Division of Labour: February 2007 Archives
February 28, 2007
Thanks David

Yesterday, UGA's David Mustard delivered Berry's 2007 ODE Lecture. His talk, "HOPE Scholarship: Good or Hopeless," was well-received by a standing-room only crowd. I very much appreciate David's willingness to give a talk at Berry.

Posted by E. Frank Stephenson at 12:55 PM in Misc.

Mike Lester on Gore's Carbon Footprint

Mike Lester of the RNT provides a nifty follow-up to my post yesterday:

GoreCarbonFootprint.gif

Posted by E. Frank Stephenson at 12:47 PM in Funny Stuff

No Bull, Once More

Following Frank's post on Dwight Lee's fine AJC column (whenever I read a piece by Dwight, I'm impressed by how easy he makes it seem to say important things well), I'd like to add a couple of comments from Peter Huber. Huber points out, here, that another way (in addition to reducing flatulence) that internal combustion engines have helped is by letting farmland return to the forests:

Happily, however, our agricultural footprint has been shrinking a lot faster than our cities have been sprawling. When Europeans first arrived on this continent, the area now represented by the lower 48 United States had about 950 million acres of forest. That area shrank steadily until about 1920, to a low of 600 million acres, as Americans spread across the landscape.

Then, astonishingly, we began to retreat, and the wilderness began to expand once again. Precisely how fast is hard to nail down: The continent is large, most of the land is privately owned, and the definitional debates rage. But all analyses show more, not less, forest land in America today--somewhere between 20 million and 140 million acres more--than in 1920. Roughly 80 million more acres of cropland were harvested 60 years ago than are harvested today.

Indeed, an implication of this change is that North America may be a net carbon sink, unlike some signatories of the Kyoto Accord. Huber again:


As best these things can be measured, the North American carbon books are now in balance. Carbon dioxide levels downwind of the estate, out in the Atlantic, are lower than upwind, in the Pacific. Carbon-sink skeptics say they don't see enough new trees to account for the drop. But then, global warming skeptics say they don't see enough human carbon emissions to account for rising temperatures. The weight of the evidence indicates both a warming planet and a huge North American carbon sink. The carbon-sink data are, if anything, the more reliable, because they require only direct measurement today, not estimates of conditions a century ago.

If we can't precisely explain where all the carbon is sinking, it's because it's hard to track deposits that average 0.002 inch over a vast continent. Many forest inventories count only "lumber quality" trunks, ignoring younger trees and grassland. New forests mean new, carbon-rich soil, which is almost impossible to inventory accurately. New soil means new sources of silt in rivers, which dump carbon into the ocean. Pampers sequester carbon, too, as long as the landfill they wind up in doesn't permit them to decompose.

Posted by Wilson Mixon at 09:59 AM in Economics

February 27, 2007
Baseball rules c. 1907

The Feb. 27, 1907 NYT reports the final schedule for the National and American League baseball teams I hesitate to say that hope was in the air the same as today because there had only been three World Series and therefore an utter lack of ~100 year droughts that make people avid fans of teams like the Cubs, White Sox, and Red Sox.

The article also reports on several rule changes - some of which are still with us today. Rule changes in most sports are generally intended to increase the social welfare of the league members - teams and players - by making the game safer for the players, safer for the fans, and/or more entertaining for fans (which implies that fans will be willing to spend more to attend the events and increasing the returns to players, managers, and owners).

Many times rule changes aim to improve offensive efficiency, and hence scoring, as it is believed that fans like to see scoring. Other rule changes are intended to bolster the defense and improve the parity of the league, as it is believed fans like more evenly matched contests. And still other times rule changes might address off-the-field behavior, as it is believed that bad behavior of a few players might reduce the overall appeal (demand) of the sport.

The rules changes in 1907 were as follows (with my opinion as to where the advantage lies in parentheses):


  • Rule 14: No other player except the pitcher shall be allowed to take the gloss of the ball, under a penalty of $5(?) for each offense (advantage: pitcher/defense);

  • Rule 51: A batsman stepping from one box to the other after the pitcher has taken his position shall be declared out (advantage: pitcher/defense);

  • Rule 83, Section 4: In all cases where a base runner is retired by being hit by a batted ball, unless batted by himself, the batter shall receive credit for a base hit (advantage: batter/offense);

  • Where two umpires have officiated in games it has always been the rule for the assistant umpire to decide all plays at first and second bases. This clause in the rule has been eliminated and the two umpires will have to come to an agreement about the matter (advantage: junior umpires);

  • If a catcher interferes with a batsman while striking at a pitched ball, the batsman becomes a base runner (advantage: batter/offense);

  • If there are two base runners and one passes another in an effort to make a run while the first runner is being "touched" the runner who passes is to be declared out (advantage: defense).

  • An interesting aspect of baseball rule changes is that they often aim to close a loophole that one or more teams had found and exploited in the previous rules. This is one reason I find the rules of baseball so interesting. Unlike the rules in football, which are mainly designed to keep the players from causing serious bodily harm to each other, the rules of baseball are set to limit the strategy space of managers, players, and umpires.

    Posted by Craig Depken at 11:24 AM in Sports

    Congratulations Gary

    Congratulations to my colleague Gary Roseman for being approved for tenure and promotion to associate professor. Gary is a superb instructor who is deserving of the promotion.

    Posted by E. Frank Stephenson at 10:38 AM in Misc.

    Another Installment of Al Gore's "Do as I Say, Not as I Do ..."

    From the Tennessee Center for Policy Research:

    Last night, Al Gore’s global-warming documentary, An Inconvenient Truth, collected an Oscar for best documentary feature, but the Tennessee Center for Policy Research has found that Gore deserves a gold statue for hypocrisy.

    Gore’s mansion, located in the posh Belle Meade area of Nashville, consumes more electricity every month than the average American household uses in an entire year, according to the Nashville Electric Service (NES).

    In his documentary, the former Vice President calls on Americans to conserve energy by reducing electricity consumption at home.

    The average household in America consumes 10,656 kilowatt-hours (kWh) per year, according to the Department of Energy. In 2006, Gore devoured nearly 221,000 kWh—more than 20 times the national average.

    Last August alone, Gore burned through 22,619 kWh—guzzling more than twice the electricity in one month than an average American family uses in an entire year. As a result of his energy consumption, Gore’s average monthly electric bill topped $1,359.

    Since the release of An Inconvenient Truth, Gore’s energy consumption has increased from an average of 16,200 kWh per month in 2005, to 18,400 kWh per month in 2006.

    Gore’s extravagant energy use does not stop at his electric bill. Natural gas bills for Gore’s mansion and guest house averaged $1,080 per month last year.

    For a previous installment of the Al Gore hypocrite, see here.

    Posted by E. Frank Stephenson at 09:59 AM in Politics

    "Cars improved the air ... that's no bull"

    So says DOL friend Dwight Lee in today's AJC. A sample:

    Long before global warming became an environmental concern, however, the move from the power provided by animals to that provided by gasoline had greatly improved the environment. The emissions that came out of the tailpipes of horses were much more lethal pollutants that those now coming out of the tailpipes of cars. Horse emissions did more than make our town and cities stink; they spread fly-borne diseases and polluted water supplies that killed people at a far greater rate than the pollution from cars and trucks ever have.

    Photochemical smog is clearly a health risk, but not nearly the health risk of cholera, diphtheria and tetanus that have been largely eliminated with the help of gasoline powered transportation.

    Dwight's article is an excellent reminder of the important question "Compared to what?" Sure cars pollute the air, but compared to the animal-powered transportation and cultivation that they replaced, they are much cleaner.

    Posted by E. Frank Stephenson at 08:40 AM in Economics

    February 26, 2007
    Adventures in Planning - The All-Nite Gas Line

    From CNN:

    YANGON, Myanmar (Reuters) -- By the standards of the late dictator Ne Win, who decreed on the advice of an astrologer in 1970 that all traffic should switch to the right side of the road, it is not such a crazy plan.

    To cut down on costly imports of petroleum, of which Myanmar does not have much, its ruling generals want every vehicle in the country to run on natural gas, of which it has plenty.

    However, early signs suggest the scheme is every bit as ill-conceived as Ne Win's whimsical stand against former colonial master Britain, which drives on the left.

    Since 2005, the junta has managed to get around 11,000 taxis and buses in Yangon -- most of them decades-old jalopies held together by bits of wire and the ingenuity of their owners -- to convert to compressed natural gas (CNG).

    Unfortunately, during this time it has installed only 20 filling stations for a city of 5 million people.

    More unfortunately, the CNG pumps they have installed are so archaic they can take 30 minutes to fill up one vehicle.

    Even more unfortunately, every time a power blackout strikes -- which is at least once a day -- the pumps grind to a halt.

    The result? Buses and taxis are spending longer queuing for fuel than ferrying around passengers. Waits of up to 10 hours are not uncommon, leaving the city's public transport system in disarray.

    Nice bit of comparative advantage here:

    They have also created a unique job opportunity for insomniacs.

    "I wait in line for people who don't want to stay up all night," said professional queuer Ko Min Aung, who says he can make 2,500 kyat -- around $2 at black market rates -- a night.


    ATSRTWT.

    [HT: E. Heath]

    Posted by Joshua Hall at 05:43 PM in Economics

    On On the Wealth of Nations

    Like Mike Munger, I recently finished reading P. J. O’Rourke’s On the Wealth of Nations. And like Mike, I was disappointed. I’m teaching undergrad History of Economic Thought this semester and I was hoping the book might be worth assigning. But it’s not really suitable. The book’s strong suit is its humor, but many of the jokes will be over the head of undergrad readers, most of whom (one must assume) aren’t already familiar with the subject.

    Even more fatally, there are too many economic and doctrine-historical errors in the book. Fixing these would not have made the book any less funny. I wish P. J. or his editor had had the good sense to hire a few economists to vet the manuscript. If they had, we wouldn’t have to wince at amateurish misstatements. Because my specialty is monetary economics, I’ll focus on the discussion of money and banking.

    O’Rourke (p. 59) writes:

    A central bank is the institution that controls the supply of a country’s money. This would be a straightforward matter if it weren’t for three facts: Money is imaginary. Banking doesn’t involve money. And a central bank isn’t a bank.

    Never mind that the three "facts" are all false; chalk that up to provocative hyperbole. The real howler here and in the discussion that follows (pp. 59-67) is that O’Rourke is completely unaware of the fact that in Adam Smith’s time Scotland had no central bank. Its money supply was controlled by the gold standard and Scotland’s competitive free banking system, not by any central bank.

    O’Rourke writes (pp. 64-65):

    He [Smith] realized that money was not a government asset, but a government liability. He called it “that great expensive instrument of commerce”.

    In the quoted phrase Smith was referring to gold and silver coins, which were neither government asset nor government liability. (That something is expensive doesn’t make it a liability.) The other items of currency in Scotland, privately issued banknotes, were also neither a government asset nor a government liability.

    O’Rourke appears completely unaware of Smith’s opinion that a central bank, i.e. an institution with a government-granted banknote monopoly like the Bank of England, was neither necessary nor desirable. O’Rourke subtitles one section (p. 65), “The Adam Smith Plan for Increased Wealth (of Nations): How Central Banks Can Use Paper Money to Make the Great Instrument of Commerce Work Cheap”. In fact Smith praised competitively issued private banknotes, not central bank notes, as a cheaper substitute for gold and silver coins.

    O’Rourke (p. 67) mistakenly writes that “Smith proposed various intelligent limitations on central banking’s paper currencies.” In fact Smith endorsed (to my view, mistakenly) two existing limitations on competitive private banking’s notes: the outlawing of notes below a minimum denomination, and the outlawing of clauses giving the issuer an option to delay redemption.

    Posted by Lawrence H. White at 05:42 PM in Economics

    Presidential debates c. 1907

    The Democrat(ic?) party selected William Jennings Bryan to run for President in 1908. The party chose their candidate in 1906. At this time, a century ago, the Republican party hasn't chosen their candidate (at least not publicly), although there are a number of contenders. One being Albert J. Beveridge.


    The timing of presidential politics in 1906-1908 is interesting. The campaign of 1908 seems to have started earlier than most presidential campaigns I can remember - save for the seven Democrats running in 2003. I am not a presidential historian, but I'd wager it took much longer to campaign in the past as communications and transportation technology were less efficient. Further, from what I have read about the debates between politicians from that era (and earlier), it seems that the debate was oftentimes more in-depth, and perhaps honest, than today; thereby requiring a little more time than a YouTube video. Finally, as many in today's media and society seem shocked that the 2008 presidential campaign seems to be in second, if not third, gear, it is informative (at least to me) to see that the long-campaign is nothing new in our history.


    The Feb. 26, 1907 NYT reports on a written "debate" between Mr. Bryan and Mr. Beveridge which was printed in Reader Magazine, focusing, in part, on the role of the states relative to the federal government. It is interesting that Bryan would "debate" with a presidential candidate (not nominee) of the other party so early in the campaign - such interchange today would be so refreshing it might actually be terrifying. Perhaps the willingness of Bryan to engage Beveridge in debate is a signal of the strength of Bryan's (and Beveridge's) convictions?

    See if you can identify the candidate by their language:

    1.

    A systematic absorption of power by the Federal Government would not only cause discontent and weaken the attachment of the people for the Government, but a withdrawal of power from the State would breed indifference to public affairs - the forerunner of despotism.

    The further the legislative body is from the community affected by the law, the easier it is for special interests to control. This has been illustrated in State Legislatures when long-time charters have been granted to franchise corporations by the votes of members whose constituents, not being interested, do not hold them to strict account, and it would be worse if Congress acted on the same subjects.

    2.

    Every corporation, so great that its business in Nation-wide, is championing State rights. Every railroad that has felt the regulating hand of the Nation's Government, is earnestly for State rights. Every trust attorney is declaiming against the dangers of centralization. Do you know who is not? I do not say that all advocates of State rights are trust attorneys, but all trust attorneys are advocates of State rights.

    We are one people, speaking one language, living in one country, under one flag. What affects one of us, affects all of us. Most of the evils that develop among us are common evils, to be reached only by a common remedy. Scarcely any evil is confined to one State. It is clear that where an evil is general, States acting separately cannot uniformly attack it; and it is a fact that in the case of every general evil the States, acting separately, never have uniformly attacked it. The American people alone, acting in common - that is, acting as a Nation - can destroy evils which affect them in common - that is, affect them as a Nation.


    Answer below the fold.

    Read More »

    Posted by Craig Depken at 10:30 AM in Politics

    Forever Stamp

    From the WaPo:

    Nothing lasts forever -- except, just maybe, the cost of mailing a letter.

    After increasing rates 13 times in 32 years, the U.S. Postal Service proposed a way yesterday for consumers to lock in the price of a first-class stamp, which officials want to raise by 3 cents, to 42 cents, next year.

    Postal officials pitched the idea of creating a "forever stamp" that would be good for sending first-class mail no matter how much -- or how often -- the cost of a postage stamp goes up. The announcement came on the same day that the Postal Service said it would seek to raise the price of a first-class stamp for the second consecutive year.

    The forever stamp, which would cost the same as a first-class stamp, would provide a hedge against future postal rate increases and end the search for 2- or 3-cent stamps that usually follows a price increase. The stamps could pose unusual challenges for the Postal Service, however, and officials say many details still have to be worked out.

    It's good to see the USPS is finally getting around to taking Paul Rubin's advice.

    Posted by E. Frank Stephenson at 08:16 AM in Economics

    February 25, 2007
    O'Rourke Doesn't Quite Get Smith

    Just finished reading PJ O'Rourke's new book, on Adam Smith's Wealth of Nations.

    A disappointment. To be fair, I am a really, really big fan of both O'Rourke and of Smith, so my hopes were perhaps unrealistically high.

    But Smith is subtle, and it is hard to understand his main thesis on division of labor. PJ apparently doesn't, or at least skips over it any real discussion. He wastes chapters paraphrasing Smith's language, instead of summarizing his ideas.

    PJ is capable of deep understanding, as his famous essay, "How to Drive Fast on Drugs While Getting Your Wing-Wang Squeezed and Not Spill Your Drink" illustrates. That article changed my life, and dating/driving habits.

    Seriously, I thought Parliament of Whores was so good I use several chapters in class. And All the Trouble in the World...well, the chapters on environmentalism are simply brilliant.

    And, to be fair, O'Rourke's analysis of Smith does have a couple of terrific chapters. Chapter 7, on power and regulation, is outstanding. Not just funny, but fundamentally insightul. And Chapter 13, "An Inquiry into Adam Smith," is a wonderful overview of the man's life.

    But too many of the other chapters just don't rise to that standard. Okay, but not great. You are still better off, if you don't want to read the whole WoN, just studying Book I and Book IV carefully, IMHO.

    (And, yes, as a friend points out: I said that O'Rourke's book was "One book that I had written." Now I just wish he had let me edit it. It could be SO much better...)

    Posted by Michael Munger at 12:04 PM

    When transportation costs matter c. 1907

    The Feb. 25, 1907 NYT reports on the outcome of combining a perishable good, transportation costs, and a country that stretches 11 time zones:

    Russia's exports of wheat during the season 1906-1907 have mounted to 62,228,000 bushels, which, while comparing poorly with the previous year's 108,248,000 bushels, is still one-fifth of the world's exports...The strange spectacle of Russia exporting one-fifth of the world's surplus of wheat from one corner of the empire while another corner is actually starving is explained by internal conditions of transportation, which make it more expeditious, as well as more economical, to bring in German rye and American wheat at the northwestern ports of the country while ample grain to feed the starving millions goes abroad from the southern provinces by way of the Black Sea and Austrian ports.
    Perhaps a better transportation system would have precluded the massive famines that hit the Russian (and later Soviet) empires. On the other hand, if the country had a better internal transportation system there might not have been an empire (see a potential example here).

    Counterintuitive trade patterns such as these seem to violate the law of comparative advantage and to many smack of a conspiracy theory. However, transportation costs are important, if not to the conspiracy theorists then to the owners of the resource, be it wheat or crude oil. The United States actually exported 11 millions barrels of crude oil in 2005, even while importing some 3.6 billion barrels of crude oil in the same year (full data here).

    Ghostbusters on Universities

    "Personally, I liked the university. They gave us money and facilities. We didn't have to produce anything. You've never been out of college. You don't know what it is like out there. I've worked in the private sector. They expect results!"

    - Dr. Raymond Stantz, a parapsychology professor played by Dan Aykroyd in the Ghostbusters movies.

    [HT: OCPA]

    Posted by Joshua Hall at 09:23 AM in Funny Stuff

    February 24, 2007
    Free interstate trade in ugly tomatoes

    Procacci Brothers Sales Corp., seeking to produce a more flavorful tomato, came up with a variety it calls the “UglyRipe”. Would consumers like its flavor and be willing to overlook its appearance? Until recently they didn’t have the choice. The UglyRipe ran afoul of the Department of Agriculture’s “standard” for the appearance of tomatoes from Florida. Bloomberg reporter Cindy Skrzycki writes:

    Those specifications were set in 1955 to assure the quality and uniformity of the Florida round tomato. Thus, Procacci's pride couldn't be sold outside Florida in the prime winter growing season, from October to June. The arbiter of compliance with the grading standard is the Florida Tomato Committee, a dozen growers who supervise most of the $500-million-a-year Florida fresh tomato industry. The committee decides what gets shipped out of the regulated tomato-growing area and what merits an exemption from the standard.

    As Milton Friedman argued with respect to medical licensing, compulsory standards in fact have nothing to do with assuring quality and uniformity – for that, non-compulsory certification is sufficient. In this case, non-compulsory certification would mean that consumers who want tomatoes the shape (and flavor?) of red tennis balls could look for the sticker “certified round by the Florida Tomato Committee”. Homelier tomatoes, without the sticker, could compete from the next produce bin. Licensing or compulsory standards have everything to do with restricting competition for the benefit of incumbents. The Florida Tomato Committee acted as an industry cartel to suppress competition along non-price dimensions.

    After much lobbying, the Department of Agriculture last month found a loophole through which it could give UglyRipe an exemption from the shape standard. Here’s a radical idea: why not abolish the federal standard? Let any firm sell misshapen tomatoes, and let consumers choose according to their own standards. And let the Florida Tomato Committee provide as much sticker information as its members are willing to pay for.

    Posted by Lawrence H. White at 08:35 PM in Economics

    On the cost of government c. 1907

    The Feb. 24, 1907 NYT reports that the 59th Congress (1907-1908) will spend a little more than $1 billion per year - the most to date. In 1907 the economy was estiamted to be approximately $34b, and the federal government was spending approximately 3% of the economy per year. The per-capita cost of the federal government was approximately $12.50 ($268 in 2005 dollars), whereas in 1879-1880 the cost per capita was $7. Today, the per-capita cost for the federal government it is approaching $10,000 (ouch) and federal government spending amounts to appproximately 20% of the nation's economy.

    What's driving the run-up in costs in 1907? The military. The largest increase in appropriations was for the navy: in 1897 the navy was appropriated $30m, in 1907 the total was $102m. The story offers that spending on the navy in 1907 was $20m more than the spending during the Spanish-American War of 1898-1899. The largest proportional increase in spending was for fortifications ($24m over two years).

    The article does have this to say about the increases in government spending:

    If the wealth of the country, rather than its population, is considered, the cost of Government is now at a much less figure on $1,000 per capita [of national income] than ever before in the history of the Republic. The fact that big Congressional appropriations are no longer political issues shows that the people care little for economy in administration so long as there is general prosperity. At the close of each Congress the minority seeks to show that there have been great extravagances in appropriations. The presentation made by the ranking Democrat of the Appropriations Committee receives space in the newspapers, but seldom attracts more than one editorial paragraph in the way of comment. [emphasis added]
    I like the use of the word "Republic" - we don't see enough of that word these days.

    Note: The Republicans held the majority after the 1906 elections.

    Posted by Craig Depken at 02:07 PM in Politics

    February 23, 2007
    Institutions Matter: Guinea and Zimbabwe Editions

    From NPR:

    But why is Guinea — the world's leading exporter of bauxite used to make aluminum — locked in a stand-off?

    The simple answer is that many are desperately poor in a potentially rich country, with mineral resources galore.

    "People are fed up," says political commentator Souleymane Diallo. "Fed up of fighting. Last year, Guineans were fighting for the bag of rice. Now they are fighting for a plate of rice. Poverty is growing very fast. Corruption is at the highest. Corruption and corruption and corruption. So it could only explode... You can see it's a general revolt all over the country."

    NPR also has a report on the awful situation in Zimbabwe. Mugabe is throwing an expensive party to celebrate his 83rd birthday; meanwhile people struggle to find food and clean water. Disgraceful.

    Posted by E. Frank Stephenson at 02:00 PM in Economics

    Markets in Everything--Cat Flatulence Edition

    A news item:

    Governments in rich nations are spending billions of dollars to buy a clearer conscience over climate change. Are they getting their money's worth?

    Enlightened individuals, those who stay awake at nights wondering what they can do to prevent the polar caps from melting, at least have a growing menu of choices.

    Sydney-based Easy Being Green says it will mitigate your cat's flatulent contribution to global warming for A$8 ($6). The same company could also make your granny ``carbon-neutral'' at A$10 a year, according to a report in the Australian newspaper last weekend.

    Grannies produce only 25% more carbon emissions than cats. Who knew?

    HT to MR for the markets in everything concept.

    Posted by E. Frank Stephenson at 12:44 PM in Misc.

    MPS & Kili

    I'll be away for a couple of weeks to attend the Mont Pelerin Society Special Meeting in Nairobi, Kenya, and then after the conference, Ben Powell and I are going to attempt Mt. Kilimanjaro (19,340'). With luck we should make the summit very early in the morning on Wednsday March 6 (Tuesday evening EST). I'll bring back a full report.

    Posted by Robert Lawson at 10:42 AM in Economics

    On family values c. 1907

    The Feb. 23, 1907 NYT reports on the first wave of divorce statistics being gathered by the Bureau of the Census (the data collection started in Summer 1906):

    Applications for divorce filed throughout the United States in the two decades up to 1907 number 1,400,000. Upon these applications, 1,000,000 were granted, as against only 328,000 divorces granted in the preceding twenty-year period. For the earlier period the number of divorces averages 33 per 100,000 of population, and 70 per 100,000 for the later period. The average annual ratio of divorces for Chicago has risen from 73 to 107 per 100,000 during the two decades; for Boston from 40 to 63 per 100,000, and from 22 to 63 for Philadelphia...Divorces for the whole country have more than doubled, and they are increasing in the rural districts as well as in the cities.

    Posted by Craig Depken at 10:31 AM in Culture

    February 22, 2007
    On G.W. (the first) c. 1907

    The Feb. 22, 1907 NYT has the following story concerning the legacy of George Washington:

    It is not a wholly easy task that the Italian Government has set for the School Directors of the kingdom in directing them to explain to their pupils to-day "the meaning and importance" of the anniversary of Washington's birth in the United States. It is, indeed, a task for which a good many of our own teachers might find themselves only indifferently equipped.
    Nothing different today.
    [I]t is hard to picture definitely what it was that he did for his country and what was the full significance of his remarkable career. This is all the harder because the approximately true Washington is known and can be known only to a limited number of rather careful students, while the portrait that serves and must serve for the great mass of us is at best vague and in many respects quite misleading.
    At least the Washington mythology seems to have been foisted on him and not created and nurtured by him. This is in stark contrast to today's leaders who seem to write a book a year with yet another explanation of their life and why we should think it important.
    Two seemingly contradictory facts stand out in the life of Washington. One is that we cannot conceive of the independence of the country won and its National Government established without him, and the other is that in peaceful times it is quite possible that Washington would have passed thorough an uneventful existence known only to his immediate associates.

    Following up on Ed's post earlier today:
    Had he lived in the latter half of the nineteenth century he might, indeed, have been one of the great property holders of the day as he actually was of his own day. He was by native propensity a bold speculator in land values, and at seventeen, when surveying for Lord Fairfax, he located lands he afterward secured and made very profitable. His fortune, estimated at above half a million at his death - among the very largest, if not the largest, of that time - was gathered in part by skillful and sagacious farming, but also by shrewd speculation and by investment in corporate ventures.

    The NYT offers a final salutation:
    But all this conjecture is really beside the mark. What we know and what we cannot afford to forget are his indispensable services to our country and the splendid unselfishness with which they were rendered.

    Posted by Craig Depken at 06:26 PM in Politics

    Something to think about?

    I've just finished Ernle Bradford's "Hannibal," part of the Wordsworth Military Library. Finally I think I have a grasp of why Hannibal is important to world history and, as it turns out, it has little to do with elephants and the Alps.

    On page 95 Bradford writes:

    The one thing that Fabius [Roman Consul turned dictator] had to do, he realised, was avoid defeat. The victory that he must aim for was not the traditional one upon the battlefield - something that the genius of his opponent rendered unlikely - but success achieved over a very long period of time, if need be. The presence of his troops must be used to reassure the allies and their cities that Rome was watching over them. Time and the extent of the land itself must be made to work for him. The Carthaginian's [Hannibal's] army must be reduced slowly, its morale snapped, and its opportunities for engaging him in a straightforward battle reduced to a minimum.
    The delaying tactics led to a 17 year war that was fought on two continents - Europe and Africa - from Spain to Macedonia. While Hannibal pretty much had his way with the Romans whenever they engaged in battle, Hannibal ultimately lost. The question is, which side of the current-day conflict is Hannibal and which side is Fabius?

    Early in the war with Hannibal, Rome had it's political strife. After Hannibal crosses the Alps, rests, and then takes it to the Romans, for example at Lake Trasimene in 217 BC, Fabius's strategy of delay is attacked as intentionally prolonging the war, leading to the election of Gaius Terentius Varro to co-consul. As Bradford writes:

    Varro was a plebeian of ultra-democratic opinions who had managed to get voted into office by the people for his defamatory attacks on Fabius the dictator. His arguments, and those of his supporters, will be familiar to those who have observed the pattern of similar politicians in later centuries: the nobles had been seeking war for many years, and it was they who had brought Hannibal to Italy. It was their machinations, too, that were spinning out the war, when it might be brought to a victorious conclusion; the consuls had employed the arts of Fabius to prolong the war, when they could have ended it. The nobles had all made a compact to this effect; nor would the people see an end to the war until they had elected a true plebeian, a new man, to the consulship."
    The newly elected co-consuls don't see eye-to-eye about things and this division of leadership and intention leads to the disaster at Cannae.

    Whether current-day Varroses would do the same is something to think about. The uncanny "repeat of history" suggests that human nature has not changed over the course of 2200 plus years. It is therefore unlikely that it will change in the next three or four.

    Posted by Craig Depken at 05:48 PM in Politics

    The Partisan Perils of Winning the Presidency

    This is interesting data assembled by Lou Jacobs of Roll Call.

    Seats Held by Party at Inaugurations and after Six Years in Office
    President Clinton

    U.S. House 258 211
    U.S. Senate 57 45
    Governorships 30 17
    State Houses Controlled 33 26
    State Senates Controlled 30 26

    President Bush
    U.S. House 221 202
    U.S. Senate 50 49
    Governorships 29 22
    State Houses Controlled 24 22
    State Senates Controlled 24 19

    Jacobs compiled numbers from the president's first inauguration. It seems to me he ought to base it from before that first election, as the president ought to get some credit for seats gained in his first election. But it's still interesting, and it's a good reminder to you partisans that in every election loss, there is a silver lining.

    Posted by Brad Smith at 04:17 PM in Politics

    Raise a Glass to George Washington

    Eric Schansberg writes in an email message:

    Years ago, I learned that George Washington kept track of his gambling pursuits. Today, I learned that he was probably the #1 whiskey producer in colonial America. Go George!

    Link is to this Opinion Journal piece (free) by the ever readable John Fund. It's a very enjoyable and informative article. Two of many gems:


    Mr. Rees is proud that Mount Vernon is helping showcase our Founding Father's business career by opening a complete reconstruction of his 75-by-30-foot distillery, which at its peak turned out 11,000 gallons a year of corn and rye whiskey along with fruit brandy. (The distillery and accompanying museum open to the public on March 31.) James Anderson, a Scot who was convinced making whiskey was a growth industry, pitched the idea to Washington just weeks before he retired from office. Import taxes had reduced the consumption of molasses-based rum and made home-grown hooch popular. At the time, the average American consumed five gallons of distilled spirits every year, compared with only 1.8 gallons today.

    WOW!!! And another:

    But for all of Washington's commendable belief in moderate alcohol use, he very much appreciated its utility. Esther White, a Mount Vernon archaeologist, told me Washington once lost a 1755 campaign for the Virginia House of Delegates because he didn't treat prospective supporters to a drink. Two years later, he rolled out 144 gallons of refreshment. He won with 307 votes, a return on his investment of better than two votes per gallon. He never lost another campaign.

    Enjoy! And raise a glass to our first prez.

    Posted by Edward J. Lopez at 03:42 PM in Misc.

    Adam Smith Currency

    From the BBC:

    A £20 note featuring economist Adam Smith will be issued on 13 March, the Bank of England has said.

    HT: Steven Dubner

    ADDENDUM: See also Larry's post last October.

    Posted by E. Frank Stephenson at 01:22 PM in Economics

    On regulating tea c. 1907

    The Feb. 22, 1907 NYT reports:

    WASHINGTON - Upon the recommendation of the Board of Government Tea Experts the Secretary of the Treasury has established the same tea standards for the year of 1907 as were in force in 1906.
    A google search for "board of government tea experts" yields zero hits (thankfully). The article contains an utter lack of irony that the the very product whose regulation triggered the Boston Tea Party and arguably led to the divorce of the U.S. colonies from the mother country is, 135 years years later, still being regulated. Perhaps any (intended) irony was understood to the readers of the NYT at the time?

    A few other questions come to mind:

    1. Why would the Secretary of the Treasury be regulating tea?
    2. How does one become a tea expert, much less a government tea expert?
    3. How much did the Board of Government Tea Experts cost this country per annum?

    [Update (17:30CST 2/22/2007: Reader Joe Horton emails to inform that this department was not abolished until 1995!!]

    [Update (10:28CST 2/23/2007: Reader Joe Horton points to This about-dot-com story concerning the end of the government's tea tasting in 1996]

    Posted by Craig Depken at 10:29 AM in Economics

    February 21, 2007
    Hear me on Weekend America

    This afternoon I went down to my campus radio station's studio to be interviewed. Not about economics -- I was there in the guise of my alter ego, the surf music and spaghetti-western maven. The subject was the CD "For a Few Guitars More" (Dancing Bear, 2003), which I co-organized, on which a variety of surf bands pay tribute to Ennio Morricone's spaghetti western themes. The interview is for a segment to air this weekend on the public radio show "Weekend America". They're also planning to interview a guitarist (Ferenc Dobronyi) from one of the bands (Pollo del Mar) that contributed.

    From what I gather, one of the show's hosts was looking for a different hook to the story about Ennio Morricone finally getting an Oscar. She found the website that has my liner notes for the CD and a link to a news article about it. The radio show will play from clips from the CD intercut with me and Ferenc talking about Morricone and the CD. I was interviewed for half an hour, but I'm guessing they'll boil it down to 5 minutes.

    The show airs at different times in different cities, usually on Saturday afternoon. The stations and times are listed here. Podcasts of the show are available after 3pm Saturday here.

    Posted by Lawrence H. White at 05:59 PM in Culture

    On Electronic Beacons for Climbers

    Oregon is considering a law requiring climbers to wear electronic locator beacons above 10,000 feet on Mt. Hood. From CNN:

    Charley Shimanski of the Mountain Rescue Association, which represents 100 search-and-rescue groups in the U.S. and Canada, said he worries that relying on electronic beacons could give climbers a false sense of security.

    "They might think, `I've got this gizmo that tells everybody where I am, so I can take greater risks,'" Shimanski said in a phone interview from Evergreen, Colorado.

    Now where have I heard this before? From JR Clark and Dwight Lee:

    In many situations public policies, crafted to save lives and/or reduce losses, end up exacerbating rather than solving the problems. Government attempts to rescue climbers on Mt. McKinley illustrate our point. The highest peak in North America, Mt. McKinley has long been considered a demanding test of mountaineering skill and bravery. Since the first expedition attempted to reach Mt. McKinley's summit in 1903, the mountain has claimed the lives of sixty-one climbers (as of 1990). From our perspective, the most interesting fact about these fatalities is that thirty-four of them (56 percent of the total) occurred from 1980 to 1989, a decade that followed by several years the beginning of serious rescue efforts. The early climbers had an important safety advantage (incentive) over present-day mountaineers: they were completely on their own. There were no rescue groups to call on, no government agencies watching over the mountain, no helicopters or planes capable of flying injured climbers off the mountain. To survive a McKinley expedition, the earliest climbers knew they had to rely strictly on their own skills and good judgment. And they succeeded extremely well. From 1903 to 1913, forty-seven men attempted to reach the top of North America. None died and by all accounts none was seriously hurt.

    The first helicopter rescue occurred in 1953 and was followed by one each in 1960 and 1967. During the mid-to-late 1970s and throughout the 1980s the government assumed ever-increasing responsibility for climber safety. If an individual or team found itself in trouble, the Park Service would not only organize and coordinate searchand-rescue efforts, but pay the bill.

    By the 1980s, climbers had apparently begun to incorporate the rescue programs into their decision calculus, and both the number of climbers and the long-run death toll climbed significantly above their pre-rescue program levels. In all the years prior to 1970 a total of 35 rescues were performed. However, during the 1976 climbing season alone, there were 33 rescues. About one out of every eighteen people who attempted to climb the mountain had to be rescued. Jim Hale, a professional mountain guide operating on the mountain, observed, "You could really see a big attitude change in 1976. Back in the 1960s and even in the early 1970s, there was more of an understanding that people were on their own. They didn't rely on others for help. But in 1976, word got out that the National Park Service would pay for rescues. The prevailing attitude seemed to be "Don't worry. If we get in trouble, the Park Service will rescue us."

    Posted by E. Frank Stephenson at 05:36 PM in Economics

    Beloit College

    I am happy to announce that I will be joining the Department of Economics and Management at Beloit College this fall. I am extremely excited about being able to work with such great colleagues and students.

    Thanks to everyone who I had the opportunity to interact with this spring. It was a great opportunity to spend time with old friends and make new ones.

    Posted by Joshua Hall at 08:35 AM in Personal

    February 20, 2007
    Endorsement Markets

    Last week, State Sen. Darrell Jackson, Democrat of South Carolina, endorsed Hillary Clinton for president. The Associated Press reports what appears to be a quid pro quo:

    Soon after the endorsement, Jackson acknowledged that his media consulting firm had negotiated a $10,000 per month contract with Clinton's campaign.

    In response to questions, however, Mrs. Clinton has “denied that her campaign traded money for an endorsement”. Hey, what’s there to be ashamed of? Doesn’t Buick trade money for Tiger Woods’ endorsement? Doesn’t Total Gym trade money for Chuck Norris’s endorsement?

    Posted by Lawrence H. White at 01:38 PM in Economics

    Welcome Melissa

    I'm pleased to announce that Melissa Yeoh, a PhD candidate at Clemson, has accepted an offer to join Berry's economics department next year. Melissa will be a classroom dynamo and she's doing interesting work in IO, public, and environmental.

    Although searches are time consuming and sometimes (though not this time) get bogged down in nasty academic politics, I met some interesting people and made some new friends this year. Thanks to all who applied.

    BTW, I think co-blogger Josh will have some exciting job market news to post.

    Posted by E. Frank Stephenson at 12:25 PM in Misc.

    Congratulations JC

    My friend JC Bradbury is having a pretty good week. His book The Baseball Professor is receiving favorable reviews (e.g., this one in the WSJ).

    On Saturday, JC and his wife welcomed their second daughter, Sarah, to the world. Wonder if her first word will be "PrOPS."

    Posted by E. Frank Stephenson at 09:10 AM in Misc.

    Black Market for Cigarettes in California Prisons

    Some folks will never learn that if large gains from trade exist, people will trade even if exchange is prohibited. Case in point--the black market for cigarettes in California prisons:

    LANCASTER -- There's no if, and or butt about it: California's ban on tobacco in prisons has produced a burgeoning black market behind bars, where a pack of smokes can fetch up to $125.

    Prison officials who already have their hands full keeping drugs and weapons away from inmates now are spending time tracking down tobacco smugglers, some of them guards and other prison employees. Fights over tobacco have broken out -- at one Northern California prison guards had to use pepper spray to break up a brawl among 30 inmates.

    The ban was put in place in July 2005 to improve work conditions and cut rising health care costs among inmates but it also has led to an explosive growth of tobacco trafficking. The combination of potentially big profits and relatively light penalties are driving the surge.


    "I've never seen anything like it," said Lt. Kenny Calhoun of the Sierra Conservation Center in Northern California, where officials report cigarette prices of $125 a pack.

    Darren Cloyd is nearing the end of his 15-year sentence at California State Prison, Los Angeles County, for second-degree armed robbery. Before the ban he remembers paying about $10 for a can with enough rolling tobacco for dozens of cigarettes. Now one contraband cigarette can cost that much.

    Posted by E. Frank Stephenson at 08:51 AM in Economics

    NASA=Need A Sane Astronaut?

    Christopher Buckley offers a new screening test for the astronaut program.

    HT: Craig Newmark

    Posted by E. Frank Stephenson at 08:34 AM in Funny Stuff

    February 19, 2007
    On the price of gasoline c. 1907

    From the Feb. 19, 1907 NYT:

    The motor car manufacturers have a double reason for urging the passage of the bill enabling small famrers to distill alcohol for fuel. They have favored it because many thousands of stationary farm engines could use the alcohol, lessening the demand and lowering the price of gasoline to automobile owners. Now that alcohol has been found more efficient than gasoline in their own motors, they may be expected to insist even more strongly that the senate sanction the bill, which has already passed the House.
    Isn't it interesting that the 1907 New York Times expected its readers to understand supply and demand whereas the 2007 New York Times seems to expects its readers to not understand supply and demand.

    Posted by Craig Depken at 10:46 AM in Politics

    Non-price rationing in action

    lettuce.jpg

    (Taken 2/18/07 at a Kroger in Columbus Ohio).

    Posted by Robert Lawson at 09:10 AM in Economics

    February 18, 2007
    Governments and business: Dixie edition

    The big news in Birmingham last week was the announcement that Spain's second-largest bank, Banco Bilbao Vizcaya Argentaria (BBVA), had reached an agreement to purchase Birmingham-based Compass Bank for $9.6 billion. The conventional wisdom about this deal is that BBVA wants to expand in the southwestern region of the US, where Compass has a large presence (including almost 200 branches in Texas, 71 in Arizona, etc.). The parties announced that BBVA would retain the Compass name and its Birmingham HQ -- for now. Local talk focused on how long that would be the case. Unfortunately, several of the local political leaders who will make the pitch to BBVA that they should retain their substantial Birmingham operations spent last week huffing and puffing about a local hospital that is planning to move to a new facility in the suburbs. I wonder how the staff at the Birmingham economic development office reacted to this headline, the same day the BBVA deal was announced: "City council: Payback discussed if Trinity moves"?

    (Update: For more on the BBVA-Compass deal, click here.)

    Meanwhile, we're getting ready for a special Legislative session devoted to passing various "incentive" packages to attract, among others, Thyssen-Krupp to locate in Alabama.

    Another business-government story is unfolding across the border in Mississippi. On Valentine's Day, State Farm Insurance announced that it would write no new homeowner or commercial policies in Mississippi for the foreseeable future, because the state's "legal and business environment . . . is becoming more unpredictable." Mississippi Attorney General Jim Hood wasted no time in living up to State Farm's expectations. On Friday Hood announced he would seek legislation that would force State Farm to write such policies if it continued to write auto policies, citing Florida as precedent for such a move. However,

    Florida Gov. Charlie Crist issued his order to insurance companies last week freezing insurance rates until June and ordering companies to keep existing customers. The order does not mandate companies take on new policies.

    The insurance industry challenged Crist's order in court this week.

    "I'm not sure we really want to pattern any action after Florida," [Deputy Insurnace Commissioner] Harrell said.

    State Farm responded to Hood the same day, stating the obvious:
    “We must be able to rely on our contract terms, charge an appropriate premium and manage our exposure so that we can keep our commitments to our policyholders. However, today’s actions show just how unpredictable and untenable the current environment can be,” Trippel added.

    RiskProf will be keeping an eye on this story.

    Posted by Mike DeBow at 11:26 AM

    Markets in everything: Toilets at Mardi Gras

    "Finding toilet at Mardi Gras a challenge," reported the AP yesterday. According to the story, the city government "provides 228 portable toilets, including 58 in the French Quarter, and 86 in the Central Business District." As you might imagine, this leaves quite a bit of room for entrepreneurial action:

    Many restaurants along the parade routes offer a wristband that entitles the wearer to not only use the bathroom but to enjoy food and drink. They can run from $65 per person to more than $100.

    Providing facilities for revelers has become a moneymaking proposition for individuals and nonprofit groups.

    Portable toilets appear in yards and even on the backs of pickup trucks. The average rent for a single stall portable restroom delivered the Friday before Mardi Gras and picked up the Wednesday after is $100.

    Most entrepreneurs charge $1 a visit.

    At the Academy of the Sacred Heart, a Catholic school on the uptown parade route, the Father's Club sells food, daiquiris, beer and soft drinks to raise money during the parades. It also maintains banks of portable potties.

    "It's a real public service," said Liz Manthey, director of development for the school. "They're cleaned every day, there's a place to wash your hands. Believe me, people are very happy to find it."

    In spite of this private sector response, as the title of the story makes clear, the AP reporter thinks there aren't enough toilets to go around. So, why is the market for Mardi Gras toilet facilities failing to clear? Or does the fact that many of the consumers of this service are drunk (and thus more inclined than usual to avail themselves of a stranger's doorway, for example) somehow enter into the equation? Or is the AP reporter simply wrong in his claim that there aren't "enough" toilets? Comments are welcome.

    Posted by Mike DeBow at 10:38 AM  ·  Comments (0)

    February 17, 2007
    The Gentle Cynic c. 1907

    From the Feb. 17, 1907 NYT:


  • The road to pleasure is much shorter going than coming back.
  • Experience makes a cynic, lack of it a fool.
  • A closed mouth is seldom open to suspicion.
  • You can't expect a mere man to be perfect when even the sun has spots on it.
  • Prejudices are merely other people's opinions.
  • An innocent lie never hurts quite as much as a malicious truth.
  • The office holder always believes that one good term deserves another.
  • Good deeds may never die, but lots of them seem to go into a trance.
  • Lots of us would rather be happy than be in love.
    It's too bad a man can't get into heaven with his tombstone inscription as a passport.

  • Posted by Craig Depken at 01:44 PM in Culture

    Mr. Anyone vs. Mr. Lincoln

    One wonders if forty years from now anything close to the following homage, printed in the Feb. 17, 1907 NYT, would be written for any current-day politician:

    Two angels at his cradle met
    The day of Lincoln's birth;
    "What gift shall we bestow," said one,
    "Upon this child of earth -
    A sword, a pen, a bell, a book,
    A crucible or spade?"
    "Nay," cried the other, "let an axe
    Within his hand be laid."

    So Lincoln swung the humble blade,
    And felled the forest tree,
    Struck off the ancient rusty chains
    And set the bondman free.
    For all who climbed toward the stars
    He blazed the way to fame,
    And carved upon his native land
    The letters of his name.

    Beside the hatchet Washington
    Once owned in early youth,
    Which ever since has pointed out
    The glory of the truth,
    And with the flashing sword which Grant
    to splendid victory bore,
    The Nation treasures Lincoln's axe
    Immortal evermore.

    Minna Irving

    Posted by Craig Depken at 01:35 PM in Politics

    February 16, 2007
    Full vs. money price 101

    From this entertaining NYTimes article, explaining the curious rationing of late night t.v. audience tickets.

    Steve Martin once said that comedy is not pretty. It’s not cheap, either, as anyone who has run up a bar tab waiting through five stand-up comics knows. But almost every night of the week New York offers one of the world’s great comedy bargains, the chance to be part of the audience for the late-night shows watched by millions, free. In less than one square mile in Midtown, four weekday shows are taped in the afternoon: “Late Show With David Letterman,” “Late Night With Conan O’Brien,” “The Daily Show With Jon Stewart” and “The Colbert Report.” And “Saturday Night Live” broadcasts 20 new episodes each season.

    “Free” almost always comes with qualifiers of course. As I learned while standing my way into every studio I could, the price for those free seats is time. And in deep winter there is another cost: the price of long johns. And something to protect tender ears from bitterly unfunny gusts.

    Posted by Edward J. Lopez at 01:34 PM in Economics

    In favor of less hot air on campus

    The first paragraph of this Chronicle of Higher Education report is disturbing:

    A growing number of college and university presidents are signing on to a pact under which they agree to cut their institutions' carbon emissions to zero over time.
    I think the Chronicle intended to say net carbon emissions as the second paragraph explains:
    Each institution will set its own date for reaching campuswide "carbon neutrality" -- the point at which its carbon-dioxide emissions are offset by the use of renewable sources of energy and the oxygen released from trees and other plants on the campus -- and each will determine for itself how that goal will be achieved.

    Posted by Craig Depken at 11:41 AM in Economics

    February 15, 2007
    Adam Smith Bow

    I am incredibly appreciative of the Christmas present I received from two of my former students--an Adam Smith bow tie. A perfect gift for a DOLer eh? Thanks again to Keri and Dan for the gift and thanks to Erin for the photo:

    AdamSmithBow.JPG

    Posted by E. Frank Stephenson at 08:37 AM in Misc.

    February 14, 2007
    New: Southern Journal of Entrepreneurship

    A new venture in entrepreneurship studies. Website here. And see email from Noel Campbell, advisory board member, beneath fold.

    Read More »

    Posted by Edward J. Lopez at 01:27 PM in Economics

    February 13, 2007
    Wisconsin Gov. Proposes Taxing Big Oil
    Gov. Jim Doyle proposes taxing big oil companies more than $270 million over the next two years to help pay for the state's transportation needs.

    Doyle said the assessment will equate to $1.50 per barrel of oil sold in the state, and the companies would be prohibited from passing the tax on to customers at the pump. Violations carry a criminal penalty of up to six months in prison. [emphasis added.]

    In other news, the governor wants to prohibit 2 + 2 from equalling 4. If the penalties are set high enough, then goshdarnit, we can demand that 2 + 2 = 5!

    [HT: Dave]

    Posted by Robert Lawson at 02:56 PM in Economics

    February 12, 2007
    So the War is About Oil After All?

    Greg Mankiw quotes the following passage from the new Economic Report of the President (p. 129):

    The purchase of a gallon of gasoline imposes these national security and environmental costs on everyone, not just on the buyer and seller. Though State and Federal gasoline and diesel fuel taxes and regulations help account for these other costs, many studies suggest that the total external costs of oil may be higher. Carefully crafted government policy may be a useful way to account for these additional costs. However, this objective should be balanced against additional inefficiencies that government involvement introduces into the market. Once policies are in place that ensure that individuals account for the full costs of the goods and services they consume—e.g., national security and environmental concerns—competitive markets are the most efficient means to determine how goods are produced, as well as which goods are produced in the future.

    I have added the emphasis in bold. The antecedent of "these national security ... costs" is not clear from the quote, but it seems that the CEA might be telling us the war is about oil after all. (CEA notwithstanding, I'm dubious of the proposition.) If so, this might cause a bigger kerfuffle than the big stink over Mankiw and offshore outsourcing.

    The hour is late; I might update tomorrow.

    UPDATE (2/13, 8:50 AM): I've put the paragraph before the one that Mankiw excerpts below the fold. The CEA argues that having OPEC (especially Iran and Venezuela) producing much of the world's oil gives them "disproportionate diplomatic leverage."

    Read More »

    Posted by E. Frank Stephenson at 10:54 PM in Misc.

    Don't smoke! Wait, no, smoke! I mean, don't!

    From the "unintended consequences" department (and Fark) comes this story about the hardships some states are feeling from passing higher cigarette taxes.

    If you're a statist who likes penalizing behaviors, cigarette taxes have been great. If you're a statist who likes government spending, cigarette taxes have been terrible. Who can count the conflicts of interest? Tobacco subsidies, voters who want to ban smoking, libertarians who don't want to ban smoking, more tax revenue, fewer smokers so less tax revenue...

    You'd think after teaching so many principles of economics classes that we've come a long way, baby. But there are the obligatory amusing quotes:

    Think taxes are determined by the inelasticity of demand? "Bob Kurtter, a state budget watcher at Moody's Investors Service, said it's an easy call for budget-challenged states to turn to sin taxes: 'They're the most socially acceptable form of taxes you can raise.'"

    Big Brother Creepiness in California, which apparently has a "Board of Equalization." It employs Anita Gore (I guess Al is in demand) who said "But if smoking continues to decline, then revenues would continue to decline."

    But, you could see the glass as half full: "'The wonderful thing about tobacco revenues is when they go down, there's less smoking,' said Eric Lindblom, who heads policy research at the Campaign for Tobacco-Free Kids in Washington."

    Posted by Tim Shaughnessy at 03:37 PM in Economics

    February 11, 2007
    Minimum Wage Layoffs in Arizona

    Surprise, surprise:

    Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring freezes and laying off employees.

    And teens are among the first workers to go.

    Companies maintain the new wage was raised to $6.75 per hour from $5.15 per hour to help the breadwinners in working-poor families. Teens typically have other means of support.

    Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school.

    "I've had to go to some of my kids and say, 'Look, my payroll just increased 13 percent,' " he said. " 'Sorry, I don't have any hours for you.' "

    Messner's monthly cost to train an employee has jumped from $440 to $580 as the turnover rate remains high.

    "We go to great lengths to hang on to our high school workers, but there are a lot of kids who come in and get one check in their pocket and feel like they're living large and out the door they go," he said. "We never get our return on investment when that happens."

    Tom Kelly, owner of Mary Coyle Ol' Fashion Ice Cream Parlor in Phoenix, voted for the minimum-wage increase. But he said, "The new law has impacted us quite a bit."

    It added about $2,000 per month in expenses. The store, which employs mostly teen workers, has cut back on hours and has not replaced a couple of workers who quit.

    Posted by E. Frank Stephenson at 04:40 PM in Economics

    Ecuador's default and dollarization

    In 2000, Ecuador dropped its hyperinflating local currency and adopted the US dollar. In 2005, as I noted here, the president of the country was ousted, but there was no currency crisis. Score a point for dollarization. In November 2006 Ecuador elected a new left-wing president, Rafael Correa, who took office last month. In his inaugural address, reports Reuters, Correa threatened to default on government’s external debt:

    While Ecuador's state coffers are flush with oil export revenues, Correa has left open the question of whether he will pay what he calls an "immoral burden" of debt obligations left by previous governments.

    Bond-rating agencies immediately lowered Ecuador’s credit rating. Prices of Ecuador government bonds have dropped, raising their yields to junk-bond levels. Bloomberg reported last week:

    Ecuador's 10 percent bond due in 2030, the country's most- traded bond in international markets, fell 0.10 cent on the dollar to 79.90 at 4:30 p.m. New York time, according to JPMorgan Chase & Co. At that price, the bond yields 12.70 percent. Fitch, Standard & Poor's and Moody's all cut the country's credit rating last month.

    And yet, there is no currency crisis. The banking system is also holding up well:

    So far the impact on Ecuador's banking industry has been marginal, said Fernando Pozo, general manager of Banco del Pichincha CA, the country's biggest non-state bank, with $2.9 billion in assets. ``Dollarization creates a separation between economic and political issues,'' he said last week in an interview in Quito.

    Score another point for dollarization.

    Read More »

    Posted by Lawrence H. White at 01:34 PM in Economics

    February 10, 2007
    The Gentle Cynic c. 1907

    From the Feb. 10, 1907 NYT:

  • A man with a wooden leg naturally has a lumbering gait.
  • The average man doesn't know what he wants until he can't get it.
  • We always see the worst of people when we fail to get the best of them.
  • Our credit is indeed bad when we feel that we can't trust ourselves.
  • A man is either taken aback by criticism, or he takes affront.
  • A girl can either make a fool of a fellow or make him make one of himself.
  • Posted by Craig Depken at 03:42 PM in Culture

    Germany’s alternative currency projects

    There have been a spate of recent news articles on “alternative currencies” in Germany. (Thanks to those who sent me links.) In Bavaria, you can pay for some goods with the chiemgauer. In Bremen, with rolands. There are reportedly dozens of such regional currencies, though on such a small scale that the Bundesbank is ignoring them.

    These are “alternative currencies” in a very limited sense: a different issuer’s liability, but not really a different unit of account. Each one trades 1:1 to the euro. Though not called euros, they are in essence private euro banknotes. (The chiemgauer’s home page calls it a Komplementärwährung, complementary currency). This isn’t a case like the US dollar replacing (e.g.) the rouble, since these notes will have exactly the same purchasing power behavior (inflation rate) as the standard euro notes.

    So what is the point of the currencies? My initial thought was that it must be simply an effort to capture seigniorage locally rather than cede it to the European Central Bank. That seems to be the point of the “Ithaca Hours” alternative currency in Ithaca, NY. But here is what the chiemgauer’s home page states about its backing (translation by babelfish.altavista.com):

    Covering: A Chiemgauer is covered by a euro. The money is deposited on a daily allowance account without material interest.

    With 100% zero-interest reserves, there is no seigniorage to the chiemgauer’s issuer. Instead there are two public-interest goals:

    Goal of the Chiemgauer e. V. is the promotion of non-profit associations and the stimulation of regional economic circulations.

    The chiemgauer project turns a profit, which it donates to non-profit associations, (1) by imposing a 2% fee for extending the validity of a note beyond three months after issue (Silvio Gesell’s old scheme to stimulate spending by imposing a holding fee on money is the inspiration here), and (2) by charging 5% for converting chiemgauers back into euros.

    The “stimulation of regional economic circulations” is pure poppycock. Writes one Antonia Loick, an enthusiast for the scheme:

    the money cannot be invested and taken out of the economic cycle, thus ensuring that it remains in circulation. After all, a regional currency earns no interest, so hoarding it is unprofitable. … Even if some economists may not be convinced by the project, it is important to stress that these initiatives do strengthen local and regional economies, and communities.

    Needless to say, saving and investing do not take money “out of the economic cycle” or weaken local and regional economies. A sudden and unexpected increase in hoarding of euros could have that effect, but I don’t see any mechanism by which the chiemgauer automatically expands to fill the gap. People who want to hoard will definitely not want to hold chiemgauers.

    The appeal of the chiemgauer, as far as I can see, is limited to people who (1) want to donate, and to signal that they are donating, to local charities, in however cumbersome a fashion, and (2) people who want to make some kind of pro-region anti-EU statement.

    Posted by Lawrence H. White at 11:06 AM in Economics

    February 09, 2007
    Leviathan must feed

    From this Chicago Sun Times story:

    What could be the nation's first tax on bullets is being floated as a way to help balance Cook County's budget.

    Commissioner Roberto Maldonado wants to slap a 10-cent-a-bullet tax on those buying ammunition in the county. It's one of dozens of plans offered to close the county's $500 million budget deficit.

    It's not so much that taxing ammunition is necessarily a bad idea. There might be public-good reasons to reduce the amount of ammunition sold. However, Cook County isn't that big - wouldn't most people jump over the county line to purchase their ammunition?

    Moreover, I don't remember the theory of "taxing things simply to balance the budget" from my public finance classes. Perhaps I missed that lecture.

    Posted by Craig Depken at 10:36 PM in Economics

    Not my favorite argument for the gold standard

    From the essay, “Tomorrow's World Currency - The Gold Standard” at khilafah.com:

    It is only the Islamic State, carrying the ideology of Islam, that will adopt such a standard. Moreover, the shariah has made it an obligation to implement the gold (or silver) standard. When the Islamic State comes it will adopt the gold and silver bimetalic standard, thus transforming the current international money markets and free the world from the dominance of the capitalist nations (insha -Allah).

    But hey – if an international gold standard is ever going to be restored, absent an international treaty for simultaneous re-adoption by many nations, somebody will have to go first.

    Posted by Lawrence H. White at 04:16 PM in Economics

    It's Friday--Time for Some Sports

    JC Bradbury recently bemoaned the lull between football and baseball seasons. Since I like college hoops better than football I don't share his boredom in February and March, but if you're bored like JC you might want to check out the college football recruiting model developed by Allen Lynch and his co-authors. The model correctly predicts roughly 70% of players choices which isn't too bad since most players were picking among 4-6 colleges.

    What if you like college hoops as I do? Allen can help us too. For the last 13 years or so he and Jay Coleman have been publishing The Dance Card, a formula designed to predict which teams will receive at-large tournament bids from the NCAA Tournament Selection Committee. The Dance Card is updated every so often during the season so it's easy to keep track of which teams are on the bubble.

    Posted by E. Frank Stephenson at 03:35 PM in Sports

    A socialist island in a sea of markets

    A new 10-peso banknote from the Central Bank of Cuba features the slogan “Revolucion Energetica" (Energy Revolution) over a picture of a row of truck-trailer-sized power generators.

    The amusing part: the generators were purchased from and installed by Hyundai Heavy Industries, a division of the South Korean capitalist firm.

    Posted by Lawrence H. White at 02:07 PM in Economics

    Markets in Everything

    Three items (with a hat to MR for the Markets in Everything concept):

    1. Slum tourism in Kenya:

    Any journalist wanting a quick Africa poverty story can find it there in half an hour. And now at least one travel agency offers tours round Kenya's Kibera slum, one of Africa's largest.

    "People are getting tired of the Maasai Mara and wildlife. No one is enlightening us about other issues. So I've come up with a new thing -- slum tours," enthused James Asudi, general manager of Kenyan-based Victoria Safaris.

    2. GPS shoes:

    MIAMI (AP) - Isaac Daniel calls the tiny Global Positioning System chip he's embedded into a line of sneakers "peace of mind." He wishes his 8-year-old son had been wearing them when he got a call from his school in 2002 saying the boy was missing. The worried father hopped a flight to Atlanta from New York where he had been on business to find the incident had been a miscommunication and his son was safe.

    Days later, the engineer started working on a prototype of Quantum Satellite Technology, a line of $325 to $350 adult sneakers that hit shelves next month. It promises to locate the wearer anywhere in the world with the press of a button. A children's line will be out this summer.

    3. Security lines in airports:

    Some passengers at Atlanta's Hartsfield-Jackson International Airport could soon bypass others and breeze through special security checkpoints without so much as taking off their shoes. As long as they're willing to pay, that is.

    The airport version of "Lexus lanes" would charge users an annual fee — probably about $100. Users would undergo a background security screening similar to a credit check. They would then be issued a credit card-sized card that would contain biometric information. It could contain fingerprint, iris or other information specific to that person.

    Once an individual's security information is cleared by the Transportation Security Administration, that person can use the private security lines.

    Posted by E. Frank Stephenson at 12:54 PM in Economics

    Economic Freedom Fund(s)

    There's a new Index of Economic Freedom Fund that you can invest in (HT: Tyler at MR) that bases its portfolio choices on Heritage's Index of Economic Freedom. Minimum investment: $1000.

    Fyi, there's also the World Freedom Select fund run by Marshall Stocker that uses my Economic Freedom of the World index. Minimum investment: $1,000,000. (Yikes!)

    Invest at your OWN RISK.

    Posted by Robert Lawson at 09:08 AM in Economics

    Capitalism

    Recently I was explaining to a friend why I generally refrain from using the word "Capitalism":

    My reasoning is mostly tactical. The word was first coined by Marx and continues to be used as a pejorative by the left. 'Capitalism' as a term implies to me that capital is special and that the owners of capital, the capitalists, are therefore the special beneficiaries of the system. This of course was Marx's view. Even today, to many people capitalist = fat cat. But the fact is that 'capital' as a factor of production plays no more of a special role in a market economy than any other factor. You and I would argue that the real beneficiaries of the system are consumers and laborers. It would in my book be more accurate to say "laborism" than "capitalism".
    Posted by Robert Lawson at 08:50 AM in Economics

    February 08, 2007
    On tipping c. 1907

    The Feb. 8, 1907 NYT reports on the passage of an anti-tipping law:

    The House Committee on the District of Columbia made a favorable report to-day on the Murphy bill which makes it unlawful to either give or receive tips in any hotel or eating house in the District of Columbia.
    Today restaurants insist on adding a tip to certain bills and society looks down their nose at those who fail to offer a tip. At Christmas we are reminded that we are supposed to tip everyone from our mail delivery person to the folks who change our oil. How times have changed.

    In a world where everyone is trying to get the legislature to pass laws that favor their personal bottom lines, why is there no consumer movement to make tipping illegal today?

    Posted by Craig Depken at 11:04 AM in Economics

    Anti-smoking laws c. 1907

    A factoid in the back of my brain suggests that colonial Wilmington (?) banned smoking in the late 1600s. The ban wasn't intended to reduce second hand smoke or reduce health care expenditures. Rather, because everything was made of wood and straw, the ban on public smoking aimed at reducing the probability of a fire which could raze large swaths of the town very quickly. In other words, the negative externalities of public smoking have been around for a while although the natures of the externalities have changed over time.

    While we pat ourselves on the back for our progressive and enlightened attitude toward smoking, both in public and increasingly in private, the Feb. 8, 1907 NYT reminds us that we are not doing anything "new" today:

    SPRINGFIELD, ILL - The Senate passed a bill to-day prohibiting persons under 18 years of age, pupils in schools, and students in universities from smoking cigarettes in any public place.

    Posted by Craig Depken at 10:58 AM in Culture

    Cooling the globe immediately costs too much

    Assignment: Read this article by Jonah Goldberg.

    Public policy is all about trade-offs. Economists understand this better than politicians because voters want to have their cake and eat it too, and politicians think whatever is popular must also be true. ... [I]n the great scheme of trade-offs in the history of humanity, never has there been a better one than trading a tiny amount of global warming for a massive amount of global prosperity. The Earth got about 0.7 degrees Celsius warmer in the 20th century while it increased its GDP by 1,800% ....

    But the simple fact is that the activists need to hype the threat, and not just because that's what the media demand of them. Their proposed remedies cost so much money — bidding starts at 1% of global GDP a year and rises quickly — they have to ratchet up the fear factor just to get the conversation started. Even so, the costs are just too high for too little payoff. Even if the Kyoto Protocol were put into effect tomorrow — a total impossibility — we'd barely affect global warming.

    Technology 10 years from now could solve global warming at a fraction of today's costs. What technologies? I don't know. Maybe fusion. Maybe hydrogen. Maybe we'll harness the perpetual motion of Sen. Joe Biden's mouth.

    Posted by Wilson Mixon at 10:30 AM in Economics

    February 07, 2007
    Garvey Fellowship Contest

    The Independent Institute sponsors its biennial essay contest for junior faculty and students, with sizeable cash prizes awarded to winners. This year's theme is whether foreign aid is the solution to global poverty. Guidelines here. Deadline is May 1. Start typing!

    Posted by Edward J. Lopez at 08:47 PM in Misc.

    February 06, 2007
    Make your voice heard! maybe...

    Thanks to Boortz for pointing out this page, where you can ask a question to Stephen S. McMillin, Deputy Director, Office of Management and Budget. Here is my question to him, we'll see if he responds:

    As an economics professor, I have my own opinion on the answers to the following questions, but I am interested in yours:
    To what extent does the President, his staff, his or the other party, and the government in general, believe that he and/or they know better than I how to spend my money? What justification do you have for the fact that government today spends over $10,000 per person, while for the first century of our existence, government spent below $100 per person? Lastly, if one believes John Locke's statement that the mixing of labor effort (whether physical or mental) creates a property right to the fruits of that labor, how does the government justify its apparent belief in its right to my property, of which it had no part in creating?

    I'm looking forward to questions posed by fellow DoLers and its fans.

    Posted by Tim Shaughnessy at 04:00 PM in Politics

    Climate Change c. 1907

    The Feb. 6, 1907 NYT reports on the incredible cold that grips the upper Midwest and the plains (sound familiar?):

    ST. PAUL - With few exceptions there has been severe weather in this section for seventeen days, and for three days the thermometers have registered 22 degrees below zero.

    In North Dakota 30 degrees below was common, and this was coupled with terrific blizzards. For days the main lines of the Minneapolis, St. Paul and Sault Ste. Marie, the Great Northern, and the Northern Pacific Railroad have been blocked, and many of the branch lines have been at a standstill for weeks and months.

    It might well be the case that global warming/climate change is a fact. It might also be the case that human activity is to blame. However, we are warned at the same time that global warming/climate change is not just about warming temps in the winter but an increase in the variance of weather events - more swings to the extremes during any season.

    To the average layman that sounds reasonable - who remembers the last time it was 30 degrees below zero in North Dakota? Not too many people in Texas at least. However, while such stories in the NYT from 1907 do not constitute a statistical test, it is suggestive that extreme weather events have occurred in the past (what created the Grand Canyon?) and makes one wonder about the veracity/intention of implied claims to the contrary.

    Posted by Craig Depken at 11:53 AM in Science

    Taxation silliness c. 1907

    The innovative ways for government to tax the individual is often a source of amusement and astonishment, at least for me. Of course, there is a long storied history of silly taxes and schemes to extract private property in the name of the public good.

    Another example comes from the Feb. 6, 1907 NYT:

    [T]he introduction into the Legislature at Albany by Assemblyman Stevenson of a bill providing that all automobiles shall be taxed $2.50 per seat, the money so raised to be devoted to the maintenance of the highways. Mr. Stevenson's method of taxation is novel in that he makes the seating capacity of the machine the basis for taxation instead of the horse power. In New Jersey the horse power of the car forms the basis for the license fee, and in Massachusetts, where a taxation law is likely to be enforced, it seems probably that it will be regulated in proportion to the horse power of the car."
    Novel? Absolutely. Impractical? You betcha. Guaranteed to cause confusion and violations? Of course. Does the proposed tax match up with the three "necessary" conditions for a proper tax (from the politician's point of view)? It seems so.

    There were those who wondered about the definition of seating capacity:

    "I suppose this bill will place the folding or collapsible seat on the half-rate basis," said Charles T. Terry, Chairman of the Law Committee of the American Automobile Association yesterday. "I have not seen the details of Mr. Stevenson's bill, but it would be interesting to know how he will determine the exact seating capacity of a car. It would probably have the effect of forcing manufacturers to call their touring machines four and five passenger cars instead of seven and eight passenger vehicles, as is frequently the case now."

    Posted by Craig Depken at 11:45 AM in Economics

    We're the Government and You're Not

    The latest PSA from the U.S. Department of Homeland Propaganda.

    Posted by Robert Lawson at 10:46 AM in Economics

    An Eminent Domain Victory

    From the AJC:

    Stockbridge officials say they will drop their two-year effort to condemn and seize a flower shop in the Henry city for a town center project.

    Stockbridge officials wanted Mark and Regina Meeks' Stockbridge Flowers and Gifts property for a town center project that would give Henry's largest town a true downtown.

    City officials offered the Meeks money but balked at the couple's counteroffer.

    The two sides reached a deal instead for the city to buy the property and give the couple retail space in the new town center. But the city backed out of that deal and decided instead to use eminent domain laws to condemn and acquire the property.

    A Henry County judge ruled in 2006 that the city went too far in using eminent domain laws because it didn't prove the couple's property would be used for public purposes.

    The Georgia Court of Appeals affirmed that ruling on Jan. 31.

    Posted by E. Frank Stephenson at 09:53 AM in Law

    February 05, 2007
    Income levels & distribution

    Useful analysis by a business economist.

    But companies serving consumers across the income spectrum have performed well despite high energy costs. And even with recent weakness more new homes have been sold in the past four years than during any four year period of history, while homeownership rates have surged to record highs. Air miles flown, sports attendance, cell phone ownership, flat screen TV sales, jewelry sales, and dining out are all at record levels. This is not the type of economic activity one would expect in an economy where wide swaths of citizens are falling behind.

    A truly balanced analysis would compare similar periods of business cycles before passing judgment... . [I]n order to make those measurements relevant, these data should be compared to an equivalent six-year period that started in 1989 - the last full year before the recession of 1990/1991. Using full-year earnings is important because seasonal factors affect quarterly data.

    [U]sual weekly earnings for middle income men (50th percentile) were down 0.9% in 2006 versus 2000. This is obviously not great news. However, in the same phase of the previous business cycle, the wages of middle class men were down a much larger 3.8%. Earnings for women in the middle of the income distribution were 4.0% higher in 2006 than they were in 2000, versus a smaller gain of 3.6% in the same phase of the 1990s cycle.

    On a comparative business cycle basis, the average American has been much better off in the past six years than in the recovery of the early 1990s. By income level, both the middle and lower-income groups have significantly outperformed.

    The bottom-line is that some workers are clearly going through tough times as productivity growth causes a reduced demand for labor in many old-line industries that were once considered untouchable engines of growth. Nonetheless, the vast majority of workers are much better off today than they were five, 10 or 15-years ago.

    Posted by Wilson Mixon at 01:24 PM in Economics

    One Book

    (embarrassingly, I missed being tagged, five MONTHS ago, by my man E. Frank. Hope it still counts, long after the tag has gone cold).

    One Book Meme

    1. One book that changed my life: David Hume's ESSAYS: Moral, Political, and Literary. Except for being confused about causation (and who isn't?), Hume is our finest philosopher. And the Essays are all tasty morsels.

    2. One Book I've Read More Than Once: Gene Wolf's THE BOOK OF THE NEW SUN. (Yes, I know it's four volumes, but check the title: THE BOOK OF THE NEW SUN. That's one book, so there)

    3. One Book I Would Want on a Desert Island: Winston Churchill's HISTORY OF THE SECOND WORLD WAR. (Okay, that's SIX volumes, and there is no overarching title. But, c'mon....a desert island?)

    4. One Book that Made Me Laugh: P.J. O'Rourke's ALL THE TROUBLE IN THE WORLD. The chapters on environmentalists, and environmentalism, make me laugh until I touch myself.

    5. One Book that Made Me Cry: Robert Hughes's THE FATAL SHORE. People with power suck, especially when dealing with other people, which is most of the time.

    6. One Book that I Wish Had Written: P. J. O'Rourke's (you may be sensing a pattern, here) book on Adam Smith, ON THE WEALTH OF NATIONS. I could never hope to write THE WEALTH OF NATIONS. But if I had tried to write a book like ON THE WoN, it would have been a lot like P.J.'s, just not as good. (And, I should note, P.J. has come a long, long way since his days at National Lampoon, where in 1979 he wrote, "How to Drive Fast on Drugs While Getting Your Wing-Wang Squeezed and Not Spill Your Drink." A fine article, to be sure, but after you read the title that was pretty much it. Sound advice, useful, let's move on. That article was reprinted in REPUBLICAN PARTY REPTILE, btw.)

    7. One Book I Wish Had Not Been Written: I can't think of even one. I love reading Marx, who I consider to be the first public choice theorist, and in many ways presaging Stigler and the Chicago school. And zealots will always find someone to follow, blindly and without question. So, maybe that's it: suppose Hitler had been "killed trying to escape," and hadn't finished Mein Kampf. There. WWII might have been fought anyway, given the political and economic forces at work. But Germany might not have attacked Russia, and in any case the Holocaust would have been shortened, and maybe even reduced to a displacement, rather than mass execution. On the other hand, maybe not.

    8. One Book I'm Currently Reading: Thomas Cobb, AN INQUIRY INTO THE LAW OF NEGRO SLAVERY IN THE UNITED STATES. Published in 1858, it was designed to lay to rest questions of slavery's origins, legitimacy, and management. A remarkable effort by a smart man to justify an unjustifiable institution.

    9. One Book I've Been Meaning to Read: Edward Castronova's SYNTHETIC WORLDS: THE BUSINESS AND CULTURE OF ONLINE GAMES. Just keep getting ready to start it, and then doing something else. I'm staring at it, right now, on my desk, a two-month-old reproach.

    And if the "tag" dies here, so be it. My fault for taking so long to notice.

    Posted by Michael Munger at 12:30 PM

    Protocol for Examining Warming

    Amid editorial articles that consist mostly of "is, too" or "ain't, either,"George Will offers an excellent statement of the protocol that must be followed if the global warming issues are to be addressed in a scientific fashion:

    The consensus catechism about global warming has six tenets: 1. Global warming is happening. 2. It is our (humanity's, but especially America's) fault. 3. It will continue unless we mend our ways. 4. If it continues we are in grave danger. 5. We know how to slow or even reverse the warming. 6. The benefits from doing that will far exceed the costs.

    Will accepts (1) and questions all else. Even if one accepts both (1) and (2), however, many questions need to be asked.

    One question that Will does not address involves sunk costs: Some minimum level of gas emissions is unavoidable, given that so much of the world is entering the fossil fuel era. Only the effects on the environment of the difference between that level and the one that would occur if nothing is done matters. (The "incovenient truth" appears in the last paragraph.)

    BTW, the WSJ article contains at least one bit of misdirection: The IPCC did reduce the estimated change in sea level, but it did so because it expressly omitted possible effects of glacial melting which has been included in the earlier report.

    Posted by Wilson Mixon at 12:16 PM in Economics

    Economical Theft Prevention

    Yesterday I spent something like 15-20 minutes getting all the glue from the label off a small item I purchased from some cheapo discount store. I complained to my wife about stores using these kinds of labels when it's perfectly possible to make labels that peel off easily. She said they don't want to do that because the sticky labels deter thefts. If the labels peeled off easily, some people would peel them off and then claim to have come in with the item in their bag. The sticky labels are cheap theft deterrence from the store's point of view.

    I bet she's right (and not for the first time).

    Btw, I highly recommend Goo-Gone to remove those pesky labels.

    UPDATE: This came in from DoL's own Josh Hall:

    I learned this while working at the OU College Bookstore - they had to remove the labels before they returned the books to the publishers. Buy a small can of zippo lighter fluid (you can use other kinds but zippo is easy to find and easy to doll out in small doses). Put 2-3 drops on the sticker until it is saturated - you'll find it almost always comes right off. You might have to wipe away residual sticker residue with a paper towel with some zippo fluid on it. I hate keeping stickers on anything so I keep a can of zippo fluid under my kitchen sink and just remove things right when they come in the house. I mention all that because I have Goo-Gone too and in my opinion lighter fluid works better.
    Posted by Robert Lawson at 11:42 AM in Economics

    Huerta de Soto on attempts to justify fractional-reserve banking

    Now available over on Free Market News Network: part three of my review of Jesus Huerta de Soto's book on money and banking. The nub of the argument:

    When a customer opens a demand account that pays interest or does not charge storage fees, which features require that the bank defrays its costs by putting some of the funds to use, it seems clear that the customer (as in the case of a term account) is authorizing the bank to put the funds to use. That is, the demand account is a loan, not a warehousing or "irregular deposit" contract.

    Not so fast, says Huerta de Soto: the demand account or banknote contract calls for equivalent funds to be repaid to the customer whenever he may call for them. Since it shares this feature with a warehousing contract, Huerta de Soto concludes that it must be a warehousing contract, and the bank's use of any of the funds must be illegitimate. But this is a simple non sequitur. Demandability is feasible with less than 100% reserves. Demandability therefore does not entail a warehousing contract.

    Posted by Lawrence H. White at 11:41 AM in Economics

    The (recent) evolution of economic research

    In this case, the quantity increase is the focus. Elsevier has this page concerning the ASSAs. On the page is a link to a large PDF file/poster concerning the evolution of economic research since 1970 (available here).

    Here's what the poster has in the lower right corner:

    econresearch.png

    Now I have a justification for why I can't seem to keep up with as much as I once thought I did.

    The quantity-quality tradeoff is real. Two thousand (plus) economics journals?!

    Posted by Craig Depken at 11:33 AM in Economics

    February 04, 2007
    $300 hammers c. 1907

    Back in May 2006, I noted that the 1906 New York Times reported on an interesting natural experiment. The U.S.S. Louisiana and U.S.S. Connecticut, two sister battleships of ostensibly identical design, were being constructed in different shipyards: one private (building the Louisiana) and one public (building the Connecticut).

    In the May report, it was estimated that the Connecticut would cost approximately $600,000 more than the Louisiana. It turns out that it wasn't that big of a difference, not because the government yard cut on costs but arguably because the private yard realized they could spend a little more.

    The Feb. 3, 1907 NYT reports the following:

    Secretary Metcalf to-day issued a statement showing in detail the exact cost of construction of the sister battleships Connecticut and Louisiana, the former built by the government at the New York Navy Yard and the latter by the Newport News Shipbuilding Company.

    It appears that the Government-built ship cost complete $359,425 more than the privately built ship. The exact figures were (including armor and turret mounts and machinery) for the Connecticut, $6,340,247, and for the Louisiana $5,980,822. The Louisiana's armor weighed 35.23 tons more.

    Posted by Craig Depken at 04:20 PM in Economics

    Gobal warming c. 1907

    From the Feb. 4, 1907 NYT:

    A man who subsequently told the police he was Andrew J. Reese, 41 years old, of Baltimore, went to the White House to-day and asked to see the President. Being asked the object of his mission, he said Prof. Moore, chief of the Weather Bureau, had been filling the atmosphere full of heat and making the country too hot to live in. He thought he could induce the President to remove MOore and give him the job and that in that case he could off the weather so as to make it more bearable.

    He was taken to a police station and will explain his theories to the police doctors tomorrow.

    Today would he be nominated for the Nobel Peace Prize?

    Posted by Craig Depken at 04:12 PM

    On lobbyists c. 1907

    I failed to mention that the Feb. 3, 1907 NYT reported a number of individuals who had filed with the State of New York to be a lobbyist. A new state law at the time aimed to reduce influence-peddling and outright corruption through the sunshine of public knowledge. Of the thirty five individuals and firms listed, here are the "interests" identified:

    • State Homeopathic Medical Society
    • New York Anti-Saloon League
    • One firm representing the Interborough Rapid Transit Company, Manhattant Railway Company, New York City Railway Company, New York and Queens County Railway Company, and twelve (!) other railway companies in the state.
    • Buffalo Southern Railway Company
    • Brotherhood of Locomotive Engineers (9 individuals)
    • Civil Service Reform Association (3 individuals)
    • New York Telephone Company
    • Merchants' Legislative League of Utica
    • Congress of Knights of Labor
    • New York State Association Opposed to the Extension of the Suffrage of Women
    • Municipal Gas Company
    • Buffalo Life Insurance Company

    One hundred years ago the lobbyists were prowling the halls of State legislatures looking for cash or other rents. So it has been and so it will be. Yet today's Congress and state legislatures promise long-awaited "reform"?

    Posted by Craig Depken at 04:08 PM in Politics

    CEO Pay

    This piece by Rich Lowry places the Nardelli story in context:

    [I]t was understandable that Home Depot had desperately wanted a highly regarded former GE executive. According to The Economist, one study "found that the appointment of 20 GE executives as chairmen of other companies between 1989 and 2001 led to an immediate share-price gain averaging $1.1 billion."

    Posted by Wilson Mixon at 01:35 PM in Economics

    February 03, 2007
    Milton Friedman and India

    Alok Sheel of the Economic Times (India) recounts how John Kenneth Galbraith (planning) and Milton Friedman (free markets) offered opposing plans for India. Nehru spurned Friedman's advice, delaying India's development by thirty years.

    The text of Friedman's 1955 memorandum is available here.

    Posted by Lawrence H. White at 07:52 PM in Economics

    The Wisdom of Crowds

    Interesting article in Business Week. HT to Marginal Revolution.

    Posted by Wilson Mixon at 01:18 PM in Economics

    February 02, 2007
    What kind of historian of economic thought is Paul Krugman?

    While other economists remember the late Milton Friedman fondly, as vividly seen in the documentary The Power of Choice that ran on PBS on Monday night, Paul Krugman isn't playing along. Krugman has published an essay entitled “Who Was Milton Friedman?” in The New York Review of Books that doesn't just reiterate Krugman's disagreements with Friedman's views, but actually questions Friedman’s intellectual honesty as a contributor to the public policy debate.

    Arnold Kling and Russell Roberts have already shown that in this essay Krugman is not a reliable economic historian.

    Krugman's essay is also an unreliable guide to the history of economic doctrines. (I'm teaching undergrad history of economic thought for the first time this semester, so I'm presently sensitive to these issues.) Consider just the first two paragraphs.

    Krugman:

    Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics—at least in the English-speaking world—was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed. Classical economics, wrote Keynes in 1936, "conquered England as completely as the Holy Inquisition conquered Spain." And classical economics said that the answer to almost all problems was to let the forces of supply and demand do their job.

    Fact:

    A close survey of the professional journals from 1912 to 1923 reveals that American economists were virtually unanimous in their support of minimum wage legislation for women and children. Interestingly, the few academic economists who consistently rejected the minimum wage were British … During these years, the only example of a prominent American economist rejecting minimum wage legislation was J. Laurence Laughlin of the University of Chicago …”

    Robert E. Prasch, "Retrospectives: American Economists in the Progressive Era on the Minimum Wage," Journal of Economic Perspectives Spring 1999, p. 222. JSTOR link here.

    Fact: The founders of the AEA explicitly rejected laissez-faire. In the late 19th century, an

    emerging group of liberal Protestants probably provided more sustained public exposure for argument against laissez-faire than any other group in society.

    The most influential lay leader of what came to be called the "Social Gospel" movement within Protestantism was the economist Richard T. Ely. … Richard Ely is perhaps best-known to economists today as the prime mover behind the founding of the American Economic Association in 1885.

    Bradley W. Bateman and Ethan B. Kapstein, "Retrospectives: Between God and the Market: The Religious Roots of the American Economic Association," Journal of Economic Perspectives Autumn 1999, p. 250. JSTOR here.

    Krugman:

    But classical economics offered neither explanations nor solutions for the Great Depression. By the middle of the 1930s, the challenges to orthodoxy could no longer be contained.

    Since Krugman does not distinguish classical from neoclassical economics, but seems to follow Keynes’ labeling of all non-Keynesians as “classical”, we can assume this statement was meant to apply to all non-heterodox economists.

    Fact: Friedrich Hayek and Lionel Robbins offered an explanation for the Great Depression. Dennis Robertson offered another explanation. Likewise Ralph Hawtrey, likewise Arthur Pigou. These explanations – and the corresponding policy recommendations – are no doubt not to Krugman’s liking, but that’s different from his suggestion that until Keynes published The General Theory the leading economists had nothing to offer.

    Posted by Lawrence H. White at 11:11 AM in Economics

    The supply of prayers c. 1907

    The Feb. 2, 1907 NYT reports on the compensation of $5 to whomever offers prayer "which opens the session in each house of the [New York State] Legislature:"

    The clergymen are getting to be as particular as the reporters," Mr. Gleason said to-day." The cost of opening the legislative sessions with prayer is about $1,000 per session. The Senate bill last year was a little more than $400."

    "There is this to be said about the payment of $5 for each prayer. By such compensation we are resonably sure of having some one here to offer prayer. Without the pay we might not always have a clergyman here. It is a good deal to ask a man to give up engagements and come here without some compensation."

    The supply curve for prayers was (still is?) upward sloping?

    Posted by Craig Depken at 10:47 AM in Economics

    February 01, 2007
    Nuevo Speak

    News of the Chavez thing is everywhere. A few observations, which together suggest a whole new vocabulary is developing.

    Brain drain: Among the Venezuelan intelligentsia, a sabbatical is now called a "chavatical".

    El Guapo would be proud: In a festive scene from the ¡Three Amigos!, two German hit men join a crowd of Mexican outlaws in boistrous celebration of their leader, the infamous El Guapo, shooting their pistols in the air and screaming "viva El Guapo." Of course, a more literal reprise of this scene has been playing out in Caracas these past two days. As from this CNN report, "Long live the sovereign people! Long live President Hugo Chavez! Long live socialism!" said National Assembly President Cilia Flores as she proclaimed the law approved. And the German connection? It's no less obvious, e.g. the infamous enabling act of 1933.

    Democracy as red herring: From the same CNN story.

    “What kind of a dictatorship is this?" [Vice President Jorge] Rodriguez asked the crowd, saying the law "only serves to sow democracy and peace."

    "Dictatorship is what there used to be," Rodriguez said. "We want to impose the dictatorship of a true democracy."

    Can "democracy" have any meaning after this?

    HT: Wayne Leighton

    Posted by Edward J. Lopez at 12:11 PM in Politics

    Ice harvest c. 1907

    In 1906 the ice harvest was relatively small, leading to shortages in the spring/summer of 1906, subsequent price increases and accusations of price gouging.

    In early 1907, much like early 2007, a brutal cold wave hit the northeast and the upper plains and the ice harvest was predicted to be much better than in the previous year.

    The Feb. 1, 1907 NYT reports that as the availability of ice has increased, and the demand for ice harvesters has increased, so too have the wages of ice harvesters:

    The filling of one ice house here was completed to-day and it is expected that a dozen will be fully stocked by the end of next week. The dealers are paying an average of $3 per day to the ice harvesters, who receive their wages every evening. This is at the rate of about 40 cents for every ton housed. Formerly the average was 15 cents.
    An interesting in-class discussion topic? The various supply-side and demand-side influences on the wages of ice harvesters. In a broader discussion, it is interesting that today there seems to be little concern for these hard-working Americans who lost their job to the refrigerator.

    Posted by Craig Depken at 11:56 AM in Economics

    Incentives Matter: Aussie Deaths Edition

    The abstract of a new paper:

    In 1979, Australia abolished federal inheritance taxes. Using daily deaths data, we show that approximately 50 deaths were shifted from the week before the abolition to the week after. This amounts to over half of those who would have been eligible to pay the tax. Although we cannot rule out the possibility that our results are driven by misreporting, our results imply that over the very short run, the death rate may be highly elastic with respect to the inheritance tax rate.

    Posted by E. Frank Stephenson at 10:45 AM in Economics

    Soft Bigotry of Low Expectations

    From the Washington Times:

    Sen. Joseph R. Biden Jr. of Delaware yesterday made it official that he will seek the Democratic presidential nomination, but stumbled out of the gate with a memorable gaffe that became the focus of his day.
    In a critique of the Democratic field, he said of Sen. Barack Obama of Illinois: "I mean, you got the first mainstream African-American who is articulate and bright and clean and a nice-looking guy," he told the New York Observer, a weekly. "I mean, that's a storybook, man."

    Articulate--imagine that Joe.

    Posted by E. Frank Stephenson at 09:59 AM in Politics

    EFW Power Point Show

    I was playing around with those interactive EFW maps from Cato and created a little power point show that shows how the map changes over time. You’ll note two things. First, you can see the addition of new countries. Second, you will see the world getting less red and more blue green (i.e., freer) over time. (Click image to download the show.)

    2004efwmap.JPG

    Posted by Robert Lawson at 09:59 AM in Economics

    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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