Division of Labour: November 2006 Archives
November 30, 2006
In Sen. Obama's world, does labor demand slope up?
According to Senator Obama, “Wal-Mart is making a large profit and they don’t have foreign competition. What they are doing though is driving wages down significantly for not only workers at Wal-Mart, they’re also driving down wages for competitors."
Hat tip: Greg Mankiw
A few comments, based on the simplest principles of economics:
1. Wal-Mart’s large profit comes from combining resources – for which they pay competitive prices -- in a way that substantially enhances their value (turns them into higher-valued outputs). Good for them. Making a large profit isn’t a cause for scorn. Absent a legal monopoly privilege, making a large profit is the sign of a large contribution. Making losses is the thing to scorn.
2. Wal-Mart doesn’t have foreign competition? Wal-Mart is a retailer. What would “foreign competition” mean – Target is owned by a European firm? K-Mart is owned by an Asian firm? IKEA is owned by a Swedish firm? (Oh wait – it is.) Wal-Mart faces plenty of competition. There’s no artificial barrier against anyone entering the business of putting up a big-box store.
3. Wal-Mart is driving down wages? Consider the following thought experiment. Wal-Mart closes its doors and lays off all its 1.7 million employees. Would those employees then move to higher-paying jobs? Presumably they work at Wal-Mart because it offers them a better package then other jobs available to them. Would ex-Wal-Mart employees swamping the hiring counter make wages at Target rise? Hardly. By hiring millions, Wal-Mart bids up wages.
Stealing Frank's idea
Incentives Matter: Road Trip Edition
"Americans drive less for first time in 25 years." Why? "Higher gas prices cut not only sales of SUVs, but also time spent on the road." Of course, plenty of luddite urban planners want gas to be more expensive so we all can live in high rises downtown next to the crack dealers.
12 Days of Christmas are more and more expensive. Hopefully since the Dems are in control, maids-a-milking can finally get paid a living wage. And who knew swans were so expensive?
Finally, at least Bush is doing something right this year. After causing all those hurricanes last year (with tons of help from capitalist pigs), "the 2006 Atlantic hurricane season ended with a whimper rather than a bang on Thursday, without a single hurricane hitting U.S. shores." But, maybe I shouldn't give him any credit. Since, after hurricanes or other disasters, plenty of people unknowingly committing the broken-window fallacy claim that the disaster will help the economy through repair purchases and rebuilding efforts. So, if there were no hurricanes this year, then Bush effectively robbed all of those would-be rebuilders. That's why global warming is good; more global warming = more storms = more rebuilding = prosperity, so buck the trend and get that car back on the road!
Czarist favors c. 1906
In the Nov. 30, 1906 NYT is this little ditty:
The Emperor has approved the resolution adopted by the Council of Ministers fixing twelve hours as a working day, including two hours for meals in all industrial establishments. This law will become operative six weeks after its promulgation.
Fair Trade, Fair Speech
Don Boudreaux poses a sensible retort to those who oppose trade that is not "fair": They should "ask themselves if they would trust government with the power to distinguish 'fair' from 'unfair' speech and to suppress or penalize all speech declared to be 'unfair.'" I'm sure Don meant this as a legitimate rhetorical question. Unfortunately, though, many do wish to limit speech that is not "fair" and doing so was enshined in the Fairness Doctrine (1959 - mid1980s). Many, Fairness and Accuracy in Reporting among them, would welcome its revival.
Bernard Shaw on Religion c. 1906
While Richard Dawkins makes a name for himself today criticizing religion and those who are religious (Youtube clips here), Bernard Shaw had similar comments 100 years ago. In the Nov. 30, 1906 NYT:
Bernard Shaw lectured to-night in the Essex Hall, in connection with the Guild of St. Matthew, his subject being "Some Necessary Repairs to Religions." Mr. Shaw said we had a great many pressing social problems to solve, but lacked a religion which would impel us to tackle them.Those are some tough words in just the first two paragraphs of the story. Yet, the third paragraph is even tougher:
If the great congregation of cowards called the human race were to be got to disregard their own safety and interest, they must be made religious. A religious man was not one who belonged to the Church of England or who did not...[n]or was he a man with a special creed. A religious man was one who had sure knowledge that he was here, not to fulfill some narrow purpose, but as an instrument of the force which created the world and probably the universe. Religion made a man courageous, and if he was not intelligent it made him extremely dangerous. In the absence of religion a coarse man had the most courage, but with religion the most fragile and sensitive became enormously courageous.
On Funeral Prices and Organ Donations
The WaPo has a clever article by economists David Harrington and Edward Sayre on the responsiveness of organ donations to financial incentives. An excerpt:
Medical schools routinely pay for the cremation or burial (often with elaborate memorial ceremonies) of the people whose bodies were donated to them for medical research and student training. In contrast, it is against federal law to offer any compensation for transplant organ procurement, including paying for organ donors' funeral expenses. This creates a bizarre asymmetry in the treatments of organ and whole body donations.
Given the current cost of funerals, the savings from donating bodies to medical schools can be substantial. This is especially true in states with funeral industry--protective regulations that are intended to keep out low-cost competitors. Those states provide us an opportunity to test empirically the effects of compensation on whole-body donation and, in turn, to extrapolate whether there is any merit to the criticisms of organ donation compensation.
If potential whole body donors respond to financial incentives, then we ought to see more body donations in stringently regulated states where funeral prices are higher. That is, in fact, what the data show. The number of body donations in stringently regulated states is 7.6 bodies per thousand deaths and only 3.2 bodies per thousand in unregulated states. This is powerful evidence that people react to financial incentives in making whole body donation decisions. We estimate that high funeral prices in the 38 states with stringent funeral regulations increase the number of donations by 8,400 bodies per year. It stands to reason that financial incentives would also raise the donation of transplant organs.
The IOM's rejection of such proposals rests on the argument that offering modest compensation would be perceived by organ donors as sullying their gift. But the empirical data on whole body donation discredit the IOM's argument; the families of whole-body donors often proudly highlight their gifts in obituaries, despite their receiving the financial benefit of not having to pay for a funeral.
The empirical data also discredit the IOM's argument that financial incentives would not increase the supply of transplantable organs. Surely if funeral service payments increase the donation rate of whole bodies, similar compensation would increase the donation rate of transplant organs.
Bootlegger Sighting: Global Warming at the Supreme Court Issue
Part of the transcript from an 11/28 segment of the public radio show "Marketplace":
SARAH GARDNER [the reporter]: Big business can't agree on greenhouse gas regulation. Many utilities are dead set against caps on CO2. But others are begging the government to set some limits.
DORSEY: We're just trying to get the certainty for planning.
GARDNER: Brent Dorsey is with Entergy, a major power company based in New Orleans. Entergy broke ranks with its own trade association when it came out in favor of carbon regulation. And it's not because it wants to save the world. Entergy is the country's second-largest generator of nuclear power. That doesn't emit CO2 so if carbon is taxed or capped, it could put nuclear at a competitive advantage. But before Entergy invests in more nuclear plants, company execs wants that "if" resolved.
DORSEY: Until there is certainty in terms of regulation, decisionmakers are going to be faced with either flawed decisions or wrong decisions.
GARDNER: Some companies, like the Aspen Skiing Company, want CO2 regulated because they believe climate change will destroy their industry. Others, like GE, are investing heavily in green technology and may profit from carbon regulation. And then, says regulation critic Marlo Lewis, there's Wall Street.
MARLO LEWIS: Y'know if you're a trader, whatever the commodity is, whether it's pork bellies or stock or carbon credits, you make a percentage on the sale or the purchase of every trade that you handle. And so you have, unsurprisingly, companies like Goldman Sachs, that are really enthusiastic about a cap and trade program.
No Such Thing as Bad Publicity
THE K-K-Kramer scandal murdered Michael Richards' career - but it's doing wonders for sales of the latest "Seinfeld" DVD.
Season 7 of the popular sitcom is outselling the Season 6 set (released on the same day last year) by more than 75 percent, and more than 90 percent over season 5 at some online DVD retailers, according to TMZ.com.
"The subsidy is the problem"
So says David Frum in a public radio piece on increasing college prices and decreasing student learning.
November 29, 2006
Robert Samuelson (Globalization Makes an Easy Scapegoat) gets to the heart of the "fair trade" nonsense:
We may be about to shoot ourselves in the foot -- or maybe the chest -- on trade. ... We are dealing with something new here. It transcends traditional protectionism, which tries to shield specific industries and workers from imports. It's trade obstructionism: a reflexive reaction against almost any trade agreement. The idea is that much trade is inherently "unfair.'' Multinational companies use it to ship U.S. jobs abroad; other countries compete unfairly with low wages and substandard labor practices.
Posted by Wilson Mixon at 04:17 PM
Self-citations and selection bias
The Annals of Improbable Research (home of the Ig-Nobel Prize) recently directed a "challenge" to its readers - "If you know of a published academic study that surpasses Werner-Michael Kulicke’s record of including 23 self-references, please send us a copy."
Today's email contains at least one contender, and it's Nobel winner James Heckman. In this 110 page working paper, Heckman (and two co-authors) cite 30 Heckman papers (that's only two fewer than my entire resume).
Now, I respect Heckman for his contribution, but 30 self-cites? As the AIR points out:
One of the studies he [Heckman] cites is:No small irony there.
November 28, 2006
A matter of semantics?
The valuable NCPA Policy Digest passes along this observation:
In France, growing numbers of couples are choosing to raise children, buy homes and build family lives without religious or civil approval of their partnerships, says the Washington Post.
Do they mean civil approval or approval by the state? Later in the cllipping this appears:
The result is massive migration to urban areas, where young adults are more independent from their families; and a society that has become not only tolerant but supportive of personal choice in lifestyles.
If "society" is both tolerant and supportive of these unions, doesn't this constitute civil approval?
Corporate Tax Rates
I just came across an interesting study about effective corporate tax rates around the world. It turns out, not surprisingly, that effective corporate tax rates are quite different from the posted statutory rates. To pick out one extreme example, the author estimates Belgium's effective rate to be -4.4 percent while the statutory rate is 34 percent. I'm not sure I believe the numbers (a negative corporate tax rate?!) but it's an interesting study nevertheless.
It was good to see co-bloggers, friends, and a former student at the SEAs in Charleston. Some things that have caught my attention over the past week or so (many are radio links b/c of my spending much time in the car over the past 10 days):
1. Another vicitm of the drug war--a drug raid kills an 88 year old woman in Atlanta.
2. NPR reports on a study finding that teacher certification does not increase student test scores.
4. Frank Deford offers a funny take on how to make a sports movie.
5. From the better to feel good than do good dept: NPR compares the carbon offset movement to selling indulgences. (I almost ran off the road when I heard this one.)
6. Incentives matter: NC offers extra pay to teachers who will move to poor performing schools.
7. Cars are a normal good in Russia (and probably everywhere else). Hint to student readers--I expect this item or the next item to appear on the final in my principles class.
A different take on sports c. 1906
The Nov. 28, 1906 NYT has an article describing some odd views on sport by the President of Harvard:
President Charles W. Eliot, since his recent declaration that the discontinuance of football would do the university no harm, made several objections to-day to basket ball, hockey, and even baseball.Perhaps 100 years ago the idea of team sport, outside of baseball, was looked down upon? Yet, today the most popular sports in the U.S. and worldwide are team sports.
On cigarette smoking c. 1906
A letter to the editor in the Nov. 28, 1906 NYT continues the cigarette "debate":
If "M.C." in writing yesterday on the evil of cigarette smoking, referred to Gen. Grant's death as caused by cigarette smoking, he was certainly mistaken, as the cancer of the throat was caused by "dry" (unlighted) smoking of cigars to an excessive extent.
November 27, 2006
Big Time College Football c. 1906
The Nov. 27, 1906 NYT reports:
Yale's entire football receipts for this season will be about $65,000. From the Yale-Harvard game each university receives about $32,000, and from the Yale-Princeton match the rivals each secured about $13,500. Yale's only other big game was with Brown, in which her share was about $2,000. The minor games will, however, bring the total up close to $65,000.In today's dollars, the total receipts would be about $1.5 million - not but 3-5% of some of today's highest-revenue college football programs.
November 26, 2006
On cigarette smoking c. 1906
I recall the famous picture of Rep. Henry Waxman swearing in the tobacco executives before asking them what they knew about the dangers of cigarette smoking and when they knew it. Anecdotal evidence suggests that the general public knew of a correlation between cigarette smoking and illnesses of certain types long before the Surgeon General reports in the 1960s.
From a letter to the editor of the Nov. 26, 1906 NYT:
I want to say a word or two against cigarette smoking. Every place one goes a man or a boy is seen smoking a cigarette. It is bad enough to see boys smoking this poison, but when it comes to men over 50 years old it looks silly. In fact foolish.
Football reform c. 1906
The 1906 college/high school football season was the first played under the new rules designed to open the game and reduce the probability of severe injury. At the end of the season, the initial impact of the reforms were reported in the Nov. 26, 1906 NYT:
Eleven players were killed and 104 were injured in the United States during the football season according to the Chicago Tribune. These figures are compared with the casualties of 1905, when 18 players were killed and 159 severely injured, and, according to The Tribune, show that "debrutalized" football has accomplished in a large degree the object aimed at, in rendering the game less dangerous to life and limb.
Coasian action c. 1906
From the Nov. 26, 1906 NYT:
HOT SPRINGS, Ark - Miss Helen Gould has been appealed to by a local faction which has been fighting gamblers to donate to a fund for the purpose of buying out the handsomely fitted up gambling houses.
November 24, 2006
Better late than never?
Now it occurs to me, after I'm retired and can't use it--the perfect multiple-choice/discuss question for micro principles and intermediate micro (thanks in part to Dwight Lee):
November 23, 2006
Caroline Baum of Bloomberg.com reviews the Cato monetary conference, and manages (in the updated version) to get my name right one out of two times.
By the way, Baum writes that “Harvard University's Jeffrey Frankel admitted, ‘there are no libertarians in crises.’” A better verb would have been “claimed” or “charged” rather than “admitted”. Not being himself a libertarian (in or out of crises), Frankel isn’t in a position to make any “admissions” on behalf of libertarian economists.
November 22, 2006
Social Security Non-reform
Mark Thoma asks: “Is the administration willing to drop its insistence on private accounts as a condition for Social Security reform?”
I ask: if private accounts are dropped, what is left that can rightly be called “reform”? Tax hikes and benefit cuts do not constitute reform. They are merely marginal adjustments to preserve the same old lousy system.
World's worst pork
In contrast to my yummy earlier post on Wagyu beef, a new report from Heritage Foundation details the yucky mounds pork in this year's federal budget. Money passage:
Giving lawmakers their own pot of taxpayer dollars to distribute as they wish invites corruption. Not surprisingly, the media has been saturated with stories of lawmakers earmarking federal grants to projects directly benefiting campaign contributors, friends, relatives, and even themselves.
The report lists the top 100+ pork projects still in the FY2007 budget (as of 11-15-06). My favorite: $1,000,000 for Mormon cricket and grasshopper activities in Utah. What the...?
Spotlighting this stuff helps, of course. But policymakers respond more to incentives fundamentally shaped by institutions. Because the U.S. system is geographically based with single representative districts, each legislator has a strong incentive to advance budget items that impart benefits on their home district while imposing the costs on the general tax fund. In this system, logrolling, omnibus bills, and more recently earmarks, enable policies that would otherwise fail if voted on individually. The institutional structure—not bad politicians—is the root cause of economically inefficient policies such as pork barrel spending. In order to achieve fewer bad policies, public choice analysis would suggest divorcing representation from geography.
World's best beef
Due to excessive travelling, I won't be back home with family on Thanksgiving. So this holiday I will do the untraditional and dine at Harris, a San Francisco institution, with my wife (to be) and her sister. On the menu is a Kobe Wagyu boneless ribeye. After reading this story, "the world's most expensive steaks," I know what I'll be ordering:
It's a steak with the texture of foie gras, and it comes from cattle that, according to legend, are fed beer and massaged by human hands. In its raw state, the meat is pale--almost white--packed with what Chef de Cuisine David Varley of Las Vegas' Bradley Ogden restaurant calls "an ungodly amount of fat."
Now THERE'S the beef. Happy Thanksgiving, all.
Short run aftermath of the Super Bowl?
The city of Detroit has had a banner year and a half in hosting big-time sporting events. In July 2005, the city hosted the MLB All Star Game. In February 2006, the city hosted the Super Bowl XL. In May 2006, the city hosted a number of post-season NBA games, with the Pistons making it to the Eastern Conference Finals. During October and November, the city hosted a number of post-season MLB games, with the Tigers making it to the 2006 World Series.
If we believe the politicians and convention bureau folks, with all the big-time sports activity in the Motor City, Detroit should be raking in the dough. Why? Because Detroit isn't on most people's must-go tourism list and thus the additional people coming to the city would add substantially to the local economic activity. This is in contrast to other cities, such as Miami or pre-Katrina New Orleans, where sports fans likely just replace would-be sun tanners or Mardis Gras celebrants, respectively.
How can we get a handle on the impact of these events? One way would be to grab hotel occupancy rates, retail sales tax returns, or other local economic activity measures and estimate whether they experienced an appreciable change in those weeks and months during which the events took place. Perhaps this entry will inspire someone to do so, or I will offer the idea as a potential Master's thesis to one of our students.
In the meanwhile (and because I am lazy) we can look at Comerica Bank's Detroit Business Activity Index. This index is a composite of eight different sectors of the greater Detroit-area's economy. Tourism and tourism related spending is therefore only a portion of the index and it is likely that the manufacturing sector's decline will outweigh anything additional tourism might bring to the city, but in a given month who knows?. Nevertheless, this index provides an initial pass as to what these mega-events meant for the Detroit economy:
The 2006 Super Bowl might have had a slight impact on the local economy but the remaining events didn't seem to have a large contemporaneous impact on the business index. Moreover, the ocular estimator suggests that the mega-events didn't seem to dramatically alter the slope of the index's decline since just after the MLB Allstar Game.
I put together the time series of the index from January 2005 through October 2006 (STATA file here). I first looked at the difference in means between those months in which Detroit hosted a mega-event and those when it did not:
. reg index megaevent Source | SS df MS Number of obs = 22 -------------+------------------------------ F( 1, 20) = 1.88 Model | 31.6767677 1 31.6767677 Prob > F = 0.1860 Residual | 337.777778 20 16.8888889 R-squared = 0.0857 -------------+------------------------------ Adj R-squared = 0.0400 Total | 369.454545 21 17.5930736 Root MSE = 4.1096 ------------------------------------------------------------------------------ index | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- megaevent | -3.111111 2.271672 -1.37 0.186 -7.849736 1.627514 _cons | 110.1111 .9686442 113.68 0.000 108.0906 112.1317Those months with a megaevent average approximately 3 points lower than those without, but it is not possible to distinguish that difference from zero (p-value = 0.186). That said, the trend is downward to begin with and most of the events happen towards the end of the time series. I therefore regressed the index against a time trend and threw in the megaevent dummy variable:
Source | SS df MS Number of obs = 22 -------------+------------------------------ F( 2, 19) = 11.51 Model | 202.409125 2 101.204562 Prob > F = 0.0005 Residual | 167.045421 19 8.79186426 R-squared = 0.5479 -------------+------------------------------ Adj R-squared = 0.5003 Total | 369.454545 21 17.5930736 Root MSE = 2.9651 ------------------------------------------------------------------------------ index | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- timeb | -.4547473 .1031936 -4.41 0.000 -.670734 -.2387607 megaevent | -1.165803 1.697431 -0.69 0.501 -4.718567 2.386961 _cons | 114.987 1.308702 87.86 0.000 112.2479 117.7262
The results suggest that during the sample period the index declined .45 each month and that megaevents did not have a significant effect on the business index (p-value = 0.50).
I then added an interaction between the megaevent dummy variable and the time trend to see if the megaevents impacted the intertemporal rate of change of the index:
Source | SS df MS Number of obs = 22 -------------+------------------------------ F( 3, 18) = 10.34 Model | 233.794673 3 77.9315576 Prob > F = 0.0003 Residual | 135.659873 18 7.53665959 R-squared = 0.6328 -------------+------------------------------ Adj R-squared = 0.5716 Total | 369.454545 21 17.5930736 Root MSE = 2.7453 ------------------------------------------------------------------------------ index | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- timeb | -.3751276 .103203 -3.63 0.002 -.5919489 -.1583062 megaevent | 6.849738 4.230615 1.62 0.123 -2.038454 15.73793 megatime | -.5570758 .2729851 -2.04 0.056 -1.130596 .0164445 _cons | 114.1333 1.28187 89.04 0.000 111.4402 116.8264
The megaevent dummy variable remains insignficant (although it is now positive), the parameter estimate on time remains significant although it declines slightly in absolute value, and the interaction term is negative and slightly significant (p=0.056). The results suggest that when a megaevent occured in Detroit, the level of the index might have increased (the parameter estimate might be positive in a one-tailed test with a p-value around .06, indicating that 6 times out of 100 we would be incorrect stating the parameter estimate was positive). However, the intertemporal decline in the business index was perhaps more than double of what it was in the non-mega-event months. The upshot is that there doesn't seem to have been a detectably large and positive impact of the unprecedented 17 months' worth of sporting events on the Detroit metro-area's business activity index.
While this might not be the best news for those in Detroit, these preliminary results jive with recent work with Dennis Coates (presented last weekend at the Southern Economic Association meetings) suggesting that the impact of mega-events is not tremendously large compared to the local economy (the 2004 Houston Super Bowl is estimated to have generated taxable activity equivalent to approximately 0.02% of the Houston economy).
The American is a magazine of ideas for business leaders. Modeled on Henry Luce's original vision for Fortune Magazine, it surveys the full scope of American life through the lens of business and economics. The magazine is published six times a year--our first issue came out on November 15, 2006. Our web site, American.com, takes the same editorial mission to the web, with original writing every day and a selection of thought-provoking links from around the web. The American is a project of The American Enterprise Institute.
November 21, 2006
The beginning of the end c. 1906
From the Nov. 21, 1906 NYT:
Cleveland, Ohio - [State] Senator Charles W. F. Dick this afternoon made the declaration that he favored an income tax, saying:
November 20, 2006
Some light reading
A draft of my presentation at Thursday’s Cato Institute monetary conference, “Is Inflation Targeting Suitable for the United States?,” is available here. If you’d rather watch or listen than read, Real Video and podcast versions of each of the conference panels are also available at the same site.
My paper on “The Free Banking Alternative,” presented at Hillsdale College last month, is now available here.
Posted by Lawrence H. White at 03:43 PM
November 19, 2006
More Milton Friedman
More great links via Southern Appeal.
November 17, 2006
John Edwards vs. Wal-Mart
Reason's Jeff Taylor knocks one out of the park.
Milton Friedman, RIP, and inflation targeting
I was at the Cato Institute’s annual monetary conference yesterday, where Anna J. Schwartz was one of the featured speakers, when the sad news came that Milton Friedman had died. Anna was stoic as ever; perhaps she already knew. The final speaker of the day was Robert Barro, who had been asked months ago to speak about Milton Friedman’s influence. Barro noted with regret the additional poignancy his reminiscences would now have.
I had been asked to talk about inflation targeting. I prefaced my remarks by noting that asking me – someone who favors relying on markets rather than politics for monetary and banking arrangements – to discuss whether the Fed should adopt inflation targeting is like asking someone who advocates privatizing the mail whether the US Postal Service should adopt an explicit delivery-time target for priority mail. (Do Fed Ex, UPS, and DHL offer their customers a delivery-time commitment? Yes? Then, at least until we abolish the postal monopoly, it makes sense to give the USPS such a target. Application of the argument to the Fed is pretty straightforward.) My paper should eventually appear in the Cato Journal. Jim Dorn told me the conference issue would be dedicated to Milton Friedman’s memory.
Guatemala Hiking Trip Report
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After the Mont Pelerin Society’s (MPS) closing gala dinner on Thursday night of last week, Ben Powell and Ed Lopez, both professors of economics at San Jose State University, and I awoke (severely hung over!) and hitched a ride with the MPS excursion group to the colonial and touristy village of Antigua about an hour outside Guatemala City. From the village, you could see the massive double peaked volcano Acatenango (13,054’) and to the left of it its twin volcano of Fuego (12,346’). These volcanoes are our goals.
We met our guide Rafael and his sidekick Rudy and drove about an hour to the village of La Soledad where we loaded up our gear and started hiking first through farmland, then jungle, and then grassland/pine forests, and finally through moonscape volcanic sand and rocks. My pack was about 35 lbs. but I’m guessing Rafael and Rudy had twice that weight in their packs. Our goal was to reach Acatenango’s tallest peak and sleep in the crater. Fuego is active and the hope was to get some good nighttime shots of Fuego erupting. Alas just as we reached the saddle in between Acatenango’s two peaks, we heard thunder and felt a storm coming on. We quickly decided to make camp in a nearby stand of trees below the lower summit. It was a good thing too because we barely got the tents pitched before the heavens opened up. It rained for over two hours. After it stopped we ate, broke out the Zacapa Centario rum and enjoyed the eerie fog. We went to bed worried that we’d awaken to a thick fog.
Luckily we awoke at 4:30 to beautiful clear skies. We hit the summit of Acatenango, after 40 minutes of very hard hiking on steep loose volcanic sand, just before dawn and saw the sun rise over the volcanos Aqua and Pacaya (see pic) and a really cool shadow of our own mountain. From the summit you could see 12 volcanoes from Mexico to El Salvador! Fuego put out a few decent puffs while we were on Acatenango. We also took a hero shot of the three of us on top. Finally we headed down a few thousand feet to the saddle between Acatenango and Fuego, ate breakfast, dumped our heavy packs (to be picked up on the way back) and headed up to Fuego. We managed to get to within about 200-300 meters of the summit. We would have gone closer but the ridgeline trail turned very narrow and in any case you never know when a larger eruption is going to take place. (It was pretty quiet while we were up there.)
Finally, we made a long hard 4 hour hike down and up and around Acatenango’s side back to La Soledad.
« Close It
If you're looking for more Milton Friedman links
I've collected a few on Southern Appeal.
Thursday's (11/16/2006) All Things Considered carried an interesting story on profiling, "Hearing Sounds of Religion, and Fanaticism" (available on Lexis/Nexis). An excerpt:
I didn't want to be caught staring so I looked away, but not before I noticed he was driving a white cargo truck. Hold it. Muslim guy in a cargo truck. My mind played a flash round of word and picture association - all involving the words truck bombs.
Of course, this being NPR, the essayist chalked it up to societal conditioning.
Two Wal-Marts: One for us, one for John
Is Wal-Mart entering the negative campaign ad game? Maybe so, according to this report: "Wal-Mart had noted in a news release Thursday that on the same day Edwards was criticizing the company in a conference call with union-backed activists, the volunteer staff member had asked a Raleigh, N.C., electronics department manager to obtain a PS3 for the ex- senator's family."
Art Carden on Wal-Mart
It's been awhile since I last posted on Wal-Mart, but here's a nice offering from Art Carden.
NB: Happy Thanksgiving to readers and co-bloggers. I (and co-bloggers Bob, Josh, Ed, and Craig) will be attending the Southern Econ meetings Sat-Tues.
November 16, 2006
Today, I am sad.
I will forever be grateful for the help Milton Friedman gave Jim Gwartney and me as we set out to construct the economic freedom index. Even as a naive graduate student, Milton treated me as an equal. (One of my fondest memories will be of playing tennis with Milton in 1992 at one of our early meetings.)
Copied below is the forward that Milton wrote for the first edition of the EFW book.
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Freedom is a big word, and economic freedom not much smaller. To talk about economic freedom is easy; to measure it, to make fine distinctions, assign numbers to its attributes, and combine them into one overall magnitude-that is a very different and much more difficult task, as we found out when we started on this quest some thirteen years ago (see Michael Walker's introduction).
James Gwartney, Robert Lawson, and Walter Block deserve great credit for having brought this quest to so satisfactory a temporary conclusion-I say temporary because this study of economic freedom for more than 100 countries provides a cornucopia for students of the relation between economic freedom, political freedom, and civil freedom, and for further explorations of the relation between economic freedom and the level and rate of economic growth. The resulting studies will surely make revised editions necessary, both to bring the indexes of economic freedom up to date and to incorporate the additional understanding that will be generated.
For many of us, freedom-economic, political, civil-is an end in itself not a means to other ends-it is what makes life worthwhile. We would prefer to live in a free country even if it did not provide us and our fellow citizens with a higher standard of life than an alternative regime. But I am firmly persuaded that a free society could never survive under such circumstances. A free society is a delicate balance, constantly under attack, even by many who profess to be its partisans. I believe that free societies have arisen and persisted only because economic freedom is so much more productive economically than other methods of controlling economic activity.
It did not require the construction of an index of economic freedom for it to be widely believed that there is a close relation between economic freedom and the level and rate of economic growth. Theoretical considerations gave reason to expect such a relation, and little more than casual observation sufficed to show that what theory suggested, experience documented. We have not in a sense learned any big thing from this book that we did not know before. What we have done is to acquire a set of data that can be used to explore just how the relation works, and what are the essential connections, and that will enable skeptics to test their views objectively.
To achieve these advantages, it was essential that the measure of economic freedom not beg any questions by depending on outcomes; it was essential that it depend only on objective characteristics of an economy. This may seem obvious but I assure you that it is not. After all, the rate of economic growth or the level of living may be an excellent proxy for economic freedom, just as an auto's maximum speed may be an excellent proxy for the power of its motor. But any such connections must be demonstrated not assumed or taken for granted. There is nothing in the way the indexes are calculated that would prevent them from having no correlation whatsoever with such completely independent numbers as per capita GDP and the rate of growth of GDP. Yet the actual correlation between the indexes and the level and rate of economic growth documented in some of the extraordinarily informative graphs in the book (e.g., Exhibit S-2) is most impressive. No qualitative verbal description can match the power of that graph.
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A Sad Day
HT: Dan Alban and Ted Crouse
UPDATE: George Leef points out CNN puts a nasty spin on its story by quoting a so-called progressive saying "concerns of workers took a back seat compared to those of creditors and bankers."
The world loses a giant
I'm sure I won't be the first to "report" it, but Milton Friedman has passed away.
I have probably read much less of Friedman's work than others who frequent this site, but I certainly recognize the immeasurable contributions he made to the cause of economic liberty in this country and worldwide. We will all miss his voice in the debate over school choice as well, something for which he recently became a strong advocate.
I know this is playing fast and loose with statistics, but it seems like harmless fun. I treat the prices at Intrade.com as probabilities. They give the price for these six candidates to be nominated (I call this ProbNom) and to win the presidency (my ProbWin). From this, I compute the conditional "probability" of winning given nomination for the six leading contenders.
Name ProbNom ProbWin Prob(Win|Nom)
November 15, 2006
Sixes are Sevens: California edition
This article reports that San Francisco plans to place marijuana enforcement near the bottom of the list:
Legislation approved Tuesday afternoon by San Francisco's Board of Supervisors will have police put the enforcement of marijuana laws on the bottom of the priority list, although prohibitions remain for marijuana sales in public, possession by minors or use by motorists.Good for them, I suppose, but 22.37 miles away, Belmont, CA, plans to ban smoking of cigarettes everywhere except for single-family detached residences.:
“We have a tremendous opportunity here. We need to pass as stringent a law as we can, I would like to make it illegal,” said Councilman Dave Warden. “What if every city did this, image how many lives would be saved? If we can do one little thing here at this level it will matter.”Is government supposed to pass ordinances so that a single citizen can sue his neighbors? That doesn't sound right.
Freedom goes 1-1 this round?
Another Highlight of Socialized Medicine
A man fixed his front tooth with superglue after failing to find an NHS dentist.
Gordon Cook, 55, has used the bizarre "DIY dentistry" technique on a loose crown for the last three years - with each fresh application of glue lasting around two months.
The Surprising Truth about Compassionate Conservatism?
I saw a newspaper write-up today about this new book (and forthcoming 20/20 segment):
Copied from the website:
Arthur Brooks, a top scholar of economics and public policy, ... demonstrates conclusively that conservatives really are compassionate-far more compassionate than their liberal foes. Strong families, church attendance, earned income (as opposed to state-subsidized income), and the belief that individuals, not government, offer the best solution to social ills-all of these factors determine how likely one is to give. Charity matters--not just to the givers and to the recipients, but to the nation as a whole.
Headline of the day
Slaves and Whales
The article that Craig cites contains a link to a useful article about property rights in whales. An excerpt:
The debate about endangered whales is fundamentally flawed. Whale scarcity is not caused by whale hunting - the real problem is that no one owns whales.
Of course, the plight of whales and that of humans are fundamentally different. To the extent that whales are endangered, their status is due to human predation. Whether each whale could be a free moral agent is largely beside the point: Given the right (i. e. wrong) set of property rights, members of another species (ours) will hunt and kill them.
November 14, 2006
The next big idea from the U.N.
Looks like I bit on sucker-bait. I should know that if it sounds too good, or too crazy, to be true, it probably is. The piece does read like an "Onion" piece, but the follow up links were so good that I actually considered it real. My mistake. More than one helpful reader has pointed this out and hence the retraction. One helpful reader emails to point out:
I hope you know that www.gatt.org is not the real WTO website. That site is actually run by a group called the Yes Men. They're basically a "satire" group that attempts to sabotage some organizations and corporations by releasing statements falsely under their names. More information at wikipedia: http://en.wikipedia.org/wiki/Yes_men
Mea culpa - the upshot is they got me.
All I can say is "whew."
Aeon Skoble of L&P posts that John Tierney is leaving the NYT's op-ed page. His departure is a big loss for the cause of liberty.
Don Boudreaux comments here.
November 13, 2006
HillaryCare Once More?
The return of HillaryCare? This, from AP:
She also said Democrats would focus on improving the quality and affordability of health care - a touchy matter for the former first lady, who in 1993 led her husband's calamitous attempt to overhaul the nation's health care system. The failure of that effort helped Republicans win control of both the Senate and House the following year.
"¡Viva el Capitalismo!" provides an interesting analysis of the recent Nicaraguan election. An exerpt: "In a sense, these moderate left-wing leaders, perhaps now including Mr. Ortega, are a lot more in sync with what Ronald Reagan and his men were aiming for in Central America in the 1980s than Oliver North would care to admit."
A belated posting on CA's defeated Prop 87. From the LA Times (11-3-06 via Lex-Nex):
Vinod Khosla is crusading for the measure on Tuesday's ballot that would tax oil companies billions of dollars to fund alternative energy development. He says it would be a boon to the environment.
But it could also be a boon to his investment portfolio.
Khosla, a co-chairman of the campaign to pass Proposition 87 and a $1.1-million donor to the effort, invests in ethanol manufacturing companies poised to claim government grants that would be funded with the new tax. Though he has vowed to give away any profits earned from companies that receive money stemming from the initiative if the measure passes, his situation reflects a trend that alarms advocates of campaign finance reform.
Once a means for venture capitalists to pursue philanthropic interests, the bankrolling of citizen initiatives has become a financial opportunity. Their campaigns for government funding of stem cell research and the promotion of cleaner energy technologies could bring billions of dollars in public money to niche technology markets that their firms bet on.
The committees created to allocate the money under such initiatives are not obligated to follow the conflict-of-interest restrictions that guide most government agencies. Representatives of start-up firms funded by venture capital companies have seats on those panels, as do some venture capitalists.
"You have these very wealthy individuals creating pots of public money that they then play a huge role in doling out," said Ned Wiggelsworth, a policy advocate for Common Cause, an organization that lobbies for campaign finance reform. "I'm skeptical their motives are pure when they stand to profit ... financially."
Just to be clear: I think the tax was a terrible idea and am glad it was defeated. Although some supporters' motives may have been personal enrichment, I would not favor Common Cause style limits on campaign contributions.
November 12, 2006
Speed traps and perp walks c. 1906
From the Nov. 11, 1906 NYT:
PEEKSKILL, N.Y. - A number of arrests were made here to-day for automobile speeding. Fourteen prisoners were held and all pleaded guilty when arraigned before Judge Travis. Fines ranging from $10 to $25 were imposed.If only Einstein's Theory of Relativity had been around, a good lawyer might have been able to get the speeders off the hook.
The folks at EH.net suggest that the range in fines was approximately $225 to $575 in 2005 CPI adjusted dollars. Ouch.
Why were speeders arrested rather than simply given a ticket and sent on their way? Perhaps the (marginal) cost of arresting a particular speeder was less because there were fewer cars on the road? On the other hand, perhaps the marginal benefit of arresting a particular speeder was greater. At the time, only the rather well-to-do drive cars, so perhaps there was a bit of scandal involved that would titillate the common man and "make an example" of someone?
Indeed, the article describes several of the people stopped:
Among those stopped for exceeding the speed limit was a man who said he was the ex-Gov. Robert L. Pattison of Pennsylvania....Another said he was George W. Morgan and persons in the court room said he was the Superintendent of Elections in New York....Elben Van Cott, who said he was the son-in-law of Isaac N. Mills, the newly elected supreme Court Justice.The perp walk (whether on Court TV or in the columns of the NYT) might have held as much fascination in 1906 as it seems to today?
The Gentle Cynic c. 1906
From the Nov. 11, 1906 NYT:
November 11, 2006
Random Items Including a Naked Man with a Concealed Weapon
1. Via Volokh: Police in CA arrested a naked man with a concealed weapon. Story here.
2. Via the comments on the naked man with concealed weapon story: A judge has ruled that a burrito is not a sandwich. Details here.
3. A study links homeliness with crime.
4. Ah the joys of socialized medicine:
A woman has been told she must remain in agony for more than two months because her hospital will be punished if it operates on her more quickly.
Bonnie Collins, who has gallstones, has been advised by her GP to live on water and occasional cream crackers to stop her condition getting worse.
Doctors will not operate on her until Christmas at the earliest, because debt-ridden Ipswich Hospital - which is planning to treat cats and dogs for cancer to raise funds - will not get paid for moving her up the waiting list. This is because her case is classified as urgent, but not an emergency.
5. JS points me to some folks who need a lesson on value added (story here; photo included):
In a field just off N.C. 42 in Gardners Township, a large cotton module with a message turned the heads of some motorists this week.
“Victoria’s Secret sells underwear for $45 a pair. Farmers sell cotton for 45 cents a pound. What’s wrong?” was written in black paint on its side. …
Kevin Gardner said … “That is how it is in the world. Somebody overseas buys cotton at cheap prices and multiplies the price 100 fold … Farmers over here are struggling to make it.”
That inspired the college student to write the message on the side of his uncle’s cotton, he said.
“I’m not good at math, but 100 times 45 cents ….” Gardner said. “There ain’t a 100 pounds of cotton in some of those drawers.”
This New Republic article contains some suspect economic analysis, but the political anallysis is intriguing.
Democrats have responded by fielding candidates like Tester who support gun rights, oppose gay marriage, and attack the Bush administration for expanding the reach of government.
Picking Winners Once More
From a report in the Telegraph: "The French economy slumped in the third quarter as the Airbus crisis began to exact its toll, dousing hopes that Europe would take over as world's growth engine as America slows. Growth sank to zero with an accelerating twist down in September as car output fell 3.1pc and overall manufacturing slid 1pc, far worse than expectations. ... France's sudden downturn comes amid signs of flagging growth across the euro-zone following a brief burst of energy this year. Germany and Italy both face fiscal austerity packages in 2007."
November 09, 2006
Here, from USA Today, is a classic example of biased reporting. Under the headline, "Liberals mark big victories with ballot initiatives," USA Today goes crazy.
"Liberals claimed unprecedented victory in Tuesday's ballot measures as voters raised the minimum wage in six states, overturned South Dakota's restrictive abortion law and defeated for the first time a proposed constitutional ban on same-sex marriage.
All true enough. But unmentioned in the entire article are the defeats of tax increase proposals in California and elsewhere, some of which I outline here.
Passage of the Michigan Civil Rights initiative draws this passing reference, buried in mid-paragraph, "In Michigan, voters approved a ban on several affirmative action programs." Does anyone doubt its defeat would have been trumpeted to the hills?
There is no mention at all about nine states that made it harder for state and local governments to seize private property. No mention at all about the failure of campaign finance restrictions in liberal California and "good government" Oregon.
Election Reflections - A Center-right Country
Some thoughts on Tuesday's results can be found below the fold. A bad day for Republicans, but not for limited government.
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The elections were bad news for Republicans but not terribly bad news for those interested in limited government.
From a partisan standpoint, they mark a clear repudiation of Republicans. Not only did the Democrats gain both control of both houses of Congress, but not a single incumbent Democrat lost a race for House, Senate or Governor. Moreover, down ballot the Democrats captured control of 9 state legislative chambers. Whether this is bad for limited government is hard to say. Let's leave aside the theories about how gridlock is helpful here - I am skeptical that having Democrats, who generally want more government, can be better than having Republicans in control, who at least talk about limiting government. Does anyone really believe that Democratic rule, Congress would have been spending less over the past 6 years? The Democrats will want to pursue a number of initiatives such as minimum wage increases, prescription price controls and the like. I an not at all sure that Republicans will filibuster such measures in the Senate, or that the President will veto them.
But there is another way to look at this. The Democrats generally campaigned as conservatives, favoring "fiscal responsibility," opposing wasteful spending, and burying any talk of large new government programs. In fact many of those elected will moderate the Democratic caucus. Jim Webb and Bob Casey, and even Joe Tester and Sheldon Whitehouse, will be on the right side of the Democratic Senate caucus. Similarly with many of the new House members, such as Heath Schuler and Baron Hill. Meanwhile, many of the Republicans to lose, such as Chafee in the Senate and some of the northeastern House members, have been more prone to support spending, oppose tax cuts, and generally favor bigger government than their caucus. Thus, while congress overall may be more in favor of big government, the center of each party caucus may move toward smaller government. And this would be a good thing.
Leadership battles on the GOP side may also be good for limited government. Already, Michael Pence (R-IN), one of the real stalwarts for limited government from his position as Chair of the House Republican Study Committee, has announced for minority leader. Jeb Hensarling of Texas, another libertarian-Republican, will be managing his campaign. Arizona's John Shadegg, yet another libertarian-leaning Republican, will be running for the Chief Whip's spot. A GOP leadership team of Pence/Shadegg would be a great boon for limited government. Current majority leader John Boehner of Ohio will be running, and the word is that Virginia's Eric Cantor will also seek the post, with Matt Blount seeking reelection as whip. They would represent the status quo. Joe Barton may also be a candidate for leadership. Ohio's Deborah Pryce has announced that she is stepping down from the #4 GOP leadership slot, as Conference Chair, and Marsha Blackburn, a limited government fan, is rumored as a possible replacement.
On the Senate side the GOP leadership will almost certainly go to Mitch McConnell of Kentucky, the smartest, toughest member of the GOP caucus, and also one of the most principled in defense of limited government, whether staking out unpopular positions such as opposition to campaign finance reform and a flag burning amendment or pushing for lower taxes.
Meanwhile, Republicans who took a hardline position against immigration, such as Minuteman leader Randy Graf and J.D. Hayworth, did not fare well. Voters in Arizona approved ballot measures to limit government benefits to illegal aliens, and also overwhelmingly approved making English the state's official language. That is to say, voters opposed expansions of the welfare state for illegal immigrants, but did not support drastic immigration restrictions.
Limited government also faired well in other ballot initiatives. True, voters endorsed minimum wage increases everywhere they appeared on the ballot, but that's to be expected, frankly. Otherwise, though, voters took after big government. A California proposition to impose an "extraction fee" on energy companies and fund a $4 billion government research program for alternative fuels failed by 55-45. California voters approved $37 billion in government bonds, but rejected a new tax on tobacco and a $450 million property tax increase for education.
Higher taxes on tobacco were approved in Arizona and Colorado, but rejected in Missouri, as well as California.
However, taxpayers bills of rights and state spending caps, which failed in Maine, Oregon, and Nebraska.
Another California proposition, calling for tax financing of political campaigns, failed by an astonishing 75-25 margin. Campaign contributions limits also failed in Oregon by a lopsided 60-40 margin.
On the property rights front, the Kelo rebellion gained steam, as 9 of 11 ballot proposals limiting the ability of government to take private property were successful.
In Michigan, a civil rights initiative to halt state use of racial preferences passed by a comfortable margin.
Efforts to decriminalize marijuana failed. Bans on gay marriage were generally successful. Limitations on abortion generally failed, by narrow margins. A Massachusetts initiative to allow food stores to sell wine failed.
All in all, a mixed bag, but not one that suggests that people are longing for a more government spending and regulation.
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November 08, 2006
Gridlock: Good News or Wishful Thinking?
From the WaPo (with a HT to Dan Alban):
NEW YORK -- Wall Street rose for a third straight session Wednesday, with the Dow Jones industrials reaching another record close as investors grew more confident that a huge victory by Democrats in congressional elections would result in gridlock and keep lawmakers out of the way of business interests.
I hope Wall Street is right, but I'm skeptical. Congress has passed all sorts of slop over the past 6 years but Bush has found only one bill objectionable enough to warrant a veto. I expect Bush to cave on CAFE, the minimum wage, and drug price controls (if not explicit then implicit via the "buying power" of Medicare). Pro-growth tax policy, one of the few Bush bright spots, is likely to be substantially undermined by the Dems desire for "middle class tax cuts."
That's finally over.
My city elected a mayor who, in a radio interview, claimed that he didn't vote to raise taxes while in the state legislature, since some of them were fees, some votes were to continue existing taxes, etc. A rose by any other name...
On NPR's live coverage last night, the anchor, referring to the slim margin in Virginia, said something to the effect of "and you think your one vote doesn't count?"
Isn't it sad when your one vote does count? We are establishing who will determine the laws and policies which will constrain our lives, confiscate our income, and ideally protect our life, liberty, and property. Yet that determination may be made by some dude in Virginia who decided to go to the polls because the Outdoor Channel was showing a rerun of a deer hunting episode. New episode? Completely different election result, different legislative direction of our country for two years.
"Every vote counts." That's why, if I had wasted a half hour of my life yesterday, I could have voted for the Libertarian who ran, oh wait, no Libertarians ran in my district. But I guess I could have enjoyed fulfilling my "civic duty" of tapping a computer screen with a three-foot curtain pulled behind me. My benefit-cost analysis of voting doesn't include emotional benefits. A half hour of my time vs. one more vote out of several hundred thousand for a candidate I don't like.
"Soldiers die protecting your right to vote." I honor their sacrifice. Which is the worse offense, that I don't vote or that those who I can vote for stand against every Constitutional principle?
"But if everyone thought that way..." I'm not everyone, I'm just me.
I can't remember where he said it, but Walter Williams said that in the best NBA games, you never notice the referee. They make consistent calls and apply the rules fairly. Visiting fans get annoyed when a hometown ref shows favoritism. In Congress, it shouldn't matter who we elect; their job is to apply the Constitution fairly. When the understanding of our political system devolves from a Constitutional republic into a mob-rule democracy, suddenly everyone is clamoring to pick the ref who will make the worst calls in their favor.
ACORN, Voter Fraud, & Minimum Wage
ACORN, the Association of Community Organizations for Reform Now, is self-described as "the nation's largest community organization of low- and moderate-income families, working together for social justice and stronger communities."
John Fund reports on some of ACORN's shenanigans relative to elections. The article includes these references to minimum wages.
Its manual for minimum-wage campaigns says it intends "to push for as high a wage as possible." But it doesn't pay those wages.
So at least one employer's demand curve for labor slopes downward.
No, the headline doesn't refer to the commiecrat takeover of the House and the Senate. While the Democrats' big year did take down some decent Republicans (e.g., Chris Chocola of IN), the party of pills for seniors, bloated farm bills, and bridges to nowhere didn't deserve to retain control. Of course, it's hard to make a case that the Dummycrats deserve to win. Not only is their agenda rotten, but campaign tactics such as GA Rep John Lewis's telling black voters that "Your very life may depend" on voting against a Republican running for the Fulton County Commission are outrageous.
Instead, the headline refers to Maine's defeat of a Taxpayers' Bill of Rights proposal. The proposal was given a good chance to pass and its passage would have given the TABOR movement momentum in other states. TABOR's failure in Maine makes it a bit less likely that GA's Republican leadership will push the measure.
One bright spot--several states including GA passed ballot items making it more difficult for government to seize property via eminent domain. I'd be more enthusiastic if I thought the measures would truly stop government predation. Instead, I expect crafty pols will make use of loopholes or creative reading of the measures to continue their legal plunder.
November 07, 2006
Midterm elections c. 1906
A sample of articles from the Nov. 7, 1906 NYT:
Some other headlines:
November 06, 2006
Vote early (and irrationally?)
Perfect timing for Bryan Caplan's "The Myth of the Rational Voter." Some excerpts:
But why are there some areas — like politics and religion — where irrationality seems especially pronounced? My answer is that irrationality, like ignorance, is sensitive to price, and false beliefs about politics and religion are cheap. If you underestimate the costs of excessive drinking, you can ruin your life. In contrast, if you underestimate the benefits of immigration, or the evidence in favor of the theory of evolution, what happens to you? In all probability, the same thing that would have happened to you if you knew the whole truth.
HT to Don Boudreaux
November 05, 2006
Vote early (and vote often?)
From a Nov. 5, 1906 NYT editorial:
To all our readers...we tender the urgent advice to vote as early as possible.
November 02, 2006
I'm in Costa Rica attending the annual meeting of the Economic Freedom Network, the group of think tanks who co-publish the Economic Freedom of the World index.
We put out this press release today:
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NOVEMBER 2, 2006 - 08:00 ET
Latin America has never had a sustained market-based reform effort and, most dangerously, has failed to establish the rule of law. Limited reforms were attempted in the first half of the 1990s but were too restricted and too short lived to have much effect, the Network said in a communique issued prior to meetings in San Jose, Costa Rica. The communique in English, Spanish and Portuguese can be found at www.freetheworld.com.
"It's a myth that Latin America went through a sustained period of reform. We had some weak reforms but still Latin Americans remain among the least free economically on the planet - and the last decade has seen continual reversal of even these modest reforms," said Rigoberto Stewart, President of Costa Rica's Institute for Liberty and the Analysis of Public Policy, which co-hosted the Costa Rica meeting with The Fraser Institute. "If Latin Americans are ever going to build prosperity and reduce poverty, we must enter into a period of real reform - especially in building the rule of law."
Chile is the only nation in the region to establish a high coherence with the rule of law and adopt wide-ranging market reforms. Consequently, it outpaces all other Latin American nations by a wide margin, with real per capita economic growth of just under 25 per cent between 1995 and 2004, compared to a Latin American average of just over 10 per cent, according to the Network's research.
Venezuela ranks as one of the world's least free nations with the lowest level of economic freedom in Latin America and the fifth lowest in the world. Despite great oil wealth, the lack of market economics has deprived the people of Venezuela of the prosperity they should enjoy. Per capita incomes in Venezuela were lower in 2004 than in 1995, and the current government seems set on a course that will deprive the people of Venezuela of their birthright and keep them mired in poverty.
Brazil, the largest country in the region, has a mediocre economic freedom performance by Latin American standards and a very poor one by world standards. Brazil's score in rule of law has declined by 1.6 points since 1995, worse than the average Latin American average decline of 1.0 points. Brazil's weak performance in economic freedom - ranking 88th out of the 130 nations - is reflected in its per capita GDP growth. The total increase between 1995 and 2004 is just 8.5 per cent, worse than the regional average.
The average score of all Latin American nations in 2004 would rank the region, were it to be considered a nation, 65th out of 130 nations in the index of economic freedom, tied with Namibia, Tanzania, and Uganda. Even worse, Latin America ranks 85th in rule of law behind Russia, Senegal, and Uganda.
"The rule of law provides the infrastructure of a market economy, and too many nations in Latin America simply do not have the legal infrastructure they need for success," said Fred McMahon, Director, Trade and Globalization Studies at The Fraser Institute. "But the rule of law cannot be built quickly through a simple formula. It requires study, hard work, dedication to the cause, and patience."
The Economic Freedom of the World network consists of independent social and economic policy research organizations from 72 nations. It publishes the Economic Freedom of the World Annual Report which is recognized globally as a marker of good institutions.
For more information on the Economic Freedom Network, data sets and previous Economic Freedom of the World reports, go to www.freetheworld.com.
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"A Farewell to Alms: A Brief Economic History of the World"
This book, by UC Davis economist Gregory Clark, is the subject of Tyler Cowen's NYT column today. Due out in 2007 from Princeton U. Press, Clark has made it available in toto right now as a single big PDF file, here. Clark's bottom line? Economic growth and development are driven much more by "demography, technology, and labor efficiency" than by governmental and economic institutions and policies. (P. 422)
Bush still a Keynesian
I caught Rush Limbaugh's interview with the President yesterday on his show, in which Dubya had some disappointing things to say about China:
Our relationship with China is a very complex relationship, and it's an important relationship. Obviously we have an economic relationship, and we're trying to put that relationship in a position where our Americans can realize that trade is not only free but it's fair.
The last three words always make me shudder, since the implication is that free trade between two consenting parties can be unfair. Then there was this:
One great opportunity for China, Rush, is to encourage China to develop a society in which there are savers. In other words, a society in which there's a pension plan. Let me rephrase that: a society in which there's consumer [sic] because now there's a society of too many savers. The reason they're saving so much money is because there's not a pension plan or a legitimate healthcare system. The people horde [sic] the money they have in anticipating there's going to be a bad day. If we can encourage China to be a country of consumers, you can imagine what it would mean for US producers and manufacturers to have access to that market.
Yup, we're all Keynesians still. Saving is considered hoarding and is to be avoided. Hoarding occurs because there is no one besides me that is responsible for my retirement or health care (since it is determined by God that someone else must be responsible for me in my old age or bad health). Since it is consuming and spending that benefits US producers and manufacturers, we should stop buying our children piggy banks and start getting them credit cards. I know in my own life that nothing but good things have happened when I've spent instead of saved.
Bush's $300 per person tax cut checks a few years back were sold to the public on the same principle: "we need these tax cuts so that people start spending money and get the economy moving again."
Here's hoping Say's law doesn't completely die.
"Sometimes our government goes too far"
So says DeKalb County (GA) CEO Vernon Jones after he vetoed tighter smoking regulations for the county. If only we heard Jones's sentiment more often from him and other government officials.
November 01, 2006
Cultural commentary c. 1906
A snippet from the Springfield Homestead repeated in the Nov. 1, 1906 NYT :
There need be no misgivings anywhere or at any time over the usual good sense of the people of the United States or of any State thereof. This is a democratic Government of a well-intending and fairly intelligent democracy, and a Government by it and for it. Out of our scares the Government has gone on to better things. The American public is not a mob. It is a sane and self-controlled Nation.This is something to mull over.
The value of a reputation c. 1906
From the Nov. 1, 1906 NYT:
PHILADELPHIA - Miss Bella Blum, daughter of Israel Blum, a wealthy resident of Brooklyn, N.Y., instituted suit in the Common Pleas Court to-day to recover $25,000 damages from Abraham Press, charging breach of promise of marriage. Press is a jeweler. Miss Blum, who is 19 years old, is seeking to recover jewelry worth over $2,000, which, she declares, Press gave her but afterward obtained on the pretext of having it repaired.The folks at EH.net suggest that $25,000 in 1906 is approximately $560,000 in CPI adjusted 2005 dollars. Was the reputation of the jilted bride-to-be damaged that much? What a difference 100 years makes.
On a similar note, last year I "reported" on the alleged value of a stolen kiss in 1905 - approximately $208,000 in 2005 dollars. It is interesting(?) that a stolen kiss wasn't worth as much as being left at the altar, so to speak.
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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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