Division of Labour: August 2006 Archives
August 31, 2006
I'm pleased to announce that my former colleague Wilson Mixon has agreed to join our little corner of the blogosphere. Many readers and co-bloggers know Wilson from his many years of involvement with APEE.
Also on the administrative front, I'll be adding Greg Mankiw's blog to our blogroll.
Baseball Postseason Probabilities
Baseball Prospectus has a nifty Monte Carlo simulation of baseball teams' probability of making the playoffs. Of the DOL gang, it looks like Larry will have the best oppotunity to see playoff baseball--the Cards are estimated to have an 80% chance of making the playoffs. Bob's Reds rate about 29%; Craig and I are pretty much out of luck--the Rangers have a 2.5% chance and the Braves a 3.5% chance. I think BP repeats the simulation daily to reflect games of the previous evening.
August 30, 2006
Korean grocers sue Young, Wal-Mart
A California Korean grocers group is suing former U.N. Ambassador Andrew Young and Wal-Mart Stores Inc., alleging libel over Young's derogatory comments about small grocery stores in urban communities.
Young resigned as head of a Wal-Mart advocacy group Aug. 18 after saying Jewish, Korean and Arab grocers "ripped off" blacks by overcharging them for "stale bread and bad meat and wilted vegetables."
The suit, filed in Los Angeles County Superior Court last week by Paul Park, the president of the California Korean American Grocery Retailer Association and his group, seeks $7.5 million in general and special damages and an unspecified amount in punitive damages.
Young's comments were not only false, according to the suit, but they injured the reputations of Korean American grocers, hurt their sales and therefore also damaged the association.
Eugene Volokh, a law professor at the University of California, Los Angeles and an expert in libel law, said the plaintiffs are not likely to succeed.
"As a general matter, you can sue if someone makes false statements about you personally," Volokh said.
"You can sue if someone makes false statements about a small group of people, including you," he continued. "But when statements are made about a very large group, no particular member of that group can sue for libel."
Wal-Mart didn't make the statement, Andy Young did. I'm wondering if this is really about taking a crack at Wal-Mart's deep pockets.
Sonny Perdue Does the SAT Score Spin
SAT scores have been released; Georgia's score fell 3 points but moved up from 50th to 46th in the rankings.
Here is Gov. Perdue's policy advisor when scores were announced in 2005 (quoted from AJC via Lex/Nex):
The good news is that Georgia's SAT scores continue to improve across the board under Gov. Sonny Perdue's leadership. Our average score went up another six points this year, with three-point gains on both the math and verbal tests. This improvement exceeded the national average.
The bad news is that Georgia was so far behind other states when Perdue took office that our gains have not yet translated into a substantial jump in the national rankings. Decades of bureaucratic mandates and micromanagement of our education system by Democratic regimes led us off a cliff. It's going to take some time to climb back up the mountain.
The governor's philosophy has always been that if we do the right things to raise scores, then the ranking will take care of itself. This year's scores prove that his strategy of raising awareness of the importance of the test while providing the resources for adequate test preparation has us on the right track. Granted, our scores aren't where the governor wants them to be nor where the public expects them to be. But this year's improvement serves as positive reinforcement that the measures that we have taken are paying off.
Now here's Gov. Perdue commenting on the 2006 scores:
“I’m extremely proud of our progress this year, but rest assured, we will not stop working until Georgia is at the top of the list in SAT scores,” said Governor Sonny Perdue. “Georgia’s improving ranking paints a more accurate picture to the global business community of the strength and quality of Georgia’s students. It demonstrates that our students are working harder, achieving more and becoming better prepared for their futures.”
Notice this year's spin is all about the ranking with no mention of the scores. Last year, when scores were up but the ranking was not, the spin was all about the scores. To be fair, the SAT has changed this year so that may sway the scores a bit.
Posted by E. Frank Stephenson at 12:50 PM
Robert Samuelson invites Congressional Democrats to put-up-or-shut-up regarding Wal-Mart:
"Congress should just buy the company and then legislate good behavior. Wal-Mart executives 'talk about paying [workers] $10 an hour,' Sen. Joseph Biden told a rally in Iowa, according to the Times. 'How can you live a middle-class life on that?'
"Well, if $10 is too little, the government could order the Department of Wal-Mart to pay more. How about $15 or $20? Similarly, if Wal-Mart's health insurance is inadequate, Congress could command more coverage."
Other recent defenses of the company include Rich Lowry and Jonah Goldberg on NRO; and Michael Strong on Tech Central Station. Strong roughly estimates that Wal-Mart may be "single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year."
(Just after I posted this, I noticed that Frank had already highlighted Strong's article. This additional nod shouldn't hurt, though.)
Update: One more -- Richard Vedder and Bryan O'Keefe in The Washington Times: "Take Mr. Biden's comments. Contrary to his claims, there is enormous economic evidence that Wal-Mart's has helped poor and middle class consumers--in fact, more than anybody else. Our own data analysis shows Wal-Mart is concentrated primarily in smaller, rural counties with a per capita income far lower than other retailers, like Costco. And, unlike the picture painted by labor activists, when the Wal-Mart moves in, good things happen. Looking at 25 small towns where Wal-Mart opened stores in 2002, we found employment growth was much stronger in 'Wal-Mart communities' than in other areas.
"Other academics have reached similar conclusions about Wal-Mart's positive effects for the poor and middle class. University of Missouri economist Emek Basker shows Wal-Mart's presence tends to lower prices by varying amounts, perhaps nearly 10 percent in the long run.
"Respected Massachusetts Institute of Technology economist Jerry Hausman argues that consumer welfare gains are even larger than those estimated by Mr. Basker, probably in excess of 20 percent of sales."
Here's some more good news: Vedder and O'Keefe have a book forthcoming from AEI, titled The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy.
Cornell's Football Schedule c. 1906The August 30, 1906 NYT announces Cornell's football schedule:
There aren't a lot of 21st century football powerhouses on this list, but then we are talking about 1906. At the time many of the so-called Northeastern Independents were at or near the pinnacle of football prowess.*
How did the Big Red fare? Here are the season-end results:
date visitor visitscore home homescore 9/29/1906 Colgate 0 Cornell 0 10/3/1906 Hamilton 0 Cornell 21 10/6/1906 Oberlin 5 Cornell 25 10/10/1906 Niagara 6 Cornell 23 10/13/1906 Bucknell 6 Cornell 24 10/20/1906 Bowdoin 0 Cornell 72 10/27/1906 Princeton 14 Cornell 5 11/3/1906 Pittsburgh 0 Cornell 23 11/10/1906 Holy Cross 6 Cornell 16 11/17/1906 Swarthmore 0 Cornell 28 11/29/1906 Cornell 0 Pennsylvania 0Cornell finished the season with a 8-1-2 record, scoring 237 points to its opponents' 37. The Wilson retro-rating system puts Cornell fifth in the country after Yale (#1), Princeton, Harvard, and Penn State.
Out of 64 teams playing in 1906, the Northeast Independents (UMass, Holy Cross, Amherst, Williams, Dartmouth, Army, Colgate, Brown, Syracuse, Cornell, Harvard, and Yale) had an average Wilson retro-rating of 692 versus an average rating of 519 amongst the 52 other teams (statistically different with P=0.001).In 1906, the average retro-rating rank amongst the Northeast Indpendents was 17 with all but one (UMass) above the median rating.
* My original language was unintentionally misleading: "There aren't a lot of household names on this list." I was referring to the football dimension and not general name recognition. HT: Co-blogger Larry White. Larry also points out that "Western University of Pennsylvania...is now known as the University of Pittsburgh," which the historical score data reflects.
...for the ease of the masters.
The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or more properly speaking, for the ease of the masters.
Posted by Robert Lawson at 08:59 AM
August 29, 2006
From this TCS Daily article:
Whether we handle WalMart and the attendant issues as intelligent adults, capable of reasoning, or we do so as whining three-year-olds with all the attendant knowledge of incentives, utopian wishes and economic consequences such a three-year-old might possess is, indeed, one of the important questions facing the country.
The Duke Rape Case Fraud
Stuart Taylor has this excellent column at Slate, on the alleged - and it now appears almost certainly false - rape of a stripper by members of the Duke Lacrosse team. It's a story of dishonest, politically ambitious prosecutors; crooked cops bent on making the evidence fit the crime, ideologically driven academics, and mostly, the shameless, ideologically charged reporting of America's most influential newspaper. It's long, but well worth a read - a real life Bonfire of the Vanities.
Richard Vedder blogs (hat tip to E. Frank):
When asked why [university faculty] teach so little, we reply "teaching is only a small part of our duties." But who decided that? The donors to universities? State legislatures? No. The universities themselves have decided to downplay instruction in order to do what the faculty wants ….
As my former colleague Dwight Lee has been known to say, if you want to know for whose benefit the universities are run, observe who gets the best parking spaces. (Not the students but the administrators and faculty.) At Wal-Mart, by contrast, they ask the employees to park away from the building.
Which "world issues," exactly?
I don't really know what this means, about CNN.com visitors or whatever, but the "QuickVote" on CNN.com's homepage has the following question:
Who would win a debate on world issues between President Bush and Iranian President Ahmadinejad?
Results as of 10:45am are
Bush 36% 244 votes
Apparently Iran's prez wants to debate W, "so Iran can voice its point of view on how to end world predicaments." I'll just take a stab at this, but I'm betting that, from Mahmoud's point of view, the primary way to end all the world's predicaments is to stiff-arm the residents of a certain Middle Eastern Jewish state into the Mediterranean.
Act locally, think globally: Shop Wal-Mart
So says Michael Strong. An excerpt about Wal-Mart's effect on reducing poverty in China:
Wal-Mart might well be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year.
There are estimates that 70 percent of Wal-Mart's products are made in China. One writer vividly suggests that "One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market."  Even without considering the $263 billion in consumer savings that Wal-Mart provides for low-income Americans, or the millions lifted out of poverty by Wal-Mart in other developing nations, it is unlikely that there is any single organization on the planet that alleviates poverty so effectively for so many people. Moreover, insofar as China's rapid manufacturing growth has been associated with a decline in its status as a global arms dealer, Wal-Mart has also done more than its share in contributing to global peace.
How can this be, given the vast and growing literature documenting Wal-Mart's faults? We have seen workers in the factories of Wal-Mart's suppliers complain on tape about being forced to work long hours under terrible conditions. Certainly no one should be forced at any workplace. And yet even articles documenting Wal-Mart's faults often mention other facts that ought to be considered before coming to too quick a judgment concerning the overall impact of the corporation. In a Washington Post story titled "Chinese Workers Pay for Wal-Mart's Low Prices," documenting abuses of workers at Wal-Mart suppliers in China, the authors point out that:
"China is the most populous country, with 1.3 billion people, most still poor enough to willingly move hundreds of miles from home for jobs that would be shunned by anyone with better prospects."
If we care about alleviating global poverty we need to take this fact seriously. Without Wal-Mart, about half a million of these people each year would be stuck in rural poverty that is, for most of them, far worse than sweatshop labor.
HT: Wilson Mixon
On spelling reform c. 1906
Filed in the things don't change drawer is the 1906 movement to reform spelling in American. Teddy Roosevelt passed an
In the August 29, 1906 NYT is an article announcing that Webster's Dictionary would not include the new spellings simply because Roosevelt said so. The company had this to say:
"English is a lively enough language without a wholesale change such as that which is now being agitated. Snipped particles, like `stopt' for stopped are particularly undesirable, and hideous, and will not come into good use for a long time."How long? Perhaps until text messaging? What was that, 2003 or 2004?
In another article there is concern that Congress will try to block the President's move by requiring that Congressional documents be printed using standard English with the President's/Executive branch documents being printed in reformed English. This leads to the following concern:
[I]t may easily produce a vexatious mix-up in requiring two sets of employes at the printing office. It will be practically impossible for one set of men to follow both styles alternately without making frequent blunders in each, and two sets of men means two sets of salaries.
As an aside, you might notice that there seem to be typos in the 1906 articles I pull from. There might be some typos, but fortunately for me many of what seem to be typos are accurate. For example, employe and to-day and per-cent are typed as they were spelled in 1905/1906. Thus, it is apparent that English does evolve and "reform" although it is interesting that the President of the United States would attempt such a reform unilaterally (consider if Bush tried to change nuclear to nucular and strategy to strategery? Although some of these Bushisms are already creeping into the language even if only in jest.)
The simplified spelling movement is still rolling along.
Heck, with my bad primary education you would think I'd be a life-time member.
On disaster's aftermath c. 1906
An amazing letter to the editor in the August 29, 1906 NYT:
We had an earthquake that scared us all up to our full capacity to be frightened, followed by a conflagration which devoured all the business section and about one half the resident section, reckoning in point of population, (not area.) The loss of life will never be known, I might say three thousand, or again five thousand. Each would be simply a guess. The property loss likewise may have been $500,000,000 or again $700,000,000. I don't know, nor does any one else. Discomforts were plenty; actual suffering not at all. My family and I dined off a can of corn, eaten cold out of the can, this being our sole dish the evening after the earthquake...I carried wood and water, cooked in the streets, stood in the bread line for four hours, and with thankful heart received, in the shape of two hard-boiled eggs, my share of the millions the country at large had contributed.
Wow. And this not five months after the SF earthquake. Something to think about amidst the carping sure to fill the airwaves today and the rest of the week.
Fox ran a special report on the cost of college Sunday evening. Newt Gingrich was the host and it featured economists Richard Vedder (read his take on the program here) and James Heckman. Although the show raised some good points (e.g., the mandatory fees racket for sports and student clubs, the possibility that government subsidies are actually driving up college costs, the use of TAs instead of professors to teach classes at research schools, and the extravagent spending on things like climbing walls that are not related to instruction), I found it generally disappointing. Discussion of the good points was mostly superficial in order to focus on the anecdotal examples at the core of the program.
Two especially maddening points:
1. High and/or rising costs were repeatedly cited, but it was unclear whether the figures were sticker prices or prices net of various forms of financial aid. (I suspect the former but it was not clear.) There's a big difference since many colleges discount 40% or more (on average, not for every student) off of the sticker prices. Would one reach the same conclusion that college is expensive and getting more so? Probably, but either way it's more appropriate to use the net number which more closely corresponds to what students actually pay.
I though the show was on sounder ground when it pointed out that colleges' price discrimination regime was premised on requiring students to provide detailed family financial information via FAFSA. The form is required of students seeking federal aid (e.g., Pell Grants) but is it also required of students seeking only institutionally funded aid? In a related vein, how much of the rising cost of college can be traced back to mandates from accrediting agencies or government?
2. One of the students profiled in the show was a young woman from New York. Her family claimed it would be unable to afford college even though it had a family income of $135k. Sure NY is an expensive place to live and a tax hell, but there was no evidence that the family had done any substantial saving in anticipation of the daughter going to college or that she had considering more than the two colleges (UMass Amherst and SUNY-Albany) discussed in the program. I found this student's situation to be an unconvincing example of difficulty affording college and found myself muttering "cry me a river" during most of her portion of the program.
August 28, 2006
The Most Frequent Contributors to Top Economics Journals
From an interesting article in the most recent Journal of Economics and Finance.*
Who were the ten most published authors from 1954 to 2003 in American Economic Review, Econometrica, International Economic Review, Journal of Economic Theory, Journal of Political Economy, Quarterly Journal of Economics, Review of Economics and Statistics, and Review of Economic Studies?
Answers below the fold.
Read More »
Rank Author Number of Appearances
* Jean L. Heck and Peter A. Zaleski, "The Most Frequent Contributors to the Elite Economics Journals: Half Century Contributions to the 'Blue Ribbon Eight'," Journal of Economics and Finance 30, no. 1 (Spring): 1-37.
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Vintage turf battles
To put it mildly, the vintage base ball community has been fairly cold to the idea of the new Vintage Base Ball Federation previously blogged about my Mike. (A taste of the responses I've seen floating around the listservs is pasted below the fold.)
I have nothing against people making money with vintage base ball. Doing well and doing good are not incompatible. Also, I have nothing against marketing the game aggressively. My first reaction was, "Great, vintage base ball is going to get some attention here."
But after reading more about it, my thinking was, "Oh no..."
I have a problem with the idea of using "hyrbid" rules from the 1860s to the 1880s. In the last decade the vintage base ball movement has worked very hard to research and portray different time periods as accurately as possible. To combine some aspects of early 1860s base ball (for example, a ball caught on one bounce is an out) with 1880s base ball (for example, the use of gloves) is simply inaccurate.
Of secondary concern, I am not thrilled with the general thrust toward more aggressive competitiveness in vintage base ball. Winning is good. But one of the main attractions of vintage base ball for both players and fans is that it eschews the worst aspects of modern life. There are few insults in vintage base ball worse than calling someone a "softballer". I realize that in real life the relatively genteel game of the 1850s gave way to the more aggressive game of the 1880s so it does matter what era you're trying to recreate. But I do hope the game remains a game for people interested at least as much in history and accuracy as in winning.
Read More »
While I haven't time at the moment for a lengthy reply, I want to add
I've also stayed quiet the last couple days over this just to see
This will give the public an inaccurate view of 19th century base
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Buy APEE stuff!
August 27, 2006
On monopoly c. 1906
Some disappointing language from the August 27, 1906 NYT:
The economic effect of concentration of ownership is even more beneficial than the industrial. A runaway market for products is as harmful as a runaway market for stocks, and similarly productive of paralysis from exhaustion after the debauch. The greatest restraining factor in the iron market at present is the influence of the leading interest, which is supplying its customers at schedule rates, and discouraging exaction of premiums by others. Yet sentiment is alleged to be all against the trusts. Is it so in fact, or in restless imaginations?
On immigration c. 1906
From the August 27, 1906 NYT:
There is considerable agitation at the present for the radical restriction of immigration, actuated, as freely admitted, by a desire to thwart the demoralizing influence of foreign labor in the commercial and manufacturing centres of the country....The permanent benefits derived by this country from foreign labor, foreign brains, and foreign capital, aside from the patriotic devotion displayed by foreign-born citizens of this country in times of peril, must certainly be fresh in the memory of those who now seek the exclusion of their brethren. To whom do you owe the Monitor, and can you soon forget the Irish Brigade at Fredericksburg?
August 26, 2006
Musings of the Gentle Cynic c. 1906
From the August 26, 1906 NYT:
On American Football c. 1906
The August 26, 1906 NYT has a lengthy interview with "one of the most prominent men interested in football at West point," who otherwise remains unnamed, concerning the new rules put in place for the 1906 season (set to start in four weeks). Here are a few snippets:
The forward pass, which was advanced as so potent a factor in opening up the play, I do not believe will be very prominent. The pass is too uncertain, requires too much accuracy in handling the ball, something that was extremely difficult under the old rules to make it of great value. Its moral effect, in keeping the opposing side on the qui vive of expectancy watching for its appearance, will be of greater value than the pass itself. I believe you will see few passes and unimportant gains made with them when made....
Eulogy for Maynard Ferguson
This came to me from my friend, Mike Stroup, and I reprint with permission:
Some of us follow the careers of fantastic athletes. Others admire movie superstars. “Different” people like me admire incredible jazz musicians. Maynard Ferguson, jazz trumpeter extraordinaire, died this week. He was 78.
August 25, 2006
My Turn to Whack Gladwell
Don Boudreaux and others (see his post for links) are chewing on Malcolm Gladwell's assertion that our system of employer-provided medical insurance hurts our international competitiveness. Don raises several objections; I offer another.
Studies show that employees bear most of the burden of employer-provided benefits. Hence if government health care somehow relieved businesses of providing medical insurance for their employees (ignoring for the moment the taxation necessary to fund the program), cash compensation would rise and there would be little change in total labor cost and firms' "competitiveness."
A New Wave or Political Forecasting?
Keep your eye on this site, set for public launch soon. Disclosure: I am an advisor to the Exchange.
Posted by Brad Smith at 04:02 PM
Incentives Matter: Vegas Casino Workers Edition
Excerpts from a news item via Drudge:
A restructuring of how Wynn Las Vegas manages its casino soon will leave many dealers there a little lighter in the wallet.
Starting Sept. 1, table game supervisors will share in the tips earned by dealers, a move gaming industry insiders said is unheard of along the Strip.
A widening disparity between the wages earned by dealers and casino floor supervisors caused the Strip casino to alter the structure of its table games division, Pascal said.
Starting next week, pit bosses and floor supervisors will be known as "casino service team leaders." Their responsibilities will cover the operations of specific table games, including game protection and customer service. The new plan will be phased in over several weeks.
Pascal said that Wynn Las Vegas dealers are the highest- paid dealers in the city, averaging about $100,000 per year in salary and tip earnings. But the employees supervising dealers average about $60,000 a year in salary, Pascal said.
"Because of our property, that disparity has gotten wider," Pascal said, citing Wynn's emphasis on high-end play as one reason its dealers' tokes are larger than most Strip properties. "There was no incentive in the division to advance and grow.
"Everybody wanted to become dealers," he added.
Dealers who split tips by shifts now will share those tokes with team leaders and supervisors, who also will receive a boost in base salary.
The result, Pascal said, will be dealers earning an average of $90,000 annually while supervisors will be paid $95,000.
Proudly coming in last
Whew, not a good week for my adopted home state of Louisiana. One story that you have probably heard, and two that you probably haven't.
1) Re-elected New Orleans mayor Ray Nagin, when asked why his city still hasn't been cleaned up (an Atlanta Fed publication says that 86% of debris caused by the storm on private property still remains) said "You guys in New York can’t get a hole in the ground fixed and it’s five years later. So let’s be fair." Which reminds me of just about every other time I've heard pleas for fairness in public debate. When all outcomes of a group are equal to the worst performing member of that group, it is labeled "fair." It's been my experience that comparing your position with others, instead of with a goal you set for yourself, usually is stifling. Instead of figuring out how to fix his city, Nagin finds a worse situation, points to it, which enables him to continue to sit around.
2) A white school bus driver in Coushatta made nine black children sit in the back of the bus, saying that the front of the bus was for white kids. I guess you can take solace in the fact that instances like this are so rare that, when they do happen, they make the news. Wonder if the driver has a Confederate flag flying at home. I know, I know, the South didn't fight to keep slavery. State's rights and such, yup. And Al Qaeda hates us because we have troops in Saudi Arabia, not because we're not Muslims.
3) And, rounding out why you shouldn't want to move here (thanks, Baton Rouge pols!), Louisiana came in not 48th, not 49th, but dead last in a Forbes ranking of the best states for business. Virginia came in first. Too bad there isn't a hole in New York we can blame this on. Our neighbor, Texas, is number two on the list, so you'd think some spillover effects of good governance might occur, but I've noticed that Louisianans like corrupt politicians because it gives them something to laugh at. Like when you voted for the loser for prom king because you wanted to laugh at me! er, I mean him.
Eating Crow c. 1906
From the August 25, 1906 NYT:
Judge James Nixon of the Americus City Court and a former member of the Georgia Legislature ate broiled crow to-day to settle an election wager which he made with Judge Paschal.
I wonder how the political discourse would change if we could go back to having our esteemed leaders literally eat crow.
College vs. Diapers?
This Chicago Trib story reports that:
Couples will decide to have smaller families, he [Mayor Daley] said, if they cannot afford to send all of their children to college.
Hmmm. Perhaps some will make the reproductive decision on this margin. My thoughts center more on the cell phones, designer clothes, first cars, proms, and who knows what else, that my girls will cost me long before college enters the picture.
The reporter lets the cat out of the bag in the second full paragraph of the story (tsk, tsk, tsk):
And if the federal government doesn't address the problem, he said, the United States will be unable to compete in the global marketplace.
Riiiight...the federal government needs to address the "problem." Got it.
Good strategy or shakedown?
I am not an expert on Wal-Mart, I prefer Target, but this fastblast struck me as either brilliant strategy or the response to a previous shakedown.
In an unprecedented push, Wal-Mart Stores has hired a gay-marketing shop, joined the National Gay & Lesbian Chamber of Commerce and begun discussions with activist groups about extending domestic-partnership benefits to its employees.
The move might (ought to?) be a net positive benefit, but in today's world one wonders how many decisions are being made in the second, third, fourth best world. On the other hand, WalMart is down only a penny this morning, which according to the ocular estimator version of the event study doesn't seem like much.
What's good for astronomers is good for economists?
Now that the astronomers have purged Pluto from the planetary club - shock to the astrologers, I am sure - I wonder what would be purged from economics if it were put to a vote?
That's my short list after fifteen seconds of thought.
The Vintage Base Ball Federation (VBBF) was officially launched yesterday.
Congratulations, Jim, and good luck.
Since several of the boys here at DoL are VBB participants, I thought I would blog this up.
(Full disclosure: Jim B has been very supportive of my run for Governor of NC, and has agreed to write the foreward for the resulting book. He is a big believer in participant observation, which he is certainly good at himself. Now, I'm not saying he would VOTE for me; he just loves encouraging other people to do weird stuff. I am going to have to work to make that book even half as good as either Ball Four or Foul Ball. And, I was using the latter book in class; a very fine textbook on local land use from a public policy perspective)
(Nod to my man Martin, who is complicit in nearly everything)
August 24, 2006
CARTERSVILLE — Despite the successes of 2006, economic development professionals say improved business incentives are needed for Georgia to remain competitive at attracting new jobs and investment.
They pitched their wish list Wednesday to a business incentives study committee for the state House of Representatives at the first of several meetings the committee has planned to gather ideas for the upcoming legislative session.
Topping the list were requests to expand existing tax breaks and increase the available funding of discretionary incentives — or grants and loans the state can offer for site preparation or other project costs for a new or expanding business.
Cullen Larson, executive director of the Georgia Economic Developers Association, brought suggestions such as allowing job tax credits and other types of tax credits to be applied toward a company’s payroll taxes. The credits now can be applied only to corporate income taxes, an area where some companies have no tax obligation or a tax obligation too small for the tax credit to be beneficial.
Hey, how about some tax credits for me? After all, I owe BOTH payroll and income taxes. Kidding aside, the last thing we need more tax credits to complicate the tax code and reward politically favored behavior. And it is especially perverse for an existing business to have some of its tax dollars go to subsidize a potential competitor.
Assorted tax credits, grants, and loans aren't the only schemes being used here. One of the newest "economic development" rackets in Georgia is Tax Allocation Districts (TADs)--developers get their taxes frozen at the value of the property at the beginning of a project because the incremental increases in taxes that would come from rising property values are rebated back to cover developers' construction costs. (Background here, albeit from a pro-TAD perspective.) But I shouldn't be so dismissive--my better two-thirds and I are thinking of adding a screen porch and outdoor fireplace to the McMansion. Maybe we should get our house declared a TAD.
Put US aircraft to better use
This looks to me like an improvement over current US policies in Iraq ...
An Answer for Don Boudreaux
Don asks, "Why do so many people who weigh in on this issue make such fantastically illogical "arguments" in favor of raising the minimum wage?"
Answer: They have to resort to illogical "arguments" because, based on available evidence* (e.g., here), there are no logical arguments in favor of higher minimum wages. Of course, Don's well aware of this; I'm sure his question was merely rhetorical.
*Moreover, even if the evidence suggested that higher minimum wages helped poor people, such laws would be an affront to individual liberty.
Once More on Medical Bills and Bankruptcy
In previous posts (e.g., here), I've expressed doubt that half of bankruptcies are caused by medical bills. A new study from AEI finds that "nearly 27 percent of filings are a consequence of primarily medical debt, while in approximately 36 percent of cases medical debts co-exist with primarily credit card debts."
Hal Varian on Gas Prices
THE recent gyrations in oil prices offer a textbook illustration of how financial markets and commodity markets interact.
Oil prices are notoriously volatile, particularly when times are tense in oil-producing countries — just about all the time these days. So when BP announced this month that it might have to suspend as much as 8 percent of the nation’s oil production because of corrosion in pipes on the North Slope of Alaska, the price of crude oil immediately shot up by 3 percent and wholesale gasoline prices simultaneously increased by about 2 percent.
But why? Even if it will cost more to produce gasoline in the future, gasoline being sold today was made with cheaper oil. This must be a rip-off, right?
Actually, no. The reason behind the quick price change is a phenomenon known as storage arbitrage.
Incentives Matter: Gas Prices and School Bus Ridership Edition
With gas prices hovering around $3 per gallon, more parents are sending their kids to school on the bus this fall, and school districts across the nation have noticed the increase in ridership.
"The more the prices go up, the less riders get to school on their own and they go with our buses," said Doug Geller, assistant director of transportation for the Clark County School District in Las Vegas.
In Las Vegas, ridership has risen to about 45 percent of the district's more than 320,000 students.
Similar story here.
August 23, 2006
From Forbes.com a list of the drunkest cities in the country, although dictionary.com has no entry for the word "drunkest."
I suppose Forbes means the cities with the most drunk populations - can a city be drunk?
Here's the top five:
Party Schools c. 1906
As a follow up on Frank's post concerning party schools, I wanted to mention my pride that my alma mater (UGA) is gaining on the party school dimension even as we gain on the academic and intercollegiate football dimensions. However, I not the considerable inflation in drink specials. In the late 80s and early 90s the drink specials ranged from penny drinks through nickels and quarters.
A little tidbit from the August 23, 1906 NYT suggests that Princeton might have been near the top of the list of party schools 100 years ago:
The Woman's Christian Temperance Union has taken a step in the right direction in its decision to attempt the reform of the students of Princeton University...It is well known that smoking, which I believe is the more prevalent of the vices mentioned, retards and stunts the growth, and may very possibly be responsible for the lack of athletic supremacy referred to.
Appearance vs. Reality c. 1906
From the August 23, 1906 NYT:
In the room in the Gerard lodging house...where he had lived for twenty-six years in apparent poverty, William E. Whitaker, 50 years old, died last night of acute kidney trouble. Though he always lived with utmost frugality and in a seemingly hand-to-mouth fashion, when his effects were searched three bank books showing deposits in his name in as many banks to the amount of $7,411 were found.
According to the good folks at EH.net
The know not what they missed
It seems every fall there is at least one article that lists the differences between the freshman class of this year and the freshman class of, say, 1987 (mine). As we roll into the new fall semester (we start next Monday), here's another - it includes 75 items. Wow things are changing fast!!
Here's the top eleven:
1. The Soviet Union has never existed and therefore is about as scary as the student union.I included #11 because a) it is true and b) it represents the 85th seal of the Apocalypse.
The list seems a bit strained at times as I remember getting lost in the old big-box stores such as Treasure Island and K-Mart and I wonder how many freshman (and non-freshman) even know who Manuel Noriega is and why we care(d).
[Update: Frank Stephenson emails me: "I was going to add a comment that my colleague Gary Roseman brought to my attention—items 1, 2, 4, and 6 (and perhaps others down the list)—are not literally correct. While a child the age of, say, your cutie with the DOL bib doesn’t know or remember much, she would have been alive while GWB is president. The same can be said of the items on the list."]
August 22, 2006
The Possible vs. the Probable
I came across this "how to" tip describing how to air condition your home for free. Well, not really. It basically comes down to digging a large hole, insulating it very well, and then filling it with snow/ice over the course of the winter. It's an interesting concept - one that was used in the very beginning of air conditioning (Biltmore or some other "estate" had a similar setup in the late 1800s) - but doesn't seem worth the trouble.
I haven't checked all the math, but assuming it is correct, the author suggests about 1 million pounds of snow/ice would do the trick (for three months worth of air conditioning). Total dollar savings? Estimated to be $1,500.
Let's see - I can pay $1,500 to avoid shoveling 1 million pounds of snow/ice?*
* Or I can live in North Texas where there is no snow to speak of.
Government Supported Drug Use?
It certainly seems that way. This paper finds a strong relationship between the timing of government benefits being paid (e.g., the first of the month) and drug-related hospital admissions. Another installment of your tax dollars at work.
Wal-Mart Made Andrew Young a Bigot
You knew it was coming--Andrew Young's bigoted rant about Jews, Koreans, and Arabs has now been blamed on Young's working for Wal-Mart. From News and Observer columnist Barry Saunders (with a HT to the Locker Room):
I love Andy Young and what he has fought for, and am heartsick that more than 50 years of working to make the world a better, more inclusive place could be obliterated because of his ardor in defending a gluttonous retail behemoth.
It is because of my deep love and respect for Young that I dedicate this song to him. Maestro, hit it:
When a man loves a Wal-Mart
Can't keep his mind on nothing else...
He'll attack Jews, and A-rabs, too.
He'll give up all his comforts, sleep out in the rain
If Wal-Mart says that's how it ought to be.
If Wal-Mart plays him for a fool
He can't see it, he's the last one to know.
It can bring him such misery.
When Andy Young loves a Wal-Mart
He can see no wrong
He won't set foot in no Korean's store.
Yes, when a man loves a Wal-Mart
Spend his very last dime
Just to buy a pair of new BVDs.
Let's hope Wal-Mart paid Young enough to compensate for his damaged reputation or to help mend relations with the groups he maligned.
Posted by E. Frank Stephenson at 10:21 AM
Party School Competition
Parents and educators are doing a double-take at a coupon book advertising alcohol specials and bail bonds being handed to University of Georgia students at a pair of Athens bookstores.
The booklet, which includes discount coupons and ads for alcohol specials such as $1 drinks at one bar, a free order of nachos with the purchase of a pitcher of beer at another and 20 percent off at Double "O" Bonding, an Athens bail bonds company, was included with textbook purchases.
In the news...
The old alma mater, Ohio University, (sniff) still makin' me proud. We're #6! We're #6! We're #6! ....
An article about Charlie 'Lefty' Trudeau's vintage base ball bat making business. Charlie plays with me on the Ohio Village Muffins and also for the Columbus Capitals. If you're in the central Ohio area, come see us and about 25 other clubs play all day on Saturday and Sunday of Labor Day Weekend at the Ohio Village.
August 21, 2006
Mont Pelerin Society Essay Competition
Interested in Freedom?
Posted by Robert Lawson at 10:49 AM
August 19, 2006
David Nicklaus’ column in the St. Louis Post-Dispatch today contains this nugget:
Missouri Gov. Matt Blunt … announced last week that one of the state's most lucrative business-incentive programs is off-limits to any biofuel plant that's not majority-owned by Missouri farmers.
Mr. Mills -- not to be confused with REM’s bass player -- is wrong. The local economy generates the greatest real income when its participants are allowed to take advantage of trade, to import whatever is cheaper to buy than to make at home and to export whatever fetches a higher price away from home. (Adam Smith pointed this out a while back.) That includes equity shares for biofuel plants. The logical implication of Mills' position is complete autarky.
"Business incentive programs" of course means subsidies. If Mr. Mills had said that the greatest contribution to buying votes for the incumbent comes when state subsidies go exclusively to state residents, he would be making an honest point. But the Missouri economy -- the wellbeing of the taxpayer -- would be better served by simply eliminating the subsidies.
Letter to WSJ
I submitted this letter to the editor of the WSJ today:
To the editor:
Hendrik Van den Berg (Letters to the Editor, August 19-20) correctly points out that all taxes are not equally distortionary, but he completely misses the big picture that wasteful spending is the underlying cause of the tax pain being inflicted. Rather than accepting the government’s “immense need for revenue,” the relevant question is whether government should continue to levy any sort of taxes to fund bridges to nowhere, welfare for wealthy farmers, or pills for senior citizens. Government schemes and boondoggles, be they funded by the most distortionary or the least distortionary form of taxation, are the true source of taxpayer misery.
E. Frank Stephenson
August 18, 2006
Rebuilding c. 1906
From the August 18, 1906 NYT:
Within the twenty-four hours ended at 6 o'clock last night, fifty-one permanent buildings were started in this city and seventy-seven building permits were issued. The street railway companies report that their business is now equal to 90 per cent. of the traffic handled before the earthquake.
Let's remind ourselves of what's happened in 1906. On April 18, 1906 a massive quake destroyed much of San Francisco proper and the outlying areas were also dramatically hit (Here's a pic of city hall and more information here). In the aftermath of the disaster, cities and states vied with themselves to send relief aid and cash. The private sector immediately started the clean-up, including the evil capitalist pig-dog railroads.
This little story on the four month anniversary (122 days later) reports that the rebuilding of SF is well apace. Would that we could do the same for New Orleans twelve months later.
The lack of any ongoing information/coverage on what is happening in New Orleans (which is either a function of a lack of interest, a lack of action, or a lack of scandal) is, in my opinion, a national disgrace.
How things change c. 1906
From the August 18, 1906 NYT:
Gompers, with his counsel, appeared at Washington to advocate a bill prohibiting the Federal Courts from issuing injunctions in any case between employer and employe, except to prevent irreparable injury to property or to a property right. But its atrocity consisted in the proviso that "for the purposes of this act, no right to carry on business of any particular kind or at any particular place, or at all, shall be considered or treated as property, or as constituting a property right."
Big Tobacco - get it outta here!!
Advertising Age reports on a sweeping legal decision against big tobacco concerning the sale of "lights" and "ultralight" cigarettes. Specifically, it seems one U.S. District Court Judge Gladys Kessler has decided that the cigarette companies cannot sell light cigarettes. I take this to mean that instead of "Camel Lights" the cigarettes will be called something else that all smokers will associate with "Camel Lights" but that the title does not convey.
From the article:
Judge Kessler's 1,742-page decision -- the order was another 18 pages --included sweeping limits on tobacco makers. Among them:What exactly is a 15-second corrective spot? What exactly is corrective advertising? What exactly has been the harm? Is anyone going to read a 1700 page legal opinion? (here it is if you want to try)
Read More »
The case was brought during the Clinton administration as a follow up to the big settlement that has been frittered away and represented one of the largest extortions in human history. There have been other decisions in the "lights" case - in 2003, Phillip-Morris was ordered to pay $10.1B (to whom?) for "misleading smokers".
Non-smokers might not know the difference between a Pall Mall and a Lucky Strike, but smokers definitely do. There is a difference between a Camel Light and a regular Camel and, gasp, the old filterless Camels. The health repercussions might not differ much, I am not arguing that, yet if you smoke Camel lights and smoke a few regular Camels, you won't feel so good and the same goes for the other brands.
Is a "light cigarette" safer than a "regular cigarette"? There are those who claim that the advertising hinted at that, even if it never came out and said so directly. I am not sure, but then I am a rare bird - an educated person who actually partakes every now and then. Yet, this is only a degree of difference from other advertising come-ons such as "lite dressing" and such.
There is a bizarre set of outcomes from such decisions. Much of the empirical evidence suggests that cigarette advertising is predominantly predatory in nature, that is Camel stealing market share from Doral and Marlboro fighting to keep market share from leaking to Basic. There is not much evidence that cigarette advertising expands the size of the market, i.e., the number of smokers.
Predatory advertising is a form of prisoner's dilemma for firms. They would love to cooperate and not advertise, therefore saving themselves the money they would have spent/wasted on advertising efforts that do nothing but protect market share. Legal limitations to the advertising of cigarettes might represent the cooperative outcome cigarette companies so desperately desire but cannot obtain for fears of anti-trust. If this is the case, advertising bans/limitations might actually increase the profits of those firms that remain.
Of course, as the temperance movement continues to expand, the ability to smoke cigarettes will continue to be curtailed. We are now encouraged to buy cigarettes but not to smoke them. Eventually we will be required to buy cigarettes (okay, not actually buy them but we as a society will be taxed the equivalent of what was being earned off the smoker tax) and we won't even have the ability to exercise the option if we wish.
« Close It
Class-Size Limits and Teacher Quality
Lots of good stuff to blog today--or maybe I just don't want to finish my syllabi for Monday.
Consider the calls for reducing class sizes in government schools. Proposals at both the state and federal levels have called for class-size reductions in an effort to boost student performance. Typically, such proposals have implicitly assumed that teacher quality will remain constant when hundreds or thousands of additional teachers are hired to lead the smaller classes. This assumption is mistaken.
Now we have this in the Macon (GA) Telegraph:
It could cost Bibb County schools as much as $500,000 just at the elementary level to hire 10 teachers and add class space to satisfy the state's new class-size reduction mandate, school officials said Thursday.
Superintendent Sharon Patterson said Bibb has 17 elementary classrooms across the system with more students per room than allotted under the new law, and are now required to move the extra kids into new classrooms.
Another concern for school officials is where to find certified teachers during a state teacher shortage. The school system already had about 12 teacher vacancies at the first day of school, according to school officials.
"I'm concerned about taking children away from certified instructors and putting them in rooms that don't have certified teachers," said board member Bob Nickels. "If you don't have a teacher available you have to take a sub, who's not qualified."
BTW, teacher certification probably has little to do with true teacher quality but that's a topic for another day. The important point is that there is not an infinite supply of equally skilled teachers. It just might be better to have more kids in a class with a better teacher than to divide the students into smaller classes with inferior teachers.
Andrew Young's Trent Lott Moment?
Andrew Young's endorsement of Cynthia McKinney seemed a bit odd since Young has a reputation as something of a statesman rather than a rabble-rouser. Judging by comments in today's AJC, the McKinney endorsement does seem in keeping with Young's view of the world:
In an interview published in Thursday's Los Angeles Sentinel, Young was asked to comment on whether he is concerned that Wal-Mart causes mom-and-pop stores to close.
"Well, I think they should; they ran the 'mom and pop' stores out of my neighborhood," the Sentinel, a newspaper serving the African-American community, reported. "But you see, those are the people who have been overcharging us — selling us stale bread and bad meat and wilted vegetables. And they sold out and moved to Florida. I think they've ripped off our communities enough. First it was Jews, then it was Koreans and now it's Arabs; very few black people own these stores."
Of course, it's likely that the left-of-mainstream media will mostly give Young a free pass (there doesn't appear to be anything on CNN.com as of this writing) unlike the treatment of Lott or the recent treatment of George Allen. All such comments are repugnant, not just the ones uttered by Republicans.
ADDENDUM: An email from a friend reminds me that Young will definitely get some flak from the left-of-mainstream media--they'll go after him for saying something positive about Wal-Mart.
Another Innumerate Reporter
Consumer inflation accelerated in July, reflecting a big jump in gasoline and other energy prices. In evidence that the economy is slowing, industrial output in July slipped to just half the June pace.
The Labor Department reported Wednesday that its closely watched Consumer Price Index rose by 0.4 percent last month, double the 0.2 percent increase in June. While energy costs had fallen in June, they rose by 2.9 percent last month, the biggest increase in three months.
Meanwhile, the Federal Reserve reported that output at the nation's factories, mines and utilities increased by 0.4 percent last month, just half of the 0.8 percent gain in June.
Fortunately industrial output in July did not slip "to just half the June pace." Instead the rate of growth of industrial output fell by half from 0.8 percent to 0.4 percent. So output actually increased in July, albeit at a slower rate of increase than June, rather than falling in half. A big difference, no? BTW, a bit of common sense and casual observation would have been useful here--if output really did decrease by half then it would have been abundantly clear from unemployed workers, fewer trucks on the highways, and the like.
HT: WSJ's "Best of the Web Today"
Reverse Causation Sighting
From The Economist (which really ought to know better):
Gross overcrowding has led to a sky-high recidivist rate.
Geez--you think just maybe it could be the other way around? Perhaps it's a sky-high recidivist rate leading to gross overcrowding. (HT: WSJ's "Best of the Web Today")
August 17, 2006
Education and Economic Development
There's lots of chatter around the old blogosphere about Austan Goolsbee's NYT column. An excerpt:
If Stanford can hatch world-famous companies around Palo Alto, politicians assume, their colleges can, too. But with so many trying to spin universities away from their traditional academic focus into engines of economic development, it is worth considering whether investing in local universities can achieve that goal.
This strategy is based on the view that research done by professors can form the basis for local start-up companies and that the graduates of the university can supply the entrepreneurs and employees.
But advocates should remember an old maxim of economic development: Beware of investing in things that can move. As it turns out, graduates and research ideas both tend to move around a lot.
Subsidizing teaching is problematic as a development strategy because graduates frequently move out of state.
A study by the economists John Bound, Jeffrey Groen and Gabor Kezdi of the University of Michigan and Sarah Turner of the University of Virginia, “Trade in University Training: Cross-State Variation in the Production and Stock of College-Educated Labor,” found little evidence of people staying in places because they went to college there.
Given the mobility of college graduates, I'm wondering if the optimal state stategy for economic development* become not spending lots of resources creating graduates but instead creating an environment (e.g., tax code) for attracting them. I think it might, though I have not read the Bound et al. paper.
*Although I've used the term here, I normally cringe at the phrase "economic development" because I associate it with the mercantilist complex of corporate welfare, development incentives, and the like.
Keep your hands off my conveyor belt
Advertising Age reports on a new "trend" (or rather an attempt) to place advertising on the lowly conveyor belt in the checkout line:
"Conveyor belts have never been on anybody's radar screen for marketing," said Frank Cox, president-CEO of EnVision Marketing Group, a Little Rock, Ark., firm with a patented system to print digital, photo-quality ads directly on conveyor belts. "But a store with eight to 10 checkout lanes, well, you're talking about 100 square feet of wasted ad real estate."I wonder how effective the advertising will be. If the conveyor belt is empty, by definition there is only one person standing in front of the conveyor belt - the clerk. If there are more people standing in front of the conveyor belt, i.e., customers, they are likely unloading the buggy of goodies and covering the advertising with Cream of Mushroom soup and such.
This might explain why the test runs have generally failed to attract a national advertiser and instead it's the local real estate agent and insurance agents who are buying space on the conveyor belt. Yep, nothing says "Let me sell your house" than seeing my real estate agent travelling the conveyor circuit.
College Football Rules Changes c. 2006
The NCAA has released the rules changes for the 2006-2007 football season. Many are reasonable and others are questionable. The main upshot seems to be a) reduce the amount of time it takes to play a game and b) decrease the odds that a bad call can make the difference between a lucrative post-season berth, a not-so-lucrative post-season berth, or no post-season berth.
Major rules changes:
Alex at MR blogs about being insulted by Gordon Tullock. Here' my story:
I am presenting my first paper at my first economics conference (the Southern Economics Association I think). It was a chapter or something from my dissertation and the empirical results were, um, how shall I say this, underwhelming. After going through the model and somewhat apologetically presenting my results which didn't show what the model predicted. Gordon says to me, "That's ok, Bob, a lot of other people haven't found that result either."
August 16, 2006
The next generation of DoL
Frank was kind enough to send Cate a DoL bib from the CafePress collection. The quality is excellent and the size is perfect for a three week old to grow into.
More on abolishing the Fed
In response to my comment at Greg Mankiw's blog, “Reasonable” asks:
What's the possible advantage of completely removing any remaining discretionary Central bank control over the money supply, compared to establishing a conservative Central Bank committed to following a monetary rule?
My answer: Abolishing the central bank makes the commitment not to inflate/devalue more credible. Friedman’s worry – a reasonable one, I think – is that the central bank won’t in fact be committed to following a monetary rule. I’d grant you that OECD central banks that have adopted inflation targeting have stuck to it surprisingly well, even if not flawlessly. In other countries commitment is more of a problem (for elaboration see this article).
The last case I know of a Central Bank who gave up all control over the money supply was Argentina, and look where that took them. And don't come back and tell me it's that the Argentines didn't follow a 'pure' enough model.
My reading of the Argentine experience is different. The adoption of the convertibility system gave Argentina a longer stretch of decent money than it’s had before or since. But Argentina didn’t in fact give up all control over the money supply – its “currency board” was “unorthodox” in several ways. (On this see Kurt Schuler’s article.). Fundamentally, Argentina retained a central bank with the option to devalue. And the government exercised that option, even though there was no good reason to think it would help – and in fact it didn’t help. Devaluation only pushed the economy deeper into crisis.
We saw similar mass movements in the US in the late 19th century rise up over similar issues (which is arguably why we got a Fed several years later).
The US got a Fed because we had banking panics. We had banking panics because we had a perversely regulated banking system. Contrast Canada: no geographical restrictions on banks, lighter note-issue restrictions, consequently no panics and no clamor for a central bank in the late 19th century.
So what conceivable advantage is there in your scheme (reduce 'inflation' in the US!?) to give up this small degree of discretionary power and risk playing around with politics that severe, other than this starry eyed nostalgia for a 'golden' past?
A more credible commitment to stable money.
Baseball Lawsuit c. 1906
In the August 16, 1906 NYT is an interesting article describing how :
the New York National League Baseball Club [the NY Giants] brought suit against the Chicago National League Baseball club [the Chicago Cubs] for $3,500, alleging damages to that extent on account of the forfeited game of Aug. 7, when Umpire Johnstone was refused entrance to the Polo Grounds and gave the game to Chicago. Manager McGraw of New York wanted the game to be played with player from each of the teams as umpires, but the Chicago manager refused to agree to this, and the Ne York management now declares the club is damaged to the extent of the club is damaged to the extent of $3,500....The damages are said to lie in the loss of gate receipts.
Wait a second. New York bars an umpire, the game is forfeited to Chicago, and New York sues Chicago for damages?
Going back to the Aug. 8, 1906 NYT, here's what evidently happened.
Johnstone umpired a game between Chicago and New York on the previous day [Monday, Aug. 6] and ordered "Manager McGraw and Third Baseman Devlin out of the game. McGraw and Devlin received their notices of official suspension yesterday [Aug. 7] , and the action against Johnstone by the local club came immediately after...The New York Club officials refused to admit the umpire to the grounds, and he promptly declared the game forfeited to Chicago by the customary score of 9 to 0...Police Inspector Sweeney had requested the New York Club not to allow Umpire Johnstone to enter the grounds, as after threats against him it might precipitate a riot...For a time 8,000 spectators massed in front of the entrances and would not leave the grounds. Many of them were appeased with the announcement, however, that all reserved seat checks and rain checks would be good for any other game this season, and a subsequent announcement was made...that money would be refunded on all checks upon presentation at the office of the New York Club...
It seems that McGraw argued that if there was to be any forfeit it should have been the Cubs that forfeited to the Giants. This was because, according to the rules at the time, if an umpire was absent or unable to perform his duties, an agreed-upon individual chosen by the home team could substitute. McGraw claims he had a substitute ready to go at 5 minutes before 4pm (the start of the game) and the Cubs were the ones who walked away. Therefore, the Cubs should forfeit.
One wonders if this means that if the Cubs had forfeited the refunds would not have been offered by the Giants.
Back to the $3,500 claim, the price of admission to the Polo Grounds in 1906 was $0.50. This would imply an actual gate of 7,000 people versus the estimated 8,000 people (assuming all tickets were redeemed for a refund or another game). The attendance figures available in the Retrosheet.org game logs from 1906 indicate an average attendance at the Polo Grounds in 1906 of 7,200 with a standard deviation of 3,000 (albeit on only eight games).
Abolish the Fed and freeze the base: Milton Friedman
In a recent letter to Greg Mankiw, posted today on Mankiw's blog, Milton Friedman writes:
Nothing that I have observed in recent decades has led me to change my mind about the desirability of a monetary rule which simply increased the quantity of money at a fixed rate month after month, year after year. That rule would get rid of the mistakes and that is probably about all you could expect to get from a monetary system.
This is consistent with what Friedman has been saying since 1984.
Regarding the base freeze proposal, Mankiw comments:
I would have thought that the experience of the 1930s argues against such a rule. If I recall correctly, most of the decline in the monetary aggregates during that period was attributable not to high-powered money but to inside money and the money multiplier. If we abolished the Fed and kept high-powered money constant, it seems that a similar set of events could potentially unfold.
Do we need to keep the Fed around because the money multiplier might collapse again? Mankiw is right that the money multiplier declined sharply in the 1930s, but why did it? The proximate cause of the collapse in the 1930s was bank runs and fear of more bank runs. The underlying reason for the bank runs was geographic and note-issue restrictions that make US banks unnecessarily fragile. There were no bank runs and no money-multiplier collapse in Canada in the 1930s, which had neither restriction. Fortunately we no longer have the geographic restrictions in the US. We still have note-issue restrictions. Friedman’s brief letter neglected to mention an important adjunct to his base-freeze proposal that he has elsewhere mentioned, which is that shifts in the public’s demand to hold currency could be accommodated by letting commercial banks freely issue currency redeemable for base money. With well-diversified note-issuing banks, a collapse of the money multiplier would not occur.
Take, for example, Levitt's tales of the big city. The Chicago Municipality administers an annual test for schoolchildren. A suspicion arose that teachers, were "correcting" their students' answers before sending the tests to be checked. Levitt obtained the data from the municipality and developed a computer program that looks for classes with suspicious combinations of answers. For example, if all of the students in a particular class responded correctly to questions 7, 8 and 10, and erred on question 9, a suspicion arises that the teacher falsified the answers to four questions. (On question 9, the teacher either made a mistake himself or tried unsuccessfully to avoid raising suspicion.) In this way, Levitt discovered dozens of deceitful teachers. The IDF's intelligence units and credit card companies use similar algorithms. What have we learned about Levitt? He is a smart guy with connections in the municipality. What is the connection to economics? None.
[HT: Matt Holian]
August 15, 2006
Bootleggers Disguised as Baptists: Austin Taco Stand Edition
From the Austin Chronicle (scroll down):
Yet for the most part, Rodriguez embraces the new regulations. In the two decades since he opened his first trailer, he's watched taco stands crop up wherever there are hungry Austinites and an open slab of pavement, sometimes only a neglected patch of grass. The reason for the boom is obvious. Immigrants are flooding into Austin, increasing the demand for quick and inexpensive (and Mexican) food, and there are few businesses that you can start with such a small investment. "There are people in Austin now that can make you a trailer for $6,000," he says. Indeed, Rodriguez, perhaps because of his own position in the market, hopes the ordinance will thin the competition. "There's too many taco stands," he says. "And not all of them have high standards. Some them have gone into residential neighborhoods to set up, and that causes problems for everyone. We're not in Mexico any more. This is the U.S."
Welfare Reform Shell Game
The 1996 welfare reform is widely hailed as a success. Not so fast says Douglas Besharov in today's NYT:
What about the other 50 percent of families who left welfare? Well, some mothers did not “need” welfare, perhaps because they were living with parents or a boyfriend, and some left because of intense pressure from caseworkers. More troubling, about a quarter of those who leave welfare return to the program, with many cycling in and out as they face temporary ups and downs.
In addition, when they’re off welfare, some of these families survive only because they still receive government assistance — through food stamps (an average of more than $2,500), the Women, Infants and Children program (about $1,800 for infants and new mothers), Supplemental Security Income (an average of over $6,500), or housing aid (an average of $6,000). Their children also qualify for Medicaid. In reality, these families are still on welfare because they are still receiving benefits and not working — call it “welfare lite.”
So, yes, welfare reform reduced welfare dependency, but not as much as suggested by the political rhetoric, and a great deal of dependency is now diffused and hidden within larger social welfare programs.
Why Voter Turnout is Too High
NEW YORK (Reuters) - Three quarters of Americans can correctly identify two of Snow White's seven dwarfs while only a quarter can name two Supreme Court Justices, according to a poll on pop culture released on Monday.
Respondents were far more familiar with the Three Stooges -- Larry, Curly and Moe -- than the three branches of the U.S. government -- judicial, executive and legislative. Seventy-four percent identified the former, 42 percent the latter.
Twice as many people (23 percent) were able to identify the most recent winner of the television talent show "American Idol," Taylor Hicks, as were able to name the Supreme Court Justice confirmed in January 2006, Samuel Alito (11 percent).
It's taken as a given that not enough people vote; this is the reason for motor voter, extending polling hours, increased absentee voting, and the like. I'm a contrarian; I don't think we're well-served by having folks more familiar with American Idol than the U.S. Constitution voting on our life, liberty, and property.
ADDENDUM: This CATO paper by Ilya Somin has more on voter ignorance.
August 14, 2006
On AOL search data
I mentioned that last week there was a release of data pertaining to about 20 million AOL searches and how AOL tried to put the genie back in the bottle. Unfortunately for AOL and AOL users, the data have been stored on a number of mirror sites, and incorporated into Splunk'd which is a large data mining program. Heck, for some reason even I downloaded the data, all 439 MB of it. For giggles, I tried to read the data into STATA, but that didn't work very well with the limited resources of my laptop.
Nevertheless, for those who would like to see some of the data, here are the first 100,000 searches in a 40MB STATA data file
1. The Pornhound
I qualify myself as an Omnivore.
Here's a link to Splunk'd [I can only get it to work in IE - dangit]. I especially like the display searches by time option. You could spend a lot of time at Splunk'd but I did three quick searhces: approximately 1100 searches had the term "economics," 580 searches with "Sheehan" (mostly in March 2006 and then dropping off considerably), and 1,920 searches for "Tom Cruise." That says something, but I am not sure what.
Personal privacy concerns c. 1906
From the August 14, 1906 NYT:
A force of clerks from the Department of Commerce and Labor at Washington invaded the Surrogates' Court on the ground floor of the County Court House yesterday morning for the purpose of making up records of all divorces granted in this city for the last twenty years...The records, when they are completed, will be used for purposes of information by Congress, when it takes up the question of a uniform divorce law...In each divorce case the clerk is expected to find out and fill in the answers to these questions:
The article points out that the data are included in the divorce decrees but that these decrees are under seal.
All of this sounds eerily similar to the DOJ requests for search history from ISPs and search engines. Many privacy advocates suggested that even anonymous data concerning Internet searches could be used to back-track to an individual. This has been proven a couple of times using the AOL data that was "released" to the public and then "un-released."
In a similar fashion, could government clerks of 1906 be trusted to keep quiet about their knowledge that certain society types had a drinking problem that led to a divorce, or that a certain divorcee receives alimony?
Consumer shakedown c. 1906
The Aug. 14, 1906 NYT has another article concerning the taxameter (which is the new spelling being used rather than "taximeter") and the overcharging by cabbies. In this round, the head of the Independent Hackman's Association offered the following bone to the Merchants' Association:
If it [the Merchants' Association] will urge a law, and aid us in its passage, limiting the number of cab licenses to 2,000, every cab driver will buy a taxameter, and there will be no more overcharging.
The rather explicit admission that overcharging is occuring in NYC is a bit of a retreat from earlier statements in which the hackman's association claimed that overcharging was the sole province of the "night hawks" or those who ran cabs during the evening hours.
It isn't clear exactly how many cab licenses are let at the time, but the proposal suggests that it is considerably more than 2,000.
So let's get this straight. The public wants the cabbies to stop overcharging from the legal rate of $0.50 per mile. The public has a hard time avoiding the overcharge because they are often physically intimidated by the cabbies or are ignorant of the legal rates (cabbies have the rates in a book but only have to reveal the rates upon request - there is a proposal to post the legal rates on the cab itself where the fare can see the price, but the cabbies have balked at that proposal). There is an appeal process which requires the fare to file a formal complaint against the particular cabbie, indentified by a license number, and specifying the pickup point, the dropoff point, the price charged, the day and the time. If the appeal is upheld, the cabbie is forced to refund the overcharge and pay a fine. The refund is then posted to the address provided by the complaintant. Yet, this appeal process is time consuming, and, for many, might not be worth the trouble.
The taxameter is a proven technology that will make the fare more legitimate and which costs approximately $15. The real question is who pays for the taxameter? If the government mandates the taxameters, there are many who claim the government should pay for them. On the other hand, the government suggests that the taxameter should be paid for by the cabbies. The cabbies, of course, do not want to pay for the taxameter. The public stands to gain from the technology, but it would prove difficult to have the public pay for the taxameters.
A Ramsey-type tax could be instituted. In other words, there would be a "taxameter tax" that each fare would pay that would go to the government for the cost of the taxameter. However, such a tax might turn out to be like the telephone tax for the Spanish-American War and never disappear.
The answer, according to the Hackman's Association, is to restrict the supply of cab services, thereby likely increasing the price of cab services, at which point the cabbies will purchase the taxameter and stop "overcharging." This is similar to the Ramsey-type tax in that the users (cab fares) will pay for the taxameter. However, the cabbies' solution would not only reduce the quantity of cab services available, which would cause an unambiguous decline in consumer surplus and an ambiguous effect on producer surplus, but would likely increase prices more than the optimal user tax, thereby causing greater dead weight loss than if the taxameters could be purchased in a different way.
These are the types of problems that "good" government or centralized decision making could solve, that is, to internalize the benefits of a new technology and reduce the free-rider problem. Unfortunately, whether 1906 or 2006, the proposed solution to a real problem seeks a government intervention that is likely to cause as many new problems, in terms of market conduct and performance, as it solves.
F. A. Hayek, intellectual father of the Wikipedia
Stacy Shiff, in an entertaining New Yorker article on the history of the Wikipedia project, asks Wikipedia founder Jimbo Wales about his influences, and he replies by citing Hayek:
“I’m very much an Enlightenment kind of guy,” Wales told me. The promise of the Internet is free knowledge for everyone, he recalls thinking. How do we make that happen?
The article tries to explain how rules have evolved to govern the nobody-in-charge interaction on Wikipedia.
August 12, 2006
Football rule changes c. 1906 and 2006
From the August 12, 1906 NYT:
Many of the rules [of college football] have been changed and others thoroughly explained, with the double object of eliminating brutality and making the game more interesting to spectators. Of the many changes, the most radical has been the introduction of the forward pass.
Sports leagues can provide public goods such as rules changes that make the game more entertaining and safe at the same time. College football suffered more than 100 deaths during the 1905 season. These rules changes were a direct response to these deaths and the threatened abandonment of the game altogether.
Thankfully, as professional and college football is (still!) right around the corner, rules changes of these ilk were instituted.
From Scout.com the article "NFL Rule changes for 2006" posted on August 12, 2006:
Some of these are modifications to existing rules, such as the horse-collaring rule. To the extent that modifications are made to improve player safety while not dramatically altering the quality of play, these decisions are examples of how centralized decision making can be welfare enhancing, i.e., it can make players, fans, and owners all better off, and are very similar to the rules changes of 1906.
Personally, I like the carryover of personal fouls from the end of the half/regulation. It has always bothered me that a penalty thrown at the end of the half, say for taunting or other bad behavior, didn't carry any true punishment.
Although I am not a huge fan of instant replay, the professional (and increasingly the college) game is so fast and there are so few games that perhaps it is warranted relative to, say, professional baseball's regular season. An additional problem is the increasing cost to a bad call. It is entirely plausible that a bad call could be marginal in the sense that it could deny a team a post-season berth. In this case, the dollar cost of the bad call to the teams might be dramatic and justify the use of instant replay. This is why the instant replay is becoming more important in college football - a bad call could be the difference between a high pay-out bowl game and a low pay-out bowl game.
If high school football begins to generate significant revenues, be ready for instant replay at that level as well.
Musings of a Gentle Cynic c. 1906
From the August 12, 1906 NYT:
Kids Needing Vouchers--Camden New Jersey Edition
An excerpt from an NPR story on government school fraud:
School officials in Camden, N.J., have been under investigation for allegations of cheating on state tests, falsifying data and a cover-up. The results of that investigation are expected any day.
The alleged corruption is so pervasive and so blatant that New Jersey's commissioner of education has vowed to clean house. The two whistleblowers in the case say that's too little, too late for Camden's 17,000 school children.
Paula Veggian has worked for Camden, N.J. public schools for nearly 40 years, first as a math teacher and then as a scheduler at Brimm Medical Arts High School, the district's academic jewel.
"I have devoted my entire adult career to the children in the city of Camden, and what I uncovered was very damaging to children," Veggian says.
What Veggian uncovered and reported to her superiors was a grade-fixing scheme and the falsification of students' transcripts. She agreed to speak to NPR -- her first public discussion of the case -- at her attorney's office.
There's lots wrong with colleges, but this type of fraud is one reason why I'm not sure the higher ed commission's call for standardized tests is such a great idea.
August 11, 2006
Higher Ed Commission Report
The Higher Education Commission's report is out. My former teacher (and Josh's as well), Richard Vedder was a member of the commission.
The chairman, Charles Miller, an investor and a former chairman of the University of Texas Regents, had hoped to turn out a punchy report that would rattle academia with warnings of crisis.
Only one member of the commission refused to sign this
David Ward, who as president of the largest association of colleges and universities was the most powerful representative of the higher education establishment on the commission, refused to sign.
No surprise there.
[HT: Dave Reed]
TEL Testimony/Rome Braves
I spent yesterday afternoon testifying before a GA Senate committee considering a tax-expenditure limitation for Georgia. So this morning I open the Rome News-Tribune and find an article containing a terrible picture of me and some dopey quotes. Fortunately I can't find a link. :-) (BTW--thanks again to co-bloggers Bob and Josh for their Ohio TEL study; I made good use of it again.)
Last night was Berry night at the Rome Braves; our new president threw out the first pitch. As for the game, fans were treated (if that's the right word) to a no-hitter by the visiting Augusta GreenJackets (an affiliate of the Giants). Three GJ pitchers allowed no hits or walks; the only Rome baserunner reached on a HBP in the first inning.
If waking to find my face for radio in the local fishwrap isn't bad enough for one's birthday, I'm off for a dept chairs meeting that's scheduled to run until mid-afternoon. It's the academic equivalent of water torture; I expect many of my colleagues will bring reading.
August 10, 2006
Pee Wee Starts Kindergarten
Yesterday was my son's first day of kindergarten. The local newspaper (sign of a small city I suppose) had an article; Pee Wee's photo didn't make the print edition but is included in the web version of the article (he's the one on the right).
The Taximeter c. 1906
Over the past few days in the NYT from 100 years ago there have appeared several articles concerning the prices charged by cabs in New York, especially when compared to London, Berlin, and Paris. The short version is that in European cities the taximeter is already in place, that is a meter that tells how far the cab has travelled and how much is owed.
In the U.S. the taximeter is not in place, although the city aldermen are considering its requirement. There is considerable consternation amongst cabbies that the taximeter is an unnecessary intrusion of government into their affairs and that the government will move to further regulate the price of cab services. On the other side of the debate is the public which claims "random pricing" and distinctly different pricing practices between day cabbies, ostensibly more honest, and night cabbies, ostensibly less honest.
From the Aug. 10, 1908 NYT comes the following points:
There is always a way to "hack" whatever technology would be implemented to measure the distance/fare of a cab. Nevertheless, for the most part, perhaps such above board pricing generated by an agreed-upon arbiter, in this case the taximeter, would be welfare improving.
There is a brewing set of problems between four groups: The Public Hack Owners Association, which is comprised of the owners of cabs, the Independent Hackmen's Association, which is comprised of owners and drivers. The former want more enforcement against cabbies who are accused of "over charging." The latter are not impressed, and suggest that it is owners extorting drivers.
On a different front there are public hackmen who are allowed to solicit fares from anywhere, and there are hotel hacks, which by law have no right to solicit business from the street. There is a "battleground" centered at Grand Central Station where "a man leaves the station he is more than likely to take a a hack attached to the Grand Union Hotel or the Hotel Belmont. This may be because he would rather deal with the hotel vehicles, or it may be because the public hacks are stretched along the Park Avenue to Fortieth Street, and are therefore more difficult to reach."
The prices charged by hotel hacks are generally higher than the public hacks, but the hotel hackman's rates are "regulated" or "set" by the hotels and "few complaints of hotel hackmen's extortion are heard."
There are movements to start licensing cabs, install the taximeter (but it's not clear at this point who will pay the $15 for each one), regulate the rates that can be charge, hopes to regulate the rates that will be paid, to do away with pre-fare negotiations, to ensure the ability to engage in pre-fare negotiations, fears of collusion amongst cabbies who operate in a local area, and other interesting problems.
Can these problems be solved by government regulation? Like many other areas of government intervention, it is likely that any benefits from the regulation would be more than offset by the unintended, bureaucratic consequences introduced by the specific regulation employed.
Nevertheless, markets often organize (read, regulate) themeselves without the direct intervention of the government. For example, my experience in Morocco (in 1998) was that the self-regulation of the cab market was very powerful and was more than likely welfare improving.*
In Morocco, local taxis were typically Renault R-4's or Opels or Ford Escorts, not the type of vehicle you would want to pay to ride cross-county in. Each town had their own specific color - Rabat was Blue, Casablanca was Yellow, etc. The long-distance cabs (intercity) were all Mercedes-Benzes, usually 300D diesels, and were all white.
The self-regulation made it easier for consumers to locate the type of taxi they needed, and the color-coding to city kept local cabbies from infiltrating the wrong market. I thought the taxi market there worked at least as well as those in other cities (perhaps even better than Taipei and current Washington DC?).
In the Aug. 9, 1906 NYT, one cabbie explained his expenses and complained that the regulated
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* I spent the month of May 1998 in Rabat, Morocco and travelled around the country during a Faculty Exchange program. There were numerous examples of self-regulating markets that, I assume, are much more common to lesser-developed countries than many realize.
My visit/experience was overwhelmingly positive, although my visit was pre-9.11.
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Great debate finishing line
Block: With regards to National Parks, I want to ask Richard a question. Richard, where would you rather meet me tonight at 3 in the morning, in private enterprise Disney Land or in New York City's Central Park which is a government park?
An Inconvenient Hypocrite
From USA Today:
Al Gore has spoken: The world must embrace a "carbon-neutral lifestyle." To do otherwise, he says, will result in a cataclysmic catastrophe. "Humanity is sitting on a ticking time bomb," warns the website for his film, An Inconvenient Truth. "We have just 10 years to avert a major catastrophe that could send our entire planet into a tailspin."
Graciously, Gore tells consumers how to change their lives to curb their carbon-gobbling ways: Switch to compact fluorescent light bulbs, use a clothesline, drive a hybrid, use renewable energy, dramatically cut back on consumption. Better still, responsible global citizens can follow Gore's example, because, as he readily points out in his speeches, he lives a "carbon-neutral lifestyle." But if Al Gore is the world's role model for ecology, the planet is doomed.
For someone who says the sky is falling, he does very little. He says he recycles and drives a hybrid. And he claims he uses renewable energy credits to offset the pollution he produces when using a private jet to promote his film. (In reality, Paramount Classics, the film's distributor, pays this.)
Public records reveal that as Gore lectures Americans on excessive consumption, he and his wife Tipper live in two properties: a 10,000-square-foot, 20-room, eight-bathroom home in Nashville, and a 4,000-square-foot home in Arlington, Va. (He also has a third home in Carthage, Tenn.) For someone rallying the planet to pursue a path of extreme personal sacrifice, Gore requires little from himself.
August 09, 2006
Competition for inputs c. 1906
From the August 9, 1906 NYT:
The automobile is largely responsible for several noteworthy disturbances in the commodity markets. It lifted the price of rubber to an almost intolerable figure for the common uses. Gasoline is another commodity whose price has soared under the auto demand. Prices of leather are now reaching record figures...the price of "spready steer hides" advanced last week to 17 1/4 cents, while during the paper-money inflation period of the civil war the highest price reached was 14 1/2 cents, which had stood as the high record in all the succeeding years until now. We may have to go without rubbers or rubber coats, and we may have to go without boots or shoes, but we must have our automobiles.There seems to be an undercurrent of the same sentiment directed towards the American car owner and his/her seemingly insatiable appetite for things mobile. If only we didn't demand to drive, the price of gasoline would fall, the price of other goods would fall, and life would be so much more wonderful. Yet the argument implicitly assumes that all uses of an input are created equally, and that is simply not true.
If the price of gasoline increased with the advent of the car was it because the car conveyed more market power to the gasoline manufacturer? Not likely. It is more plausible that the car made gasoline more valuable to the end consumer, i.e., the end consumer was willing to pay more for gasoline given its new use.
Before the car gasoline was, perhaps, only used for light and heat. However nice light and heat, the ability to motor across the countryside was and is a very valuable alternative use of the same product. Doing away with the car, whether in 1906 or 2006, might reduce the prices of certain inputs such as gasoline and rubber. Yet, such price reductions would partly reflect the reduced value of these inputs to the end consumer.
Where the money goes
Interesting tidbit learned this morning while watching an old episode of Blockbusters on Game Show Network: Alaska leads the nation in federal aid per capita. Host Bill Cullen was surprised (noting that Alaska is rich in natural resources), but I think there's a simple explanation. Come up with your own hypothesis and see if it matches mine (below the fold).
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My explanation: because Alaska leads the nation in Congressmen per capita (it has the smallest population, but the same number of US senators as every other state), it has more Congressional voting power per capita to parlay into aid. (I'm guessing this pattern is already discussed in the literature.) And we know from the "bridges to nowhere" episode that Alaska's senators are shameless.
P.S. Yeah, I know, watching old game shows is kind of pathetic, but hey -- I can't spend all my hours on dialysis reading.
CORRECTION: An email correspondent points out that Alaska actually ranks not 50th but 47th in population (North Dakota, Vermont, and Wyoming have fewer inhabitants; numbers are here). Okay, so the correlation doesn't have an R-squared of one.
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On tax holidays
Following up on Frank's post below, here's my three cents on the tax holidays.
Here in Texas we had our holiday this past weekend. The tax holiday is only for the state's portion of the tax, and what exactly qualifies for the exemptions is rather humorous to hear - notebooks but not backpacks, belts with buckles but not belts without buckles, and so forth - but also humorous to hear the good folks who talk about how much a) they are saving and b) how much they are spending because of the tax holiday.
Now, we all know that demand curves are downward sloping, and we don't know what many demand curves actually look like, but the elasticity of demand when prices fall by 6.25 percent seems much greater than when prices increase by the same amount. This might be expected, but I wonder if it's really worth it in the end. Consider that during the tax holiday the walk-out-the-door price of a $40 blouse falls by 6.25 percent, which reflects $2.40. However, for this savings the person either had to literally get to the mall at 8 in the morning or fight so much traffic (at least in Arlington's intensive retail district) that it hardly seems worth it (especially in 100+ heat). In fact, we have stopped shopping on tax holiday weekends for this very reason.
Tax holidays provide some savings, there is no doubt. Yet, if a family went shopping for school clothes (er uniforms) that didn't show any cleavage (in Arlington!) and spent $600, then the savings would come to $37.50, or just enough to get a family of four into the eight o'clock showing of Talladega Nights (but without popcorn). If this is the margin on which behavior will change, so be it.
I agree with Frank that in one sense the tax holidays are gimmicks. Our state politicians, including those running for governor, get to prattle on about how the citizens of the state of Texas will save some several millions of dollars in state taxes, that the "hard working" family is being taken care of by the benevolent state, and so forth.
On the other hand, at least in Texas, the local sales taxes and special taxes (such as, ahem, stadium taxes) are still collected. Therefore, if the hayseeds from the exurbs come into, let's say, Arlington, to do some shopping in the "big city" they bring their tax dollars to Arlington. Currently, Arlington's local sales tax is 1.5 percent and there is a special 1/2 penny tax for the Cowboy's stadium.
Last year, I saw this happen in the Babies R' Us - a few the people walking through the store were dressed as if they literally had come straight from the farm, not fashion-statement farm dressing, but the scrape the manure from the kickers and dust-the-butt type of farm dressing. (If you know farmers, you know of what I speak.)
This got me thinking that the tax holidays might cause a net tax transfer from the rural to the urban/suburban areas, which in turn could put pressure on rural budgets, perhaps leading to reduced public services or increased taxes elsewhere (read, property taxes). The hypothesis of tax transfers is in the process of being tested using Texas data - however the paper likely won't be ready until the end of the calendar year.
August 08, 2006
Sales Tax Holidays
Georgia, like several other states, had a sales tax holiday last weekend. To my thinking, it's mostly a gimmick that allow big-government pols to masquerade as tax cutters and for them to engage in a bit of social engineering in deciding which products are eligible. The Tax Foundation has a report on the spread of tax holidays around the country.
Misleading headline of the day c. 1906
The headline of an article in the August 8, 1906 NYT:
BELCHER IN STRIPES - Begins his 12 year term in Jail - Will have work in the KitchenI clicked on the story because the headline was interesting. Heck, one never knows if there was an interesting case of belching in public or whatever.
It turns out that Belcher was the ex-mayor of Paterson, New Jersey, going to jail for ebezzlement and forgery.
Perhaps it was worth it? c. 1906
From the August 8, 1906 NYT:
UNION CITY, Tenn - After deliberating for more than three hours the jury in the suit of Miss Lola Walker, who is said to have formerly been a society girl and who was later a chorus girl, returned a verdict this afternoon awarding her $21,000 damages against Col. Richard Edwards, a wealthy young clubman, whose residence is in Union City and who is well known in New York, Chicago, and St. Louis...Miss Walker brought suit for $50,000, alleging breach of promise of marriage. An appeal will be taken to the Supreme Court by Col. Edwards.
I am not sure what the characterizations such as "society girl", "chorus girl," and "wealthy clubman" specifically indicate as these terms are not used today. However, one gets the feeling that they are not intended as complements.
Notwithstanding the expected appeal, an interesting question to ponder is whether the $21,000 was a reasonable price to avoid matrimony to Miss. Walker.
Product Review--DOL Merchandise
Bob noted awhile back that we now have DOL merchandise. I bought a shirt and a couple of other items and was completely satisfied. Of course, caveat emptor still applies.
Job openings for economists
A contact at Housing and Urban Development emails to inform of job openings for masters level economists.
The job description can be found here.
Deadline for applications is August 11.
Time waster of the day
HT: Dennis Wilson
Advertising Age reports on the forthcoming book What Sticks: Why Most Advertising Fails and How to Guarantee Yours Succeeds. The headline:
New Book Reports 37% of All Advertising Is Wasted
I am shocked that only 37% is wasted, if by wasted it is meant that the advertising has no influence on behavior.
The story contains the following two paragraphs that should make economists cringe:
Contained in the book's initial chapters are some remarkable revelations, including the allegation that two of the Big Three automakers used to base their annual media budgets on one another's prior-year measured-media spending. The authors discovered that many longstanding axioms of media planning were based on nothing more than hunch and legend. They reveal how frequently marketers disregard research when it doesn't jibe with their own opinions -- or seek out research that does.
Week in Review
Pee Wee and I spent the end of last week visiting family in NC and since our return I've been hunkered down prepping for upcoming testimony on tax-expenditure limitations before a GA Senate committee. Here are some things that caught my eye over the past few days:
1. Parade mag (the Sunday paper insert) had an article on eminent domain abuse. The article's significance is not its substance but rather the implication that there is wide public acceptance that Kelo was an abomination.
2. Unintended consequences in action: this article reports that govt mapping of woodpecker populations has led folks to preemptively destroy woodpecker habitat. (HT: The Locker Room) See also this article in the Journal of Law and Economics.
3. Surprise, surprise--Italy pardons a bunch of crooks and has an increase in crime.
4. Allen Sanderson applies economic principles to explain soccer's low popularity in the US relative to the rest of the world.
5. NPR had a story on the Irish miracle--Ireland's economic turnaround over the past 20 years.
6. We're from the government and we're here to help: MIT economist Amy Finkelstein finds that about half of the increase in medical expenditure results from medical insurance. I bet similar third party payer effects also explains much of the increase in higher ed spending.
7. Another wacky minor league baseball promo--the independent league Newark Bears hosted Britney Spears baby safety night.
8. Price system sighting--Lynne Kiesling blogs on increasing copper prices.
9. Sports Illustrated has a piece on sports economics. The article pays special attention (including a cool photo) to Skip Sauer, one of the genuine good guys in this business.
10. Great moments in socialized medicine: Great Britain is now imposing minimum waiting times for patients.
August 07, 2006
On Heat Waves c. 1906
Perhaps it doesn't mean anything, yet for what it's worth, here are some weather reports from the Aug. 7, 1906 NYT:
This Year's Minimum Wage Politics
Last week Senate Democrats successfully filibustered the "Trifecta" bill favored by Republicans. If you're the average American, you're wondering what the heck the "Trifecta" bill was.
Well, it has nothing to do with horse racing. Rather, it was an attempt to package together an increase in the minimum wage with estate tax reduction and the extension of several other tax breaks, including deductability of state sales tax on federal income tax, and some business tax breaks, that will otherwise expire in the near future.
Republicans adopted the "Trifecta" package as a way to force the tax extenders and estate tax reduction past a Democratic filibuster, by tying it to a minimum wage increase, which the Republican leadership is under great pressure to pass anyway. The GOP theory was that it was a no-lose situation - either they'd get the tax breaks at an acceptable cost of getting the minimum wage monkey off their backs, or that they could label the Democrats as "obstructionist," and accuse them of voting against a minimum wage increase.
This is one of those typical Republican moves that is probably too cute to work in the short term, and counterproductive in the long term. The problem here is that most Americans tend to support raising the minimum wage. Republicans understand that doing so merely robs Peter to pay Paul. I'm not sure that the American public doesn't understand this too - I have no idea how many people grasp the notion that minimum wage increases can hurt overall employment for example - but even if they do most Americans seem to think that low wage worker Paul is more deserving even if Peter is already an unemployed worker at the bottom of the economic latter.
For Republicans to make the "obstructionist" label work, they have to convince voters that Democrats are to blame. One way to do that is to announce that Republicans favor a higher minimum wage. But then, so do Democrats. So if that is really true, Republicans are the obstructionists for linking a higher minimum wage, which both they and Democrats want, to something else. Option B is to announce that Republicans oppose the minimum wage increase, but were willing to compromise with Democrats - "we'll give you something, you give us something." That's reasonable, and if people are really as fed up with partisanship as some claim, it's not a bad argument. Indeed, that really was the offer. But I doubt very much that Republicans will make that argument, because they sense that the public likes minimum wage hikes.
The end result, then, is that the Republicans, instead of arguing that tax cuts are good, will be out on the campaign trail arguing that minimum wage hikes are good, and the Democrats refused to pass one. But that won't make the "obstructionist" label stick to Democrats. Democrats will just announce that they favor minimum wage increases too, but not at the cost of "tax cuts for the rich." Meanwhile, voters just won't believe the Republican spin - everyone knows it's Democrats who want to raise the minimum wage. And it means Republicans will be arguing exactly the wrong thing: the wrong thing to fire up their base; the wrong thing to reach out to growth-minded independents and Democrats; and the wrong thing to educate the public in the long-term on the benefits of limited government. And Republicans must educate the public on the benefits of limited government if they are to win elections down the road. After all, that is the philosophy that Republicans stand for in the public mind, the philosophy that most Republicans are most comfortable running on, and the philosophy on which Republicans hold a competitive advantage over the Democrats in the mind of the electorate.
Cross posted at Redstate.
August 05, 2006
On cynicism about the media c. 1906
Current-day cynics about the U.S. media are perhaps less novel and less clever than they think. From the August 5, 1906 NYT:
[O]n one occasion she [Queen Maud of Norway] was with her sisters at a public gathering in London, and noticed a curious reporter gazing at their every movement. Accordingly, she wrote something on a piece of paper, and, making a pretense of handing it to one of her sisters, dropped it. The reporter, of course, in great glee picked it up, expecting to get a scoop for his paper. Imagine his chagrin when he fond written on it the commonplace remark: 'My new boots pinch me terribly.'"
August 04, 2006
Tax Policy and Entrepreneurship
Donald Bruce and Mohammed Mohsin have a new article out in Small Business Economics on tax policy and entrepreneurship (as measured by self-employment).* They find that while taxes do affect the level of entrepreneurship, it would require a fairly large tax change to have any noticeable impact on self-employment. They therefore conclude that "our results indicate that tax policies in isolation are not good instruments for generating changes in the level of entrepreneurial activity."
*Donald Bruce and Mohammed Mohsin, "Tax Policy and Entrepreneurship: New Time-Series Evidence," Small Business Economics 26 (2006): 409-425.
Baptists and bootleggers, payday loan edition
Lobbying for laws that restrict the sale of a good or service to consumers typically comes from a combination of do-gooders (paternalists who think the item is bad for consumers) and rent-seekers (business owners who will profit from the restriction). Bruce Yandle famously labeled the coalition that favors restriction of legal alcohol sales “Baptists and bootleggers”.
Here’s another example, from today’s St. Louis Post-Dispatch:
Money lending by so-called "payday" stores, often found outside military bases, is drawing increasing national attention - and appears headed for a showdown in Washington.
The “predatory lending” label – as though lenders were kidnapping soldiers and forcing them to sign loan contracts – reflects the do-gooder perspective. The rent-seeking perspective comes to light later in the article:
Talent's chief opponent in the fall's Senate race, Missouri Auditor Claire McCaskill, said the bills by Graves and Talent were crafted to avoid affecting Pioneer Financial Services, a firm based in Kansas City that makes longer-term loans to service members and that has contributed to Graves. [A payday lender trade association] said the bill would help Pioneer by killing its payday competitors.
Recommended reading: Jeremy Bentham, Defence of Usury.
Tufte on House Prices vs. Income Changes
We know how to calculate averages, but few know how a median differs. The latter is the middle value when you sort from smallest to largest. Average prices tend to be higher than medians because prices can't go below zero, but they can go sky high.
August 03, 2006
Why Economists blog
The Economist magazine explains, with an opening nod to F. A. Hayek.
Who will kill the movie “Who Killed the Electric Car”?
By which I mean, who will be responsible for restricting its ticket sales when it opens tomorrow? If it doesn't do boffo box office business, won't that be evidence of a conspiracy? (The review that currently appears first on imdb.com suspects that there’s a conspiracy to badmouth it there!)
Recommended reading: F. A. Hayek, "Technical Progress and Excess Capacity," in Hayek, Money, Capital, and Fluctuations: Early Essays, edited by Roy McCloughry. Chicago: University of Chicago Press, 1984.
Competition is a beautiful thing
A couple weeks ago I was looking into flights to Boston for the marathon in April. Nonstop flights from Columbus were going for almost $400 on Delta and American.
Last week Jetblue announced new nonstop service from Columbus to Boston. Today I checked Jetblue's price for the same days (and basically same times). $218.60. Today's price on Delta: $218.59.
Military blunder c. 1906?
I have only a passing knowledge of the history of the submarine. This little tidbit is a new one to me, so I wonder if the French had taken advantage of this offer if the German capabilities would have been comparatively less about eight years later:
KIEL - A submarine boat constructed by an engineer name Mont Justin at Krupp's Germania Works was launched to-day. The trials will take place in September.
Non-price competition c. 1906
The Aug. 3, 1906 NYT describes an interesting pre-temperance battle amongst two ice companies in West Virginia:
CLARKSBURG, West Va. - Beer is being given away here by two brewing companies as a side issue in their fight over the price of ice.
The battle would likely not last too long (what is "too long" anyway?) when the ice-shortage ended or the temperatures cooled, whichever came first. The ongoing ice famine of 1906 has driven the retail price in New York and Philadelphia up towards 70 cents per hundred pounds (for residential consumers, corporate types who buy a lot of ice get a bit of a break). The ten cents per 100 pounds might have been close to marginal cost.
However, the response of giving ice away for free doesn't jive with the Cournot-in-Price aka Bertrand model of price competition wherein prices should converge (counter-intuitively) towards marginal cost, unless marginal cost of producing ice was zero.
The description of the price war and then the non-price competition in ice doesn't define the ultimate prize. What exactly were the two breweries "fighting" over - the entire market for ice in Clarksburg? Perhaps. Yet this would only make sense if one or the other could service the entire market for ice. It would seem these two firms would face the same problem as other firms engaged in price wars. Let's say Clarksburg Brewery "won" the price war, became a local monopolist, and raised the price of ice. Other than contracts perhaps, what's to keep the Reymann Brewing Company from once again encroaching on the Clarksburg market?
Why I hate cost-benefit tests.
Greg Mankiw speculates that exercise may not pass a cost-benefit test because (1) the costs of exercise occur now and the benefits (in terms of life expectancy) occur later and that this a poor investment using any reasonable discount rate, and (2) the benefits of exercise are undoutedly overstated because of reverse causation (i.e., it's not just that exercisers are healthier but that healthier people exercise).
But costs and benefits are subjective! How does Greg Mankiw or anyone else know if the benefits of exercising are worth the costs? As long as both the costs and benefits accrue to the same person, I presume people who exercise have concluded that the benefits exceed the costs. I presume people who don't exercise have concluded otherwise. 'Nuf said.
Now you could get into a debate with behavioral economists/psychologists about how good people are at judging costs and benefits, but Mankiw didn't go that route.
For my money, the ONLY use for cost-benefit analysis is when the people benefiting are different from the people paying the costs--as so often happens with government programs. Here we have no choice but to try to assign values to the benefits and costs to make efficiency judgements.
August 02, 2006
On College Football c. 1905
This is a little afield from my normal NYT extracts, but for other purposes I have been scouring old documents for issues concerning college athletics. During the process, I came across this article in the Jan. 19, 1905 issue of Life Magazine:
FOOTBALL IS INDISPENSABLE
Except for the Philippines issue, this article could be reprinted in today's Newsweek, Sports Illustrated, or Sporting News, and have the same accuracy as it did 101 years ago.
It is interesting that over the past one hundred years only r two more sports have begun to carry their own weight in terms of revenues approaching costs: men's basketball and, to a lesser extent, women's basketball.
Amateur sports are generally of lower quality than professional sports, and the lack of revenue generation by, say golf and swimming, suggests to me that those sports are indeed remaining amateur. The sports that generate the most revenue on campus are also those that are closest to professional-quality play.
Indexing Denies Credit Claiming
I just did a little primal scream therapy on minimum wage, over at The End.
One of the commenters over there makes a good point, and I think the problem is actually a serious one. And, since I have not seen it made very clearly anywhere else, I'll make it here.
The question: why not index the minimum wage, maybe with some lag or going up by regular amounts every two years, based on the CPI?
The answer: Politicians wouldn't be able to claim credit for an index, a one-time solution that actually fixes the minimum wage in real terms. This way, without indexation, they (the supporters) get to look like big heroes.
And, the more the increases get dragged out, and the bigger the consequent increase (which really only restores the minimum wage to its previous real value), the bigger the heroism.
The challenge: if liberals really want to solve the minimum wage problem, they should be explicitly advocating indexation. Instead, these periodic increases simply ensure that the minimum wage will always be a good campaign issue, and fund-raising device.
In short, the minimum wage combined with secular inflation is a nearly perfect job security device for liberal members of Congress: we will fight for a wage increase, for YOU! But we will not fight for indexation, which would make you outgrow your need for us. We need to be needed.
Send flowers to Havana
As he becomes more and more like Dr. Laura every day, Sean Hannity on his radio show yesterday said that he hopes Fidel Castro's latest illness is fatal. Does anyone remember, before the 2000 election, when Hannity was relatively sane? When he would actually ask liberal guests or callers intelligent questions? Now, his critiques consist of avoiding questions, calling those who disagree "big libs," and doing Clinton and Ted Kennedy impressions.
But, let not your hearts be troubled. Even though Castro is sick, we know that he has the best possible chance for survival. As we've been told for decades, the only humane system of health care is one that is universal, one which the government oversees. Of course, Cuba is near the top of the list of countries that provide all of their citizens free health care, so Castro couldn't be in a better place. It's really amazing that more high-level diplomats, politicians, and celebrities in other countries don't go to Cuba when in a dire medical emergency.
August 01, 2006
I Never Though I'd See The Day
Rich Vedder has a blog on college affordability.
Curriculum Movie/Book Bleg
I am looking to add a film or two to my two upper-level classes this semester: Intermediate Microeconomics and Public Finance. For micro I am considering showing Tucker and The Hudsucker Proxy, and in public I am considering Mr. Smith Goes to Washington. But I am looking for other options. If you have any suggestions, I'd love to hear them. E-mail me at rlawson[at]capital[dot]edu.
Also, I'm assigning a book report or two in each course. I prefer books authored by a single person (i.e., not edited collections). Any ideas here are also greatly appreciated.
Setting the bar high c. 1906
From the Aug. 1, 1906 NYT concerning the recruitment of Federal Meat Inspectors, precipitated by federal legislation rather hastily passed after Upton Sinclair's The Jungle was published earlier in the year:
It may be no easy matter to get the 500 inspectors required by the Department of Agriculture to carry out the provisions of the meat inspection law. Only eight out of every hundred of those taking the civil service examination so far have passed.
Cornerstones c. 1906
From the Aug. 1, 1906 NYT:
The cornerstone of the new Senate office building facing the Capitol plaza was laid at noon to-day [July 31]. The exercises were informal. In the stone a sealed box was placed containing a Bible, copies of the Declaration of Independence, and of the Constitution, photographs of President [Theodore] Roosevelt, Vice President Fairbanks, and of several public buildings, and copies of a number of official documents.
This was the cornerstone for the Russell Senate Office Building.
Talk about mission creep. The official RSOB webpage states the following:
Today 36 senators and 5 committees occupy space in the Russell Building, which in 1958 housed 96 senators and 10 committees.
I wonder what the Bible was for? Perhaps a symbolic gesture that the country is founded on something contained therein? I wonder if the Senators and committees that have offices in the building know or would even care about such symbolism.
French Seeking Jobs in Britain
The BBC reports on people moving from France to Britain looking for jobs. The article has some nice reporting on French labor market rigidities.
Russ Roberts links to a NYT piece on declining male labor force participation. It's a good thing in some ways--increased prosperity has allowed for early retirement. Alas, there are also some folks who relying on other folks to work in their stead as this passage excerpted by Roberts indicates:
But the fastest growing source of help is a patchwork system of government support, the main one being federal disability insurance, which is financed by Social Security payroll taxes. The disability stipends range up to $1,000 a month and, after the first two years, Medicare kicks in, giving access to health insurance that for many missing men no longer comes with the low-wage jobs available to them.
No federal entitlement program is growing as quickly, with more than 6.5 million men and women now receiving monthly disability payments, up from 3 million in 1990. About 25 percent of the missing men are collecting this insurance.
The ailments that qualify them are usually real, like back pain, heart trouble or mental illness. But in some cases, the illnesses are not so serious that they would prevent people from working if a well-paying job with benefits were an option.
The disability program, in turn, is an obstacle to working again. Taking a job holds the risk of demonstrating that one can earn a living and is thus no longer entitled to the monthly payments. But staying out of work has consequences. Skills deteriorate, along with the desire for a paying job and the habits that it requires.
Pay particular attention to the third paragraph--the illnesses are no so severe that they would prevent someone from working a high pay/high benefits job. Since when does the severity of a disability depend on a person's labor market alternatives? BTW, there's a thriving legal practice in helping people receive Social Security disabilty payments.
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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