Division of Labour: June 2007 Archives
June 30, 2007
Demand curves are downward sloping c. 1907
The June 30, 1907 NYT has the following story:
A newspaper published in Suffolk has somehow become the vehicle of a discussion of the Rev. Mr. Campbell's so-called new theology. It seemed as though every man and woman in England who could write had turned theologian and was sending letters for publication in this paper. The editor got very tired of these effusions, but did not dare say he would have no more of them. His wife told him what to do, and now there is a notice running in his paper that whoever wishes to express his opinions on the new theology must pay five shillings an opinion, the money to go to a local hospital. It is almost needless to say that the hospital is not getting rich.Now that's a smart wife...
Central bank scandal allegations in Tanzania
Opposition-party legislators are demanding the resignation of the Governor of the Bank of Tanzania, Daud Ballali, following allegations of “massive embezzlement of public funds”.
In related scandal allegations, ruling-party legislator Chrisant Mzindakaya has been accused of getting a large loan from Standard Chartered Bank for his own personal business use “for which the central bank was the guarantor.”
But Mzindakaya later dismissed the charges against him as baseless, telling the House that he got the bank loan with the government (Finance ministry) merely standing as his guarantor.
Oh, your special privilege came from the government's finance ministry, rather than from the government’s central bank? Well, that’s different then.
The Fed is not losing so much seigniorage to the Euro
Since the introduction of euro notes and coins in 2002, circulation has soared above expectations. Last year, the value exceeded the value of dollar bills in circulation.
The study found that Europeans carry around more cash per capita than Americans, and (as a standard inventory model would consequently predict) withdraw more per ATM transaction. The FT offers as an explanation that credit and debit cards are less commonly used in Europe. I’d say that’s jointly determined with cash-holding practices, not exogenous, and therefore part of what needs to be explained rather than an explanation. (I don't think Europe is lagging the US in technical knowledge of how do do card payments.) For an exogenous explanatory factor I would suggest: marginal tax rates are higher in the EU, so the underground cash economy is relatively bigger.
The Gentle Cynic c. 1907
From the June 30, 1907 NYT:
June 29, 2007
New book on Smith
The Institute of Economic Affairs has just published Eamonn Butler's "Adam Smith -- A Primer." For details -- including a free download in PDF -- click here.
Robert Bork interview
The Federalist Society sponsored a day-long conference this past Tuesday in honor of Robert Bork's 80th birthday. The luncheon program was a wide-ranging interview of Bork by Judge Ray Randolph of the D.C. Circuit. (I was in attendance and enjoyed it immensely. I was lucky enough to have Bork for both Con Law and Antitrust while a law student.) The video of the program is now available online on the Society's website. Running time is 1 hour, 4 minutes. Watching this is a nice way to celebrate the Leegin Creative Leather decision (see below).
June 28, 2007
A sunny day for the Chicago School
The Supreme Court's 5-4 decision today in Leegin Creative Leather Products is a very big deal in the antitrust treatment of vertical restraints. It explicitly overrules the Court's ancient Dr. Miles precedent (1911), so that henceforth resale price maintenance will be subject to the "rule of reason" rather than treated as a per se violation of the Sherman Act. Justice Kennedy wrote for the majority; Justice Breyer, for the dissenters.
Kudos and a big ol' shout out to my college roommate, former DoLer, and Ashland University history professor, John Moser for his fantastic performance as Howard Cosell last night at the Ashland (Ohio) Sports and Society Chautauqua. Well done John!
If you're in the area, there's still three more nights left with performances of Bobby Jones, Alta Weiss, and Joe Louis still to come.
Too high? Too low? Just Right? None of the above?
Mark Perry, whose Carpe Diem blog is really excellent, comments on the poor dumb schmuck in Wisconsin who was told to increase prices at his gas station.
Raj filed a lawsuit Tuesday seeking to overturn a 1930s state law requiring retailers to mark up the price of gas. "I should be allowed to give whatever discounts I want to give to the people in order to run my business," Bhandari said, and his lawyer added, "Entrepreneurs and consumers - not state bureaucrats - are in the best position to decide the price of gas."
Reminds me of these immortal lines from the classic "The Incredible Bread Machine",
You're gouging on your prices if You charge more than the rest. But it's unfair competition if You think you can charge less! "A second point that we would make To help avoid confusion... Don't try to charge the same amount, That would be Collusion!
Rizzo vs. Summers
In a letter to the Financial Times, my former colleague and ongoing book-series co-editor Mario Rizzo takes Larry Summers down a peg regarding the case for more redistribution of income.
Hat tip: Mario Rizzo
Posted by Lawrence H. White at 10:48 AM
June 26, 2007
Markets in Everything: Papa Don't Pinot Edition
Another news item from my vacation in northern Michigan:
The Material Girl's father, Tony Ciccone, recently decided to advance his winery business by releasing Madonna Wine, which is available in five varieties: Pinot Grigio, Pinot Noir, Gewurztraminer, Cabernet Franc and Chardonnay.
"Most of our wines are state-bottled wines," Ciccone said. "We don't try to make California wines or wines from France. We make wines that are Michigan wines."
Ciccone, who has been bottling wine out of his Ciccone Vineyard & Winery in Suttons Bay for nine years, is a regular visitor to Bay City. And when he's not seeing friends and family, he ventures over to the Water Front Market to visit owner Greg Schultz.
"Sales have been pretty good, considering it's a $40 bottle of wine," Schultz said.
Madonna Wine was released in December 2006, Ciccone said, and its popularity has increased ever since. The label on each bottle features a colorful picture of Madonna, with whom he consulted beforehand to make sure his daughter approved of the idea.
BTW, if you're inclined to buy a bottle via mail you might owe a thanks to Juanita Swedenburg who recently passed. She filed the suit, litigated by IJ, that led the Supreme Court to open interstate wine shipment.
HT to MR for the Markets in Everything concept.
June 25, 2007
Hans Sennholz, RIP
From Richard Ebeling at the Foundation for Economic Education (FEE) and Pete Boettke at The Austrian Economists blog comes the sad news of the passing of Hans Sennholz, 85. Professor Sennholz studied under Ludwig von Mises at NYU and taught economics at Grove City College in Pennsylvania for many years, where Boettke was one of his students.
He will be missed. I will post a longer obit at Free Market News Network later this week.
ADDENDUM: Here is the FMNN link (free registration required).
R.I.P. Antioch College
The board of Antioch College, located in the lovely town of Yellow Springs, Ohio and the home of the world's most bizarre sexual conduct policy, has announced its decision to close the main campus of the college.
What are radicalized lefty students who aren't smart enough to get into Oberlin College going to do now?
Artists full employment act c. 1907
The June 25, 1907 NYT reports the following mind-boggling story:
The snapshot photographer in Germany is threatened with exinction after July 1, owing to the great risk he will run of being mulcted in heavy fines under the new act which goes into force on that date. The right of all persons to the exclusive reproduction of their own portraits or pictures of their houses or belongings is by the new enactment made obsolete.This artist-rent-protection law is similar to a law that was being debated during this time in France, which the NYT had reported on earlier in the week. The French were considering taxing the "classics" of literature, i.e., the books written by dead writers, in order to ensure a greater income for living authors.
In a bizarre argument that sounded like something out of Atlas Shrugged, it was suggested that the writers of the "classics" were, after all, dead, and it wasn't fair that the new, living, writers had to compete with them. The article describing this French law mentioned that the idea had snuck across the Channel and that the British were in the early stages of discussing a similar law.
Amazing. Yet another reminder that our contemporaneous politicians do not have a monopoly on bad ideas.
June 24, 2007
New Bank of Scotland notes
The Bank of Scotland has announced that this fall it will issue its first complete new set of banknotes (all denominations) since 1995. The BBC's account includes an image of white-gloved hands holding the new notes. Design theme: Scottish bridges. New security features: metallic security thread, hologram foil patch.
A private bank, the Bank of Scotland began issuing notes soon after its founding in 1695. Its circulation is around £800m.
Lindsay Lohan Moment c. 1907
From the June 24, 1907 NYT:
Can you explain why Mark Twain, while visiting London to accept a complimentary degree from Oxford University, whould consider worth while to make such a spectacel of himself as he appears to have done by appearing in the foyer of one of London's best hotels in bath gown and slippers...As a reasonable American I should like to know what treatement would be meted out to any Englishman behaving in a like manner in the Waldorf-Astoria or Astor Hotel. Every newspaper in the city would howl its indignation at the insult offered our beautiful city, especially if it it occured, as it has done in London, during the season. Is it any wonder our manners are sometimes called into question.Today, we celebrate such behavior. Oh, how times are changed.
June 23, 2007
Musings of the gentle cynic c. 1907
From the June 23, 1907 NYT:
Sunlight as a Disinfectant?
I'm currently visiting some family and friends in Michigan. En route, I had a nice visit with co-blogger Bob and his family.
The big news up here is an online database of public employee salaries created by the Lansing State Journal. The database lists the salaries of some 53,000 state employees. State employee unions are not amused--they are threatening a boycott of the LSJ.
Speaking of things Michigan--Mark Perry reports that Michigan has overtaken Mississippi for the highest unemployment rate in the country.
June 19, 2007
A Cowen Moment?
You've heard of a Schelling Point?
Well I think we need a term for Tyler Cowen's work on the economics of culture. I recently experienced a "Cowen Moment" as I was I was sitting in an Irish pub in Aix-en-Provence, France, eating Italian food, listening to a guy with a guitar sing Eric Clapton. And yet it all seemed very ordinary.
June 18, 2007
My rain man Frank raises a question on why journals do not adopt standard formatting/heading rules.
As an editor of Public Choice, I think I can give an answer, or rather several answers.
Read More »
1. Different journals are different. Really. Reducing the transactions costs to authors is not really our goal. Why don't restaurants all have the same menus? True, it would reduce search costs. You could just walk into any restaurant and order. But any standard like this reduces opportunities for innovation. Vive la difference!
2. I assume that the transactions costs Frank S speaks of are the result of having a paper turned down at one journal, and then trying to decide where to send it next. Or, perhaps one has a generic format for papers, and always uses this BEFORE deciding where to send the paper. This is not THAT big a cost, and surely it doesn't take more than an hour or two to change the formatting. Given the silly things referees make authors do, this is the second order of smalls. "Reestimate everything using my pet MLE procedure, even though it clearly won't matter!" THOSE are the things that are a waste of time.
3. In my view, if there were one standard, the top journals could dominate even more than they do now. Public Choice accepts notes, short papers, and purely formal/theoretic pieces. We do this in part because few other journals do this, and it gives us a niche. But I also really believe it is important for authors, especially junior people, to have an outlet for odd or offbeat papers, ones that don't fit the AER/JPE/QJE Procrustean bed of standard formats.
« Close It
June 17, 2007
One man’s ceiling …
An interesting passage appears near the end of a recent column on the yield curve by David Nicklaus of the St. Louis Post Dispatch:
Measures of core inflation remain stubbornly above 2 percent, which is the most the Fed is willing to tolerate.
I think I see the problem. The fact that everyone knows that the Fed is willing to tolerate inflation rates up to 2 percent means that 2 percent is the time-consistent inflation rate to expect. (See Kydland and Prescott 1977.) If the public should expect anything less than 2 percent, the Fed would be faced with an irresistible temptation to use the surprise inflation available under the 2 percent ceiling to goose the real output numbers. And everyone knows this, so nobody expects less than 2 percent. The Fed will have to lower its announced (and demonstrated) "comfort zone" to get inflationary expectations below 2 percent.
June 16, 2007
The Gentle Cynic c. 1907
From the June 16, 1907 NYT:
June 14, 2007
More on Bicycles
Dan Alban sends along info on two more bicycle programs--one in DC and the other in Paris. Both appear to be fundamentally different from the Lexington KY program because they create personal responsibility by linking users to specific bikes (Paris requires a credit card or a refundable deposit).
Billy Donovan Night at the Ballpark
Fort Myers, Fla. — A minor league baseball team will poke fun at the University of Florida coach who backed out of his deal with the Orlando Magic when the Fort Myers Miracle host "Billy Donovan Night" on June 20.
Just like Donovan escaped his five-year, $27.5 million contract with the Magic, fans can try to negotiate their way out of their ticket purchase.
The contract, in this case, is the ticket. Fans will have up to the first three innings to restructure their deal, but even that's negotiable.
The price of the ticket, the seat location and even a buyout can be arranged. Part of the negotiating process will involve making a free throw.
The Miracle will have Fort Myers defense attorney Michael Hornung on site to negotiate settlements. Hornung attended the same high school — St. Agnes on Long Island, N.Y. — as Donovan.
A Fort Myers man who shares the coach's name is scheduled to throw out the first pitch. After that, waffles — to poke fun at the coach's "waffling" — will be served. And hair gel, mocking Donovan's slick look, will be handed out.
June 13, 2007
A snarky question: Economists are well aware of the importance of transactions costs, so why hasn't someone reduced them (or attempted to coordinate journal editors in reducing them) by standardizing journal formatting (section headings, tables, references, etc.)? Comments are open.
Background--I'll be away most of the next six weeks so I've been scrambling to finish some papers before leaving. Each of the journals to which I'm submitting a paper has different formatting. Not really a big deal--perhaps an hour per paper, some of which can be done by my very capable student worker--but it just seems like an obvious question.
Calling Gary Becker ...
Less severe penalties lead to more crime. A lower probability of apprehension because of, say, fewer police officers leads to more crime. Case-in-point this news report on Wal-Mart's shoplifting problem:
Flickinger and other analysts say the increase in theft may be tied to Wal-Mart's highly publicized decision last year to no longer prosecute minor cases of shoplifting in order to focus on organized shoplifting rings. Former employees also say staffing levels, including security personnel, have been reduced, making it easier for theft to occur.
One "benefit" of the trade embargo with Cuba?
The trade embargo with Cuba is a head-scratcher for free-market/free-trade economists. However, one "benefit" of an embargo is the lack of headlines like this one from the June 13, 1907 NYT:
SHORTAGE OF HAVANA CIGARS
[place tongue firmly in cheek while you continue reading]
Yep, the trade embargo "insulates" us from these unforeseen supply shocks. Simply making Cuban cigars illegal and therefore generally unavailable relieves the casual consumer of concerns and anxiety concerning the Cuban tobacco crop. This is a little recognized benefit of the embargo and should be included in any cost-benefit analysis of the policy. Is this relief of worry enough to make the net benefits of the embargo positive? Well, that's an empirical issue.
Here's more from the article:
There is in sight a shortage of imported cigars, said to be as serous as this country experienced during the Spanish war. This situation comes from the fact that in addition to an almost total failure of the tobacco crop in Cuba a strike is in progress in Havana which involves the expert cigarmakers of practically every factory.Could they not have struck for an increase in Spanish-denominated wages?
June 12, 2007
New paper about the Cowboys Stadium Referendum in Arlington
Colleague Mike Ward and ex-colleague Carolyn Dehring and myself have recently submitted the second of potentially three papers concerning the November 2004 Cowboys Stadium referendum in Arlington. The second paper available here at SSRN focuses on the impact of the potential stadium on local property values and how those impacts influenced precinct-level support for the stadium vote.
We find fairly compelling evidence that precincts in which property values increased with the probability that the stadium would be built in Arlington provided more support for the stadium referendum - what we claim is a direct test of the so-called Homevoter Hypothesis.
Here are the details:
The first paper available here investigates the impact of the pending stadium referendum on property values in Arlington relative to the surrounding areas.
Cross posted at Heavy Lifting
A review of Freedomnomics
I've posted a review of John Lott's new book Freedomnomics over at Free Market News Network.
June 11, 2007
How's your liberty?
A step in the right direction for due process and habeus corpus.
WASHINGTON (Reuters) - President George W. Bush cannot order the military to seize and indefinitely detain a Qatari national and suspected al Qaeda operative, the only person being held in the United States as an "enemy combatant," an appeals court ruled on Monday.
Here is SCOTUSblog on the ruling:
The panel majority ruled that Congress has not taken away the legal right of Ali Saleh Kahlah al-Marri to challenge his detention, thus limiting the reach of the Military Commissions Act's court-stripping provisions. "As an alien captured and detained within the United States," the Court said, "he has a right to habeas corpus protected by the Constitution's Suspension Clause." The Court said, though, that it was avoiding "difficult constitutional questions" about the MCA's court-stripping provision, finding that it could interpret the MCA to stay clear of those issues. It found that the MCA withdraws habeas only for those properly detained as enemy combatants, and it ruled that al-Marri's detention did not meet that test because of the lack of presidential authority.
The MCA is just the latest iteration in a string of attempts to limit habeus corpus, which goes back to 1996 when the Clinton Administration put the first limits on habeus corpus since Lincoln.
Don't worry, they're probably not after you. And if by strange occurence that changes, you always have recourse in the Chief Privacy Officer at Homeland Security. Don't forget to encrypt your messages to the CPO in case the guys down the hall are listening in.
Checking in from France
I'm in Aix-en-Provence for a couple of weeks giving some lectures at Universite Paul Cezanne at the invitation of Prof. Pierre Garello. Also visiting right now are Sandford Ikeda and Gary Libecap so when I'm not soaking up the Provencial scene, I've been attending some interesting lectures by them.
Yesterday I ran an absolutely brutal 30km (18.6 mile) race, The Penitentissme, which had over 1400m (4500+ ft) of elevation gain/loss! It took me 4:18 to complete for a 13:52/mile pace. Not bad actually since we had to walk/climb for at least 1.5 hours of the total.
For my 20€ fee I scored two bottles of wine, a jar of honey, and a bottle of olive oil. The only problem is that the t-shirt has a drawing of some monks running (the race is named after a local sandstone rock formation, the Pentitents, that looks like a line of monks) that looks to an American like a bunch of KKK guys. Not a shirt I think I'll wear much back home!
One really odd (I mean stupid) thing is that you have to have a 'medical certificate' signed in order to run a race in France. The organizers insist on this in order to reduce their liability. As bad as tort law seems to have gotten in the US apparently it's much worse here. Thankfully, they accepted an e-mail from a running buddy back home who is a doctor.
June 10, 2007
Rosa Parks c. 1907
The June 8, 1907 NYT reports on an early attempt to kill "Jim Crow":
Whether railroads have the right, under the law, to provide separate cars for white and colored passengers in Inter-State traffic practically is the question which was argued to-day before the Inter-State Commerce Commission.I am so glad that I did not grow up in a Chattanooga (and country in general) characterized by such blatant racism, although the practice surely still exists today. The whole separate but equal argument was such a farce it is amazing to me that it worked for so long. How much further along would we have been if Georgia Edwards was remembered the same way as Rosa Parks?
The Gentle Cynic c. 1907
From the June 8, 1907 NYT:
June 09, 2007
Global warming non est disputandum
Wired.com reports an AP story, "NASA Head Regrets Global Warming Remarks"
LOS ANGELES (AP) -- The head of NASA told scientists and engineers that he regrets airing his personal views about global warming during a recent radio interview, according to a video of the meeting obtained by The Associated Press.
Hot air has this great headline:
June 07, 2007
A Fark overload
Fark has become a must-visit-daily website for me, mostly just for yucks. Today's has a buffet of weird semi-relevant news:
1) 3 of 4 people think the rich get richer and the poor get poorer. Being true to the nature of journalism, the story doesn't include any data on whether this belief is actually true or not. Data that my intermediate macro students could find in about 5 minutes.
2) Those pessimistic poll respondents should move to Norway, where Oslo has a labor shortage. What is interesting are the links to related stories with titles like "Too many jobs" and "Norway needs more unemployment." Now I'm curious about the extent of unionization in Norway.
3) From the public industry file, a Snohomish WA school district eliminated 35 teachers but bought a spiffy $15,000 espresso machine. But they did it for the sake of substitutes, since the machine will produce quality drinks "for less than Starbucks prices." If it's financed through taxes, I bet it is cheaper.
4) Perhaps unaware of climate cycles, people are freaking out that Greenland is turning green (again). Shreveport, LA (my residence) is named after a guy named Shreve; I guess people don't realize why Greenland was named green-land.
and on a personal note 5) Canuck cops raided a house full of exotic and illegal weapons. First they came for my throwing stars, and I did nothing... Nunchaku are apparently illegal in Canada; no word on if Bruce Lee movies are.
Incentives Matter: UGA Athlete Edition
When Georgia officials tried to find a way to make student-athletes show up for classes and academic appointments, athletic director Damon Evans made a bold proposal:
Unexcused absences should bring $10 fines or game suspensions.
Georgia officials say the policy deserves credit for a strong academic showing this spring.
For the first time, more than 50 percent of Georgia's student-athletes had 3.0 or better grade-point averages in the spring semester.
Also, when compared with last spring, there were far fewer dropped classes and a sharp increase in credit hours earned -- 954 this spring, compared with 770 last spring, according to Ted White, Georgia's director of academic services.
The policy produced dramatic results in its first month.
In a three-week period in January, student-athletes missed 46 classes or academic appointments, a 90 percent drop from 421 over a three-week period in September.
Quite a turnabout from the Jim Harrick Jr. exam (scroll down).
Taxing pollution vs. taxing fuels
Quebec is imposing a carbon tab, and according to this article (HT, NCPA):
The amount of the carbon tax varies according to the amount of carbon dioxide each fuel produces. For gasoline, the tax is 0.8 cents a litre, the charge for diesel is 0.9 cents, for light heating oil 0.96 cents, heavy heating oil 1 cent a litre, coke used in steel making 1.3 cents a litre, coal $8 a tonne and propane 0.5 cents a litre.
I suspect that a tax like this one will work better that a cap-and-trade system because carbon output (and sequestration) comes from so many sources. But a brief review of principles suggests that this is still a second-best approach. Recall this tautology: E = E/G x G/M x M, where E is the emission level, M is miles driven, and G/M is gallons per mile. This statement identifies three ways that pollution might be abated: burn each gallon cleaner, burn fewer gallons per mile, or drive less.
The infamous US CAFE standards sets a maximum G/M, making per-mile driving cheaper and probably increasing M -- a classic Laffer Curve problem. An input tax, a la Quebec, provides an incentive to economize on both G/M and M but not to achieve abatement efficiently if reducing E/G is the best way to proceed.
Since the target in Quebec is CO2 emissions, this is probably not a big deal, but why settle for second best? Anyway, why let the focus on CO2 take attention away from other pollutants?
A remote sensor for measuring the tailpipe exhaust of moving vehicles, FEAT was created in 1987 with a grant from the Colorado Office of Energy Conservation.
(I include the last paragaph mainly to note that Gary Bishop is a Berry College graduate.) Stedman's approach would allow pollutant-specific tax rates to be applied with direct implications for E/G values.
Is this important? This article by Lynn Scarlett suggests that it is:
Automobiles in general now account for as much as half of total air-pollution emissions in many U.S. cities. But these aggregate figures obscure a critical detail. Only a fraction of cars -- around 10 percent -- account for more than half of all vehicle emissions of carbon monoxide and hydrocarbons. It is these so-called gross polluters that California and other states are trying to target with their new smog check programs. ...
It seems to be a relatively simple matter to measure E/M and M, and then to let the pollutor decide how to react: probably by some combination of decreasing E/G (regular tune-ups, for example), G/M (slowing down, maybe), or M.
Tragedy of the Schwinn, Part 39
Dan Alban, my Berry Bikes collaborator, alerts me to yet another failed common property/open access bicycle program. This one is in Lexington KY (these things always seem to be in college towns):
It looked lonely -- more trash can than mode of transportation.
The bright yellow bike was locked to a telephone pole at the corner of Main and Tucker streets. The seat was missing. An empty Mountain Dew bottle, a coffee cup and a cigarette pack sat in its basket.
Somewhere out there are 51 other yellow bikes, part of a three-week-old program to promote bike use downtown.
When the program was launched in May, the bikes were clustered conspicuously along busy downtown streets. But today some wonder where all the bikes have gone.
The program has been more popular than expected, organizers said. More bikes will be added throughout the summer, but there are also concerns that people are taking them outside of downtown, storing them at home or stealing them.
A Herald-Leader reporter and photographer drove around downtown and surrounding neighborhoods yesterday for about four hours on a hunt for Yellow Bikes.
The trip turned up 10 bikes, four of which had flat tires or missing seats. Most of the 10 were in residential areas north of the downtown business district, although one bike was locked to a street sign in a neighborhood south of Chevy Chase. One bike with no seat and a flat rear tire had been locked near the corner of North Broadway and West Sixth Street for two weeks, a neighbor said.
Renee Jackson, executive director of the Downtown Lexington Corp. and a Yellow Bikes board member, said a volunteer looked for all the bikes a week ago. After searching most of the city, the volunteer found 42 of the original 52, the most distant one in north Lexington near New Circle Road.
Other than the serial numbers on the bikes, there's no way to track them.
Flowers said he heard from a customer at the store that someone peeled off the stickers and was riding a Yellow Bike, passing it off as their own.
Private Contracting vs. Government Contracting: A Case Study
A small portion of my drive between my home and office is on Riverside Parkway. Riverside Parkway is 2-3 miles long and is currently being widened from 2 to 4 lanes. The project started in Spring 2005 (this post was near the beginning of the project) and was supposed to be finished in December 2006 (see here, scroll down to project number 30). The project is not yet complete, though this isn't surprising since most days I see no construction activity.
For comparison, consider a private construction project--Berry College's Cage Center. The Cage is a $32 million athletic and recreation center. Site prep started last summer and construction got underway in September. (A sequence of construction photos and a live cam are available here.) Construction is progressing rapidly and it is expected to be completed on or ahead of schedule in 2008.
As Bruce Herrick, one of my undergrad profs, used to say--for instance isn't proof. And although I think the road project should be less complicated and faster to complete, I could be wrong. Nonetheless, the pokey pace of construction on Riverside Parkway and the buzz of activity on the Cage strike me as a nifty illustration of government inefficiency vs. private sector efficiency.
Expanding Gasoline Prompts Lawsuit
Plaintiffs claim retailers are paying taxes on gallons of colder gasoline, which take up less space, and then keeping extra taxes when heat expands the fuel into more, less-efficient gallons at the pump.
Even a federal lawsuit filed in Rome has raised the issue of how the temperature of fuel when pumped can cost consumers — especially those in warmer states.
National Institute of Standards and Technology data shows temperatures of fuel at gas stations around the country average about five degrees warmer than the federal standard temperature of 60 degrees at which gas is priced to sell.
At Georgia gas stations, according to the federal agency that presented the data, that temperature is 12 degrees higher at 72 degrees.
The physics behind the problem is fairly simple.
At 60 degrees, a 231-cubic-inch gallon of fuel delivers a certain amount of energy.
At 90 degrees, however, the same gallon of fuel expands to more than 235 cubic inches.
Because consumers are still paying for 231-cubic-inch gallons they are forced to spend more money — and pay more tax — for the same amount of energy.
In practical terms, this means a Roman who pumped 10 gallons of gas into his truck at 90 degrees would be able to drive 196.6 miles, if the vehicle is supposed to get 20 miles per gallon.
A pdf of the suit is here.
June 06, 2007
Who should get the next kidney?
Dutch television aired a show on Friday night that purported to be “a reality show featuring three patients competing for a kidney from a terminally ill woman”. Co-blogger Ed Lopez noted the pre-show publicity. Turns out it was an unreality show, a stunt designed to raise awareness of the shortage of kidney donors, with the “donor” being played by an actress (while the “contestants” were played by people who actually do need kidney transplants).
Televising a contest among hard-luck contestants is tacky, of course. (Anybody out there old enough to remember the NBC daytime TV show Queen for a Day?) But the Dutch televisers did have a point: there are indeed three or four people like me, seeking a kidney transplant, for every available cadaveric kidney. Anything that increases in the number of people who sign up to donate at death, or the number of living donors, would help. Barring the elimination of the zero price ceiling on kidneys (payment for organs is illegal in the US), the shortage will continue to be severe. A little publicity, even if tacky, couldn’t hurt and might help bring forth more donors.
Many would-be arbiters of kidney donation, however, are adamantly concerned with "equitably" allocating the supply, even where that would mean a smaller supply. The New York Times reports a comment on the Dutch TV show from an American bioethicist:
It’s not all that different from what’s happening on the Internet, on sites like MatchingDonors.com, where people looking for organs post their pictures and their stories, hoping a potential donor will choose them,” said Jeffrey Kahn, director of the University of Minnesota’s Center for Bioethics. … “I think we’d reject as a matter of morality and equity that the prettiest people, the people with the best story, or the ones who can pay the most, should get access to this very scarce resource,” Mr. Kahn said.
Actually, Mr. Kahn, with all due respect (as Ricky Bobby would say), some of us in need of a kidney would disagree. Allocating kidneys by “morality and equity” criteria presumably means that those in need of a kidney should wait their turn for an organ from a single common pool. This makes sense insofar as transplantable kidneys are supplied to such a pool without restriction by recently deceased donors. But transplantable kidneys may also come from living donors. If we recognize the living donor’s right to his own kidney -- and we should -- then we have to accept the donor’s choice of a recipient even if we don’t like the donor’s criteria.
Consider the case of Lisa Cunningham, who contacted the local newspaper in her search for a kidney donor.
Cunningham's decision to go public triggered a national story when Beth Israel Deaconness Medical Center's transplant director said he would refuse to give Cunningham the potentially life-saving transplant if she found her donor through the media. Citing ethical concerns over donor or patient exploitation and fairness, Dr. Douglas Hanto said he thought it would be best that if an altruistic donor came forward, for that kidney to go to the next person most in need on the waiting list - not Cunningham.
Cunningham died of kidney failure last month after failing to find a donor. Hanto has since reversed his hospital’s policy against directed donations from strangers.
If “equity” criteria were always to trump the donor’s wishes, a donor would not be allowed to direct his donation even to a blood relative. Surely Kahn, Hanto, et al. realize that most donors who come forward to donate do so to donate to a relative. They would not donate if their kidneys would instead go to anonymous recipients on the waiting list. Surely the same applies to potential donors who may have been moved by Lisa Cunningham’s story: some who would donate to her would not come forward to donate to an anonymous recipient.
This is why there is, in fact, no waiting list for live donations, only for cadaveric organs, as Sally Satel noted while rebutting Hanto in an op-ed.
For the sake of those who need a kidney, the decision on who should get access to the “very scarce resource” of a living-donor kidney should therefore be entirely up to the donor, even if the donor wants to choose on the basis of the recipient’s prettiness, narrative excellence, or willingness to pay. If we leave it up to a committee of well-meaning bioethicists we will have fewer donors and we will therefore lose lives that could have been saved.
Econ 101 for philosophers
David Schmidtz, an economically literate classical-liberal philosopher, has a marvelous article in the current issue of Ethics criticizing the book Why Social Justice Matters by Brian Barry, a soak-the-rich egalitarian-socialist philosopher. Here is Schmidtz explaining gains from trade and the role of profit:
Barry offers the socialist slogan “people before profit”. … But if producers are making a profit, they are selling what they produce. If they sell what they produce, they are putting a product in the hands of consumers who judge themselves better off paying for that product (thereby financing its continued production) than they otherwise would be. In our world, to say people before profit is, in effect, to say that people should not be allowed to produce in such a way as to have large numbers of customers who gain from trade. … “People before profit” is an idea whose time has passed, and whose time should never have come.
Later on, Schmidtz notes the importance of aligning incentives with desired results:
Sometimes, distributing according to need does not result in needs being met. It induces people to do what manifests need rather than what meets need.
Two Recent Papers Caught My Eye
1. Incidence is tricky--the costs of taxes or regulations (or benefits of subsidies) can be shifted. Below is the abstract of a paper by UNC economist David Blau; he finds that the cost of a child care center regulation is borne by the employees of child care centers.
The effects of regulations governing staff-child ratio, group size, and staff qualifications in child care centers are estimated, using data on a sample of centers. The data contain measures of staff characteristics and wages, price of the service, and the developmental quality of the child care provided. Regulations vary across states, but may be endogenous to these outcomes. Estimates with state fixed effects are feasible because regulations vary within states by age group of children and job title of staff. Estimates with state fixed effects show that tougher regulations have some impact on input use, but have little or no impact on price and quality. The most striking finding is that tougher regulations reduce staff wages, suggesting that the incidence of child care regulations is on employees of day care centers.
2. Another entry in the incentives matter category--below is the abstract of a paper finding that higher welfare benefits increase the incidence of single mother families.
This paper uses data from the eight waves of the European Community Household Panel (1994-2001) to estimate the impact of welfare benefits on the incidence of single motherhood and headship among young women across European countries. The regressions include country fixed effects as well as time trends that are allowed to vary by country, to account for fixed and trending unmeasured factors that could influence both benefit levels and family formation. The analysis also accounts for individual characteristics and labor market conditions. The results suggest that benefit levels have a small but significant positive effect on the prevalence of single mothers. An increase in yearly benefits of 1,000 euros is estimated to increase the incidence of single mother families by about 2 percent.
The Silliest Sentences I've Read Today
The day is still young but I suspect this bit from Investors Business Daily might be difficult to top:
Currently, some 10% of all Mexican households get remittances from the U.S. Foreign workers now make up 16% of the Mexican work force. If they stayed home and worked in Mexico they would be building Mexico's economy — not that of the U.S. Instead, they live in poverty here, overwhelming U.S. social services agencies and making Mexico's economy much weaker than it should be.
If workers stayed in Mexico they might be "building Mexico's economy" in the sense of producing a higher GDP. Likewise the U.S. economy might have a lower GDP. Mexicans working in the U.S. might "live in poverty here" but if they stayed home "building Mexico's economy" they'd live in even worse poverty. Economics is not about "economies"--it's about people creating prosperity and happiness for themselves. People migrating from Mexico do so--often at great peril and cost to themselves--in order to improve their standard of living (or at least that of their families that get remittances). I don't deny that Mexican migrants create some problems for U.S. social service agencies. On net Mexican migration might (though I think not) even make the U.S. worse off because of the increased social service burdens. However, it's nonsense on stilts to think that Mexican migration makes Mexicans worse off.
On global warming c. 1907
From the June 6, 1907 NYT:
As the weather has been taking a prominent place in journalism of late, and as all references to it are invariable concluded with the words "since the establishment of the Weather Bureau," it may be of interest to note what the weather was before that epoch and to observe that there was plenty of it.Wouldn't it be nice if the print media would offer similar perspective in the current global warming/cooling debate.
Curious headlines c. 1907
Given our advantage of historical perspective, stories from 100 years ago in the New York Times often merit a little extra interest based on who is being described in the story - a few days ago I mentioned a baseball story with the headline claiming that Cy Young had beaten St. Louis.
In the June 6, 1906 NYT:
The Brothers Wright, whose negotiations for the sale of their airship to the German Government were announced exclusively in the cables of the New York Times, left Paris to-day for Berlin to conclude arrangements for the construction of a number of airships.In 2005 dollars, that's $250,000 each.
The Right Way to Take on Wal-Mart Is ...
... catering to customer tastes. Today's WSJ reports that some supermarkets are doing so successfully. Some excerpts:
The supermarkets are winning back shoppers by sharpening their differences with Wal-Mart's price-obsessed supercenters, stressing less-hectic stores with exotic or difficult-to-match products and greater convenience. Last year, sales at supermarkets open at least a year rose 4%, the biggest increase in five years, according to retail consultants TNS Retail Forward. While the gains are still modest, the supermarkets got more good news last week when Wal-Mart announced it would cut back on new supercenter openings for the next several years.
Scott Frondorf, a 44-year-old Green Township, Ohio, software executive, and his wife now do more of their food shopping at a local Kroger store that offers expanded produce and "boutique-like" seafood, cheese and wine. The couple still shops occasionally at a huge warehouse market, but "momentum is definitely in the Kroger direction," says Mr. Frondorf.
Many of the chains are still learning to sidestep Wal-Mart. They are cutting back on drugs and health and beauty products, which are Wal-Mart strengths, to stress fresh produce, higher-quality meat and easy-to-prepare foods. Subdued lighting and high-end selections buttress the nonsupercenter experience. Instead of the rows of aisles with commonplace brands, the supermarkets are adding tables providing ingredients for planned meals, luring the kind of customer who shops for dinner instead of stocking up on groceries once a week, says Paul Weitzel, managing partner at grocery consultants Willard Bishop LLC. Mr. Frondorf says he was pleasantly surprised recently to find Kroger carried the walnut oil he needed for a gourmet recipe.
Safeway Inc. has converted about half of its 1,755 stores into "Lifestyle" markets with wood floors, on-site bakeries and high-end private-label brands. The third largest food retailer after Wal-Mart and Kroger, it expects to convert all its stores by 2009.
While I'm on the topic of Wal-Mart--it's been awhile, you know--a friend calls the new Wal-Mart book by Michael Hicks "terrific." It's priced for libraries--a hefty $99.95.
June 05, 2007
Another Booby Trap in the Tax Code
Just as the AMT isn't indexed for inflation (though it's now preferable to the regular income tax), the taxation of Social Security benefits also is not indexed for inflation. Scott Burns explains the consequences.
Why central bankers fudge the truth, with illustrations from Sri Lanka
My new favorite South Asian business columnist, “Fuss-budget” of Lanka Business Online, speaks truth to power:
Let's ask our selves this question. Why do central bankers - all over the world - economise with the truth? The short answer is that central bankers lie because they want to print money and dupe the users of their worthless fiat money into believing that there is 'credible monetary policy' behind it. […]
As we say in America, read the whole thing. Not only does Fuss-budget get the connection between money-printing and inflation, and between the monetary institutional set-up and the propensity to print money, but he has the good taste to cite at length my paper on the problem of status-quo bias in monetary policy research created by the central bank having a near-oligopoly in hiring and subsidizing monetary policy researchers.
June 04, 2007
On food purity c. 1907
To remind us, once again, that there are no new problems only our problems, the NYT of June 4, 1907 reports the following:
Negotiations are under way between the United States and France respecting the degree of compliance with the American National Pure Food Law which shall be exacted.
Perhaps someone can send a message to the Chinese that our hopes and expectations for "untainted food" are not new.
On tuberculosis c. 1907
The June 4, 1907 NYT reminds us that tuberculosis was a big deal not so long ago:
The world's fight against the ravages of consumption will be the main subject discussed during the meeting of the American Medical Association, which opened its annual session here to-day. The National Anti-Tuberculosis League is also in session here, with delegates from all parts of the United States...The last statement sounds similar to the "we are flying with germ carriers" argument of today.
One small victory c. 1907
From the June 4, 1907 NYT:
Twelve Chicago theatre managers and ticket scalpers, who were arrested charged with violating the law by selling theatre tickets at an advance over the published rate, were discharged to-day when their case was called in Municipal Court.
June 03, 2007
On technological advancement c. 1907
In the June 3, 1907 NYT the beginning of the end for a certain occupation is predicted:
A new invention has been introduced in Newcastle by which it is feared the lamplighters of the city will lose their vocation. A German inventor has placed a machine at the local gas works which will enable the gas company to light and extinguish all the street lamps simultaneously.
June 02, 2007
Musing of the Gentle Cynic c. 1907
From the June 2, 1907 NYT:
Biofuels and Beer Prices
This ethanol bit is getting out of hand--it's started to push up the price of beer:
Like most Germans, brewer Helmut Erdmann is all for the fight against global warming. Unless, that is, it drives up the price of his beer.
And that is exactly what is happening to Erdmann and other German brewers as farmers abandon barley -- the raw material for the national beverage -- to plant other, subsidized crops for sale as environmentally friendly biofuels.
In the past two years, the price of barley has doubled to $271 a ton as farmers plant more crops such as rapeseed and corn that can be turned into ethanol or biodiesel, a fuel made from vegetable oil.
HT: Michael Sanera of the Locker Room
The Hamermesh effect c. 1907
From the June 2, 1907 NYT:
NEW HAVEN, Conn. - William H. Hackett, Principal of the New Haven High School, President of the Teachers' League of this city, said to-day that a handsome face and a tailor-made gown are greater factors in getting promotions for teachers in the New Haven schools than mental qualifications.
Angus and the Giant Paintball
I wasn't going to do this shameless self-promotion, but Angus found such a fantastic link I have to.
Check out the performance art bit. Go there. But hurry, only two more days.
And welcome to Angus.
Posted by Michael Munger at 09:17 AM
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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