Division of Labour: December 2006 Archives
December 31, 2006
2006 Running Year in Review
Total Miles: 1315.8
Yellow: individual runs
Not as many runs/miles as last year, but a good year. In addition to setting a marathon PR, I ran post-high school PR's in the 5k (19:03), 4 mile (22:20), and 10k (40:20). Unfortunately, the year ended on a sour note as I came down with a bad case of piriformis syndrome that sidelined me for two months. I've only just begun to run again, but am still hoping to run Boston in April.
December 30, 2006
Tipping in France c. 1906
From the Dec. 30, 1906 NYT:
France's $75,000,000 a Year in Tips
The Gentle Cynic c. 1906
From the Dec. 30, 1906 NYT:
On ticket scalping c. 1906
The Dec. 30, 1906 NYT reports on a crackdown on ticket scalping outside the Hippodrome:
The police of the East Fifty-first Street Station made war on the ticket speculators in front of the Hippodrome yesterday afternoon. The trouble began on Friday night when Lee Shubert himself was so bothered by the men that he made a complaint to Inspector Walsh. A manager naturally is not averse to seeing speculators in front of his playhouse, since it is a sign of prosperity, but in this instance Mr. Shubert thought the nuisance had gone too far.Speculators are a sign of prosperity in the sense that excess demand is sufficient for a secondary market for tickets to exist. However, secondary markets imply that, for at least some people, the ticket window price was set too low. This would seem to imply that, everything else equal, the event promoter is sacrificing profit.
The January 2007 issue of Public Choice has my contribution to the debate, which discusses conditions in which banning ticket scalping can cause prices to increase at the ticket window.
December 29, 2006
Is it that good to be a Dane?
This paper titled "Why Danes are smug: comparative study of life satisfaction in the European Union" published in the British Medical Journal, investigates the phenomenon of why the Danish are always so happy.
The paper includes this graph showing the percentage of survey respondents who admit to being very satisfied with their life. The Danes consistently come out on top (BTW, what's up with Portugal?):
The authors posit a number of reasons for why the Danes are so much happier than the rest of Europe:
The article is written in what starts out as serious tones and ends up sounding like one of Preston McAfee's "tounge-in-cheek, but hey there is something important here" pieces. It is hard to tell if the journal and the article are meant to be taken seriously - I leave it to the reader to decide. The article concludes:
The causes of the stolid depth of Danish wellbeing are undoubtedly multifactorial. We are satisfied, however, that in the end and against all odds we have contributed to comprehension of the conundrum of Danish contentment. We doubt that further research would lead, in the foreseeable future, to deeper understanding, but decades of effort might possibly result in some incremental advance. Optimism is unwarranted.
This is the type of research I want to perform.
Arguments against the (military) draft
America’s experience with the all-volunteer force suggests four principal reasons for its success: leadership, analysis, targeted programs, and adequate budgets. Whenever one of these factors has been missing over the past 30 years, the force has faltered...
December 28, 2006
Skousen on Friedman
Mark Skousen ends his tribute to Milton Friedman with this quip:
Well did Chicago colleague George J. Stigler say of these two economists: "All great economists are tall. There are two exceptions: John Kenneth Galbraith and Milton Friedman."
Cute. But Stigler, if he actually made the quoted statement, was not in fact speaking well. He was committing (perhaps deliberately, for comic effect) the logical fallacy of denying the antecedent. Specifically, Galbraith (tall, but a poor economist) would be an exception to the statement: “All tall economists are great economists” (or equivalently, “If you are a tall economist, then you are a great economist”). Galbraith can’t be an exception to the statement that “All great economists are tall,” because that second statement doesn’t rule out any number of poor economists also being tall. (Note the implication: because the second statement doesn’t imply that the tall Stigler must be a great economist, it doesn’t flatter Stigler the way it is supposed to!)
On a more serious note, Skousen makes the following remark:
Free-market economists such as Ludwig von Mises and Friedrich Hayek failed in their attempts to dislodge Keynesianism because they refused to do any empirical work.
Skousen should know that Hayek did some empirical work, though it is fair to say that both Mises and Hayek offered mostly theoretical arguments and non-statistical historical claims against Keynesian theory. If they had offered statistical analysis, would they have succeeded in stemming the Keynesian tide? Doubtful. Serious empirical work (by the standards of the day) was done by other Hayekians, such as Lionel Robbins in The Great Depression (1934) and Philips, McManus, and Nelson in Banking and the Business Cycle (1937). Those efforts didn’t stem the tide either.
Caveat Emptor c. 1906
The Dec. 28, 1906 NYT reports from St. Louis:
Because the baby she took from a foundling home cried when she says it was guaranteed not to cry, Mrs. Bessie Buehler of 2,215 Locust Street wants to return it, and she doesn't want another in its place. One night's care of the infant was enough to convince Mrs. Buehler that it had good lungs and was determined to use them.
Here's the Google Maps depiction of 2215 Locust Street. It's not too far from the stadium district.
One 'A' too many c. 1906
The Dec. 28, 1906 NYT reports this little ditty (borrowed from Harper's Weekly):
A number of years ago when the present Second Assistant Secretary of State, Alvey A. Adee, was Third Assistant, an employe of the State Department was called to the 'phone.
Never heard of Alvey A. Adee? Neither had I. Yet, he merits a Wikipedia entry, which is more than I can say about myself. His claim to fame, other than an interesting name? He served as acting Secretary of State during the Spanish-American War.
The broken window effect in gambling c. 1906
The Dec. 28, 1906 NYT reports on a series of gambling raids throughout Manhattan. A police captain reports that two groups of people are "pleased with the raids." The first is comprised of proprietors who have not been raided, as their competition is being removed by the police. The second is the group who make gambling equipment:
Well, the men who manufacturer the gambling paraphernalia are keeping their shops working night and day. That stuff, the roulette tables, poker chips, and all the other devices used in a first-class gambling house, you know, isn't cheap, and there's big profit in it. The more smashing and burning the police do, so much better for the trade, which is in a few hands.In a partial eqiulibrium sense, the exogenous actions of the police probably did increase the profits of the gambling equipment manufacturer, at least in the short run. This is similar to what happens in today's "wars" on vice. Whether social welfare increased in 1906 or increases in 2006 by preventing people from doing what they want is difficult to determine.
December 27, 2006
On curriculum reform c. 1906
To be filed in the TNC (Things Never Change) drawer, the Dec. 27, 1906 NYT reports on "College Reform". The President of Yale, speaking to a convention of teachers and principals:
We have to-day a great many more elective courses of study than we need, and we have multiplied them without any definite principle or clear understanding of the purpose for which the elective systems exists. Its true object is to find out the lines of work a boy [or girl] is good for. To do this it is not necessary to have as many different studies as there are different kinds of human interest...There are three well-defined types of mind - the scientific, the literary, and the practical. If you have arranged your courses so that you can find out to which of these types a pupil belongs...you have done all that is needed. The work of the school will be more efficiently and economically accomplished if this adaptation is made with a few subjects instead of a great many.
The "Wise Men" Solution c. 1906
From an editorial in the Dec. 27, 1906 NYT:
Our inquiries at the country's traffic centres did not reveal any single cause of the shortage of cars which is annoying every railway, every shipper, and every consumer of anything transported by railway. The unfeeling railway men seem to think that there is nothing to do but to work out of the congestion as best as we may, but down at Washington the wise men know better than that. The true remedy is to give power to the wise and strong man who are charged, it is true, with other matters, but who would have not objection to taking charge of any other small jobs which are badly attended to.
In other words, the supply of railway services, specifically the capacity of railway cars, seems to be less than the demand for railway services. This, in turn, has created a shortage for which there seems to be two options: let the private sector deal with the problem or give the solution to the program to the "wise men" of the government.
The editorial goes on:
The President has taken up the subject with the Inter-State Commerce Commission and has asked them to draft drastic remedial legislation giving them power..."to compel any railroad to forward an adequate number of cars to any point at any time of emergency." This is thorough, but too slow for Senator Hansrough's taste. He is to the force with a project of law "to compel the railroads to anticipate extraordinary movements of commodities, and to take care of such shipments when they are offered."In something that would seemed to have come from Ayn Rand's Atlas Shrugged, one branch of the Federal government proposes to compel private companies to respond to "emergencies" with an "adequate number of cars." Who is to define an emergency and who is to define adequate? The implication is the "wise men" of the ICC will take care of those definitions, thank you very much.
But another branch of government tops the other with proposed legislation that requires railroads to "anticipate extraordinary movements of commodities."
These are excellent remedies. The only defect is that they are to be applied solely to the railways. It would be derisory to suggest that Congress should pass an act enabling, or rather "compelling," all of us to be foresighted and forehanded. We would not make any such absurd suggestion as that, but recommend only that the Inter-State Commerce Commission, or the President, or both, should have power over all directly concerned. On Christmas Day, for instance, there were 14,000 cars idle at Galveston because shippers would not unload them. Is it not clear that the situation would be relieved if the Inter-State Commerce Commission had authority to order every shipper to provide himself with storage facilities adequate to enable him to take the goods out of the cars and turn them back for other loads?
The NYT pokes fun at the idea that the government should be able to compel private firms to not only formulate accurate expectations but to act upon them for the betterment of others, with no regard for the profitability of doing so.
The editorial finally zeroes in on the major problem of the "wise men" solution, long before Hayek, Mises, or Rand put pen to paper:
There can be one objection. If the Commission orders everybody else to be foresighted who will enforce the order? We are not aware that the Commission had placed itself upon record as ordering now what it would order for the next emergency.This is exactly the post-Katrina criticism many levelled against FEMA. The editorial slams the door shut on the "wise men" solution with a penetrating logic we could only hope those in the halls of Congress would employ:
We heartily favor making everybody foresighted and competent by law, but we are a little anxious about the detail of making those issuing the orders themselves foresighted and competent.
Markets in Everything: College Town edition
The University of Connecticut's main campus boasts a string of new buildings, thanks to a multibillion-dollar infusion of state cash. The student body is growing. And there are two powerhouse basketball teams that bring big-time sports to a rural corner of the state. ADVERTISEMENT
HT: Marginal Revolution for the MIE concept.
December 26, 2006
Quote of the day
Nostalgia isn't what it used to be. --Peter De Vries
HT: usemycomputer dot com
Rationality of Ideology
My main man at Clemson, Bill Dougan, and I had a paper in the Journal of Law and Economics in 1989, entitled "The Rationality of Ideology".
We tried to think of examples that our theory would explain, examples that standard rational choice theory might miss. We thought of some.
But here is a terrific one:
"Republican House staff members who are losing their jobs in the aftermath
Now, that does NOT explain why these same yo-yos voted FOR all those roads bills, and earmarks. But the point is that the only way to establish an ideological reputation is when it costs you to do so.
(Nod to KL, who is neither rational nor ideological)
December 25, 2006
James Brown, RIP
When I was young, Brown once appeared on TV wearing an outfit with the initials GFOS spelled out in sequins on his cummerbund. Contrary to the joke at my junior high the next day, the initials did not stand for “Go $#@! O’ Self”. They stood for “Godfather of Soul”.
Brown was best known as a vocalist, but he was also an amazing bandleader and organist. For his best instrumental work, check out the 2-CD set Soul Pride: The Instrumentals.
December 24, 2006
To be a record holder or to be alive? c. 1906
From the Dec. 24, 1906 NYT:
[S]everal stories underground, underneath the Hotel Astor, Times Square, the coalpassers had some tests of endurance yesterday afternoon. One of these men, John Faulkner, of 400 West Fortieth Street, tried to break the record for the number of shovelfuls of coas passed in an hour.
100 x 40 lbs = 4,000 lbs/ min = 2 tons of coal/min.
Before technological change, such a record might have been impressive - at least enough to get a couple of beers at the Pub. Perhaps the competitive spirit took over to the extent that he gave his life for a record that no-one would remember until someone with strange habit of reading the paper from 100 years ago would come across his feat. Notice today that watch feats of strength such as Mr. Faulkner's on ESPN's "World's Strongest Man."
Faulkner's record was very impressive, but, alas, didn't come with an endorsement from a body-building enhancement.
On foreign remittances c. 1906
Certain circles express concern that foreign nationals send U.S. dollars across our borders to their family and friends in other countries. I am not sure anyone has a solid number on the amount of remittances per year, but numbers I hear here in the DFW area put it in the $80 billion range.
From the Dec. 24, 1906 NYT is a story of Christmas remittances back home. The total dollars remitted is estimated to be around $8 m (around $180m in 2005 dollars). This is only for the month of December, so if Christmas remittances are three times the normal amount, the annual remittances in 1906 would be somewhere close to $840 m in 2005 dollars.
Eh.net estimates annual real GDP of the U.S. in 1906 (in 2000 dollars) to be $475.4 billion. Estimated remittances in 1906 would be $737m in 2000 dollars. Annual remittances in 1906 were then approximately 0.15% of GDP.
In 2006, $80 billion in remittances abroad would be approximately 0.66% of GDP. Today's remittances are a bit higher than in the past, but hardly seem to be a new problem. Not being a macroeconomist, I am not sure what the negative theoretical implications are for U.S. currency being shipped abroad.
The 1906 NYT article lists the countries with the greatest remittances:
The upshot seems to be that immigrants, regardless of where they are from, send money back home. This is straightforward - immigrants are not sending money to a black box but to their closest family and friends who are not enjoying the benefits of our system.
I haven't seen any complaints during the 1905-1906 periods about the dollars being sent back to Great Britain. Although, the article does note: "[o]f course, there is some offset to the stream of money flowing from the Post Office to Europe in the form of remittances from the other side to us. This return current, however, never goes above 25 per cent. of what we send."
December 21, 2006
"You violated my fargin robot rights"
It is said that democratic governments are myopic, scarecely looking beyond the next election. "Not so we the British," say...uhm, the British. This BBC story tells of a far reaching study, released today by UK's Office of Science and Innovation.
The 246 summary papers, called the Sigma and Delta scans, were complied by futures researchers, Outsights-Ipsos Mori partnership and the US-based Institute for the Future (IFTF).
Perhaps the most tantalizing futurist prediction? Rights for robots.
The paper which addresses Robo-rights, titled Utopian dream or rise of the machines? examines the developments in artificial intelligence and how this may impact on law and politics.
With apologies to Philip K. Dick, Isaac Asimov et al., HT: Wired blog
Christmas materialism c. 1906
Occasionally the paper from 100 years ago reveals, in a subtle way, that many of the problems we face today are not new problems, they are just our problems.
From the Dec. 21, 1906 NYT:
As Christmas Approaches
Taxation c. 1906
From the Dec. 21, 1906 NYT:
The monster which French lawgivers intend to attack is ubiquitous. Its name is "piano," and the Minister of Finance seriously thinks of proposing a tax on those instruments not in use in a professional capacity - and they, of course, form the majority. There are in France about 500,000 pianos, and a tax of, say, 10s. would bring in the respectable sum of 250,000 [pounds]. It is very tempting to a Minister who struggles with an annual deficit.
Costs of Higher Ed
There are clearly external benefits to higher education (although they may be inframarginal) but there are also external costs as well, something usually overlooked by those looking at the positive spillovers from higher education spending. See, for example, this article from Inside Higher Ed. Colleges and universities spent $94.6 million on lobbying Congress. This number undoubtedly understates the amount of deadweight loss due to rent-seeking because there is a lot of activity that is not captured by direct lobbying expenditures (such as lobbying of state officials). The net effect of higher education spending may be positive but these costs cannot be ignored in comparing the costs and the benefits.
December 20, 2006
It seems to me the curse of the professor of macroeconomics is the lack of fun examples to use in class. From movie clips to newspaper stories, microeconomic examples seem to abound. Unfortunately, very few movies show the protagonist and his unrequited love interest discussing the differences between frictional and structural unemployment, or the defendant crying in court that he stole from the bakery because we aren't at full employment since the Fed is engaging in unwise restrictive policies.
However, this story about marijuana seems well-suited for a discussion about national income accounting. It appears that pot is the top cash crop in the US. An obvious discussion topic is the role that black markets play in our economy. But, after reading the following
The study estimates that marijuana production, at a value of $35.8 billion, exceeds the combined value of corn ($23.3 billion) and wheat ($7.5 billion).
you could discuss several topics:
December 19, 2006
Off for the Holidays
This is likely my last post until after New Year's (maybe even until after the AEA meetings). My family will be spending some time northern Michigan; hopefully there will be some good snow for Pee Wee. Whenever we return to my wife's hometown we chuckle about the photo below. It is not a photoshop creation; my wife took the photo during a trip home a few years ago. Happy holidays to co-bloggers and readers.
Minneapolis Joins the Pigou Club
Last Wednesday, NPR had a report (listen here) on a variable road pricing experiment in Minneapolis. On a freeway from the downtown to the western suburbs there is a lane with embedded sensors. The price of driving in the lane varies with the amount of congestion in the lanes; more congestion leads to a higher price. Perhaps surprisingly, the NPR report does not include any snarky references to "Lexus lanes."
Baptists and Bootleggers Once More
On irradiation, from the Wall Street Journal (subscription required):
The technology is known as food "irradiation," a process that propels gamma rays into meat, poultry and produce in order to kill most insects and bacteria. It is similar to milk pasteurization, and it's a shame some food marketer didn't call it that from the beginning because its safety and health benefits are well established. The American Medical Association, the Centers for Disease Control (CDC), the Food and Drug Administration and the World Health Organization have all certified that a big reduction in disease could result from irradiating foods.
Know thy enemy c. 1906
The Dec. 19, 1906 NYT contains an argument for allowing women in the jury pool:
In breach of promise cases the presence of female jurors among the male jurors would certainly benefit the men, as they would at once see through the wiles of their own sex, disconnect the picture hat and the pretty gown, and disclose the hussy at heart in the pleading innocent betrayed one.
December 18, 2006
Creating private property
December 17, 2006
HT, Marginal Revoution
Bad economics c. 1906
The Dec. 17, 1906 NYT has a demoralizing letter to the editor that, notwithstanding our theoretical and empirical advancements in the field of economics and the relatively large numbers of people who have taken at least one economics class in their young adulthood, might still be written today:
[Y]ou use the expression "we have combinations in restraint of trade." Why "restraint of trade"?
The appeal to the idea that ruinous competition might harm a factory, or perhaps an entire industry, and therefore must be precluded is the language of the protectionist, even if protection comes in subtle forms. It is bad enough that cartels would be justified in such a manner in 1906. Shame on those who use the same language today.
December 16, 2006
What am I missing?
Food Stamp Participation in the United States is up by approximately 47% between 2001 and 2006 but is down about 4.5% between 2005 and 2006? Is the overall increase a) the outcome of compassionate conservatism, in which the Bush administration has sought out those without enough to eat and to provide them with government aid, i.e., a supply-side effect, b) the Bush administration and the macroeconomy is driving people into hunger and therefore there has been a necessary increase in those who need assistance, i.e., a demand-side effect, or c) there is something going on here in which people are getting one over on the people like me, i.e., a free-rider effect?
The one-year reduction is arguably the recovery from Katrina/Rita, yet the dramatic increase in half a decade suggests there is a racket here, either on the demand side or on the supply side. I don't know the answer, but it would be interesting if someone does.
Where you don't want to be sued, at least according to the American Tort Reform Association or Foundation (they seem to go by both names):
Here's their 2006 Report.
Posted by Craig Depken at 06:34 PM
Dyspeptic Philosophy c. 1906
From the December 16, 1906 NYT:
Guns or caviar?
Slate reports a handy-dandy measure of global bellicosity.
So, which is it? Is the world more peaceful or more warlike? Since Americans are doing the lion's share of the fighting and military policing, it's difficult for us to answer the question objectively. Fortunately, there is an unbiased global economic indicator that sheds some light on the question: the Guns-to-Caviar Index.
The graph is here.
December 15, 2006
The System Is the Problem
Good deeds don't go unpunished, as this Washington Post article demonstrates.
At dawn on Tuesday more than a thousand Immigration and Customs Enforcement agents descended on six plants owned by Swift & Co., one of the country's largest meat processors. Some 1,300 workers were arrested, and operations at all six slaughterhouses were suspended. Seen in one light, the raids were perfectly justified. Both employer and employees were breaking the law.
A Student Writes...
This semester I started assigning an "economics puzzles" writing assignment for micro principles. You know the drill. Come up with an interesting behavioral observation that transcends the obvious (i.e., common sense) explanation, then solve it using economic reasoning. (Here's the whole assignment laid out, and here are some examples from earlier semesters.)
I used to assign this at the intermediate level, but since I no longer teach intermediate, this is my first experiment with this assignment at the principles level. On balance, the results were very cool. Not air tight economic arguments in all cases, but definitely not bad for freshmen early in their intellectual journeys. Below is a sampling (with names withheld to protect the innocent):
1. Why is it when your order a small sandwich at Togo's or a small French fries at Burger King the difference between a small and large is only a...very small increase in price?
2. Why would legalizing marijuana decrease the market price?
4. Why do families and friends by overpriced magazines, frozen pizzas, gift wrap and five pound tubs of cookie dough for school fundraisers? A sizeable portion of the profits from the sale don't even go to the school...
Do other merry DOLers have examples of "a student writes..."?
Need Your Vote!
Okay, this is shameless.
But, on behalf of my man Russ Roberts, and the truly excellent podcasts at EconTalk, including Milton Friedman and many other key figures in economics....
VOTE IT LIKE YOUR BACK AIN'T GOT NO BONES!!!!!
Go to this site, and vote for "EconTalk". I'm beggin' ya, here.
And, while you are there, please consider voting for one of the most interesting conservative/talk blogs, "Betsy's Page", on the 251-500 top blogs category.
Posted by Michael Munger at 02:43 PM
The need for cattle-lytic converters
Mike Lester's cartoon is the better of the two, but this one from Chip Bok provides unsuspected context.
Mike Lester, the superb cartoonist for the Rome News-Tribune, offered his take on the UN report that cows contribute more to global warming than cars. The cartoon has some barnyard humor so I put it below the fold. Laugh at your own risk.
Read More »
December 14, 2006
Things I wonder about....
Many people think it's perfectly ok to use physical force to prevent prospective immigrants (i.e., people who were born on the other sides of lines politicians have drawn on maps) from entering the country because they pay few taxes, might send their kids to public schools, visit subsidized hospitals, go on welfare, speak poor English, or commit crimes.
I wonder why we can't use physical force to deport natives (i.e., people who were born on this side of the lines politicians have drawn on maps) who actually do pay little in taxes, send their kids to public schools, visit subsidized hospitals, go on welfare, can't speak English well, and do commit crimes.
"China in Revolt" paints a picture consistent with Friedman's view that markets erode authority.
By Deng’s time, frustrated bureaucrats and countless individuals, including some of the poorest and most desperate citizens in China, were ready to take the next step—ignoring central-government decrees and building large private businesses that now account for at least 40 percent of the Chinese economy. This became China’s “economic miracle,” brought to fruition even as government officials remained holed up in their offices in Beijing, preparing meticulously detailed five-year plans.
Stop Making Pennies Off Our Pennies!
I don't know if we should get rid of the penny or not, but I suspect that private issuers would respond to the current situation differently than the U.S. Mint.
The U.S. Mint has implemented a law against melting down pennies and nickels which, at current metals prices, could be worth more as metal than as currency.
The new regulations authorize a fine of up to $10,000, or imprisonment of up to five years, or both, against violators.
See more here.
Return to Commodity Money
WASHINGTON — People who melt pennies or nickels to profit from the jump in metals prices could face jail time and pay thousands of dollars in fines, according to new rules out Thursday.
Soaring metals prices mean that the value of the metal in pennies and nickels exceeds the face value of the coins. Based on current metals prices, the value of the metal in a nickel is now 6.99 cents, while the penny's metal is worth 1.12 cents, according to the U.S. Mint.
Another Post on the Minimum Wage
CHRIS FARRELL: The big economist complaint about the minimum wage is, yes, you know, you have good intentions to help the most vulnerable citizens in our society, but it doesn't work. It actually hurts the most vulnerable citizens in our society because when you raise the minimum wage, employers stop hiring these least-skilled workers. So that has been the traditional complaint by mainstream economists about raising the minimum wage. Good heart, bad policy.
[Host Scott] JAGOW: But now some economists have a change of heart I understand?
FARRELL: They have a genuine change of heart and what it is, is that a number of economists starting in the 1990s, particularly David Card and Alan Krueger, Princeton University. They started doing these studies looking at the impact of the minimum wage and what they found is that it has a very small impact on employment and may not have any impact on employment. And now there was a recent survey of economists about things that they agree on and if you look at like, free trade's a good thing. Alright, most economists say yes free trade's a good thing. The one that they disagreed on, almost divided down the middle, is the minimum wage. And so now what you have is a true, genuine disagreement among economists, which is actually in parts of it quite vituperative, about the impact of the minimum wage and whether or not it should be raised.
JAGOW: So things have been getting kind of nasty about this?
FARRELL: Well it has been nasty in parts although recently, I follow the economic blogs, the virtual ink that has been spilled over the minimum wage, it's fascinating.
Well, Mr. Farrell, if you happen to read this economics blog, here's part of a recent paper by David Neumark:
The evidence from a large body of existing research suggests that minimum wage increases do more harm than good. Minimum wages reduce employment of young and less-skilled workers. Minimum wages deliver no net benefits to poor or low-income families, and if anything make them worse off, increasing poverty. Finally, there is some evidence that minimum wages have longer-run adverse effects, lowering the acquisition of skills and therefore lowering wages and earnings even beyond the age when individuals are most directly affected by a higher minimum.
How Reuters analyzes the minimum wage
Reuters carries the story, "Democrats to raise wages for poor workers."
The incoming Democratic-led U.S. Congress intends to give a hand to dishwashers, fast-food cooks and America's other poorest-paid workers by raising the federal minimum wage for the first time in a decade.
The article makes no mention of possible employment effects or any other negative impact. One secondary effect is claimed:
In addition to raising the pay of people who now earn less than $7.25 per hour, the proposed new minimum wage, an increase would prompt employers to increase the wages of an estimated 8.3 million other low-paid workers, according to some estimates.
Not only will the minimum wage increase further distort the labor market, but it will also carry baggage in the form of goodies for Republican constituents, though the Democrats might not have to give the Republicans much due to the bill's popularity:
"I think a minimum-wage bill -- pretty much a Democratic document without a lot of extras to placate Republicans and their small-business allies -- will pass, hit the president's desk and he'll sign it," said Ethan Siegal of the Washington Exchange, a private group that tracks Congress for institutional investors.
English 1, Teddy Roosevelt 0 c. 1906
The Dec. 13, 1906 NYT reports that President Teddy Roosevelt was abandoning his "simplified English" executive order:
President Roosevelt has surrendered gracefully to the English language, and Noah Webster is to-night receiving congratulations from Samuel Johnson, Worcester, and all his chums on the other side of the Styx. Representative Landis of Indiana, Chairman of the House Printing Committee, is authority for the statement that the President will issue an oder complying with the House's wishes on the subject, not waiting for Senatorial action, and that this order will regulate thru, clipt, and dropt to Skibo Castle and other places where the air is more congenial than in Washington.Thk gdness.
December 13, 2006
Levitt vs. Levitt & Dubner
On the Freakonmics blog, Steve Levitt writes:
Whatever small offsetting impact that more reckless driving due to seat belts may have, it is trivial compared to the benefits of wearing a seat belt. Articles like the one in Time Magazine encourage people to come to completely the wrong conclusion on this question.
Here (via Lex Nex) is part of Levitt & Dubner's Feb. 19 "Freakonomics" column:
Although it is wildly reductive to put it this way, a Nascar driver has two main goals: to win a race and to not be killed. Nascar's recent safety measures seem to have considerably reduced the likelihood of being killed. So could it be that drivers are now willing to be more reckless? When crashing is made less costly, an economist would fully expect drivers to be crashing like crazy; could it be that Nascar's safety measures have led to fewer deaths but more crashes?
A quick look at the data seems to suggest so. In last year's Nextel Cup races, there were 345 cars involved in crashes, an all-time high. But, as Matt Kenseth points out, the two cup races held during 2005 at Lowe's Motor Speedway near Charlotte, N.C., were unusually brutal -- the track had a new surface that caused numerous flat tires -- and may have aberrationally affected the crash count. ''In Charlotte, pretty much everybody wrecked in both races,'' he says. ''It was the fault of the track and the tires -- but if you take those races out of it, crashes are probably about even.'' And there were actually fewer crashes in 2004 than there were in 2003. While the number of overall crashes are up a bit since Earnhardt's death (Nascar will not release annual crash counts, but one official did confirm this trend), they haven't increased nearly as much as an economist might have predicted based on how Nascar's safety measures would seem to have shifted a driver's incentives.
Maybe that's because there are other, perhaps stronger, incentives at play. The first is that Nascar has increased its penalties for reckless driving, not only fining drivers but also subtracting points in their race for the cup championship. The other lies in how the cup championship itself has been restructured. Two years ago, Nascar gave its 36-race season a playoff format. In order to qualify for the playoffs -- and have a chance at winning the $6 million-plus cup championship -- a driver must be among the points leaders after the first 26 races of the season. While a couple of 20th-place finishes during those first 26 races won't necessary ruin your championship hopes (each race fields a slate of 43 cars), a few bad crashes might.
So Nascar has reduced a danger incentive but imposed a financial incentive, thus maintaining the delicate and masterful balance it has cultivated: it has enough crashes to satisfy its fans but not too many to destroy the sport -- or its drivers.
Maybe there's a significant difference (e.g., large dollar prizes) between NACSAR and ordinary driving, but it seems that Levitt is of two minds on the Peltzman effect. (Or maybe Dubner gives it more credence than Levitt does.) Levitt & Dubner talk of NASCAR achieving a "masterful balance" by imposing a financial disincentive to wreckless driving. Presumably such a disincentive would not be necessary if the Peltzman effect was (as Levitt writes on the blog) "not at all important in reality."
BTW, here's Josh's post on the Feb 19 "Freakonomics" column; his post includes a link to the Sobel & Nesbit NASCAR paper finding evidence of offsetting behavior.
Charles Murray on immigration
Charles Murray stakes out a moderate libertarian position on immigration policy at National Review Online. Regarding illegal immigration, he offers the following principles:
1. Making laws about who gets to become a citizen, under what circumstances, is a legitimate function of the state.
It’s hard to disagree with (1) or (3). Everyone of course agrees with (2) when it comes to protecting borders against terrorists and invading armies. But I’m not keen on “protecting borders” against tourists and workers. I would prefer the pre-1914 world without passports. A wall along the Mexican border isn’t helpful against terrorists or invading armies.
On legal immigration, Murray declares:
2. Massive immigration of legal low-skill workers is problematic for many reasons, and some of them have to do with human capital. Yes, mean IQ does vary by ethnic group, and IQ tends to be below average in low-job-skill populations. One can grant all the ways in which smart people coming from Latin American or African countries are low-job-skill because they have been deprived of opportunity, and still be forced to accept the statistical tendencies.
But why is immigration of low-IQ workers a problem? As Bryan Caplan points out, the Law of Comparative Advantage shows that we gain from hiring people whose human capital differs from ours.
Here is Murray’s key policy recommendation:
4. When it comes to the nitty-gritty, I would … make immigrants ineligible for all benefits and social services except public education for their children.
Privatize the provision of education, and I’m agreed. Immigrants who come to work, good; immigrants who come to sponge, bad. But sponging by US citizens is likewise undesirable. The more we reduce the incentives or eligibility to sponge by US citizens as well, the less different need be the eligibility rules for immigrants.
Read More »
I like what William Leggett had to say on the topic long ago:
But with regard to these poor creatures who are flocking to our country as the boasted asylum of the oppressed of all the world, we ought to welcome them hither, not meet them with scowls, and raise a deafening clamour to excite unkindly prejudices against them, and drive them back from our inhospitable shores. For our part, we open our arms to them, and embrace them as brothers; for are they not a part of the great family of man? ... We are not bound to support them; they must support themselves. If they are idle, let them starve; if they are vicious, let them be punished; but, in God’s name, as they bear God’s image, let us not turn them away from a portion of that earth, which was given by its maker to all mankind, with no natural marks to designate the limits beyond which they may not freely pass.
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That damned law of demand (again)
From today's inbox:
TO: Faculty and Staff
So we have to pay our students more, but we're not going to increase the budget to pay them? Surely they're not suggesting that we're going to employ fewer students?! I mean that's crazy talk! Who would ever imagine that increasing the minimum wage would cost jobs?
Flair Enters NC Gov Race
And, forgive me for being excited....
BUT THE FREAKIN' NATURE BOY HAS ENTERED THE NC GOVERNOR'S RACE!
You can find the tale o' the tape here....
Journals: Will They Die?
An interesting article on the economics of journal publishing.
It is not clear to me that the monopoly position of academic journals is sustainable, or desirable. But tenure decisions are SO wrapped up in rankings and refereeing that we may be stuck.
Here's what I know: it is harder and harder to find reviwers who will referee papers for me at Public Choice. Ick.
December 12, 2006
This is the concluding paragraph in a remarkable Washington Post editorial.
The contrast between Cuba and Chile more than 30 years after Mr. Pinochet's coup is a reminder of a famous essay written by Jeane J. Kirkpatrick, the provocative and energetic scholar and U.S. ambassador to the United Nations who died Thursday. In "Dictatorships and Double Standards," a work that caught the eye of President Ronald Reagan, Ms. Kirkpatrick argued that right-wing dictators such as Mr. Pinochet were ultimately less malign than communist rulers, in part because their regimes were more likely to pave the way for liberal democracies. She, too, was vilified by the left. Yet by now it should be obvious: She was right.
This article in the Sun-Times provides much more detail.
The perfect crime c. 1906
In the Dec. 12, 1906 NYT is an article titled "A $40,000,000 Mail Graft." That's a headline to grab your attention. In 2005 dollars, the headline would read "A $895,871,559.63 Mail Graft" - okay, not down to the penny, but you get the point.
What's going on? The article explains that:
...in 1905, the New York Central Railroad was overpaid for carrying mails to the extent of $270,000, and that within the last ten years the Government has overpaid for the carriage of mails about $40,000,000...How could this large overcharge occur year after year? Thanks to a little clever government math, the railroads were making out like, well, railroads being paid by the government*:
The cause of these overpayments. Mr. Murdock laid to the antiquated system under the present law, which is thirty-three years old. He said it is the practice to take the daily weight of mail carried for a number of successive working days in order to get the average for the year. The Sunday weight of mail would be included in the grand total, but when the average was taken the Sundays would be stricken from the total o fdays, thus reducing the divisor without a corresponding reduction of the dividend.For those who don't understand, the average weight per day would be calculated as
The weight was calculated as if all days in the week, and hence, year were included. However, the number of days was calculated by taking away the Sundays. The result? The calculated average weight of mail per day would be overstated, the railroads were paid based on average weight carried, and hence the railroads were overpaid.
Let's take an example. Assume the government/railroad honestly measured the total weight of mail carried over the course of one week to be 100 tons. If all seven days were correctly included in the calculation of the average the result would be 100/7 = 14.28 tons per day. If, instead, only six days were used in the denominator of the ratio, the "average" would be biased upward to 16.66 tons per day! The correct average would be calculated as 85.72/6 = 14.28, that is, it wouldn't change.
Was this fraud? I am no lawyer, but I don't think so. After all, the government established the payment system through legislation - which is genius. If the railroads were purposefully overstating how much actual mail was being carried, that would seem fraudulent. Yet, if the railroads were already making 16% more through the "new math" of the government, perhaps they were less prone to engage in fraud that could actually get them in trouble.
* Rather than "like bandits"
I'm teaching a course in Labor Economis next semester and am in the market for feature films related to the topic.
Norma Rae comes to mind but I'm open to other ideas if you have them. My e-mail is rlawson[at]capital[dot]edu. Thanks.
On Socialism c. 1906
From the Dec. 12, 1906 NYT:
Socialism is not, as is sometimes thought, the enemy of capital. The real antagonist of Socialism, the power against which Socialism is striking, and which, if Socialism wins, must be destroyed, is the family.
On the Rottenberg Hypothesis c. 1906
Simon Rottenberg, one of the founding-fathers (so to speak) of sports economics postulated in a 1956 Journal of Political Economy paper that the then-prevailing reserve clause in professional baseball did not alter the distribution of players but did alter the distribution of the rents in the baseball labor market.
Rottenberg's "Coase-like" hypothesis in 1956 had to wait 20 years for free agency to be reestablished in professional baseball and the subsequent data for an empirical test. For the most part, Rottenberg has been supported.
Here's an anecdotal story of what Rottenberg's hypothesis is all about. In 1906, professional baseball players worked under the reserve clause - a player was tied to his current team indefinitely and could be benched, traded, or sold by his current team owner without so much as a `by-your -leave.' The December 12, 1906 NYT reports on the winter meetings of the professional baseball team owners who decided to enforce numbers on player uniforms.
In addition, there is this snippet:
It became known yesterday that President Ebbets offered $12,000 to Charley Murphy of the Chicagos for three of his players. President Dovey, the new owner of the Boston Club, increased the offer to $15,000 and then the Brooklyn President agreed to give the same amount. The names of the players were not divulged, but it is not thought that President Murphy will be in a hurry to part with his men.In other words, players play where they are the most valuable, regardless of the reserve clause.
On Africa c. 1906
From the Dec. 12, 1906 NYT:
"The dark places of the earth are full of horrible cruelty." That is a saying a great many centuries anterior to either the existence of sensational newspapers or the formation of the Congo Free State. But it seems to have an impressive modern instance in the case of the Congo Free State...The evidence of "horrible cruelty" has been so abundant and so shocking that it has penetrated to Belgium.Belgium was, at the time, the "administrator" of the country.
December 11, 2006
Warming, Global and Otherwise
George Will's roundup of some strange and ominous happenings of the past year includes these:
Two U.S. explorers went to the North Pole to study how global warming threatens polar bears. They had planned to go last year, but were forced to delay Project Thin Ice because of unusually heavy snow and ice.
More on the latter from The Guardian:
The new figures are the result of Greece's determination to avoid a ticking off from the EU, which has the right to impose hefty fines on a eurozone country if its budget deficit rises above 3% [sic] of GDP. By boosting the size of its economy the Greek deficit will fall from 2.1% of GDP to 1.9%. Without the change the deficit would have fallen from 2.6% of GDP to 2.4%, according to the Financial Times.
But it might have backfired:
While the new figures will allow Greece to escape possible fines for running a high deficit, the country will pay for its honesty in other ways.
Aging--it isn't just for wine:
It was brewed in the year that the Suez Canal opened, Charles Dickens embarked on one of his last literary tours and the Cutty Sark was launched in Scotland.
The Victorian beer was part of a cache of 250 vintage bottles found in the vaults of Worthington's White Shield brewery in Burton-on-Trent.
Better to Feel Good than Do Good: Prius Edition (Again)
The 'green-living' Toyota Prius has become the ultimate statement for those seeking to stress their commitment to the environment.
However, the environment-saving credentials of the cars are seriously undermined by the disclosure that one of the car's essential components is produced at a factory that has created devastation likened to the arid environment of the moon.
So many plants and trees around the factory at Sudbury in Ontario, Canada, have died that astronauts from Nasa practised driving moon buggies on the outskirts of the city because it was considered the closest thing on earth to the rocky lunar landscape.
Unlike normal cars, hybrids such as the Prius, whose proud owners include Gwyneth Paltrow, Brad Pitt, Julia Roberts and ex-Tory leader Michael Howard, are powered by a battery that contains nickel - as well as a traditional petrol engine.
David Martin, energy co-ordinator of Greenpeace Canada, said: "The acid rain around Sudbury was so bad it destroyed all the plants and the soil slid down off the hillside.
But some experts doubt whether the Prius even wins the argument over fuel consumption.
Robert Fowler, of the Battery Vehicle Association, said: "It is questionable whether it does any more miles to the gallon than a good diesel.
"The hybrid system has a very small battery so most of the time it's operating as a petrol car, particularly out of town and above 30mph."
A Toyota spokesman said last night: "I cannot confirm the source of the nickel used in the Prius battery. It is true there is a slight increase in the energy required to produce the materials for the car."
A previous post on the Prius is here.
HT: JS [my favorite pre-med econ major :-) ]
For the cat lover c .1906
From the Dec. 11, 1906 NYT:
Some 40,000 canary birds from the Hartz Mountains arrived here yesterday on the steamship Rhein, but the real story was in the troubles of Gretchen, the ship's cat.
Posted by Craig Depken at 10:26 AM
December 09, 2006
Effects of Nevada's minimum wage law:
Several Nevada nonprofit organizations received grim news Friday that could affect their ability to offer jobs to disabled people. Labor Commissioner Michael Tanchek told representatives of the nonprofits that he sees no way to exempt them from a new minimum wage law that took effect last month.
Read Clive Crook's "On Milton Friedman's Unfinished Work." I started clipping excerpts to post, but not much of this short article warrants omission.
David Horowitz ("Academic freedom for students") reports on remarkable goings-on in the Pennsylvania university system:
[W]hen the regulations were examined, it was evident that they applied only to professors. In other words, students not only did not know their rights, they didn't have any. The committee has recommended that this deficiency be corrected, and universities have already stepped forward to do so.
The advantages of criticizing trade
Don Boudreaux's letter to Kai Ryssdal, host of American Public Media's "Marketplace," appears (with permission) here:
Dear Mr. Ryssdal:
This letter opens my eyes to yet another way that trade can be misrepresented: Selling abroad makes us dependent on foreign money. Of course, buying from abroad makes us dependeent on foreign products.
Add this gem to the usual litany of woes:
Running a trade deficit means that foreigners are taking away jobs from Americans who could be producing the imported products. At the same time, the implied foreign investment makes us dependent (that word again) or the whims of foreigners. Never mention the people who have jobs because of those investment.
Critics of trade just can't lose.
Don expands on this at Cafe Hayek.
Don's post suggests that this type of reasoning (?) be called msilitnacrem--reverse mercantilism. His email message suggested that "Marketplace" should be renamed "Stateplace." Both suggestions have merit.
Humor, and the lack thereof
If you want to stir up some discord in your household, I recommend Christopher Hitchens's "Why Women Aren't Funny."
Why are women, who have the whole male world at their mercy, not funny? Please do not pretend not to know what I am talking about.
Hitchens follows Kipling in attributing the relative lack of humor to childbirth:
She who faces Death by torture for
What a bunch of criminals
In international rankings, the United States is third in economic freedom, produces 28 percent of the world's $44 trillion of output with less than 5 percent of global population, and ranks between third and seventh in GDP per capita. What a great country!
Unless you're one of the 7 million Americans in prison, on parole or on probation within the criminal justice system. That's one for every 32 adults in the U.S.
With a prison population of 2.2. million, the U.S. ranks first (not third, not seventh) in putting the stripes on people. From a current Reuters Story, "U.S. has most prisoners in world due to tough laws,"
According to the International Center for Prison Studies at King's College in London, more people are behind bars in the United States than in any other country. China ranks second with 1.5 million prisoners, followed by Russia with 870,000.
This, of course, is not a new phenomenon. But reports like this are important, uncomfortable reminders of the social costs of mandatory sentencing, three-strikes, and criminalization of voluntary exchanges (drugs mainly, but also prostitution, gambling, etc.). Reforms are justified, and underway, on many fronts. (Read more beneath the fold.) The logical conclusion of these reforms calls into question the very nature of criminal law. As Bruce Benson writes in his entry, "Crime," in the forthcoming Encyclopedia of Libertarianism,
In a restitution based system crime (perhaps more appropriately called intentional tort) should involve only intentional, non-consensual acts entailing the initiation of force, fraud, or coercion against another person since only those acts justify pursuit of restitution. This eliminates all so called "victimless" or "consensual" crimes such as prostitution, drug consumption, gambling (that is not fraudulently rigged), and so on that are so prevalent today. Thus, criminal law would not be able to victimize individuals who voluntarily consume goods and services while imposing no cost on others... [O]ffenses against non-voluntary victims should be treated as intentional torts.
According to Wikipedia's entry on Mandatory Sentencing, the idea is realistic:
Australia, Mexico, New Zealand and some other countries employ a system of mandatory restorative justice, in which the criminal must apologise to the victim or provide some form of reparation instead of being imprisoned for minor crimes. In serious crimes, some other form of punishment is still used.
Read More »
Some of the ongoing reforms:
In a turn with many complicated effects, SCOTUS ruled that the Federal Sentencing Guidelines, if manadatory, are unconstituitonal infringements on 6th Amendment rights. The Guideilnes are now advisory.
There is also mounting pressure on W. to make greater use of his clemency power. See today's W.Post article (HT Douglas Berman) on Weldon Angelos, serving "an obscene sentence of 55 years on small-time marijuana possession and gun charges." The sentencing judge called the sentence "unjst, cruel, and even irrational," exceeding sentences for "aircraft hijacking, second degree murder, espionage, kidnapping, aggravated assault, and rape." This S.F. Chronicle op-ed weighs in similarly (HT Douglas Berman again):
Thanks to draconian federal drug sentences, the number of federal prisoners reached a record 193,989 on Nov. 9 -- that's a steep increase from 150,000 in 2003. The prison population is not growing because the feds are locking up drug kingpins. As the U.S. Sentencing Commission noted in a 2002 report, while the 1986 federal drug law promised to go after "serious" and "major" traffickers, the majority of federal cocaine offenders performed low-level functions. The percentage of biggies behind bars is shrinking, while the low-life chump class grows.
Finally, there hopeful speculation that the new Democratic Congress will tackle medical marijuana; ONDCP reauthorization, and other electoral bruisers.
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The Gentle Cynic c. 1906
From the Dec. 9, 1906 NYT:
Dartmouth's grade inflation approach
On May 23, 1994 the Faculty voted that transcripts and student grade reports should indicate, along with the grade earned, the median grade given in the class as well as the class enrollment. Departments may recommend, with approval of the Committee on Instruction, that certain courses (e.g., honors classes, independent study) be exempted from this provision. Courses with enrollments of less than ten will also be exempted. At the bottom of the transcript there will be a summary statement of the following type: 'Exceeded the median grade in 13 courses; equaled the median grade in 7 courses; below the median grade in 13 courses; 33 courses taken eligible for this comparison.' This provision applies to members of the Class of 1998 and later classes.
Here are the median grades in Spring 2006 in economics courses at Dartmouth:
06S ECON-001-01 81 B -
December 08, 2006
My Two Cents on Grade Inflation
My thinking on grade inflation is similar but not identical to Wilson's. Instead of switching to ranks, I'd simply add an additional column to each student's transcript. The additional column would contain the gpa for each class taken. For example, a student's transcript might indicate a grade of B+ with a class gpa of 2.6. If one wanted to take one more step, transcripts could also report cumlative class grade point averages. Little Johnny, for example, might have a 3.3 gpa in classes with a cumulative gpa of 3.6. By contrast, Little Susie might have a 3.2 gpa but have earned that gpa in classes with a cumulative gpa of 2.7.
Larry informs me that the Lindsey essay is available here.
More on Grade Inflation
I suggest a radical approach to grade inflation: get rid of it by getting rid of grades. Aside from being subject to inflationary pressures, grades are odd creatures in the first place. Every instructor has complained about the difference between a high-B and a low-B student, hence +/- grading which reduces but does not resolve the problem.
Why not just rank each student in each class? We already do this with grades, except that all students with a given grade are implicitly assigned the same rank. In a system based on ranking, a student's transcript would report the mean percentile rank, perhaps with a supplemental histogram of percentiles in all classes taken.
Not only would ranking rather than grading remove the possibility of grade inflation, it would also reduce students' incentives to seek out crip courses in order to pump up the average. One could still take a crip course to free up time for studying other subjects, but could not count on a higher grade (now rank) in the course to directly affect the overall average.
Brink Lindsey (subscription required) calls for a new fusion of libertarians and progressives. He characterizes the current state of affairs thusly:
Yet progressives remain stubbornly resistant to embracing capitalism, their great natural ally. In particular, they are unable to make their peace with the more competitive, more entrepreneurial, more globalized U.S. economy that emerged out of the stagflationary mess of the 1970s. Knee-jerk antipathy to markets and the creative destruction they bring continues to be widespread, and bitter denunciations of the unfairness of the system, mixed with nostalgia for the good old days of the Big Government/Big Labor/Big Business triumvirate, too often substitute for clear thinking about realistic policy options.
Lindsey points to a few cases in which some fusion has occurred and closes with the following assessment of what would be required for his program to be realized:
It must be based on a real intellectual movement, with intellectual coherence. A movement that, at the philosophical level, seeks some kind of reconciliation between Hayek and Rawls.
Re: Tim's post below, the best idea I've heard to rein in grade inflation was this:
First, double tuition.
Second, tell students that they would get a rebate on their tuition if their grades were good. If you get straight A's you get 75% back, straight B's 50% back, straight C's 25% back--something like this. Note that if the average student gets B's then this is revenue neutral.
Third, make sure each faculty member (or at least department) gets a cut of the revenue generated from his students.
At first glance you'd think the students would clamor even more for better grades, and I'm sure they would. But you have to imagine the faculty member's point of view too. Sure if the professor gives high grades, the students will like him, but then the net revenue will be low and his pay raise and travel budget may be cut. If he gives all F's, then students won't enroll in his courses and his pay raise and travel budgets may still be cut (the wrong side of the Laffer Curve). An equilibrium of sorts should develop if the professor wants to maximize his pay/budget. Then the admin could adjust the rebate formula to get the desired grading/budgetary outcomes. And more dynamically, it should draw better students, hoping to get large rebates, to the university.
[Btw, I know Paul Beaumont and just laughed my a$$ off. The Full Beaumonty! The females of my FSU cohort felt the same way as Tim's, but that's a new term to me.]
I have subscription about to expire to Trails.com. The site has chapters from dozens of hiking books in .pdf form that you can retreive. I have 38 free downloads remaining. So if anyone wants any information about a mountain or hiking trail, let me know and I'll see what I can do.
New Adam Smith sidebar quote
December 07, 2006
Markets for Everything
Wine too? That's odd.
As if grades aren't inflated enough already. I'll plead guilty too.
Anyone have any suggestions on how better to align the incentives of instructors (want to teach ideas and course material) and students (a few want that; most want a good grade)? The Full Beaumonty at FSU (so nicknamed because, when I was there, all the female grad students thought he was hot and arguably wished he would perform said dance) once argued that we should abolish all curriculum requirements, core classes, exams, etc. To get your degree you would get one exam, and it would be up to you to take whatever classes you felt you needed to pass that exam.
December 06, 2006
Set your Tivo®
The ABC Family cable network will air “The Year without a Santa Claus,” the original Rankin-Bass puppetoon (stop-motion-animated; similar to but not quite the same as Claymation because it uses hard puppets rather than modeling clay), this Saturday (9 Dec.) at 5pm Eastern (4pm central). And again on Friday, 15 Dec., 7/6c; Weds. 20 Dec. 7/6c; and Sun. 24 Dec. 9/8c.
Sure, you’ve seen (or deliberately skipped) it every year since in debuted in 1974; why see it again? Because you’ll need to refresh your memory before you tackle the new live-action version, which NBC will air Monday, December 11th at 9/8c. John Goodman plays Santa, Delta Burke plays Mrs. Claus, Chris Kattan (naturally) plays the devious elf Sparky. Carole Kane is Mother Nature, Harvey Fierstein (!) is the Heat Miser; Michael McKean is the Snow Miser. In case you think I must be making all this up, here’s the IMDB link, and here’s a YouTube clip.
The economics of married life
Lopez comments on the economics of his upcoming nuptials. Sorry, Ed, but you ain't seen nothing yet. Here's your indifference curve set after marriage:
At least he can joke about it
I thought Larry Summers was treated poorly by Harvard, but the folks at Harvard don't really care what I think. That said, Dr. Summers was mentioned in this Chronicle story:
Mr. Summers’s controversial remarks about the aptitude of women in science and mathematics helped lead to his ouster as president last February. Today he participated in an hourlong discussion at the Brookings Institution, a think tank, about several new papers on science and economic growth. There was no talk about female scientists — until the very last question, that is. An audience member asked the panel about what universities should do to help women in the sciences avoid glass ceilings in their careers. All eyes swung to Mr. Summers.
The intermediate micro of planning your own wedding
It's really very simple, actually. If M=income, N=leisure, H=work, w=wage, and T=time endowment, then your usual labor-leisure choice set is:
But the choice set while planning your own wedding is:
We should have hitched up wagons in Vegas, baby.
Free to Choose and U of C memorial service now online
The Idea Channel is currently streaming both the 1980 and 1990 versions of Free to Choose. The site also announces a PBS program on Friedman's life and work that will air on January 29. (Hat tip to A Bama Blog.)
On November 20, some of Friedman's colleagues at the University of Chicago gathered to pay tribute. Click here to watch the program, which includes Gary Becker, Eugene Fama, Robert Lucas and Sam Peltzman.
Spring Semester Lectures at Capital University
2006-2007 George H. Moor Chair Programs
Environmental Protection: A Question of Moral Imperatives
About the speaker: J. R. Clark earned the Ph.D. in Economics from Virginia Polytechnic Institute under the Nobel Laureate James Buchanan. He holds the Probasco Chair at The University of Tennessee at Chattanooga, and is the author of six books and numerous academic articles published in the United States, Japan, Italy, Canada, France, India and Russia. Prior to coming to UTC, Clark was with the Joint Council on Economic Education in New York, chaired a large economics department in New Jersey, held the Hendrix Chair, and was a research fellow at Princeton University. In 1996, he was inducted into the Mont Pelérin Society and elected to its board of directors in 2006. Currently he serves as Secretary/Treasurer for both the Southern Economic Association and the Association for Private Enterprise Education. His consulting experience includes Fortune 500 companies, government agencies, universities, and publishing firms as well as performing litigation support for law firms in personal injury, wrongful death, business evaluations and matrimonial cases. He has received significant grants in entrepreneurship from the J. Howard Pew Freedom Foundation Trust, is Past President of The Association of Private Enterprise, and held seats on the boards of the Palmer R. Chitester Fund and William B. Cockroft Foundation. Clark holds an Airline Transport Pilot's rating and currently flies light corporate class aircraft.
Demand and Technological Change in Energy Markets
About the speaker: Dr. Lynne Kiesling is a Senior Fellow at Reason Public Policy Institute and a Senior Lecturer of Economics at Northwestern University. Dr. Kiesling's research focuses on regulation and technological change, and other issues in regulation and privatization. In particular, Dr. Kiesling is increasingly called upon to offer commentary and analysis of the ongoing electricity crisis in the Western United States and gas price fluctuations in the Midwest and nationwide. In this role, Kiesling appears regularly on local, regional, and national programs and publications, and has authored numerous publications. Through Reason Public Policy Institute 's California Electricity Crisis Resource Center (www.rppi.org/electricity), for which she manages content, Kiesling seeks to shape the debate and public opinion about workable, market-oriented energy policies. Before joining Reason Public Policy Institute , Dr. Kiesling taught economics and public policy at the College of William and Mary in Virginia, during which time she published extensively in academic journals. She has also worked as an international economic consultant for PricewaterhouseCoopers LLP. Dr. Kiesling holds a Ph.D. in Economics from Northwestern University, specializing in industrial organization, information theory, public finance and economic history. She also holds a B.S. in Economics from Miami University, Oxford, Ohio.
Sullivan Lecture at Capital University Law School*
About the speaker: Randy E. Barnett is the Carmack Waterhouse Professor at Georgetown University Law Center, where he teaches constitutional law. He has also taught torts, criminal law, evidence, agency and partnership, and jurisprudence. After graduating from Northwestern University and Harvard Law School, he tried many felony cases as a prosecutor in the Cook County States' Attorney's Office in Chicago. In November 2004, he appeared before the U.S. Supreme Court to argue the medical cannabis case of Gonzalez v. Raich , after successfully arguing in the Ninth Circuit in 2003. He also represents the Oakland Cannabis Buyers Cooperative. He also coauthored an amicus brief to the Supreme Court in the case of Lawrence v. Texas. Professor Barnett lectures internationally and appears frequently on radio and television programs such as the CBS Evening News, The News Hour (PBS), Talk of the Nation (NPR), and the Ricki Lake Show. Professor Barnett's scholarship includes more than eighty articles and reviews, as well as seven books, including Restoring the Lost Constitution: The Presumption of Liberty, (Princeton, 2004), which was awarded the Lysander Spooner Book Award for the best book on liberty for 2004,Contracts Cases and Doctrine (Aspen, 3rd ed. 2003) and Perspectives on Contract Law (Aspen, 3rd ed. 2005). His book The Structure of Liberty: Justice and the Rule of Law (Oxford, 1998) was awarded the Ralph Gregory Elliot Book Award and has been translated into Japanese. Professor Barnett is a senior fellow of the Cato Institute in Washington DC and the Goldwater Institute in Phoenix, Arizona. Before moving to Boston University, he was the Legal Affairs Contributor for WBEZ (NPR) in Chicago where he broadcast a 15-hour series on the Bill of Rights.
December 05, 2006
Two cheers for the Bowl system
Every year we have to listen to the inevitable cries from this or that team that is left out of the big national title game in college football. This year it's Michigan. "Why can't we have a tournament like other sports or football at other levels?" they ask.
Count me in the minority that acutally likes the Bowl game system and dislikes tournaments.
What I don't like about tournaments is that every team, except one, finishes the season with a loss. Every team, except one, no matter how great a season they had ends up with a bitter taste, a "woulda, coulda, shoulda..." GMU basketball fans had a fantastic season last year, but let's face it, it was more bitter in the end than sweet.
The reality is only one team can win the "national title." But I like the fact that after the bowl season is over exactly 50% of the teams in the post season will look back on the season with a warm feeling of a bowl victory.
Sports games are inherently zero-sum, and therefore not like real life (notwithstanding all the sports/life metaphors we have to endure), but 50% winners and 50% losers strikes me as closer to real life than 1 winner and N-1 losers.
Running and Skin Cancer
A new study covered in Runner's World:
An Austrian study that made worldwide headlines last week suggesting a link between marathon running and skin cancers, possibly including the dangerous malignant melanoma (MM), turns out to be somewhat less worrisome than many news reports indicated. Of course, sun exposure is a known cause of skin cancers, and runners do go out in the sun (in skimpy clothing), so they should be careful. But the research study uncovered no melanomas among either the 210 marathoners or the 210 control group members, and never attempted to measure skin cancer incidence. "On clinical examination, no skin lesions suggestive of MM were diagnosed in either group," wrote the authors, a group of running aficionadoes and marathoners/triathletes from the University of Graz in Graz, Austria.
On Congressional salaries c. 1906
The Dec. 5, 1906 NYT reports on Congressmen proposing to raise their salaries (once again):
A proposition is underway to increase the salaries of Congressmen to a point where they will not be tempted to eke out their incomes by porch-climbing and panhandling...If the Democrats can be induced to restrain their propensities for making the eagle scream, the measure stands an excellent chance.$5,000 in 1906 is approximately $112,000 in 2005 CPI adjusted dollars and $7,500 in 1906 would be worth about $168,000. Current Congressional salaries are right at $165,000 today.
In other words, we pay Congressmen the same today, in real terms, as we did 100 years ago. In return, we have a much more intrusive and paternalistic government. Correlation or causation?
On college slobs c. 1906
From the Dec. 5, 1906 NYT:
The tailor whose shop is located near Columbia University sighed as he regarded a crowd of students passing his doorway. "The college boy is the worst dressed young man in America," he announced. "Why so?" inquired the customer to whom he was talking.
December 04, 2006
Read all about them in Arnold Kling's offering on education and entrepreneurship. I was especially pleased that Kling included accrediting agencies as one of the significant barriers to improving higher ed.
HT: George Leef
Last Friday, I was the guest speaker for the Middle Georgia Economics Seminar Series (a consortium of Mercer, Wesleyan, and Macon St.). I thoroughly enjoyed my visit; my paper is here. There was a good turnout of students (at 3:30 on a Friday!) and they came prepared with interesting questions. I also enjoyed meeting faculty members Ihsuan Li, Allen Lynch, Scott Beaulier, Atul Saxena, and Phil Taylor. Thanks to all for a pleasant visit.
A Story About A Christmas Story
While visiting friends this weekend, my son watched A Christmas Story for the first time. When the movie was over he came downstairs and I asked him how the movie was. He said, "It was good. This guy got shot in the face." Without skipping a beat, my friend said, "What were you watching - the Dick Cheney story?"
My enemy's enemy is my friend--Sports Edition
This OSU-hating Columbus resident, who is also an FSU alumnus, has only one thing to say about the BCS championship game:
GO BUCKS! GO BUCKS! GO BUCKS!
(I can't believe I said that.)
December 03, 2006
Washington Times on medical tourism:
"[M]edical tourists" have a vacation in an exotic place where they can soak up the sun, visit a few golden temples or other landmarks and end up with a new hip or knee, a healthy heart -- or a robot-controlled joint replacement, a procedure that has not yet been approved in this country.
December 02, 2006
APEE Economic Communicators Contest
First Prize: $10,000
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The rules are simple: If you believe you are effective at communicating economic concepts we're looking for you! Contestants must submit:
1. A video clip of your teaching or speaking that is at least 5 minutes but no more than 20 minutes. You can submit a recording of a public lecture or simply a recording you make at home. The topic should be either an original idea incorporating economic concepts, or a great explanation of an existing idea in economics. The clip can be an excerpt of a longer talk.
This contest is open to anyone (e.g., assistant professors, graduate students, high school teachers) who do not have tenure at a college or university. Submissions will be considered by a panel of judges from APEE and the MBM Institute. The top three finalsists will be invited to each make a 15 minute presentation during a plenary session at the 2007 APEE annual meeting, scheduled for April 8-10 in Cancun, Mexico, where they will be judged by a distinguished panel of communicators. Airfare and hotel accommodations will be provided, and finalists must be in attendance and agree to have their performances broadcast to win the cash prizes.
* All entries must be received by February 2, 2007.
Questions? Contact Ed Stringham, APEE President (email@example.com) or Tony Woodlief, MBM Institute President (firstname.lastname@example.org). Entries can be either e-mailed to one of the above addresses (if video is on the web) or mailed to: Market-Based Management Institute, P.O. Box 8250, Wichita, KS 67208.
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December 01, 2006
Another problem with government-issued currency
U.S. District Judge James Robertson ruled Tuesday that the government had violated the law because the vision impaired could not tell the difference of one bill's denomination from another.
Possible devices (variously used in other countries) for making a $20 bill distinguishable from a $1 bill by touch include: different sizes, foil patches, rough patches, raised printing, and series of perforated dots.
The US Treasury, which prints US currency notes for the Federal Reserve, objects that the costs of redesigning and retooling would exceed the benefits. Spokesmen for the vending machine and slot machine industries are naturally concerned about the potential need for a costly re-fitting of millions of machines to accept new notes. Banks’ automatic teller machines may similarly need re-tooling to dispense differently sized notes.
If we wanted to weigh the costs and benefits, is there an accurate way to determine whether it is worth the cost to redesign the currency for the sake of some subset of users? We can imagine an academic economist making an honest attempt to do a serious cost-benefit analysis, recording the Treasury's estimate of retooling expenses and using questionnaires to form an estimate of blind currency users’ willingness to pay. But such an analysis, even if better than nothing, is a poor substitute for a real market test. On the cost side, a bureaucracy (unlike profit-driven competing firms) has little or no incentive to find, much less report, the minimum cost method of retooling. On the benefit side, it is impossible to measure actual willingness to pay by such methods as questionaires. Those problems aside, it’s unlikely in the extreme that the government will ever base its decision on such an analysis. Judge Robertson didn’t cite or ask for any cost-benefit study – he simply ordered a redesign.
We need to ask an even more basic question: Why should currency design be a government decision at all? It becomes a government decision, of course, when government is the monopoly provider of currency. But that's not the only feasible arrangement. Currency notes were privately printed in the United States during the nineteenth century, by such security printing firms as the American Bank Note Company, and issued by hundreds of private commercial banks. Even today banknotes are privately and competitively issued in Scotland, Northern Ireland, and Hong Kong. The Royal Bank of Scotland, for example, stocks its “cash dispensers” (ATMs) with Royal Bank notes. Under competitive pressure, private issuers all denominate their notes in the standard monetary unit (dollars in the US, pounds sterling in the UK), because that is what consumers want. But each bank strives to make its own brand of notes more attractive for users through pleasing designs and advanced counterfeit-proofing devices. In the past, banks even experimented with different sets of denominations – for example, some banks issued $3 bills – in hopes that consumers might find them useful.
Re-privatizing the issue of currency in the United States would give us a true cost-benefit test as to whether it is worth adding tactile devices to distinguish denominations. If a bank could cover the costs of producing blind-friendly notes by attracting enough blind customers to its ATMs, it would. Not every bank would need to follow the same policy. Today, under Federal Reserve monopoly, we are stuck with one-size-fits-all currency even where one size doesn’t in fact fit everyone so well.
Without such a market test, we are left either with merely guessing whether the benefits to the blind exceed the extra production costs, or with cost-be-damned edicts like Judge Robertson’s.
BTW, I have recently signed on to write columns for Free Market Network News. A longer version of this piece will appear there on Monday.
George Best banknote update
Back in October I noted here that Northern Ireland's private Ulster Bank (a subsidiary of Nat West) would be issuing a new banknote to commemorate native soccer legend George Best, who died one year ago. Today comes the news that all one million of the £5 notes have been snapped up by collectors. The going price on eBay is currently about 6 times face value.
Car manufacturers c. 1906
The Dec. 1, 1906 contains an advertisement for an Auto Show at Madison Square Garden from Jan. 12 - 19, 1907. Here's the list of manufacturers scheduled to present their wares:
It is interesting how few names would be recognized by today's non-car-enthusiast.
Tax compliance c. 1906
From the Dec. 1, 1906 NYT:
No one will be much surprised that ex-Mayor Seth Low has paid to the Treasury of the city $27,000 or more for taxes he had erroneously thought when he made out his statement of taxable property that he was not legally bound to pay...The point of peculiar public interest in the transaction is that the tax law is in such a condition that a gentleman of Mr. Low's knowledge, and his business and official experience, earnestly desirous to pay all that he ought to pay, was unable correctly to tell how much that was, and was finally forced to secure the trained judgment of a prominent lawyer to solve the puzzle for him.We have to take Mr. Low's veracity on the reporter's word. Yet, pre-income tax laws were already sufficiently complicated for such a story to be of interest?
This I already knew...
From the movie, Tenacious D and the Pick of Destiny, comes this wonderful, and very crude song, "The Government Totally Sucks." Lyrics and a link to listen are found below the fold. WARNING: very foul language!
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"Government Totally Sucks" [Listen here]
The government totally sucks
Ben franklin was a rebel indeed
Now let me tell you something about the government (uh huh) They're fucking up the environment (say what?) They're taking all the fucking beautiful animals (yeah?) And making them fucking extinct (oh no!)
The government totally sucks
Cos the land of love and freedom,
The USAAAAAA YEAAHHH
Government totally sucks!
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Clueless on Immigration
No, this isn't a rant about anti-immigration economists. I just wanted to share the following clip from the movie Clueless that I've showed in class to introduce my discussion of immigration. It helps to reinforce to my students the importance of the argument that led to a conclusion. To often they think because they got the right answer they deserve 100 percent, even if everything leading them there was wrong.
I've placed the clip below the fold.
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TANSTAAFL is often attributed to Milton Friedman. Allister Heath ("The amazing freebie economy") points to the actual source:
It was Robert Heinlein, the libertarian science-fiction writer, who famously coined the adage 'There Ain't No Such Thing As A Free Lunch' Tanstaafl for short in his 1966 cult classic, The Moon Is a Harsh Mistress.
I think this book may be the best single libertarian tract extant. The link above is to The Spectator, which provides an abstract. The article, available on Lexis/Nexis, chronicles the extent to which many formerly priced items are becoming available free of charge.
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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