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).

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.

From the NYT:

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.

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.

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.

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.

Story here.

From the AJC:

The new BCS format is a move mandated by the university presidents in order to expand opportunities to the smaller, non-BCS conferences.

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.

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 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?

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"

WASHINGTON (Reuters) -
President George W. Bush, trying to stave off a potential election-year problem for fellow Republicans, has asked the government to look into spiking gas prices and if Americans are being treated fairly.

With oil prices hitting record highs and gas at the pump topping $3 a gallon in some places, Democrats hoping to win control of Congress in November have used the issue to slam White House energy policy and Republicans' ties to big oil companies.

[...]

In a move that has not been previously announced, Bush will say that in recent days he asked the Departments of Energy and Justice to look into possible cheating or illegal manipulation of gasoline markets.

Attorney General Alberto Gonzales and the Federal Trade Commission (FTC) would be sending letters on Tuesday to all 50 states "to remind them to stay on top of this," McClellan said.

GOVERNMENT RESPONSIBILITY

"It's important to make sure that there's not any price gouging," he said. "The federal government has a responsibility to act."

Republican leaders in Congress, worried that high fuel costs will turn voters against them, urged the Bush administration to investigate.

"Anyone who is trying to take advantage of this situation while American families are forced into making tough choices over whether to fill up their cars or severely cut back their budgets should be investigated and prosecuted," Senate Majority Leader Bill Frist and House Speaker Dennis Hastert wrote in a letter to Bush on Monday.

Full story here.

This blog has a history of debunking price gouging arguments (including my favorite).

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.

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.

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.

The Fund's investments are managed by Steve Milloy, publisher of the blog junkscience.com and author of Junk Science Judo.

This is not investment advice. But if you're into the idea of investing for a cause, you may want to check it out.

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.

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....)

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.

Excerpted from the NYT:

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.

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.

Bill Kenerson, of Beau Ties Ltd, has started a blog. Among his first offerings are a post on Tucker Carlson's giving up bow ties and a post that CSI will feature his ties in an upcoming episode.

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

New working paper - comments always appreciated.

Corruption and Creditworthiness: Evidence from Sovereign Credit Ratings

with Courtney LaFountain and Roger Butters

We estimate the impact of corruption on a country's creditworthiness. Corruption affects creditworthiness through its impact on the size of the formal sector of an economy. We find that creditworthiness, as measured by sovereign credit ratings, is decreasing in corruption. It follows from our benchmark estimates that a one standard deviation decrease in corruption improves sovereign credit ratings by almost a full rating category (e.g. BBB to A). On long term foreign currency denominated debt, this translates into annual savings of roughly $10,100 for every $1 million of debt.

Available here

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.

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!

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.

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.

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.

In the spirit of fair use, here is a PDF version of the front page of the April 19, 1906 NYT. Here are two stories from the front page: story one and story two.

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.

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.

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?

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.