Division of Labour: May 2006 Archives
May 31, 2006
Democracy and Growth: Was Olson Right?

I would never have believed it.

But, in a just-completed working paper with my long-time coauthor and pal, Kevin Grier, we find some pretty interesting things:

1. Democracies grow faster. (Yeah, you might think so, but this result is controversial)

2. New dictatorships grow very slowly, and very old dictatorships grow very slowly. But durable dictatorships in the middle years actually grow nearly as fast as democracies. A nonlinear specification fits almost exactly.

3. And this is consistent with a clear prediction from Mancur Olson. Interesting that he got it so right:
A rational autocrat with a long time horizon will not confiscate his subjects’ assets, because this will reduce investment and future income and, thus, his own long-run tax receipts.
Now, suppose the autocratic ruler is uncertain about whether he will be in charge much longer. He may be uncertain about this because he fears invasion from a yet-more-powerful domain, a coup d’etat, a revolution, or an assassination. When uncertainty gives him a short-term view, he has an incentive, no matter how gigantic his empire or how exalted his lineage might be, to seize any asset whose total value exceeds the discounted present value of its tax yield over his short-term horizon. With a sufficiently short planning horizon, it pays any autocrat not only to confiscate all readily seizable assets but also to repudiate his debts and to generate inflation by printing money for his own use, no matter how great the long-run cost….
Any autocracy must sooner or later have a short time horizon. In addition to the external and internal enemies and accidents that can end any autocracy, there is the fundamental problem of succession. If an autocrat were to create a body with the power to guarantee an orderly succession, that body would have to have more power than anyone else in the society. But it could only have this power if it had more power than the autocrat—and thus the capacity to overrule the autocrat—in which case the society by definition would not be an autocracy.
(pp. 47-8, Olson, Mancur. (1997). The New Institutional Economics: The Collective Choice Approach to Economic Development. In C. Clague (ed), Institutions and Economic Development: Growth and Governance in Less-Developed and Post-Socialist Countries.)

If you want to see the paper, it is here... We would love to have comments.

KB Grier
MC Munger

Posted by Michael Munger at 04:05 PM in Economics  ·  TrackBack (0)

Flavors come and flavors go

A communique from reader Thomas Edwards, posted here with permission:

The most important issue is the elimination of Diet Vanilla Coke, which I have noticed has also led to a parallel reduction in the distribution of Diet Vanilla Pepsi. DVP is basically only available in large grocery stores now in the Washington, DC, metro area. Before DVC was eliminated, DVP was available in most convenience stores as well.

Diet Black Cherry & Black Cherry Vanilla Coke tastes pretty bad to me.
I know there are others in my camp because of the number of online
petitions for the return of Diet Vanilla Coke.

Unfortunately, we lovers of the pure diet vanilla colas appear to be
in the minority, as lots of people do seem to like the Black Cherry

Here is a BBC story on the discontinuation of Vanilla Coke, Diet Vanilla Coke, and Diet Coke with Lemon. Wikipedia is all over the history of Diet Vanilla Coke here.

Btw, Co-blogger Craig wondered whether I'd noticed Coca-Cola Blak. Yes, I mentioned it here in December.

Posted by Lawrence H. White at 12:58 PM in Culture  ·  TrackBack (0)

Interesting visual

J-Walk blog has an interesting link to a data-to-visual site looking at the State of the Union speeches over time.

Teddy Roosevelt and Calvin Coolidge used the words "should" and "ought" a lot, while Pres. Bush's SOTU speeches include a lot of instances of the word "applause"?

Posted by Craig Depken at 11:23 AM in Politics  ·  TrackBack (0)

May 30, 2006
Public Choice Meetings 2007

New public choice society president Randy Holcombe announces by email:

The 2007 annual meeting of the Public Choice Society will be held jointly with the European Public Choice Society in Amsterdam. The meeting will offer a great opportunity for interaction with the worldwide public choice community, and I want to encourage everyone to attend.

The meeting will begin with an evening reception on March 29 and will run through April 1.

That is a Thursday-Sunday schedule. I imagine the meetings will be conducted on the European model. That means an academic/university locale and included snacks, coffee breaks, and meals, usually in an attractive setting (museum/castle/etc). Also, you'll need to send in an actual paper (work in progress) in order to get on the program.

This will be a useful conference for anyone doing applied political economy. Also, I hope it will prove to be an important event in revitalizing the public choice as a research program. For now, I encourage everyone to look up this conference and consider attending, presenting a paper, organizing as session, and enjoying everything that Amsterdam, one of Europe's most interesting cities, has to offer.

Here is my earlier post on this past April's European public choice meetings. The 2007 call for papers will soon appear on the Public Choice Society web page. The 2008 world public choice meetings will most likely be in San Antonio (my home town...Thanks, Randy!).

Posted by Edward J. Lopez at 11:59 AM in Economics  ·  TrackBack (0)

My favorite former professor in the news...
Richard K. Vedder has a lot to say about higher education, and he hasn’t exactly had a problem getting heard: He writes regularly for The Wall Street Journal, has published a book about college costs and prices, and has testified before Congress on several occasions. Last fall, Vedder got a major bump in visibility when Education Secretary Margaret Spellings included him among 19 members of a federal commission to study the future of higher education, and he has taken full advantage, becoming (arguably) the panel’s most outspoken and (inarguably) most entertaining member. [Full Story.]
Posted by Robert Lawson at 11:04 AM in Economics  ·  TrackBack (0)

Conservative Rock?

John J. Miller at NRO gives us the 50 greatest conservative rock songs.

[HT: Dave Reed]

Posted by Robert Lawson at 10:14 AM in Culture  ·  TrackBack (0)

Amusement Park Pricing

Put my money on Six Flags. Price discrimination works.

The most talked-about change at Cedar Point amusement park in Ohio isn't the new supersized swing that catapults thrill seekers 125 feet into the air.

It's the drop in prices -- from a $5 cut in admission for adults, to cotton candy that now sells for a quarter. Just about every food item is cheaper or the same price as last year.

Cedar Point hopes the moves will increase attendance after a down year in 2005. Knott's Berry Farm, owned by the same company, has made similar price reductions at the theme park in Southern California after a disappointing year.

Six Flags, meanwhile, has increased the gate price at most of its parks. Adult admission at Six Flags Great Adventure in New Jersey is $59.99 -- that's up $11 -- but the price does not include a number of discounts the park is offering.

[HT: Ann Zerkle]

[Link to Walter Oi's classic article on the Disneyland Dilemma.]

Posted by Robert Lawson at 10:08 AM in Economics  ·  TrackBack (0)

Kudos to the Capital CRs

Campaigns and Elections Magazine has just named Capital University College Republicans as one of the TOP 5 Republicans Clubs in the nation. The magazine ran an article that featured the best Republican and Democrat clubs in America, and the Capital CRs made the top 5 list! (Click here to see the article.)

Posted by Robert Lawson at 10:02 AM in Politics  ·  TrackBack (0)

May 29, 2006
On gasoline prices

The Energy Information Agency has weekly average retail price of premium gasoline for six European countries and the United States from 1996 through 2006. I threw the data in STATA and just took a time plot without controlling for inflation or exchange rates:

While many people here in the states insist there is a grand conspiracy to keep gasoline prices high in the United States, the conspiracy would have to be world wide because the good folks in the Netherlands are taking it hard as well.

So, how do we know the price increases are likely demand driven (rather than supply driven)? This picture from the EIA tells a lot:

As crude oil becomes more valuable out of the ground relative to being in the ground, we expect the quantity of crude oil extracted in the world to increase. There are a lot of twists and turns between the well head and the gasoline pump, and crude oil doesn't have to be turned into gasoline, but if the price of gasoline is increasing around the world even while the quantity supplied of crude oil is increasing this is consistent with world-wide demand shocks.

[STATA data file]

Posted by Craig Depken at 07:35 PM in Economics  ·  TrackBack (0)

And they say fiat money is “intrinsically useless”

If you’re visiting Davenport, Iowa, don’t miss the huge “layer cake” that goes on display today at the Enchanted Inn on the western side of town. Local resident R.T. Schroeder and friends made the “cake” from 481 one-dollar bills and some Styrofoam. The Quad-City Times notes: “The layers of the cake plainly show the face of George Washington.”

Posted by Lawrence H. White at 01:39 PM in Economics  ·  TrackBack (0)

When more is not better

The Times Online reports that a 63-year-old British man has been convicted of harassment for anonymously sending a woman letters containing more than £3000 in cash.

Posted by Lawrence H. White at 01:25 PM in Misc.  ·  TrackBack (0)

More on soda

Following up on Larry's post below, living here in the heart of DP country we have had the Berries and Cream DP for a few months.

My suspicion is that the Berries and Cream Dr. Pepper is likely to be a short-run production. Why? Because it's not good, at least for this Diet Dr. Pepper fan. Of course, there's no accounting for taste, so my prediction may be wrong.

As for increased competition for shelf space, Larry failed to mention Coca-Cola Black [I think] coffee laced soda, and all the new "low calorie energy drinks" that somehow defy the first law of thermodynamics.

Here in Arlington, the soda "aisle" is now augmented by pallets of 12 packs of Coke or Pepsi products positioned in the prime real estate at the end of the aisles. One of the two is "on sale" for $2.50 a 12 pack every week, but never both. That is an interesting equilibrium.

Posted by Craig Depken at 12:20 AM in Culture  ·  TrackBack (0)

May 26, 2006
The soft drink aisle is running out of shelf space

Dr. Pepper has recently introduced a Berries and Cream flavor, to go along with its regular and Cherry Vanilla versions. Pepsi has announced that this fall it will bring out Dole Sparklers, “an entirely new line of sparkling juice drinks,” and Sierra Mist Cranberry Splash.

Posted by Lawrence H. White at 07:09 PM in Culture  ·  TrackBack (0)


Another great libertarian-conservative has landed a spot in the professoriate. Allison Hayward, aka the Skeptic, will be joining the faculty at George Mason University School of Law as an Assistant Professor in the fall. I don't know much else about her, but according to the school's press release, she used to be Chief of Staff to a former FEC Chairman.

Posted by Brad Smith at 05:37 PM in Misc.  ·  TrackBack (0)

The price of soda c. 1906

From the May 26, 1906 NYT:

Today, a case of soda costs about $5 on sale, whereas the $2.50 per case in 1906 is $52.30 in 2004 CPI adjusted dollars (EH.net). Ouch.

Posted by Craig Depken at 02:01 PM in Misc.  ·  TrackBack (0)

Media induced violence c. 1906

The link between media violence and youth violence is tenable, yet it is intuitively appealing, and evidently has been for some time.

From the May 26, NYT:

No more are German youths to read of the adventures of Jack Harkaway among the Indians; no longer will they be able to spend their pfennings on translations of "Texas Jack" and "Nick Carter." Even if international complications come, the Prussian officials are determine that these pernicious influences shall be removed. A decree has just been issued by which the police forbid the street sale of American dime novels. The declare that the case of Wilhelm Klein was only the latest of a long series of similar cases, and they have made up their minds that the influence of the dime novel is responsible for a deplorable outbreak of juvenile crime.
An antique example of America exporting its culture to the rest of the world?

Posted by Craig Depken at 01:37 PM in Culture  ·  TrackBack (0)

Don't just privatize the state lottery, open it to competition

Considering the Illinois governor's plan to “privatize” the state lottery by selling off the monopoly right to run the lottery, business columnist David Nicklaus of the St. Louis Post-Dispatch asks precisely the right questions:

Why is the state in the gambling business in the first place?

For that matter, why should each state's lottery be a monopoly? Wouldn't the state's lottery players, at least, be better off if several companies were allowed to compete for their business?

And he notes:

The state doesn't run its own casinos; a scheme of licensing, regulation and taxation works fine. Similarly, Illinois regulates and taxes cigarettes and liquor but doesn't sell them directly. Ultimately, states run lotteries for the same reason Willie Sutton robbed banks: It's where the money is.

The money will still be there to be taxed, Nicklaus is pointing out, if there are competing private lotteries. What he should also have noted is that the goal of making Illinois lottery players better off (i.e. increasing the payback percentage above its current 56 percent) is antithetical to the goal of deriving revenue from taxing the lotteries. Let's suppose that an untaxed, competitive, and efficiently run lottery would pay back 95 percent (that's about what casino slot machines pay). The state's tax revenue can only come from reducing the payback percentage below 95 percent.

Suppose Illinois would agree to move to competing private lotteries only if the tax on those lotteries would yield the state as much as its current monopoly lottery operation. With a tax wedge that large, competing lotteries can give lottery players better returns (above 56 percent payback) only to the extent that the current state administration of the lottery consumes more resources than competing private firms would, plus the extent that private firms would sell more lottery tickets than the state monopoly does (at any given payback rate). There are probably gains to be made in both places, but I’d expect them to be relatively modest.

Posted by Lawrence H. White at 01:35 PM in Economics  ·  TrackBack (0)

May 25, 2006
Something Else to Keep the Congressional Price Gouging Caucus Busy

A news item (via WSJ's "Best of the Web Today"):

Kirk Alvers has done the math: He's being charged $3 for a gallon of gas but $18 for 36 ounces of ketchup.

Alvers and other Basha High students are seeing red over a school policy that charges them 25 cents for two half-ounce packets of ketchup at lunch. The policy was enacted recently to limit waste and messiness in the school's lunch area.

Actually his math is wrong--the price works out to $9 for 36 ounces of ketchup. Maybe he needs The Diff.

Posted by E. Frank Stephenson at 03:49 PM in Misc.  ·  TrackBack (0)

Economics of Prostitution

John Allen Paulos explains, in English rather than equations, a recent paper from the JPE.

Posted by E. Frank Stephenson at 03:25 PM in Economics  ·  TrackBack (0)

Restaurants, Obesity, and Reverse Causation

A recent NBER paper finds (the quote is from a summary of the paper hence the use of the third person):

As the number of restaurants per capita increases so does BMI. The average BMI will rise by 0.09 percent if the per capita number of restaurants increases by one percent. The authors note that the rapid increase in obesity in the 1980s is partly an "unintended consequence of the campaign to reduce smoking." On balance, however, they conclude that "the increase in the per capita number of restaurants makes the largest contribution to the BMI outcome, accounting for 54 percent of the growth" in a pooled sample of men and women.

The findings may well be correct, but it seems to me that the reverse could be true--that restaurants tend to locate near fat people. More precisely, fat people might eat out more often and restaurants probably make location decisions based on the propensity of people in an area to eat out.

I'm also a bit suspicious of the results because "The authors can account for 79 percent of the change in BMI for males and one percent of the change in BMI for females."

Posted by E. Frank Stephenson at 03:14 PM in Economics  ·  TrackBack (0)

$300 hammers c. 1906

The May 25, 1906 NYT is full of interesting stories. The headline "Battleship Building Race: Private Firm Beats Government Both in Time and Cost" caught my eye. Evidently, there was an "experiment" in which two battleships were to be constructed at the same time, one by the Newport News Shipbuilding Company and the other by the government at the Brooklyn Navy Yard.

The keel of the Louisiana was laid on Feb. 7, 1903, at Newport News, and the keel of the Connecticut, which was to be built in competition, was laid down at the Brooklyn Navy Yard March 7 of the same year. The Louisiana was launched Aug. 27, 1904, and the Connecticut followed her into the water a month later, Sept. 29. So far the race had been close, but soon the private workmen forged ahead, and the result was that the Louisiana was delivered ready for service probably some months in advance of the Connecticut.
The article implicitly assumes the quality of work and the characteristics of the two ships are basically identical. Moreover, it is not indicated whether the amount of man-hours spent on each ship was equal.

The last sentence is a doozie:

The Louisiana cost $3,992,000, while the Connecticut has already cost all of the total appropriation of $4,212,000, and the department has asked Congress for $380,000 more.

Posted by Craig Depken at 12:10 PM in Economics  ·  TrackBack (0)

On bribery c. 1906

From the May 25, 1906 NYT:

Frederick Vrooman, an assistant trainmaster, told the commission that he had received gifts of money in amounts from $5 to $20 from various coal companies, which he named.

"Why did they give you this money?" questioned Mr. Glasgow.

"I suppose they expected some favors."

"Were the favors granted?"

"Not that I recall."

"Then why did you take the money?"

"Well, if there was money to be given out I was there to take it."

"Is that your position now?"

"It always has been."

Perhaps this is what Rep. Jefferson was thinking? If Congress-people were more honest about their corruption, both "legal" and "illegal," perhaps their poll numbers would actually increase.

Posted by Craig Depken at 12:01 PM in Culture  ·  TrackBack (0)

It takes a village c. 1906

In the May 25, 1906 NYT is a bizarre story:

OSHKOSH, Wis. - Complaint has been made against a farmer living about five miles southwest of Neenah that he has been hitching four of his seven children to a corn plow or cultivator which he compelled them to drag through a ten-acre truck garden while he guided it....The farmer, it is alleged, was rearing them [the children] in ignorance.

Posted by Craig Depken at 11:40 AM in Culture  ·  TrackBack (0)

May 24, 2006
Wal-Mart & Productivity; Wal-Mart's Land Seized Via Eminent Domain

Co-blogger Mike DeBow requested info on Wal-Mart's effect on productivity growth. It'd be out of character for me to forego an opportunity to blog on Wal-Mart.

Here's a NYT article by Virginia Postrel that cites (and links to) a McKinsey study finding large productivity effects arising from Wal-Mart.

Now to a different Wal-Mart topic. From ABC News:

Tuesday night, during a sometimes raucous meeting, the city council voted unanimously to take Wal-Mart's land by power of eminent domain. It's a power the Supreme Court affirmed for municipalities in a controversial New London, Conn., ruling, in which the city wanted to take private property for a commercial development.

The Hercules, Calif., land in question consists of a 17-acre stretch next to new homes, offering a view of the San Pablo Bay. The city did not want Wal-Mart to be the centerpiece of its planned waterfront.

Instead, city planners have looked for a more historic-looking development, with buildings that include apartments on the second floor and shops and restaurants on the ground floor.

Sigh--more fallout from the awful Kelo decision. On the other hand, if Wal-Mart has ever benefitted from an eminent domain land grab there might a bit of rough justice here. Hopefully being on the losing side of an eminent domain issue will deter Wal-Mart from future development via eminent domain.

Posted by E. Frank Stephenson at 11:29 PM in Misc.  ·  Comments (2)  ·  TrackBack (0)

Monetary expansion for fun and profit

In teaching Money and Banking, I explain the government’s revenue (and the public’s burden) from expanding the money supply by comparing it to how a counterfeiter enriches himself at everyone else’s expense. Steve Hanke in today’s Wall Street Journal (subscription required) recounts how the enrichment part wasn’t lost on Serbia’s rulers:

... in 1990, the Serbian parliament, which was controlled by Slobodan Milosevic, had secretly ordered the Serbian National Bank (a regional central bank) to issue $1.4 billion in credits to Slobo's friends. That illegal plunder equaled more than half of all the new money the National Bank of Yugoslavia had planned to create in 1991.
Posted by Lawrence H. White at 07:17 PM in Economics  ·  TrackBack (0)

A welcome humility

Federal Reserve Governor Randy Krosner on why the Fed looks at a wide variety of indicators:

We are not quite sure where the economy is going, or even where we are," Kroszner said.
Posted by Lawrence H. White at 06:16 PM in Economics  ·  TrackBack (0)

How important is Wal-Mart?

I have a question: Can anyone steer me to a source that supports the following assertion, made by Harvard economist Kenneth Rogoff in a recent op-ed?

Consider the following stunning fact: together with a few sister “big box” stores (Target, Best Buy, and Home Depot), Wal-Mart accounts for roughly 50% of America’s much vaunted productivity growth edge over Europe during the last decade. Fifty percent! Similar advances in wholesaling supply chains account for another 25%! The notion that Americans have gotten better at everything while other rich countries have stood still is thus wildly misleading. The US productivity miracle and the emergence of Wal-Mart-style retailing are virtually synonymous.

It's not that I disbelieve it, I just have never seen such a claim made (or defended) before this. Anyone who can shed some light here is invited to either leave a comment or email me -- medebow at samford dot edu


BTW, Rogoff briefly discusses the research of the U. of Minnesota's Thomas Holmes on the reasons for Wal-Mart's success, which includes a pretty cool animation of the firm's growth over time.

Posted by Mike DeBow at 04:44 PM in Economics  ·  Comments (1)

Random links

You might find the following interesting/enlightening:

* Mark Steyn considers inter alia the Senate vote conferring Social Security coverage on illegal immigrants.

* The Opinionator makes some demographic predictions for the next hundred years.

* Roger Scruton has some thoughts on John Stuart Mill, on the bicentennial of his birth.

* Kevin Hassett reports on the current troubles of certain high-profile plaintiffs’ lawyers.

* The 2006 edition of the Pacific Research Institute’s ranking of the states as to tort law is now available online.

(cross posted at Southern Appeal)

Posted by Mike DeBow at 02:05 PM in Economics  ·  TrackBack (0)

Time to dust off the old c.v.?
THE COLUMBUS DISPATCH: Capital University President Ted Fredrickson canceled his European vacation and rushed home yesterday to deal with an operating deficit three times as large as the one expected this year at the liberal-arts college in Bexley.

The estimated deficit is $5.4 million rather than the $1.8 million discussed in early May, according to a May 16 memo from Fredrickson to the faculty and staff. The amount grew after "new information came to light" on May 15, the memo says. [Story.]

Posted by Robert Lawson at 09:44 AM in Misc.  ·  TrackBack (0)

Say it ain't so Ken.

Ken Blackwell, the Republican candidate for Ohio governor, appears to be abandoning his constitutional Tax and Expenditure Limit (TEL) Amendment in favor of a legislative TEL.

COLUMBUS - The Ohio General Assembly today enacted a key component of Republican gubernatorial nominee Ken Blackwell's economic recovery agenda state government spending controls. The Ohio House and Senate passed provisions limiting state government spending increases to 3.5 percent over the previous state budget. In addition, the new law requires a supermajority vote of the legislature to increase spending beyond the 3.5 percent ceiling.

I have written favorably about TELs here, but we argue that legislative TELs have been ineffective in the states that have tried them.

Posted by Robert Lawson at 08:33 AM in Economics  ·  TrackBack (0)

May 23, 2006
On immigration patterns

I came across The Migration Information Source which has loads of immigration data for the U.S. and the rest of the world. One telling graph is one which compares net migration levels between the U.S. and other "select" countries.

Not surprising, the U.S. strongly dominates other countries. I think the reasons for this are fairly obvious - both demand-side and supply-side influences combine to make the U.S. the choice destination of the world.

The site also includes data on the percentage change in foreign born population from 1990 to 2000 by state. I threw those numbers into STATA and gathered the the economic freedom scores for the various states from The Fraser Institute (thanks Robert Larson of DOL).

I calculated the average economic freedom score amongst the states from 1989 through 2000 and plotted percentage change in foreign-born population from 1990-2000 against the average economic freedom:

What's going on? Perhaps, just as the U.S. likely attracts more immigrants because it is relatively more free compared to other countries, states attract foreign-born immigrants, in part, by differences in economic freedom.

To formalize the relationship depicted above, I regressed percentage change in foreign born population on the average economic freedom of the state, average economic freedom squared, a BORDER variable that takes a value of one if the state shares a Mexican border, and a SOUTH variable that takes a value of one if the state was a member of the Confederacy.

. reg perchange efiaveb efiaveb2 south border,r

Regression with robust standard errors Number of obs = 50
F( 4, 45) = 6.01
Prob > F = 0.0006
R-squared = 0.3053
Root MSE = 52.611
perchange | Coef. Std. Err. t P>|t| [95% Conf. Interval]
efiave | 349.9555 173.7281 2.01 0.050 .0491525 699.8619
efiave2 | -23.46284 12.54747 -1.87 0.068 -48.73474 1.809065
south | 56.80823 23.40067 2.43 0.019 9.676869 103.9396
border | -6.236955 22.77956 -0.27 0.785 -52.11735 39.64344
_cons | -1215.791 594.182 -2.05 0.047 -2412.534 -19.04658

The results indicate the first-order effect of economic freedom on the percentage change in foreign-born population is positive but the second-order effect is negative. As anticipated, the SOUTH variable is positive and statistically significant but the BORDER variable is not (interesting).

Perhaps economic freedom is positively correlated with economic opportunity, which would attract domestic and foreign immigrants alike. Perhaps economic freedom is negatively correlated with state and federal law enforcement which might correlate with illegal immigration - yet the data reflect legal immigration. Therefore, there are likely two positive influences of improved econoimc freedom on immigration rates. On the other hand, less economic freedom tends to correlate with less opportunity but with more government (welfare and enforcement). The reduced form results suggest that the attractiveness from more economic freedom/less government outweighs the attractiveness of less economic freedom/bigger government (although the relative magnitudes of enforcement and opporunity are not identified).

My point is not to suggest making any particular state less free in order to dissuade immigrants from locating there. Rather that immigrants seem to be attracted more to opportunity states than welfare state(s). Whether increased foreign-born population correlates with reductions in economic freedom over time is actually an interesting question (anyone know of evidence testing this? My initial take below the fold).

[STATA Data File]

Read More »

Posted by Craig Depken at 08:52 PM in Politics  ·  TrackBack (0)

Interesting math in Minnesota

Last Friday, the Minnesota legislature announced it had reached a "deal" to tax Minneapolis residents (and tourists) by 0.015 pennies per dollar of taxable sales to build a new stadium for the Minnesota Twins. The new stadium is anticipated to cost somewhere in the neighborhood of $500 million (give or take 10%).

One of my studies was the focus of a story on the ABC affiliate in Minneapolis last Friday. The study focused on the impact of new stadiums on team finances. Not surprisingly, team owners stand to gain considerably when the public finances a new stadium. Video here. I still have a face for radio and I need to learn not to interject so many cynical chuckles during a telephone interview, but I commend Brad Sattin for finding me on the Internet and being willing to run with the story.

There was no announcement about the anticipated size of the Twins stadium, but given recent trends it will likely be between 40,000 and 50,000 seats. Let's take the higher number, which would imply the new Twins stadium will cost approximately $10,000 per seat.

Today the Minnesota state legislature also approved a new stadium for the Minnesota Gophers (see a trend here? Next the Vikings will get a new stadium). The interesting thing is that the Gophers stadium is anticipated to be 50,000 seats and cost only $248 million or $5,000 per seat. (announcement here).

Why the big difference in stadium costs? There are likely additional land costs in downtown Minneapolis incurred for the Twins stadium that the Gophers won't have to pay. However, I doubt the land costs are roughly half the cost of the stadium. Here in Arlington, the city is anticipating the land to cost a little more than one fourth of the total stadium cost.

What else is different? Perhaps there are different costs in building a football stadium compared to a baseball stadium. Yet, previous construction figures do not suggest the differences are that dramatic. More likely the difference is that the hopes and dreams of the Twins ownership include more numerous and more luxurious luxury suites - subsidized by the public dollars.

While it is not immediately clear that university administrations are immune to the principal-agent problem more clearly at work in the professional venue racket, I bet university administrations make stadium size and expenditure decisions closer to the social equilibrium. [I have no solid empirical evidence for this, just a hunch]

While the math in Minnesota doesn't seem to add up, this example is not unique. There are other college campuses (Stanford comes to mind) building stadiums with (ostensibly) public dollars, union labor, and with the same characteristics and regulatory constraints as professional venues but at half the cost.

Perhaps the Vikings can play in Gopher stadium instead of the Gophers playing in the Vikings's stadium?

Posted by Craig Depken at 02:09 PM in Sports  ·  TrackBack (0)

Price Discrimination Paper

My former student Ann Zerkle, now a Ph.D. student at Clemson, and I have a paper in the Journal of Economics and Finance Education. Here's the abstract:

This paper looks empirically at the financial aid award practices at a small, Midwestern, private university. By awarding more financial aid, colleges and universities effectively price discriminate; that is, they charge some students more than others. The results indicate that students with better high school records and test scores and with more financial need are given more aid. Nonwhite students also receive considerably higher aid. While these results can not be generalized, this analysis should be easy to replicate at other colleges.
Posted by Robert Lawson at 02:05 PM in Economics  ·  TrackBack (0)

Japanese Chopsticks Import Association--Who Knew?

Perhaps I need to spend more time away from northwest Georgia, but I never would have guessed that such an entity existed. I suppose it is a trade group or lobbying association.

How did I learn of the organization's existence? In this article about China's imposing a tax on chopsticks to combat deforestation.

HT: Tax Foundation blog.

Posted by E. Frank Stephenson at 12:08 PM in Economics  ·  TrackBack (0)

Great Moments in Non-market Allocation

From The Weekly Standard (with a HT to Mitch Kokai of the Locker Room):

This is the life of Lisa Cunningham, a 40-year-old mother and former social worker who lives outside of Boston. Her kidney failure was caused by Type 1 diabetes that she's had for years. Her only hope for better health and the semblance of a normal life is a kidney transplant. Until then she must continue to wait on the national list--which pairs deceased (cadaver) donors with potential transplant recipients--for at least five more years, because the demand for organs far outstrips supply. Lisa tells me her doctor says she might not live five years.

Many people in this position turn to living donors. Such donation is possible because people have two kidneys, and a healthy person can lead a normal life with a single good one. Lisa turned to relatives, but they too had diabetes or wanted to preserve their kidneys in case their children developed it. She was desperate.

So when Rob Haneisen, a reporter at the MetroWest Daily News in Framingham, Mass., who has written about people in situations like hers, asked Lisa if he could interview her for a story, she jumped. Perhaps former colleagues, long lost friends, or a Good Samaritan would read about her and volunteer to donate. Lisa had even begun coordinating with Beth Israel Deaconess Medical Center to prepare for a transplant, should a donor come forward as a result of the News article that ran on April 16.

Enter Dr. Douglas Hanto, head of the transplant division at Beth Israel. He had heard about Lisa's circumstance when Haneisen called him for an interview as part of the story. Before speaking to the reporter, Hanto had his staff phone Lisa right away to deliver shocking news: Beth Israel would flatly refuse to do her transplant if the only donor she could find was a kind-hearted stranger who responded to the article.

"We are in favor of donors coming forward and donating to the next person on the waiting list," Hanto told Haneisen. And how many have done that so far over the years, the reporter asked? "Just a couple," Hanto admitted. Also puzzling is Hanto's assertion: "We have hundreds of people on the waiting list. If we support some favored status for one patient, how can we really say we are being fair and looking out for all our patients?"

The fact is that Lisa harms nobody if a stranger responds to her story and comes to her aid. In fact, she helps people on the list because she is taken out of the cadaver-waiting queue and others can move up.

The real story here is the sorry state of the waiting list, maintained by the nonprofit United Network for Organ Sharing (UNOS) under a monopoly contract with the Department of Health and Human Services. About 92,000 Americans are on the list, most waiting for kidneys, yet only one-fourth will receive transplants within the next year. Eighteen people die every day because they have not found a donor in time.

Posted by E. Frank Stephenson at 09:35 AM in Economics  ·  TrackBack (0)

Economics "gets the chicks"

So says Olympic Gold medalist Joey Cheek in this past Sunday's Parade magazine (no link yet; available here after 5/24). Cheek will be majoring in economics at Duke, Yale, Princeton, Georgetown, or Stanford.

Hat tip to my better two-thirds. Sunday, the day she called my attention to the Parade piece, just happened to be our anniversary.

Posted by E. Frank Stephenson at 09:20 AM in Economics  ·  TrackBack (0)

May 22, 2006
Dean Smith Endorsement Kerfuffle

From the AJC:

RALEIGH, N.C. — It had the makings of quite the endorsement: former North Carolina basketball coach Dean Smith cheering lawyer Rachel Lea Hunter on to victory in her race for a seat on the state Supreme Court.

"As a loyal Democrat to another loyal Democrat. Win Rachel! Win!'" read the quote from Smith on Hunter's Web site, posted above a picture of the pair at last week's North Carolina Sports Hall of Fame banquet.

But there's a problem: Smith doesn't remember saying it. "I never really met her," he said Monday. "They just took our picture."

Ms. Hunter does, however, appear quite skilled at legalistic hair-splitting:

In a statement, she pointed out the Web site didn't specifically say Smith endorsed her.

"The statement said that I had met Dean Smith. I did. ... I did not say that he endorsed me," she said.

Posted by E. Frank Stephenson at 11:19 PM in Politics  ·  TrackBack (0)

Pre-paid Gasoline

From NPR:

First Fuel Banks has six gas stations in the St. Cloud, Minn., area, where customers can buy as much gasoline as they like, whenever the price seems right. First Fuel then stores the gasoline in its oversized tanks, or buys futures contracts for really long-term purchases.

Pre-paying for gasoline requires that customers tie up their money for a while. But otherwise, there's no charge for the program, aside from a one-dollar membership fee. And it can yield huge savings.

Thousands of First Fuel customers are able to fill their tanks for less than $2 a gallon. CEO Jim Feneis says that a few hundred of his customers actually locked their prices in at less than $1 a gallon.

Gulf Oil is rolling out a similar program in 11 northeastern states.

Posted by E. Frank Stephenson at 10:24 PM in Economics  ·  TrackBack (0)

May 21, 2006
Nicotine Fiends c. 1906

Alas, this poor bloke didn't think to sue Big Tobacco. From the May 21, 1906 NYT:

AMSTERDAM, N.Y. - Louis Allis, a young man of this city who has been smoking sixty Turkish cigarettes a day, is to be taken to the Utica Insane Asylum. Last night he became violent and it was necessary to summon two policemen to take him to the station house.

He continually calls for cigarettes. The doctors say that his nervous system is entirely broken down and he may not recover.

Wow, Turkish smokes can be strong, and sixty a day would be 5 per hour in a twelve hour day? That's a lot of chain smoking and I imagine one's nervous system might be effected. Nevertheless, the Insane Asylum?

In the bizarro world that is the current culture surrounding cigarettes, private individuals sue Big Tobacco, governments sue Big Tobacco, and governments depend on said individuals purchasing cigarettes for tax revenue to fund their projects.

Thus, we find ourselves in the strange predicament that the state and cigarette companies want us to purchase cigarettes - and three packs a day (60 smokes) would do wonders for the tax revenue of a state and profit for a cigarette company - but not smoke them (at least not in the workplace, not in a restaurant, not in a bar, not within 50 feet of an entrance, not in your car, not around kids less than 10, not within 100 feet of a school).

Just last week, the great leaders in Austin, TX, passed a $1 per pack tax to fund primary and secondary schools here in Texas (bold prediction: actual tax revenue will be less than projected, and promised property-tax reductions will be short-lived if they are not stillborn).

Posted by Craig Depken at 01:00 PM in Culture  ·  TrackBack (0)

May 20, 2006
The IMF books a loss

The IMF has acknowledged that it lost money last year, reportedly “its first annual loss in decades”.

How is that possible? Evidently the IMF’s interest income from loans to needy national governments failed to exceed its substantial outlays on staff salaries. The Associated Press says that “net income recently came in far below expectations.”

The IMF is apparently having a tough time keep its loan volume up. Argentina and Brazil have repaid their loans early. Meanwhile, “Asian countries that were hit by financial crises in the 1990s have built up huge reserves so they would not have to resort to the IMF for bailouts should they encounter financial difficulties.” Result: “Funds available for lending are at an all-time high of about $200 billion”.

What to do? Return the money to the donor nations and shrink the IMF staff? Don’t be silly. Convene a committee of experts!

Managing Director Rodrigo Rato named a panel of advisers, including former Federal Reserve Chairman Alan Greenspan and European Central Bank President Jean-Claude Trichet, to evaluate how to finance IMF operations.

Rato has charged the committee with finding a “new financing model for the IMF”. In other words, find a way to convince the governments of wealthy nations to give the IMF an annual appropriation, instead of expecting it to self-finance with loan interest.

In other IMF news, the retiring Anne Krueger’s slot as first deputy managing director of the Fund will be filled by John Lipsky. As is to confirm the suspicions of ruling-class conspiracy buffs everywhere, Lipsky is Vice Chairman of JP Morgan Investment Bank. Do you even need to ask whether he’s a member of the Council on Foreign Relations?

Posted by Lawrence H. White at 06:25 PM in Economics  ·  TrackBack (0)

May 19, 2006
How many ferry runs is that?

From the May 19, 1906 NYT:

BOSTON - The Chelsea Ferry Company, said to be the oldest business enterprise in the country, celebrated today its two hundred and seventy-fifth anniversary...The company was founded in 1631 by Thomas Williams and originally ran from Boston to Winnesimmet Village, now Chelsea.

Perhaps it is defunct now, Google has no hint of a "Chelsea Ferry Company," or perhaps it has been subsumed by some other company? Either way, that's a hell of a run for a private company.

Posted by Craig Depken at 01:01 PM in Economics  ·  TrackBack (0)

Weird Science c. 1906

From the May 19, 1906 NYT:

Prof. Hans Molisch of Prague, according to the London Mail, has been able to read a newspaper by the mircobic glow emanating from a sausage.

All meat - beef as often as in 52 cases out of 100 and veal in 50 out of 100 - contains the microbe, which projects a greenish-white light. With sausages it is not so frequent, but is, when present, much stronger....

Prof. Molisch asserts that the presence of these microbes in meat is no sign of decay, but rather the contrary, as in no case have they been found in meat unfit for human consumption.

Perhaps a cure for our addiction to foreign oil had been discovered 100 years ago (he he he)?

Posted by Craig Depken at 12:55 PM in Science  ·  TrackBack (0)

Head Start c. 1906

One recurring theme in the historical NYT is the relative lack of appeal to the federal government for policy changes and, more importantly, federal dollars. Whether this is because the income tax had yet to be passed is an interesting thought question.

Here is an example of what I mean. From the May 19, 1906 NYT:

There is room for doubt about the system of kindergarten instruction for young children in families where proper home care and influence prevail, but there can be no question about the benefit of taking the children of the poor from their wretched surroundings a few hours each day and subjecting them to the mild teaching and the wholesome association afforded by the "mission" kindergartens...

There is no way in which such of our philanthropic millionaires as consider it disgraceful to die rich can better bestow one or more of their superfluous millions than in helping the society to establish, endow, and make perpetual enough kindergartens to meet the crying need for their regenerating influence upon the swarming population that is so apt to breed vagrancy and crime.

The rhetoric is flowery, but the argument is basically the same as that offered today. Let's call it the "Head Start" program of the early 1900s. While I question the author's assumption of "superfluous millions," it is interesting that there is no mention of local/state/federal government dollars being dedicated to the kindergarten. The author may not have felt it necessary to mention government support but, perhaps more likely, such support was not forthcoming (as in the case of post-earthquake SF) and therefore the only appeal was to the private sector.

Posted by Craig Depken at 12:37 PM in Economics  ·  TrackBack (0)

With friends like these

I occasionally find myself wanting to defend my Christianity and/or Catholicism to other libertarians who seem to believe that faith and reason are mutually exclusive. Indeed, one of John Paul 2's later encyclicals is entitled Faith and Reason, where he argues the two are compatible and reinforcing, since both faith and reason are ordered to the truth.

However, there are always fellow believers who succeed in making the rest of us look like buffoons to the rest of the world. (This is still one of my favorite posts.) There is a group called PrayLive that has decided to pray for world peace...no, wait, for an end to poverty...no, wait again. They are praying "for the lowering of gas prices." Official site here, news report about a DC rally here, news report about a Hollywood rally (big surprise) here. I would blog more about this, but I have to go to the cathedral to pray that God will reduce my mortgage payment to $100 a month.

Posted by Tim Shaughnessy at 11:24 AM in Culture  ·  TrackBack (0)

May 18, 2006
Mind-boggling quantities c. 1906

During the flare ups over gasoline prices, it seems that many people are a little too flippant about gasoline producers and their profits. Statements like "Exxon-Mobil could halve their profits and still do okay", or implicit hints that making gasoline isn't that hard and therefore doesn't deserve a profit, seem common place. Yet, how many of us know exactly how to make a gallon of gasoline, much less produce, quality control, and deliver 100 million gallons of gasoline a month?

The logistics required to pull this feat off, not once but every month, are mind numbing (and that is why I run regressions).

In the May 18, 1906 NYT is the following article:

1,000,000 TONS OF RAILS

...an aggregate of 1,000,000 tons of steel rails for delivery in 1907.

This is an unprecedented amount of business for this time of year in the history of the steel trade. It is estimated that the tonnage booked by the various companies is more than 700,000 tons above the actual production of the United States in 1905.

In less than three years the steel industry had tripled its capacity of steel rails, not counting the efforts to produce other steel products? Wow.

Posted by Craig Depken at 01:59 PM in Economics  ·  TrackBack (0)

On Tuition Increases

There is a common buzz about tuition increases on public campuses around the country. Students and parents are outraged that college is "so expensive" and there are activists that decry that college is becoming unaffordable for all but the elite.

Whenever tuition increases say by 10% in a given year, there are doomsday predictions that the price of a public university college education in 2030 will be $200,000 or more. Yet, the claim is simply not credible because, assuming relative prices stayed constant, the nominal price for Harvard would be about $1.2-$1.5 million for four years.

The little-mentioned fact is that tuition increases are not correlating with an equal increase in spending per student. In other words, if tuition increases by 10% the university's budget is not increasing by 10%.

What's going on? Here in Texas (and I wager in the rest of the country as well), the state contribution to per-student expenditure has been decreasing over time. In the mid 1990s the burden was 60-40 in "favor" of the student. Now the burden has flipped so that it is 60-40 in "favor" of the state. Tuition might increase, but not the per-student spending (alas).

Perhaps my intuition is supported by this "report" concerning the price of college in the U.S. While I have some reservations about certain conclusions, the report gets most things correct and they include this graphic:

Without the actual data (I'm looking) it is hard to do any more than "eye-ball metrics" using the ocular estimator. However, there seem to be two regimes in the data. One is when tuition and appropriations trend together (1980-1982, 1986-1988, 1996-2000) and another when tuition and appropriations head in opposite directions (1982-1985, 1988-1994, 2000-2005). Appropriations seem to head south right around recessions - go figure.

However, the trend lines do not suggest an indefinite rise in real tuition rates.

Posted by Craig Depken at 12:23 PM in Economics  ·  TrackBack (0)

Euro Jobs

From an interesting article on European labor markets:

The proportion of part-time workers in the United States has held steady at about 13 percent for more than a decade, according to the Organization for Economic Cooperation and Development, based in Paris. The number of Europe's temporary workers - people who may work a full week but move from company to company - is soaring. In the decade from 1990 to 2000, Manpower tripled its business, Lemonnier said.

In France, Germany and Italy, more than 12 percent of people working have temporary contracts. In Spain, the figure is more than 30 percent, and in the Netherlands it is 15 percent. Indeed, the percentage of Spanish workers in temporary and part-time jobs is so high that the government in Madrid proposed this week a bill to cut the number of employees on temporary contracts.

But weren't France and Germany, unlike America's Cowboy Capitalism, supposed to be models of employment stability etc.?

Posted by E. Frank Stephenson at 12:05 PM in Economics  ·  TrackBack (0)

May 17, 2006
Good for the Goose, Bad for the Gander

An extra class combined with my usual extracurricular writing schedule has made this an extra busy semester for me. The good thing is that I now have several working papers making the rounds and several other papers to clean up once field comps are finished.

A paper I wrote with Pete Leeson, "Good for the Goose, Bad for the Gander: International Labor Standards and Comparative Development" was recently accepted for publication in the the Journal of Labor Research. Pete and I look at the issue of international labor standards, especially those pushed by the International Labour Organization (ILO). The ILO argues that certain labor standards (such as collective bargaining) are so universal as to be "core" labor standards akin to human rights.

As Pete summarized the paper on The Austrian Economists:

We investigate this claim by examining the timing of labor standard adoption in highly developed countries. These nations were all once as poor as today's developing countries and made the tradeoff between labor standards and income in the past. Their experience therefore suggests a safe income threshold for adopting similar labor standards in the developing world.

Using current GDP per capita levels and growth rates in Sub-Saharan Africa, we determine how far these developing countries are from achieving the development threshold the highly developed world reached before it created various labor standards. We find that every ILO-proposed labor standard is highly premature for Sub-Saharan Africa. These countries are between 100 and 300 years from reaching this threshold. ILO-proposed policy is exactly backward. A substantial relaxation of labor standards is the appropriate labor policy for this part of the developing world.

Click on the title of the paper above or here for an Adobe copy of the paper.

Posted by Joshua Hall at 03:41 PM

May 16, 2006
Mr. Bush, Tear Down That Wall!

Like my co-bloggers I've been content to ignore the immigration "debate" that has been going on. But after listening for weeks now, I can honestly say I am embarrassed for my nation.

In 1961, the Russians East Germans began erecting the Berlin Wall to keep their citizens from fleeing to the West. The action drew the moral condemnation of the entire world, and rightly so. If instead the West German authorities had built a wall to keep the East Germans out, would it have been the moral equivalent? I think so.

Using force to stop people from migrating is morally repugnant -- in Germany during the Cold War and in America today. We hold these truths to be self-evident, my ass. Someday, I hope someone will echo the Gipper and stand at our southern border to tell us to tear down our own wall.

Posted by Robert Lawson at 06:17 PM in Economics  ·  TrackBack (0)

Medieval banking by any other name

The Turkish website Zaman Online reports:

Turkish Prime Minister Recep Tayyip Erdogan asked officials of D-8 countries not to use the word “Islamic” to define the banking system during their closed to the press discussions in Bali. […] Erdogan addressed a question to the audience on whether to use the word “Islamic” or the word “interest-free” to define the banking system for D-8 countries. Using the term “Islamic banking” will only work to the advantage of anti-Islamists, said Erdogan, and added that trouble will emerge when efforts are made to disguise the interest ratings issue under a religious cover.

Given that the medieval Christian church also banned usury, it’s true that “interest-free” banking is not uniquely Islamic. But it really isn’t interest-free. In every economy known to man, a persistent shortage of credit exists at a zero interest rate. A positive rate is needed to clear the market. So a positive interest rate asserts itself, one way or another, under different names, in “interest-free” banking systems.

Let’s instead call it “medieval” banking.

The D-8 countries, by the way, are Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, Turkey and Bangladesh.

Posted by Lawrence H. White at 10:04 AM in Economics  ·  TrackBack (0)

May 15, 2006
Diversifying Risk c. 1906

From the May 15, 1906 NYT:

WASHINGTON, D.C. - Representative Heflin of Alabama to-day introduced a bill making it a misdemeanor for any person to keep an establishment for the purpose of dealing in cotton futures.

The bill provides that any person who buys or sells cotton for the purpose of speculating under the plan commonly known as "cotton futures" shall be deemed guilty of keeping and running a gambling house and shall be fined not less than $5,000, and also shall be imprisoned for a period of ten years.

The fine would be equal to $105,000 in CPI adjusted 2004 dollars.

Posted by Craig Depken at 01:32 PM in Economics  ·  TrackBack (0)

Incrementalism in education

It is a common place to suggest that more teachers, more schools, and more money will cure the "problems" of the public education system. How common? Let's try for the last 100 years or so.

From the May 15, 1906 NYT:

We have an abundance of suggestions for improving our public school system...What are the real evils? One of them is a lack of sufficient classrooms and teachers. This is an evil which can be cured in one or two years whenever the people of this city [New York] wish to do it. I know the answer. Lack of money! Taxes, taxes! Surely school hoiuses (sic) cost money, but they are profitable investments - profitable for the city as a whole, I mean. They save expenses for police, and for paupers; they increase the efficiency and earning capacity of the citizens and make the city a more desirable place to dwell in...

Let the city provide school rooms, sufficient in number and suitable in situation and arrangement; let the city provide a teacher for every thirty pupils enrolled, then it will have a right to expect results and not till then.

Why are the same "solutions" still proffered after a hundred years? Perhaps because the arguments help secure more resources without ever defining "victory" or "success." After all, until every child passes every test with a 100%, there is always a "problem."

Posted by Craig Depken at 12:35 PM in Economics  ·  TrackBack (0)

Why bar Lithuania from the ECB?

Reuters’ David Milliken reports:

The European Central Bank and European Commission are widely expected to rule next week that Lithuania's 2.7 percent inflation rate -- seven hundredths of a percentage point above the permitted level -- renders it ineligible to join the currency bloc.

This is very peculiar, given that Lithuania since 2002 has had a "currency board" arrangement that firmly fixes the exchange rate of the litas to the euro. The litas is essentially a fixed multiple of the euro. Goods arbitrage therefore implies that the prices of traded goods in Lithuania are a fixed multiple of Euro prices, so their inflation rate is the same.

If measured CPI inflation is higher in Lithuania, it must be that non-traded goods – like local rents – are rising. (That is why measured inflation in Ireland is higher than in other euro countries: rents in Dublin have risen with prosperity.) That’s a relative price change. Given the currency board arrangement, it isn't evidence of inflation-prone local monetary policy, and therefore it isn’t a sensible reason to bar Lithuania from ECB membership.

Question: suppose Lithuania ditched its currency board in favor of outright adoption of the euro (unilateral official “euroization”). Would a slightly higher inflation rate in Lithuania then disqualify it from ECB membership?

Posted by Lawrence H. White at 11:10 AM in Economics  ·  TrackBack (0)

Non-Price Rationing

A few months ago, co-blogger Craig wrote, "It is a common mistake to assume that the world would be a wonderful place if the price of desirable things were zero." I was reminded of his comment by this news item:

IT IS BAD enough that you can be refused medical treatment on the NHS for eating, drinking or smoking too much. Now it seems that you can be denied an operation for protesting too much in support of your religious or political beliefs.

Edward Atkinson, a 75-year-old anti-abortion activist, was jailed recently for 28 days for sending photographs of aborted foetuses to the Queen Elizabeth Hospital in King’s Lynn, Norfolk. That draconian sentence was not deemed punishment enough: the hospital has banned Mr Atkinson from receiving the hip replacement operation he was expecting.

Absolutely repugnant. Next time someone starts fretting about using prices as a rationing mechanism, ask if they'd rather have political beliefs decide who gets medical attention.

Posted by E. Frank Stephenson at 10:50 AM in Economics  ·  TrackBack (0)

Off to college again...

I just arrived at my new office at the Social Philosophy and Policy Center at Bowling Green State University where I'm a visiting scholar for the summer.

I'm living in a dorm-like efficiency room and I kind of feel like I'm at college again. BGSU is your basic college town but compared to my alma mater (Ohio University), the campus is pretty darned (what's the word?) UGLY.

Posted by Robert Lawson at 09:29 AM in Misc.  ·  TrackBack (0)

May 14, 2006
Irving responds to the Cowboys leaving

The first time the city of Irving, Texas, had a chance to respond at the ballot box to the Cowboys leaving town for Arlington, the citizens of Irving sock it to Cowboys fans and the team.

From the Star-Telegram:

The user fees allow the city to tax professional football players up to $5,000 per game played at Texas Stadium, to add up to $3 in parking fees and to increase ticket prices as much as 10 percent. But city officials have pledged not to impose the so-called locker-room tax.

The locker-tax won't be imposed here ostensibly because Texas doesn't have a state income tax. However, the ten percent ticket tax will average out to $7.50 per ticket (at last year's average prices) and the parking tax will add up as well, assuming demand for parking and tickets is relatively inelastic.

The city of Irving wants to impose the taxes to pay for the destruction of Texas Stadium and the redevelopment of the property. It is an odd sort of user-tax, one that would have been welcomed in the case of Arlington.

Oops. There are parking and ticket taxes but they will be put towards Jerry Jones's "contribution" to the stadium.

Posted by Craig Depken at 11:01 PM in Sports  ·  TrackBack (0)

Altoona Curve to Hold Frivolous Lawsuit Night

Inspired by a Los Angeles Angels fan who filed a lawsuit against the club because he did not receive a red nylon tote bag as part of the major league club’s Mother’s Day promotion last May, the Altoona Curve (AA/Eastern League) have announced that they will be holding Salute to Frivolous Lawsuit Night as part of their Sunday, July 2nd game at Blair County Ballpark.

The Curve’s salute to all ridiculous lawsuits ever filed will include the following:

A Pink Tote Bag Giveaway to the first 137 men in attendance ages 18 and over

The first 137 women 18 and over will receive lukewarm coffee so they will not burn themselves

The first 137 kids will be given a beach ball with a warning not to ingest it

Source here.

UPDATE: A correspondent suggests the Altoona Curve should differentiate between frivolous laws and frivolous lawsuits. He reports that,

The lawsuit [against the Angels] is not frivolous given California’s preposterous Unruh Civil Rights Act, which explicitly grants just the sort of cause of action the plaintiff has filed. Based on the reports I’ve seen, not only does the plaintiff have a viable case, but he is almost certain to win (or get a favorable out-of-court settlement). People have been filing, and winning, Unruh suits and settlements like this in California for decades. There are law firms that specialize in Unruh claims.

Posted by E. Frank Stephenson at 04:47 PM in Sports  ·  TrackBack (0)

May 12, 2006
Will on McCain's contradictory doctrine

George Will, perhaps channeling our fellow blogger Brad Smith, neatly summarizes the self-contradictory doctrine of Senator John McCain:

Proof that incumbent politicians are highly susceptible to corruption is the fact that the government they control is shot through with it. Yet that government should be regarded as a disinterested arbiter, untainted by politics and therefore qualified to regulate the content, quantity and timing of speech in campaigns that determine who controls the government. In the language of McCain's Imus appearance, the government is very much not "clean," but it is so clean it can be trusted to regulate speech about itself.

Hat tip: Sheldon Richman at Liberty and Power.

Posted by Lawrence H. White at 10:59 PM in Politics  ·  TrackBack (0)

What's a Plog?

I browsed to Amazon today and found a new (to me at least) feature, which they're calling Plog, or personal web log.

Your Amazon.com Plog is a personalized web log that appears on your customer home page. Every person's Plog is different (hence the name) and just like a blog, your Plog is sorted in reverse chronological order. Each post also gives you the opportunity to provide feedback to the sender as to whether you liked the post or not. This feedback loop means your Plog becomes even more relevant and interesting over time. Your Plog will appear if you are logged into our web site and is visible only to you.

On my plog there were posts by authors of books I've recently bought, as well as comments from other readers where the author's posts appeared. Pretty neat.

Posted by Edward J. Lopez at 07:48 PM in Economics  ·  TrackBack (0)

Galbraith again

* Earlier this week Robert Samuelson wrote a good column on Galbraith and the last 50 years, and it's now available (sans registration) on the MSNBC/Newsweek website.

* George Reisman has posted his 1961 review of The Affluent Society (for Human Events) on the Mises website. The note at the end of the article grants permission for use on the condition that the user mentions Reisman's website, www.capitalism.net. I am happy to comply. In a post on the Mises Blog yesterday, Reisman notes Robert Frank's NYT op-ed lamenting the fact that Galbraith never received the Nobel Prize (reg req'd). Reisman points out that Frank is the co-author of Fed chairman Ben Bernancke.

* Apparently Meghnad Desai was not bashful about stating the obvious.

Posted by Mike DeBow at 05:52 PM in Economics  ·  TrackBack (0)

Negative seigniorage

Toronto’s Globe and Mail reports:

With copper and nickel prices soaring to record highs […] the United States Mint estimates it now costs 1.23 cents (U.S.) to make a 1-cent coin and 5.73 cents to produce a nickel.

The Palm Beach Post adds:

The mint expects to lose $32 million producing pennies and nickels this year.

How to relieve taxpayers of the burden of producing unprofitable pennies and nickels? Privatize penny and nickel production. Private mints could produce pennies for under a penny each, as does the Canadian Mint, where pennies are mostly steel with a copper coating. (The US penny is mostly zinc. Zinc prices have also been soaring.) The quantity of pennies would be limited by making 100 of them redeemable for $1.

Posted by Lawrence H. White at 03:37 PM in Economics  ·  TrackBack (0)


I just got this letter from a former student,

I want to thank you for ruining my life.

I've explained to a few people what a sunk cost is. Some will seem to get it in principle, but when I apply it to personal life I usually get a face full of blank stares.

Recently my girlfriend and I walked to the Pike Market to look for something to mail a friend who was sick. When the prices were beyond her budget
constraint, she made the statement that we should try to find something so
it wasn't a "waste of time." I said well, you know... She looked at me
and said yes it is sunk, but I don't care. And then she bought something.

Again thanks. I think I'll just keep my economics inside my head.

Posted by Robert Lawson at 02:07 PM in Economics  ·  TrackBack (0)

Toby Davis, RIP

I just received word that Otto 'Toby' Davis has passed away. A great scholar and truly fine gentleman. A sad day. [UPDATE: Obituary.]

Dear Public Choice Society Members and Friends,

I am writing to pass along the sad news that Otto “Toby” Davis passed away on May 9. Toby was a founding member of the Public Choice Society and served as its president from 1970 to 1972. In the 1960s and 1970s his work, taking an economic approach to the study of electoral processes, helped push public choice into the mainstream in economics and political science, and he was one of the first scholars to pursue the econometric study of governmental budgets. His work was much broader than just public choice, and he made advances in the theory of second best and investigated many public policy issues, including education, enterprise zones, and regulation. More recently, his research has focused on the relationship between the policies and institutions of governance and economic growth. In addition to his scholarly impact, those who knew Toby will remember him as a warm and friendly individual, sincerely interested in ideas and strongly supportive of his students. Toby was a wonderful person, and his passing is a big loss for all of us in the public choice community.

Randall Holcombe
President, Public Choice Society

Posted by Robert Lawson at 08:51 AM in Economics  ·  TrackBack (0)

May 11, 2006
Government 101

Step 1: Create a problem.

President Clinton issued an Executive Order June 12 extending the current moratorium on the leasing of oil drilling sites on the outer continental shelf of the United States to June 30, 2012.


Step 2: "Fix" a problem.

WASHINGTON -- Scientists, inventors and entrepreneurs will be able to vie for a grand prize of $10 million, and smaller prizes reaching millions of dollars, under House-passed legislation to encourage research into hydrogen as an alternative fuel.

[Story.] HT: Dave Reed.

Posted by Robert Lawson at 08:14 AM in Economics ~ in Politics ~ in Science  ·  TrackBack (0)


This just in from the monkey research front (selected excerpts):

Drunk Monkeys Mirror People By Jennifer Viegas, Discovery News

May 9, 2006—Monkeys drink more alcohol when housed alone, and some like to end a long day in the lab with a boozy cocktail, according to a new analysis of alcohol consumption among members of a rhesus macaque social group.

The study, recently published in the journal Methods, also found that booze affects monkeys much the same way it affects people.

"It was not unusual to see some of the monkeys stumble and fall, sway, and vomit," Chen [one of the study’s authors and a researcher at the National Institutes of Health Animal Center in Maryland] added. "In a few of our heavy drinkers, they would drink until they fell asleep."

For the initial experiment, 21 females gained access to an aspartame-sweetened ethanol concoction during a group "happy hour." Neck collars registered the amount of fluid consumed, and each monkey received a blood alcohol level test at the end of the period.

In a follow-up experiment, 10 monkeys were housed individually during the "happy hour."

"The singly housed monkeys certainly drank more than the socially housed monkeys- at least two to three-fold more," Chen told Discovery News. "With the socially housed monkeys, there are a number of factors that can potentially compete with access to alcohol, such as social status or dominance ranking."

Lower-ranked monkeys and males tended to drink more overall, but certain individuals consistently drank more than others, regardless of status or housing conditions.

"Similar to humans, rhesus macaques have individual differences in taste preference, stress levels, drug tolerance and genetic background that lead to differences in alcohol intake," explained Chen.

In yet another study, the scientists gave a group of male monkeys 24-hour access to the beverage dispensers. According to the researchers, a spike in consumption immediately followed the facility’s working hours.

"Like humans, monkeys are more likely to drink after stressful periods, such as soon after the daily 8-5 testing hours and after a long week of testing," said Chen.

Look for Bush Administration officials to invoke the new evidence as further support for ethanol subsidies. "I'm workin hard to give Americans a comprehensive energy policy, one that's funnier than a drunk monkey."

Posted by Edward J. Lopez at 12:31 AM in Culture  ·  TrackBack (0)

May 10, 2006
Santa Fe Minimum Wage

From USA Today (with a HT to Joseph Coletti of the Locker Room):

SANTA FE — For the Martinez family, this state capital's new $9.50-an-hour minimum wage — the nation's highest — has been a blessing and a curse.

Housekeeper Di Martinez, 24, is making about $160 more a month. That has helped her contribute more to the $780 rent on a two-bedroom, 650-square-foot house she shares with four friends and her brother, Marcelo.

Yet dishwasher Marcelo Martinez's take-home pay hasn't gone up at all. In some weeks, it has actually dropped after his boss cut back on offering overtime because of the higher hourly pay. ...

"I don't really think it's made that much of a difference, except to the politicians," Di Martinez says. "We had this much before, now we have that much. But that much isn't a whole lot, anyway, you know?"

Posted by E. Frank Stephenson at 05:14 PM in Economics  ·  TrackBack (0)

High School Exit Exams

A new NBER Working Paper finds that high school exit exams increase dropouts (at least in some grades and types of school districts) and "appear to have exacerbated the inequality in educational attainment." It might be more appropriate to conclude that exit exams have little effect on true educational attainment but that they reduce the awarding of diplomas to mediocre students merely for biding their time through 4 years of high school. In fact, if there is any true change in educational attainment it might be from inducing disinterested and disruptive students to drop out thereby eliminating distractions for students truly interested in learning.

BTW, it seems like there might be an interesting follow-up study. Compare the high school graduate wage premium (relative to dropouts) in states with and without exit exams (after controlling for other factors yada yada). If exit exams make it more meaningful to earn a high school diploma then the wage gain associated with being a high school grad should increase. Of course, interstate migration will make it more difficult to identify the effect.

Posted by E. Frank Stephenson at 04:49 PM in Economics  ·  TrackBack (0)

Bush, Polls, and Gas Prices

From the NYT:

Americans have a bleaker view of the country's direction than at any time in more than two decades, according to the latest New York Times/CBS News poll. Sharp disapproval of President Bush's handling of gasoline prices ...

Just 13 percent approved of Mr. Bush's handling of rising gasoline prices.

The poll might as well ask about how he handles gravity or the rotation of the earth--presdents don't "handle" gas prices. It is true that President Bush has muttered some dopey stuff about oil "addiction" and wants to kill more people by mandating smaller cars (i.e., hiking the CAFE standards), but I doubt this is what the 87% of people who disapprove of his "handling" of gas prices have in mind.

Posted by E. Frank Stephenson at 04:32 PM in Politics  ·  TrackBack (0)

The tariff question c. 1906

Before the culture of taxation, there were considerable doubts about the government's intervention in markets. From a letter to the editor in the May 10, 1906 NYT:

This tariff question is not entirely a political matter. It is decidedly a great moral one. The legalized robbery of the great mass of the people for the pecuniary benefit of the few, the taking by means of the tariff the money from the pockets of the people and the appropriation of the same by tariff beneficiaries - the doing of such a thing directly constitutes larceny. Is it any better to steal money indirectly? The Government gets but little of this immense tribute. Does the "general welfare" require that this wholesale plundering by indirection shall be continued?

Posted by Craig Depken at 10:47 AM in Economics  ·  TrackBack (0)

The Chevrolet HHR

Suddenly the roads around here are filled with the new “retro-styled” Chevrolet model, the HHR. It looks pretty sharp, but I can’t help thinking that it looks like they mated a Hummer H3 with a Chrysler PT Cruiser.

Posted by Lawrence H. White at 10:12 AM in Misc.  ·  TrackBack (0)

Pornographers and Baptists

From today's Rome News-Tribune:

The Floyd County Commission unveiled Tuesday a proposed adult entertainment ordinance that would apply retroactively to Entice Movies & Novelties.

The county’s sole such venue opened in Shannon early last week, despite strong objections from residents who mobilized pickets at the Ga. 53 site Saturday.

“That’s what this does,” Garner said. “It can be applied to a business already open because Georgia allows an amortization period — a period in which an existing business can recoup its investment.”

Entice investors would get two years to recover their costs if they cannot comply with the new ordinance, he said, although some provisions — such as a ban on private rooms — would apply within 90 days of adoption.

Charles Craton, owner of the property occupied by Entice, said he does not believe the retroactive provision will hold up to a court challenge, but he supports a county ordinance.

“I actually encouraged (Commission Chairman) John Mayes to enact an ordinance,” Craton said. “I heard through the grapevine that a chain has been looking at Rome since all this publicity. If (the county) doesn’t do something, it could get out of hand.”

It would be just awful to have some competition wouldn't it?

Posted by E. Frank Stephenson at 09:44 AM in Misc.  ·  TrackBack (0)

May 09, 2006
The Enemy

From the NYT today:

"We've never had a more difficult melding of both houses' ideas," said Representative Bill Thomas, Republican of California and chairman of the House Ways and Means Committee.


Made me think of the old joke: Two House Democrats, one senior and one a freshman, talking strategy in the hallway. A senior House Republican walks by, and the freshman say, mostly joking, "Uh oh, careful, there goes the enemy!"

The senior Democrat immediately admonishes the tyro. "NO! No, now that's wrong. The Republicans are the opposition. The enemy...well, the enemy is the Senate."

Genius or good luck, the inherent and Constitutionally created conflict between House and Senate frustrates people who want to "get things done" in government.

For me, it seems like whenever those guys "get 'er done" it ends "doing" me, right up the doodie chute.

Posted by Michael Munger at 09:04 PM in Politics  ·  TrackBack (0)

Must Love Dogs

"No man's life, liberty or property are safe while the legislature is in session," goes an old saying. But now and then a legislature does something right, even if it is only correcting something the legislature did before.

The Florida legislature closed out its session last week by passing legislation allowing dogs to join their owners in outdoor seating at restaurants. The law had formerly prohibited their presence, even in these outdoor areas. Yeah! One thing I always liked about living in Ecuador many years ago was the ability to take my dog into restaurants. This is the kind of thing that really has little to do with public health, and that the market is perfectly good at regulating. This small step to increase freedom will make the lives of thousands of Floridians just a little bit more enjoyable.

And note, too, that the legislature also did away with a per drink tax on alcoholic beverages, and named a state pie - the former being an objectively good thing, the latter a better use of time than many other things they could have done. They provided for voter registration at bait shops and gun shops, which for some reason the St. Pete Times doesn't like - presumably, the paper is all for easier registration, just not of gun toting, fishing yahoos.

On bigger things, the legislature's record was mixed. But allowing dogs into restaurants - well, I'm thinking of moving south.

Posted by Brad Smith at 01:44 PM in Culture ~ in Funny Stuff ~ in Law ~ in Misc. ~ in Politics  ·  TrackBack (0)

A Newspaper in Need of "The Diff"

It's been a few months since I've posted on "The Diff." Now, via Craig Newmark, I've located a newspaper in need of The Diff. From the Raleigh News & Observer:

Halves vs. quarters.

Parents instead of agents.

And 11 fewer seconds on the shot clock.

Those are just a few of the adaptations Detroit Pistons assistant coach Sidney Lowe will need to make when he becomes N.C. State's head basketball coach.

Since the NBA shot clock is 24 seconds and the NCAA clock is 35 seconds, Lowe will have to adjust 11 MORE seconds on the shot clock.

Posted by E. Frank Stephenson at 11:22 AM in Misc.  ·  TrackBack (0)

Yum wins?

Last Saturday's run for the roses was marred, in my mind (and I am sure others), by the fact that the race had its first "sponsor" - Yum! which owns KFC, Pizza Hut, Taco Bell, A&W, and Long John Silvers. Yep, fast food and the mint julep and big hats, that's a great combination. The Visa sponsorship and selling the official bourbon for mint juleps to Evan Williams (yack) was bad enough, but at least it was still The Kentucky Derby.

Evidently, Yum might have come out ahead (in some sense) if this story from AdAge is correct:

The Yum logo appeared clear and in focus for three minutes, 15 seconds during NBC's 90-minute broadcast, while the presenting sponsor was also mentioned by the network's announcers on 18 occasions. All told, Yum and its fast-food restaurants -- A&W, KFC, Long John Silver's, Pizza Hut and Taco Bell -- received $2.665 million in exposure.

According to news reports, the cost of the five-year sponsorship deal is estimated at just more than $1 million a year.

Will the next one to "sell out" be The Masters?

Posted by Craig Depken at 11:04 AM in Sports  ·  TrackBack (0)

If at first you don't succeed...
The threat of a faculty noconfidence vote on Capital University President Ted Fredrickson didn’t materialize yesterday.

Instead, the school’s Faculty Senate tabled the motion at its meeting and decided to send the university’s board a letter detailing its complaints.


Posted by Robert Lawson at 09:25 AM in Misc.  ·  TrackBack (0)

Bad prediction c. 1906

In the Feb. 10, 1906 NYT The Jungle by Upton Sinclair was announced on page 85 of the NYT Book Review in a four paragraph one column how-do-you-do.

In the May 3, 1906 NYT, Mr. Sinclair offered a letter to the editor asking for a chance to prove his claims about tainted meat and other bad practices outlined in his book. He suggests that a lack of a lawsuit against him by Armour suggests that the charges Sinclair levels must be true.

Then, in the May 5, 1906 NYT [I'm catching up on a week's worth of NYT]:

CHICAGO - Arthur Meeker, the only person authorized to speak for J. Ogden Armour. says he cannot say what Mr. Armour will do about Upton Sinclair's challenge to him to bring a libel suit to test the truth of Mr. Sinclair's charges that spoiled meat is willfully put on the market in various forms at the Armour packing houses here. There is not much likelihood that the firm will notice Mr. Sinclair's attack. Mr. Armour is in Europe.


Posted by Craig Depken at 12:22 AM in Economics  ·  TrackBack (0)

May 08, 2006
Lebanese assasination tied to banking scandal

Remember the car-bomb assassination of Lebanon’s Prime Minister Rafik Hariri last year? Fortune’s Mitchell Prothero now reports that a likely motive for the killing was that Hariri threatened to expose payoffs from the corrupt Bank al-Madina to top brass in the Syrian occupation army, particularly to General Rustom Ghazali and his brothers. The bank, which collapsed in 2003, apparently laundered money for “terrorist organizations [namely Hezbollah], peddlers of West African ‘blood diamonds,’ Saddam Hussein, and Russian gangsters” as well as those who skimmed money from the UN’s notorious “oil for food” scheme. Prothero reports:

Several sources, including one alleged conspirator in the oil-for-food scandal, who refuses to let his name be used for legal and safety reasons, put the amount transferred and laundered through al-Madina at more than $1 billion, with a 25 percent commission going to Syrian officials and their Lebanese allies.

Keeping officials bribed requires cash payments on a regular basis. Modern banking technology makes it easier than sending someone with a suitcase every week:

Ghazali's three brothers were issued four ATM cards linked to a fake account with a $2,000 daily limit for withdrawals, which they made each day from December 2002 to January 2003, according to one document.

Additional payments were made by wire transfers.

The general's family, records produced by the bank appear to show, got more than $32 million from al-Madina via transfers approved by [Rana] Koleilat [Bank al-Madina's executive secretary].

When the Bank al-Madina collapsed, Lebanon’s central bank started to investigate, but

The case file and a trove of supporting documents were sealed in the vault of Lebanon's Central Bank in 2003 after threats by Ghazali, who appears to have made millions of dollars from the scheme himself. […] In an interview last year, Central Bank governor Riad Salameh didn't deny reports that Ghazali had threatened him into closing the investigation.
Posted by Lawrence H. White at 03:25 PM in Economics  ·  TrackBack (0)

Incentives Matter--"Gas Prices Force Locals onto Horses"

From Idaho:

Gas prices continue to stay high, and now a lot of people are turning to different options to get around.

In Rexburg, a few cowboys explored the possibilities on Saturday.

The signs suggest burning hay, not fuel, and these cowboys are all for it! Horsemen and women joined forces, hopped on their horses, and showed off their alternative modes of getting around.

Posted by E. Frank Stephenson at 12:03 PM in Economics  ·  TrackBack (0)

Happenings c. 1906

From the May 8, 1906 NYT:

  • Cornell reduces age limit to be on the instructional staff from 70 to 65.

  • Debutante fined $20 for speeding after "Policeman Campion testified that he had timed the car, and that it was speeding at the rate of sixteen miles an hour."

  • Normal travel time from Chicago to San Francisco: 96 hours. Fastest time to date: 44 hours and 56 minutes.

  • An editorial points out that the city of New York has net funded debt of $430,477,000. From EH.net that translates to

    In 2004, $460,477,000.00 from 1906 is worth:

    $9,632,667,198.89 using the Consumer Price Index
    $7,717,056,943.16 using the GDP deflator
    $42,202,019,357.58 using the unskilled wage
    $50,801,805,087.78 using the nominal GDP per capita
    $174,584,014,898.22 using the relative share of GDP


  • From an article concerning the SF earthquake's aftermath:
    In view of the refusal of Congress to consider a measure lending the National credit to the task of rebuilding San Francisco, the business men of the city have turned to New York's money market for the financial aid they must have to carry out their plans for a new San Francisco of steel and concrete.
    The executive branch, specifically the Department of War, is giving money to aid those still in the city - although no money seems to be forthcoming for rebuilding. One can imagine the howls of protest about "unfair profits" and "price gouging" if the private sector had moved into NO to the same degree as the government. Arguably more progress would have been made to date.

    Posted by Craig Depken at 11:42 AM in Economics  ·  TrackBack (0)

    Happy Hayek's Birthday!

    Friedrich August von Hayek was born on this date, 1899, in Vienna. Most readers of this blog know his work. If you are not so familiar, here are a couple of links to introduce one of the most -- if not the most -- important thinkers of the 20th century:

    Biographical note by Garrison & Kirzner, in the New Palgrave.

    Same, from History of Economic Thought.

    Same, from the Concise Encyclopedia of Economics.

    A nice short essay on Hayek's influence, by John Cassidy, for the Hoover Digest.

    The prize lecture and banquet speech he gave in Stockholm in connection with his 1974 Nobel Prize can be read here.

    If you could only read one of his articles, I'd recommend his influential 1945 AER piece, The Use of Knowledge in Society.

    For much more on the man and his work, see the Mises Institute website, the Library of Economics and Liberty, and Greg Ransom's Hayek Scholars' Page.

    More: Come to think of it, my own links page has a number of Hayek items in section III.E., and the Mises Blog offers up a nice list of Hayek quotes for the occasion. One of my favorites: "We must face the fact that the preservation of individual freedom is incompatible with a full satisfaction of our views of distributive justice."

    Posted by Mike DeBow at 11:37 AM  ·  TrackBack (0)

    Up off the mat...

    I have been quiet as of late for four reasons:

    1) sick child/wife
    2) end of semester and two exams today
    3) asked to write answers for end-of-chapter questions for four chapters of the new edition of Stock and Watson's Econometrics textbook (harder than I thought)
    4) my access to the historical NYT has been blocked by a computer glitch. Today, I finally called ProQuest (who offer the service through our library) and in twenty seconds the guy on the other end of the phone has a workaround and now I am back in play.

    I will have to sift through a week's worth of NYT to see if there is anything interesting, but as I have received a few emails expressing interest in the "c. 1906 project," it will continue.

    Posted by Craig Depken at 11:28 AM in Misc.  ·  TrackBack (0)

    2008--A Good Year for Libertarians?

    Mike Munger's campaign announcement and Craig's comment on voting "L" instead of "R" and "D" remind me of something I've been thinking about over the past few months--Is 2008 a good opportunity for libertarians? (Perhaps I should make that capital L Libertarians.)

    The current dissatisfaction with the two ("state-run" as Mike deftly says in his declaration speech) parties--Dumb and Dumber--certainly suggests 2008 is an opportunity for a significant third-party vote to emerge. It seems to me, however, that there is little sentiment for smaller government and more liberty. Although there is outrage over some of the pork barrel projects (the ____ to nowhere projects), there seems to be little desire for smaller government. There is also little desire for a live and let live (die might be more appropriate) approach to issues* like smoking and obesity; instead there is strong support for the nanny-state. Unfortunate, I think the public mood is quite hostile to libertarian thought. I hope I'm wrong--comments are open.

    [*In a truly free society, smoking and obesity wouldn't even be considered "issues."]

    My analysis, of course, is not meant to discourage Mike Munger's candidacy for governor of my home state. Indeed, I'm so thrilled to see a Libertarian candidate who is not a nutjob and who might change the Star Trek convention reputation of the LP (the nutjob/Star Trek references are to this post by co-blogger Bob) that I'm making the first public pledge of a campaign contribution. Mike, just tell me where to send the check.

    Posted by E. Frank Stephenson at 09:55 AM in Politics  ·  Comments (2)  ·  TrackBack (0)

    May 07, 2006
    For what it's worth


    I have chosen this forum, among friends, to announce my candidacy for the office of Governor of North Carolina, on the Libertarian Party ticket.

    The election is in 2008, but I need to get started NOW!

    This is NOT a solicitation for contributions, or help, or anything other than an announcement.

    Well...to be fair, it might very well be a warning that in fact I will soon be asking for contributions and help. But that is different from the asking itself.

    In answer to your questions:
    1. Yes, I am totally serious.
    2. I have no idea if I can win. I am going to try.
    3. My platform will be somewhat different from some of the statements of principle laid out in both the NC state platform and the national LP platform. But I am still working on platform items, and am counting from help from friends to put this together.
    4. Yes, really, I'm totally serious.

    Here is a link to my speech at the NCLP state convention, May 6.

    Posted by Michael Munger at 07:45 PM in Politics  ·  TrackBack (0)

    May 06, 2006
    J.K. Galbraith obit roundup

    Continuing my anti-capitalist theme for today, I offer a couple of links related to the death of one of the most prominent critics of American capitalism of the last hundred years:

    William F. Buckley remembers his long-time friend and ideological opposite.

    George Will sees Galbraith as a key figure in American "liberalism's transformation into a doctrine of condescension" toward average people.

    The Harvard Crimson recounts his academic career, noting that in 1939 Harvard declined to renew his contract, allegedly for political reasons, thus forcing him into the wilderness -- first to Princeton (gasp!), then the Federal Government, then Fortune magazine. He did not return to Cambridge until 1948. If you're interested in "The World According to Galbraith," you can watch him in this video of a 2002 program at the Kennedy School.

    NPR reprints the AP obit, and offers a couple of audio links.

    Posted by Mike DeBow at 05:32 PM in Economics  ·  TrackBack (0)

    "Why Isn't Socialism Dead?"

    Lee Harris, channeling Georges Sorel, attempts to explain the continuing appeal of socialism:

    "Those who, like Chavez, Morales, and Castro, are preaching the old time religion of socialism may well be able to tap into something deeper and more primordial than mere reason and argument, while those who advocate the more rational path of capitalism may find that they have few listeners among those they most need to reach -- namely, the People. Worse, in a populist democracy, the People have historically demonstrated a knack of picking as their leaders those know the best and most efficient way to by-pass their reason -- demagogues who can reach deep down to their primordial and, alas, often utterly irrational instincts. This, after all, has been the genius of every great populist leader of the past, as it is proving to be the genius of those populist leaders who are now springing up around the world, from Bolivia to Iran."

    Over on Proportional Belief, Protagoras considers the Cuban "model" and laments what happens to those who cannot learn from history.

    "What will you see if you visit Cuba today? In Havana, a city of two million people, you will see block after block of crumbling buildings, people milling around shiftlessly, literally fifty-year-old cars that are still lovingly and tenderly cared for like an ancient treasure, filthy--but "free"--health care clinics, and anti-America and anti-Bush propaganda everywhere, equaled perhaps only by the pro-Che propaganda."

    Posted by Mike DeBow at 04:41 PM in Economics  ·  TrackBack (0)

    May 05, 2006
    Cheers! New wine blog from USA Today

    First, happy Cinco de Mayo. When you're done with your Corona (worst beer in Mexico) hangover, check out the new wine blog from USA Today.

    On May 12, we will launch a wine blog on usatoday.com called Cheers.

    Every day, I'll post a recommendation of a bottle that costs $15 or less in stores and that is available in most major markets. Working with wines I encounter in trade tastings, wine-judging competitions, restaurants and bottles I buy on my own, plus samples sent by wineries, I'll sort and select the ones that stand out from the crowd.

    The idea is to test the oft-repeated assertion that more good-quality, low-cost wine is available to consumers now than at any point in history.

    The recommendations will be archived and indexed by type of wine so that you can easily find a favorite entry.

    Story here.

    Very cool, IMHO. My only complaint is, why restrict it to $15? In my humble, limited experience, bottles in this range can be difficult to distinguish and so I usually don't put very much effort into making selections. However, in the $20-$30 range, there is....well....quite a range. I would be a lot more interested to hear an expert's daily take on bottles where careful selection can really make a big difference.

    But this is very cool, nonetheless.

    Posted by Edward J. Lopez at 09:35 PM in Culture  ·  TrackBack (0)

    A barrier to cultural free trade falls

    Ending a 40-year ban, the government of Pakistan is now allowing Indian movies to be shown on television. Bollywood films have long been popular in Pakistan through under-the-counter distribution of videos and DVDs.

    One private Pakistani channel will be airing a "Festival of Amitabh Bachchan" films this month. Bachchan was the biggest Bollywood hero of the ‘70s and ‘80s, and is still a popular star. The curious selection of films to be broadcast includes
    Don, which I recommend as an over-the-top "masala" (action-comedy-romance-musical-melodrama) flick from the ‘70s that has to be seen to be believed;
    Satte Pe Satta, a weak ‘70s remake of Hollywood’s Seven Brides for Seven Brothers;
    Ek Ajnabee, a 2005 remake of Hollywood’s Man on Fire (haven’t seen it); and
    Black, a superior 2005 adaptation of Hollywood’s The Miracle Worker that features Bachchan’s most remarkable performance—mostly in English--of recent years. (Too bad his costar Rani Mukherji is so unconvincing as the deaf-blind girl.)

    Posted by Lawrence H. White at 11:55 AM in Culture  ·  TrackBack (0)

    El Maximo Mooch & Other Parasites

    From Forbes's "Fortunes Of Kings, Queens, And Dictators":

    What do Cuba’s fatigue-wearing president Fidel Castro and Monaco’s playboy bachelor Prince Albert have in common? Not much other than lofty positions and vast fortunes.

    Posted by E. Frank Stephenson at 09:45 AM in Economics  ·  TrackBack (0)

    May 04, 2006
    Reflections on the First Year of Econ Grad School

    Lauren Raymer, a former student of mine and now a graduate student at UNC, relects on her first year of grad school,

    The people that end up with doctorates 5 years down the road are not necessarily the smartest ones – they’re the most stubborn. If no one can tell you that you’re not smart enough, and you don’t tell yourself, you can finish this thing. As a good friend in my program once said to me, “If you’re good enough to get in, you’re good enough to get out”.


    Posted by Robert Lawson at 08:31 PM in Economics  ·  TrackBack (0)

    Repubs, Dems, and Government Spending

    The abstract of a new paper in the Journal of Public Economics:

    I estimate the influence of political parties on state Tax Burdens over a 40-year period (1960–2000). Holding constant a large number of state and voter characteristic variables, I find that: (i) Tax Burdens are higher when Democrats control the state legislature compared to when Republicans are in control. (ii) The political party of the governor has little effect after controlling for partisan influences in the state legislature. I explain how both findings are consistent with median voter theory. My results suggest that after 5 years of Democratic control of the legislature, state government would be approximately 3–5% larger than if Republicans controlled the legislature during that same period, with the better specifications producing estimates in the higher end of this range.

    It's probably a good thing for the Repubs that the study cut off at 2000. The GA legislature is now controlled by Republicans who've responded to their becoming a majority by increasing spending by over a billion dollars (on a base of $15 billion or so) in each of the past two years. And then there's the GOP-controlled Congress...

    Posted by E. Frank Stephenson at 03:57 PM in Economics  ·  TrackBack (0)

    The Business of Academia

    Front page of today's WSJ tells the tale of George Pettit, professor of chemistry at Arizona State for 41 years and founder/director of ASU's Cancer Research Center since 1975. In recent years, Pettit's funding sources (NIH, Nat. Cancer Inst., and patent royalties) have gone flat, and last fall Pettit evidently too aggressively pursued an IP dispute against a prominent colleague. ASU investigators found for the colleague, and "also found that Dr. Pettit had broken ASU rules by mentioning the charges to state and other officials, bypassing the university chain of command." No funding, strike one. No team play, strike two. ASU's relatively new (2002) administration dismantled Pettit's lab and sent him back to his office to teach.

    What's the big deal? Two things. First, while new administrators have always wanted to come in and clean house, the WSJ article suggests their use of a new business model, which is...well....a business model.

    The spat at Arizona State represents "the rise of the corporate university," says Gary Krahenbuhl, the former dean of the college of arts and sciences who for years was Dr. Pettit's immediate boss. "In the corporate model, anyone who is not a 'team player' in the eyes of the president is punished." Dr. Krahenbuhl took a retirement package shortly after a new president, Michael Crow, arrived in 2002.

    In an interview, Dr. Crow says that Arizona State "isn't a corporation" and that very few faculty members or administrators are unhappy with his leadership.

    Such disputes are likely to become more common in academia, especially at schools that put a premium on research with the potential for licensing revenue and outside funding. In one high-profile case, Duke University has engaged in a protracted legal battle with former faculty member and physicist John Madey over Duke's use for federally funded research of a laser patented by Dr. Madey.

    Second thing. Tenure as an institution continues to deteriorate. A major question is, what type of institution will emerge as a replacement to give intellectual freedom and job security in the face of high-risk/high-return (or very long term return) projects that are traditionally characteristic of academia?

    If I know the corporate-minded university administrator (and by experience, I unfortunately do), the corporatized university will have the malincentives of the business world (myopic herding, obsession with "price point"), without its good institutions/incentives (stock prices, market for corporate control), and compound it with all that's bad about state universities (bureaucracy, sovereign immunity). Exhibit:

    At Arizona, Dr. Crow moved quickly to launch a Biodesign Institute in 2003. He filled it with genomics, nanotechnology and other cutting-edge research programs. The second of a series of four planned buildings opened a few months ago, with special state funding of $78.5 million. The institute, according to its December 2005 business plan, is supposed to be "self-sustaining" financially within five years.

    The institute exemplifies the new type of university, where tenure still matters but professors gain and lose prestige based on their success at winning outside funding. Every laboratory bench in the 138,000 square feet of lab space is on wheels in wide-open rooms. If a researcher's grant money evaporates, or another gets a funding windfall, the institute can shrink or expand any of the labs quickly. The overall benchmark for holding onto space is $225 per square foot, per year, in outside funding.

    Nano and bio. Wow. Why not a dial-up internet institute to boot?

    I am left puzzled what this all boils down to. Is it just a few tenure-hostile boards hiring presidents and provosts who couldn't compete in the business world? If so, will the quirky form of competition in academia root these out, or is the corporate attitude reaching critical mass? What am I missing?

    Posted by Edward J. Lopez at 02:37 PM in Economics  ·  Comments (2)  ·  TrackBack (0)

    One More for the Congressional Price Gouging Caucus

    A news item:

    NEW YORK (Reuters)- Picasso's 1941 portrait of his mistress, "Dora Maar with cat," sold for an astounding $95 million at Sotheby's on Wednesday, becoming the second most expensive painting in auction history.

    The vibrant, large-scale work depicts Maar, the surrealist photographer Picasso was romantically involved with for a decade, seated in a chair with a small cat perched on the back.

    It had been expected to sell for upwards of $40 million, but the winning bid of $95,216,000, including commission, caught even Sotheby's officials by surprise.

    N.B. My point in this post and my previous post on the Congressional price gouging caucus is to ridicule the political vapors over increased gas prices. Readers should not interpret this post to mean that I am hostile to art nor should they take the previous post to mean I endorse animal cruelty. Doing so would be wrong on both counts.

    Posted by E. Frank Stephenson at 01:31 PM in Economics  ·  TrackBack (0)

    Prices, Growth, and China

    Don Boudreaux's nifty post about the pitfalls of GDP and similar statistics that are not derived from free market prices (prices emerging from voluntary exchange, secure property rights, ...) reminded me of a recent chart in the WSJ (no link; sub req).

    The chart (p.A1 on April 20) showed the quarterly change in China's GDP over the past 5 quarters. The growth rates were 9.9% (2005:Q1), 10.1% (2005:Q2), 9.8% (2005:Q3), 9.9% (2005:Q4), and 10.2% (2006:Q1). I was struck by how consistent the growth was--the growth rates of the five quarters fell within a narrow range of 0.4 percentage points. Though it is certainly possible that a country's GDP growth could be that smooth, my impressison was that U.S. GDP growth is more volatile.

    Instead of relying solely on my memory, I went to the BEA's website and found quarterly GDP growth rates since 1947. My recollection was correct, at least up until the last year or so. Prior to 2004, the smallest five quarter range for GDP growth was 2.2 percentage points (1983:Q2 to 1984:Q2 inclusive). However, from 2004:Q2 to 2005:Q2 (inclusive) U.S. GDP growth fell in a range of 0.7 percentage points. Since the U.S. economy has experienced a roughly similar period of stable growth, I suppose I should allow for the possibility that China's stable growth is legit. I can help but wonder, however, if it's an artifact of funny money prices or, even worse, cooked books for propaganda purposes.

    Posted by E. Frank Stephenson at 12:28 PM in Economics  ·  TrackBack (0)

    Better to Feel Good than to Do Good--Ethanol Edition

    From Alan Reynolds:

    It takes a lot of petroleum in the form of diesel fuel, fertilizer, plastic and pesticides to produce and distribute corn and turn it into moonshine -- about 7 barrels of oil to produce 8 barrels of corn-based ethanol. Making ethanol from sugar would be worse because formidable U.S. trade barriers push the cost of sugar far above the world price (making Brazil's ethanol industry irrelevant). Making ethanol from waste is hypothetical for now, as is the uncertain cost. Because ethanol can't flow through pipelines, it is twice as expensive as oil to transport -- by fuel-burning truck or rail.

    Unfortunately, there is much less energy in 8 gallons of ethanol than in the 7 gallons of gasoline-equivalent needed to produce it. The Energy Department estimates the highway mileage of a Nissan Titan drops from 18 mpg to 13 mpg by switching to E85 (85 percent ethanol).

    Actually, I probably should have called this post Baptists and bootleggers (a la Bruce Yandle) because the ethanol push is not just some feel good greenies. Some, perhaps even most, of the pro-ethanol move has been rent-seeking Iowa corn growers and ADM.

    Posted by E. Frank Stephenson at 11:51 AM in Economics  ·  TrackBack (0)

    Vincente Fox folds on drug decrim

    Why am I not surprised....
    Mexico's Fox backs down on drug law

    There's little detail in this early article about who said what to Fox and when, but these dots are not hard to connect.

    Posted by Edward J. Lopez at 02:32 AM in Economics  ·  TrackBack (0)

    I'm not being morbid...

    but it seems a lot of stories about death are catching my attention lately. Tiger Woods' father died from cancer on Wednesday. I know zero about golf and even less about professional sports in general, but from what I've heard Tiger's father at times "pushed him too hard," even while Tiger was growing up. I don't think I could overstate how influential my participation in sports (competitive soccer) was in forming my libertarianism. It was the persistence of coaches and parents who "pushed me too hard" who made me realize that individuals, not groups, have the capacity for greatness (I was far from great, but I got their point). If a group appears great, it is only because of the great individuals who comprise it. In sports, effort, preparation, and good decisions are generally rewarded; but sometimes they aren't and you have to learn to deal with that fact yourself instead of asking the referee to penalize your opponent. I could go on.

    2) Moussaoui was spared the death penalty. Peggy Noonan, who did this before, writes about the decision in a way that puzzles me. She wanted him to die, and the jury's decision was "a dizzy failure of nerve." Noonan also is author of a book on Pope John Paul II, who argued strongly that the need for capital punishment in modern societies, when life in prison is an alternative, is virtually nonexistent. She argues that the death penalty reflects society's view that the only just punishment for murder is killing the perpetrator. I think it's hard to argue that Moussaoui would not have embraced the death penalty as it would have made him a martyr to his peers, thus the decision to spare him is, in his mind, probably worse. He always seemed like someone who ascribed greater stature and influence to himself than was probably true (he and the shoe bomber were supposed to fly a fifth plane? Yeah, sure). At least now he can spend the rest of his life as a nobody.

    3) Brad mentioned earlier about the death of Galbraith on Saturday. It looks like I'm the first to blog about the passing of Louis Rukeyser. I can't say I'm very familiar with Rukeyser's work, though he did introduce me to the Austrian and German Historical schools of economics in a cassette tape series. Maybe that predisposes me to thinking he's a classical liberal; I could be wrong.
    The juxtaposition of these two popular economists is somewhat sobering. Like Brad, I heard reports from leftist news outlets of Galbraith as pretty much being a giant among economists, how he criticized the wealth gap and what not. It strikes me that, even less so than Tiger Woods or Peggy Noonan, economists or at least economic ideas have the potential to do great good or great harm to the world (maybe this is just hubris). Okay, whether my GE model converges toward steady state might not change much. But forceful, logical arguments that make the case for particular systems of governance; or that support or discourage the ability of free people to interact with one another in, yes, economic, profit-seeking relationships, can influence the structure and behavior of individuals in a society. It's refreshing to be involved in a discipline whose influence can lead to so much tremendous good in the world. The Scholastics and Adam Smith started what we take as inevitable economic progress, Rukeyser helped it along, and Galbraith was just a speedbump. What is sad, and what makes me want to be an even better teacher, is that Galbraith's and similar ideas are hailed by a huge number of people as superior even while, IMHO, they make the world an inferior place for the humans who inhabit it.

    Posted by Tim Shaughnessy at 01:26 AM in Economics  ·  TrackBack (0)

    May 03, 2006
    Tax Incidence for Dummies, Part Deux

    From a Reuters report:

    Thune said the energy legislation would suspend until September 30 the 18.4-cents-per-gallon retail gasoline tax. The measure would be aimed at helping consumers during the summer months, the heaviest driving season in the United States.

    However, it was not clear whether the White House would go along with a temporary suspension of the gasoline tax, which funds highway construction.

    To pay for the lost revenues, Thune said, the legislation "would suspend a number of tax credits and royalty waivers received by oil corporations."

    So the Capitol Hill chapter of Mensa has concocted a scheme to cut taxes levied on gas producers (though mostly shifted to consumers) while simultaneously increasing other taxes (or reducing tax credits) levied on oil producers. The two taxes may not operate on the same margins, but a good first guess is that the tax cut and the tax hike would roughly offset one another. If I'm right that there would be little net effect on gas prices, the policy lends credence to the notion that pols must be seen doing something regardless of what exactly they're doing. When market forces bring gas prices back down, the pols can then claim their policies worked even if the policies are contradictory bowls of economic mush.

    HT: James Taranto's "Best of the Web Today"

    Posted by E. Frank Stephenson at 01:02 PM in Economics  ·  TrackBack (0)

    Union Pacific Embargo

    Following up on Frank's post below, here in the DFW area we have plenty of spot shortages, MTBE tanks have to be scrubbed, and the public was never informed that you can't blend ethanol and gasoline in Iowa and ship it to Atlanta or DFW, the blending has to take place just before delivery of the gasoline to the station. Unfortunately, the switchover has not been very fun for those who actually have to implement the legislation that Congress and the President, in their prescient wisdom, pass.

    From OPIS:

    Ethanol marketers were not told how long the embargo Union Pacific placed on the Dallas-area Amber terminal is expected to last, but they have been told it will be in place as long as needed for the railroad to be able to manage the flow of ethanol to the location. Sources said that railcars were backed up for a mile or more going into the terminal located just north of Fort Worth.
    The change over to the ethanol mix might impose short-run price spikes and supply shortages which would be expected to work out over the next few weeks/months. On the other hand, if the logistics of ethanol blending are such that any returns to scale at the refiner level are essentially lost at the blending point, there might not be a reduction in price over the longer term.

    Posted by Craig Depken at 11:21 AM in Economics  ·  TrackBack (0)

    $100 is insulting?

    I am a big fan of mailbox money, especially if the money is removed from the clutches of the Federal government, therefore when the Republican Majority Leader of the House suggests that a $100 check in my mailbox would be insulting, I beg his pardon:

    Boehner told reporters Tuesday he considered the rebate "insulting" and said it would not solve motorists' problems. He said he received nothing but negative responses from constituents. "They thought it was stupid," said Boehner.
    $100 is less than 2 tanks of high-test for my 1988 MB roadster, but would contribute to my next digital camera. I wonder how much more of this we need until we are all voting "L" instead of "R" and "D".

    The insanity that is known as the Congressional Session gets even more bizarre as the House is evidently seriously considering an arguably hastily written federal law making price gouging illegal (more here, the 2005 bill, the 2006 bill). The story offers the following "justifications":

    About half of the states have some price gouging statutes, but enforcement and penalties vary widely. There is no federal law prohibiting price gouging nor agreement among the states on what constitutes price gouging [emphasis added].

    State attorneys general have lobbied for a federal price gouging law.

    "Nationally there is no common definition of price gouging," Arizona Attorney General Terry Goddard told a Senate hearing in November. He said some states have laws that apply only to emergencies, while others allow up to 20 percent price increases.

    The House bill requires the Federal Trade Commission to establish a definition of price gouging and imposes stiff civil and criminal penalties for violators who market gasoline, diesel fuel, crude oil and heating fuel.

    It seems that the worst federal laws come about when it is believed that the various states haven't homogenized their definitions/penalties sufficiently. The fact that the FTC hasn't come up with a working definition of price gouging in almost 100 years of existence doesn't seem to register with those on the Hill.

    I bet my students a full letter grade that they can't find a published definition of price gouging in an economics textbook. There might be one out there, but to date I have never had to pay up.

    Congress consistently passes bad legislation because (in the least) a) they think they are smarter (or more powerful) than the market, b) they subscribe to a political pragmatism that can be summed up as "any policy is better than no policy", and c) they incorrectly subscribe to a philosophy that a free society is consistent with an overarching government apparatus that will monitor the thousands of decisions of thousands of gasoline (and other) producers, retailers, and customers.

    I wouldn't mind a little mailbox money - and a corresponding reduction in federal expenditures - but I have a feeling Congress is too busy being insulted for me.

    Posted by Craig Depken at 11:06 AM in Economics  ·  TrackBack (0)

    Movie Time

    I showed my Comparative Systems students a couple movies at the end of the term this year, Good-Bye Lenin! and The Barbarian Invasions. On the final exam I asked the following question,

    In both Good Bye, Lenin! and The Barbarian Invasions, the sons must deal with the difficult situation of a dying parent. In Good Bye, Lenin! the son tries to comfort his mother by recreating the East German socialism that she so loved. In The Barbarian Invasions, the son ends up doing battle with a number of quasi-socialist economic/political institutions (socialized medicine, unions, drug prohibition, etc.) to make his father’s last days more peaceful. Compare and contrast these different views on the socialist society.

    One of my students (Jayme Lemke) wrote a particularly nice answer and I copy it (with permission) below the fold.

    Read More »

    Posted by Robert Lawson at 09:22 AM in Economics  ·  TrackBack (0)

    Gas Prices and Ethanol

    In a recent editorial the WSJ argued (sub req; excerpt via Lynne Kiesling):

    There's been unconscionable behavior all right, most of it on Capitol Hill. A decent portion of the latest run-up in gas prices -- and the entire cause of recent spot shortages -- is the direct result of the energy bill Congress passed last summer. That self-serving legislation handed Congress's friends in the ethanol lobby a mandate that forces drivers to use 7.5 billion gallons annually of that oxygenate by 2012.

    At the same time, Congress refused to provide liability protection to the makers of MTBE, a rival oxygenate getting hit with lawsuits. So MTBE makers are leaving the market in a rush, while overstretched ethanol producers (despite their promises) are in no way equipped to compensate for the loss of MTBE in the fuel supply. Ethanol is also difficult to ship and store outside of the Midwest, which is causing supply headaches and spot gas shortages along the East Coast and Texas.

    Sounds like a testable hypothesis so yours truly tracked down gas prices and states' distances from Iowa (measured state capital to state capital). Consistent with WSJ's argument about supply disruptions in Texas and the East, I included the 37 states lying east of an imaginary line extending from Texas to North Dakota.

    It seems the WSJ may be onto something*--the correlation between the change in gas prices over the March 25-April 25 period and the distance from Iowa is 0.65. States more distant from Iowa have experienced larger gas price increases over the past month.

    I then turned to regression analysis to estimate the magnitude of the effect--roughly 0.72 cents per additional 100 miles of distance from Iowa. For example, Atlanta is 971 miles from Des Moines so the estimate predicts GA gas should have increased about 7 cents per gallon more than IA gas. Turns out it did--GA gas prices went up 45 cents over the month while IA gas prices increased 38 cents.

    Bottom line: The grandstanding clowns in DC do indeed deserve some of the blame for the current gas price spike. But look again at the GA-IA comparison in the previous paragraph. Iowa's price hike is far larger than the extra bump that GA has gotten courtesy of the ethanol rent seekers. I, therefore, conclude that $70+ oil is more responsible for current gas prices than ethanol. Of course, our ethanol policy is inexcusable even if it isn't the primary culprit in the gas price increase.

    *See also this post in which Lynne Kiesling explains the economics of the ethanol/MTBE mess.

    Posted by E. Frank Stephenson at 12:20 AM in Economics  ·  TrackBack (0)

    May 02, 2006
    Somebody Needs a Better Marketing Plan

    Three colleagues and I went over to Panera for lunch today. When we returned to our vehicle after lunch, the windshield had a flyer for a new car title loan store. I'm just guessing here, but I doubt many Panera customers (or customers of the nearby Barnes&Noble and Pier One) are likely to be using the services of car title lenders. I bet the title company would gin up more customers at other stores such as the Kmart across the street.

    Posted by E. Frank Stephenson at 03:29 PM in Misc.  ·  TrackBack (0)

    Happy Belated May Day

    It wasn't until about 4:00 yesteday afternoon that I remembered that it was May Day. My my, how the world has changed! I remember vividly the May Day rallies at Ohio University in the 1980s complete with faculty wearing red armbands! Ah the nostalgia...

    Well the good folks at Catallarchy have taken the time to remember May Day properly.

    Posted by Robert Lawson at 01:46 PM in Economics  ·  TrackBack (0)

    Random economics links

    Here's some items I've been meaning to blog, culled from the growing pile of stuff on the work table in my office.

    * Richard Ebeling, of FEE and Hillsdale College, gave ten lectures on "Public Policy and the Liberal Ideal" at the Prague School of Economics last fall. You can listen to the lectures online, here.

    * Ted Frank (AEI, Overlawyered.com) and Martin Grace (Georgia State U., RiskProf) have an interesting paper on medical malpractice reform, blasting the "long line of faulty studies from [Americans for Insurance Reform] and its affiliate, the Center for Justice & Democracy (CJD), that have, unfortunately, insinuated themselves into and distorted the national debate."

    * In February the Tax Foundation recently released the 2006 version of its State Business Tax Climate Index. Their best state tax regime is Wyoming, followed by South Dakota, Alaska, Florida, and Nevada. The worst is New York, followed by (in ascending order) New Jersey, Rhode Island, Ohio, and Vermont. (Full-text PDF is here.)

    * A judicially-mandated increase in Arkansas's spending on public schools -- from an annual average of $7000 per student to $9000 -- is having predictable effects.

    * There's a self-identified libertarian on the Harvard economics faculty! Jeffrey Alan Miron is a visiting professor there, and has a blog, the earlier version of which was called "The Case for Small Government." On the older site you can find these very sensible remarks on oil prices and "gouging," from April 18.

    * For more reality-based commentary on gasoline prices and politics, read NCPA's Sterling Burnett (quoting Ben Stein, for good measure).

    * Finally, I recommend "Running on Empty? How Economic Freedom Affects Oil Supplies", a new paper from the Dallas Fed by Stephen Brown and Richard Alm. Here's the gist of it:
    "A large part of the world's oil reserves are outside the easy reach of free markets, with their incentives and disciplines. Oil prices are rising—not because the world is running out of oil but because the bulk of reserves are in countries where market incentives cannot work fully or in the hands of monopolists who may be exercising their power by restraining investment."

    More to come . . . .

    Posted by Mike DeBow at 12:21 PM  ·  TrackBack (0)

    Market entry decision c. 1906

    The most odious barrier to entry is the government bureaucrat who decides "what is best" for the consumer. There might be some role for "oversight" (libertarian readers relax), but definitely not the type of entry/exit decisions that are made by those that are likely unqualified by definition.

    The May 2, 1906 NYT has a prime example of what I am talking about:

    Controller Metz met Borough Presidents Ahearn of Manhattan and Coler of Brooklyn at the Controller's office yesterday and heard...the methods of the Atlantic Telephone Company, which is seeking a franchise to do business in the city.

    Controller Metz said after the hearing that he had not been influenced by the proposal of the company to pay the city $3,000,000 in installments for a twenty five-year franchise, and to give the city its own telephone service free.

    "If you can show me," he said as the hearing concluded," that two telephone systems are going to benefit the people of New York, I would vote for the new franchise, even if the city were not to get a cent, but I have grave doubt as to the good a second telephone system would do."

    So much is wrong with the last sentence. However, it reminds me of other famous predictions about the markets for cell phones and personal computes.

    Posted by Craig Depken at 11:39 AM in Economics  ·  TrackBack (0)

    Marriage reform c. 1906

    From the May 2, 1906 NYT:

    ALBANY - By a vote of 27 to 19 the Senate to-day passed Senator Cobb's bill providing that marriages in this State shall be illegal unless a license has first been secured from the regularly constituted authorities.

    There is no other explanation for why the New York state government felt obligated to interject itself into the marriage business - whether it was for revenue enhancement or moral oversight.

    Posted by Craig Depken at 11:32 AM in Culture  ·  TrackBack (0)

    "Social Security, Medicare trust funds sink"

    That's the headline from yesterday's USA Today. Here's how the story opens:

    The trustees for the government's two biggest benefit programs said Monday that the trust fund for Social Security will be depleted in 2040, a year earlier than expected, while Medicare will exhaust its trust fund just 12 years from now.
    The annual report showed deterioration in the financial condition of both programs although the problems in Medicare were depicted as far more serious because of the skyrocketing costs for health care.

    Just Republican spin, declares Senate Minority Leader Harry Reid (D-Nev.). Don't worry, be happy:

    Today’s report confirms that, despite White House scare tactics, Social Security remains sound for decades to come. The real threat to Social Security comes from Republicans, most of whom support and voted for privatizing Social Security. Instead of working to dismantle Social Security, we should join together to strengthen both Social Security and Medicare to build a secure retirement for all Americans.

    What's to worry about, with smart guys like Harry Reid taking care of your retirement and old-age health care needs?

    Oh, yeah.

    Posted by Mike DeBow at 11:30 AM in Economics  ·  TrackBack (0)

    May 01, 2006
    Mexico decriminalizes small quantity drug possession
    The bill legalizes possession of small amounts of heroin, cocaine, ecstasy and marijuana.

    "No charges will be brought against ... addicts or consumers who are found in possession of any narcotic for personal use," the bill reads.

    This is a huge step. The news article is from last Friday and the story continues to develop.

    Here's an interesting if topical comparison of different countries' policies.

    Posted by Edward J. Lopez at 03:32 PM  ·  Comments (0)  ·  TrackBack (0)

    Watch a Pulitzer in the Making

    As the drug war and immigration debates heat up, the Fort Worth Star Telegram gets entrepreneurial.

    Amid protests over illegal immigration and heated debates in Congress, the Star-Telegram decided to get a firsthand look at life along the border that divides us.

    Austin bureau chief Jay Root and battle-tested photographer Tom Pennington are encountering everyone from illegal immigrants and coyotes to border patrol officers as they cross back and forth from the U.S. to Mexico.

    Read their daily dispatches, and view audio and video from their journey only at www.star-telegram.com.

    From Brownsville to Tijuana, you can follow Root and Pennington's journey through a series of cool maps, cogent photos, and diary-style reports of the people and places they encounter. View the report here.

    The journalistic duo's most recent report is from Boquillas, Mexico. Boquillas is culturally and economically part of the greater Big Bend area (which, for some strange and tacit reasons, is one of my favorite places on earth). Boquillas is isolated from Mexico and was connected to the world only through an informal border crossing that supported the local economy (including tourism) that knows no political boundary. I've paid $1 each way to be rowed across the narrow river, notwithstanding a free rocky crossing by foot yards away. You used to be able to pay $1 to ride an ass up the hill and into town from the crossing. Since closing the border after 9-11, Boquillas has virtually disappeared.

    For its grander appeal, this journalistic project has much to offer and deserves due attention, IMHO. Hat tip, my buddy Steve Dieterichs.

    Posted by Edward J. Lopez at 02:56 PM in Culture  ·  Comments (2)  ·  TrackBack (0)

    McCain: "I would rather have a clean government than one where quote First Amendment rights are being respected"

    Yup, that's what Senator McCain actually said, last Friday on Imus. Here is the full quote:

    "[T]alking about campaign finance reform....I know that money corrupts....I would rather have a clean government than one where quote First Amendment rights are being respected, that has become corrupt. If I had my choice, I'd rather have the clean government."

    You can listen to the full exchange here.

    I wonder if he knows that, as President, he'll have to take an oath to protect and defend the Constitution. Anyway, at least he admits that McCain-Feingold hasn't worked: "we didn't complete the job."

    Posted by Brad Smith at 12:52 PM in Politics  ·  TrackBack (0)

    Galbraith dies

    I'm surprised none of our blog's economists have commented on the death of John Kenneth Galbraith.

    Gotta love the New York Times: they attribute the decline of Galbraith's ideas on economics not to the weakness of the ideas, but to Galbraith's failure to "develop[] disciples willing and able to prove them with mathematical models." Why would that be?

    Wrong-headed as many of Galbraith's ideas were, he deserves credit as a prolific writer and as a passionate, if misguided, advocate for economics that would benefit the poor. R.I.P.

    Posted by Brad Smith at 11:47 AM in Economics  ·  TrackBack (0)

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