Hiking Trip Reports
Hiking Trip #1: La Madre Mountain
Todd Nesbit and I began at the Sandstone Quarry in the Red Rock National Conservation Area near Las Vegas at 8:30 a.m. It was cool and very windy. We headed toward Turtlehead Peak (pic from La Madre) but headed left toward La Madre at the saddle instead of going up Turtlehead. About 5 miles, 3800' of net elevation gain, and 4 hours of tough bushwacking/difficult loose rock later we hit the summit (pic). Great views of Red Rock Canyon, the Las Vegas valley, and the larger Spring Mountains to the north.
Hiking Trip Report #2: Grand Canyon
After taking the bus to Yaki Point, Ben Powell and I hit the South Kaibab Trail into the canyon at about 7:15 a.m. It was cool, windy, and rainy the whole way down. After 2 hours or so we finally made it the 6+ miles and 4800' of elevation loss to the river (pic). We ran into a park ranger who gave us the good news that the weather was supposed to clear for a few hours before a snow storm hit. After a little lollygagging around near the river, we headed back up the Bright Angel Trail with mostly sunny skies and better temperatures. We took a hero shot pic near the rim and promptly headed for the nearest bar. 16-17 miles, 7.5 hours total.
Typo or cyber-squatting?
Yesterday, the good folks at Chick-Fil-A released the new log for the erstwhile Chick-Fil-A Peach Bowl, now called simply the Chick-Fil-A bowl. I know it is a small thing, but being from Georgia originally, I wasn't too happy about the name change.
The new logo vs. the old logo:
In the official press release is this paragraph:
Tickets for this year's Chick-fil-A Bowl are now available for public sale, and fans are encouraged to purchase early in order to guarantee availability. Fans can reserve their seats now by calling the Bowl ticket office at 404-586-TIXX (8499) or online at www.chick-fil-abowl.com.
As of 11:48 CDT, the link www.chick-fil-abowl.com is a "parked" URL at GoDaddy.com. Nice. The correct URL - www.chickfilabowl.com or www.peachbowl.com.
The URL with the hyphens is clunky relative to the actual URL, however its inclusion in the press release suggests that it was on someone's mind at one time. Perhaps cyber-squatters got to the hyphenated URL first?
April 06, 2006
Seal of approval c. 1906
From the April 6, 1906 NYT:
Dewar's Scotch. Proved as to purity. Mellowed by great age. Recommended by doctors - Adv. [emphasis added]
Berry Grads Place in Morley Competition
Earlier I noted that my former students John Coleman and Dan Alban were finalists in the Felix Morley Journalism Competition. The winners have been announced and both have placed--John as a runner up and Dan as an honorable mention. Dan--glad to see you've become a bow tie aficionado; John--the thank you on your blog is far too generous.
While I'm talking up the accomplishments of Berry grads, I should also mention the bang up presentations of Mike Hammock and Andrew Chupp at the Association of Private Enterprise Education meetings in Vegas.
Incentives Matter: Oregon Prisoner Edition
SALEM, Ore. (AP) — Kodi Dodgin used to be one of the Oregon prison system's most prolific troublemakers. Now he's only causing problems in space.
Prison records show seven incidents in which Dodgin was sent to disciplinary segregation. But now, Dodgin says, he's been free of trouble for almost two years, thanks in part to the video games he gets to play at the Two Rivers Correctional Institution in Umatilla, where the 23-year-old is serving nine years for assault, attempted escape and other crimes....
The $35 video game consoles, pre-loaded with 50 games, are being offered as an incentive for good behavior. Prisoners earn the right to buy one after 18 months of good behavior.
"It's a hot item," said Randy Geer, administrator of the Department of Corrections' non-cash incentives program. "Inmates want one, and it appears to be motivating them." ...
In 2003, state prisons started offering $300 flat-screen televisions that could be bolted to bunks and hooked up to cable. In 2004 and 2005, 2,398 inmates with at least six months of clean discipline bought the 7-inch LCD sets.
As a result, the once-frequent brawls in recreation rooms over where to sit and what to watch rarely happen these days, officers and prisoners say.
April 05, 2006
We've come a long way
From the April 6, 1906 NYT:
PROVIDENCE, R.I., April 5 - The Woman's Suffrage bill, providing that women as well as men may participate in the election of Presidential Electors, was passed to-day by the Rhode Island State Senate, by a vote of 20 to 7. The Senate gallery was filled with women during the consideration of the measure.
Partial victory in KC
Kansas City voters rejected $170 million in tax dollars to build a sliding roof that would cover both Arrowhead and Kaufman stadiums. Thumbs up.
Kansas City voters approve $850 million in tax dollars to finance $425 million in renovations to the two stadiums. Thumbs down.
I have seen only passing mentions as to what needs to be done to both stadiums, but given the funding amounts (close to what it would cost to build a new open-air stadium), it looks like the renovations are in the spirit of Soldier Field - essentially making a new stadium out of an old stadium.
Of course, I am in the "no/few tax dollars dedicated to stadiums" crowd, but half a victory is better than none. Beware, however, the rolling roof might not be dead - as is often the case with a "no" vote on these things. Proponents might try to vote on a roof again in August [perhaps on a Tuesday morning, say, from 8:05am to 8:07am?].
April 04, 2006
The current issue of Nature reports on a study purporting to calculate the value of insects to the U.S. economy. A sampling of their "conclusions":
By far the greatest direct contribution of insects comes from their role as food for birds, game and fish, Losey and Vaughan calculate. Given the overall value to the US economy of the recreation industries of hunting, fishing and birdwatching, and the proportion of species involved that eat insects, these industries would be almost $50 billion worse off each year without them.Grand sum? $57 billion. I say, "That's all?"
On the other hand, some of these same insects invade our homes, picnics, etc., thereby reducing their total value to the economy (unless we count purchases of Off! as enhancing value).
Bad idea #25 c. 1906
From the April 4, 1906 NYT:
Alderman H.C. Peters wants to have the city establish a municipal ice plant. He offered a resolution at the board yesterday proposing that the city go into the ice business in opposition to the American Ice Trust, and he declared the city could make ice for 50 cents a ton and sell it for $1.50, as against $2.50 asked by the company. The resolution went to the Committee on Laws and Legislation, which will think it over for a while.
As I have mentioned before, the winter of 1906 was very mild, and there were fears that an ice famine would be the result. However, the government getting into the ice business (or any business) with the explicit purpose of competing against private enterprise is, as we know now, not a good idea.
I suppose the Committee on Laws and Legislation thought long and hard and concluded to not enter into the ice business.
The Market Saves the Homeland
I am at the APEE convention and this morning I attended a presentation by Veronique DeRugy. With an uncanny double threat of vigor and rigor (plus wit!), Veronique demonstrates the innumerable absurdities that emerge out of Homeland Security spending. From an email she sent me this afternoon, here are just a few examples:
In 2004, DHS handed out about $153 million to programs offering food and shelter for the poor, a significant increase from the previous year’s budget.
These examples and the great many that you can find in Veronique's articles, give the overall sense that the DHS is wasting valuable resources without making us any safer. Great stuff! I told Veronique after the session that she is the best argument for human cloning that I have ever seen. If only there were 100 more doing work like hers. I hope she is training her staffers at AEI to emulate her methods and enthusiasm.
However, I also mentioned that it would be very beneficial to generalize from her work toward recommending reforms. Here is my idea for such.
Generalizing from Veronique's work, we can point to systematic problems with the current system. First, the allocation of DHS resources is constrained/controlled by a congressional calculus, which results in politicized decisions where and how to spend. Second, local units approach DMH funding as a fiscal commons; this results in an overall greater DHS budget than otherwise and reinforces the misallocation problem. Third, as a consequence, DHS does not allocate resources to the highest valued uses—where security risks and potential losses are greatest, or where increased preparedness is most
First, allocate an equal number of DHS bills to local first-responder agencies (municipalities, county governments, et al.) on a per-capita, per square mile, of population. Adjustments can be made for places like Las Vegas and Manhattan, where large numbers of people far in excess of resident population regularly gather. In fact, the allocation of dollars could even stick to the current congressional pork-barrel formula. As I'll argue, since the DHS bills would be tradable, the initial allocation doesn't matter to the argument. The key is that the
Second, restrict DHS bills to projects that are related to security and response. Here we can implement a Buchanan-like filtering mechanism. For a project to be funded with DHS bills, it must be no more than some small number (2 or 3) of orders of separation from a known mechanism for increasing security or response. This will be a sticking point, and is the aspect of the system most vulnerable, especially to politicization. However, it is also the most crucial
Third, allow local first-responder agencies (mayors, sheriffs, et al) to buy and sell DHS bills on an open market (e.g., Chicago Board of Trade). Now each local agency becomes a stakeholder in its own security and response. In fact, this forces local policymakers to evaluate the importance of security spending relative to non-security (e.g., pork barrel) spending. The mayor of a medium-sized city may perceive a moderate threat, such that $1 of security spending would be about as valuable to his or her community as $1 more in the general
The system would have several significant improvements for our society compared to the current pork barrel system. First, Congress and DHS are happy because they can still play politics but don't have to do the risk-assessment themselves (a rare political win-win). Second, local policymakers have increased flexibility for making fiscal decisions that are truly valuable to their communities, whether as security or other types of public spending (local policymakers are also more accountable). Third, local agencies no longer have to jostle for position to get a teat at the DHS sow, which is another way of saying that rent seeking costs will be lower. Fourth, the global value of DHS will be reflected in the aggregate market value of DHS bills. If the average price of a $1 DHS bill exceeds $1, we know the Department is generally doing things right. If it's less than $1, this will be a strong signal for renewed vigor in congressional oversight (the Treasury Department could buy and sell DHS bills as well), which is another way of saying let's rein in them bureaucrats.
Finally, and most importantly, tradable security bills would make sure that our resources are going to the greatest security and response needs—not to the kinds of things that infuriate Veronique's readers, but to real gains in national security.
Should we give it a try? Let's work out the details. Comments...?
April 03, 2006
Markets for everything
Ad Age Daily points out that the price of chimp "actors" has increased 25% over the past year. Why? The demand from advertisers like careerbuilder.com and beer companies has increased simultaneous with a dramatic reduction in the supply of chimp actors through recent retirements.
For those anxious about animal rights, the future is bright. Evidently CGI technology is progressing to the point that actual chimps may no longer be needed.
April 02, 2006
Immigration and Unemployment c. 1906
File this in the "things never change" drawer. The April 2, 1906 NYT reports on the increased number of "aliens" entering the country through the Port of New York, and associated "concerns":
During the last three months of 1905 there were 165,540 alien arrivals at the Port of New York, according to the quarterly bulletin of the State Department of Labor, made public to-night. This is an increase of 9,000 over the record-breaking figures of a year ago, the influx from Italy alone being larger by 20,000 than in the last quarter of 1904.The story goes on to report an estimated unemployment rate in the state of New York of 11.1 percent [typo fixed]?
The bulletin says that the closing months of the year 1905 were the busiest that the wage earners of the State have seen in many years. Among 92,000 working people in 85 different trades and occupations, only 111 per 1,000 were idle at the end of December, as compared with 196 at the close of the previous year, and 231 at the close of 1903.The unemployment figures in the bulletin are likely biased downwards, but to what extent? I haven't yet seen the 1906 equivalent of the 2006 mantra that immigrants "do jobs Americans won't do," but I am sure the sentiment was held by someone.
Poor prediction c. 1906
From the April 2, 1906 NYT:
There will be no more crop failures, confidently declared Secretary of Agriculture Wilson. Farming has become scientific, and Americans will not fear starvation, he said today [April 1].From the horse's mouth:
"When I say there will be no more crop failures, I do not mean that every seed each farmer plants will thrive and produce. We may, however, safely count on sufficient crops to supply our own needs, and leave a surplus for export."Perhaps it is unfair to test this hypothesis with events that take place twenty five years later, but then maybe politicians ought not make such bold proclamations?
April 01, 2006
Munger on Opportunity Cost
The face value of a basketball ticket to Cameron Indoor Stadium is $40. But for most games one could get a lot more than that. For some games, in fact, like Duke vs. UNC, the value of a scalped ticket is well over $1,000. In 2006, the value was more like $2,500. So, when faculty ask me (as department chair) for a raise at the end of the year, I will remind them that they don't need more money, because they are already rich.
"What do you mean?" they ask.
I reply, "Well, you can afford to spend $2,500 to go to a basketball game. You must be wealthy."
They show me the ticket. "$40! It's a $40 ticket!"
My response? "Tell you what. I have $50. Will you sell me the ticket for that price? After all, you claim it's a $40 ticket."
So far, I haven't been able to buy any tickets that way, even from people who tell me that opportunity cost is a stupid concept.
GMU hoops: Got legs?
There has been much discussion about the similarities between GMU's basketball success and that of the law school and the economics department. Pete Boettke and Alex Tabarrok on Slate.com here (and the interesting side bar here). Also see Radley Balko for FoxNews.com about GMU and George Mason the man here. Obviously, the sports coverage itself has been pervasive, as expected. (BTW, this weekend I'm at a Liberty Fund conference where I'm the only GMU alum, and there has been a lot of buzz about GMU. All the interest in the program among the other conferees has been a delight.)
But does GMU have a chance?
Consider the argument (attributable to Boettke?) that the top programs are more vulnerable to early player exit to the NBA, and that "senior led teams are more effective than freshman led teams. No matter how good freshman players are, a senior player of similar skill level will outcompete the freshman player 8 out of 10 times." (That's Boettke.) In fact, GMU starts 3 seniors (and 2 soph's) and gets 21 minutes from a junior. Meanwhile, of the 7 Gators that play more than 12 mins/game, 4 are sophomores, 2 are juniors, and the other is a freshman. While Florida's five starters average 10 or more PPG, none of their players averaged double figures prior to this year.
In short, tonight's game will come down to Mason's experience and tenacity vs. FU's talent and new chemistry. If the "money ball" idea wins out, GMU will advance. I really hope so, because it'll be great for Coach Larranaga and the Patriots, but also because I'll be joining the gang at the APEEs in Vegas tomorrow and the final is Monday night. How great would that be?
Comments are open....
Mobile communication technology c. 1906
From the April 1, 1906 NYT (not a joke, as far as I can tell):
Every man his own wireless station with the aid of an umbrella, is the promise made yesterday by an officer of the American De Forest Wireless Telegraph Company...By the pocket wireless apparatus, it is declared, any one man can, with a knowledge of the Morse alphabet, telegraph from any point in New York City to Coney Island and possibly to distances further away, even to ships at sea. This apparatus might be ready in a few weeks, it was asserted.
At the time, this likely sounded wonderful - perhaps like text messaging today? Having to learn a whole new alphabet has kept me out of the text messaging market, and I wonder if the same entry barriers would have existed 100 years ago.
I wonder who was the expected audience for such a contraption? If such a technology was the sole province of the very wealthy, would this have triggered fake portable telegraphs with which the mere mortals could pose (as was the case at one time with cell phones)?
Isn't it amazing how far we have come not only in the past ten years but in the past one hundred.
Uncommon sense c. 1906
The NYT from 100 years ago was a very different paper from today's. Consider these two paragraphs from an interview with an unnamed industrialist in the April 1, 1906 NYT:
"Take this foolish proposal that the Government shall fix railway rates. The New York Central Railroad, let us say, without undertaking to give exact figures, is able to haul a train of 2,500 tons of freight on its lines from New York to Chicago, as against the Pennsylvania, by reason of its more difficult route, being able to haul a train of only 1,000 tons. Shall the Government fix the freight rate to Chicago at the Central's figure, based on its lower cost, or at the Pennsylvania's higher cost? I say, better leave it to the practical railroad men to settle by natural competition."
Unfortunately, we see how government intervention in the market has evolved over the past 100 years - from offering half-price train tickets to Congressmen (back then) to Jack Abramoff (today).
However, the industrialist quickly recasts the question in terms that both the reporter and the average reader should be able to understand. It is one thing to talk about fixing railway rates for freight customers, it is another thing to talk about fixing the prices of consumer goods:
"Or, if you are going to adopt this principle, why not apply it to the newspapers. There are 3-cent newspapers in this city. THE TIMES, I understand, aims to supply the same news for one cent. Some people prefer THE TIMES'S news at one cent to the other fellow's at 3 cents. I don't see why can't regard newspapers as a public necessity. Now, is a benevolent Government, at the request of THE TIMES'S competitor, to step in and make you sell your newspaper at 3 cents or make the other man, at your paper's request, sell his paper at 1 cent to equalize matters? Better leave it to the buyer - that is, the customer. If he prefers the other fellow's news at 3 cents, he surely has the right to buy it, and if he likes your news at 1 cent, he surely has the right to his choice."
Such clear explanations are all too lacking in today's public discussions.
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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