Division of Labour: October 2007 Archives
October 31, 2007
Global Cooling Yachts
Stephen Salter, emeritus professor of engineering design at the University of Edinburgh ... reports [regarding] a climate debate sponsored by the Royal Meteorological Society, "I asked for a show of hands about whether official proposals for CO2 reductions could do enough to stop global warming in time," he explained. "Not one of 300 people with professional interest in the field raised a hand."
Posted by Wilson Mixon at 03:18 PM
Michael Moore's SiCKO is opening in Britain this week, but the British are not amused. Anyone can extol the virtues of universal government-furnished health care, they say, when they have never had to use it.
Richmond Fed Interviews Russ Sobel
An interesting interview with Russ Sobel (my dissertation advisor) in the Summer 2007 issue of the Richmond Fed's publication Region Focus can be found here in .pdf. The interview discusses his work on FEMA, Nascar, the Articles of Confederation, and West Virginia public policy.
APEE Young Scholars Program
The Association of Private Enterprise Education (APEE) has received a grant to help young faculty and graduate students attend our annual meeting April 6-8, 2008 in Las Vegas, NV. These funds are designed to encourage younger scholars to consider the advantages of APEE membership.
Successful applicants will have their registration fees reduced to $75 (normally $390) and be eligible for a stipend of up to $595 toward travel expenses. To apply applicants must supply us with the following: (1) a short essay (250-300 words) explaining why the applicant wishes to attend the meeting; (2) a short letter of reference, preferably from an APEE member or someone known to APEE indicating why support should be provided to the nominee, and (3) a brief letter from the applicant's department chair or graduate director indicating the level of departmental support that the applicant can expect for this trip. Some of the applicants may be on the program and preference will be given to these applications. The deadline for applying is January 18, 2008. Those selected will be notified within two weeks of that date. Successful applicants will be required to register for the conference (at the reduced rate of $75) by February 18, 2008.
Please send applications to Dr. E. F. Stephenson at efstephenson[at]berry.edu . If you have questions, you may email him or call him at (706) 238-7878.
October 30, 2007
History’s warnings about cheap money
Manuel Hinds and Benn Steil, writing in the Financial Times, wisely warn us that ”excessive monetary creation can destabilise the economy while the rate of CPI inflation remains low.” That is, cheap credit can feed an a boom-bust cycle in asset prices even if an index of consumer prices doesn’t move much. What Hinds and Steil see happening in the present, F. A. Hayek earlier saw as the story of the 1920s.
HT: Gaurav Tiwari
To whom does wealth belong?
I recently co-authored a short essay for the Journal of Lutheran Ethics titled, "To whom does wealth belong? An Economic Perspective."
The question of to whom does wealth belong is not one that most economists would be comfortable answering except in the most trivial sense. Trivially we would answer that wealth belongs – well – to those who own it. Aside from being rather circular in its logic, this reply does not get at the real issue implied by the question: To whom should wealth belong? This question is inherently normative in nature and economists qua economists are generally reluctant to take normative positions about how society should operate. We might be willing to describe the likely consequences of particular economic systems or policies, but questions of which systems or policies we should implement are, according to most economists, best left to philosophers and other moral leaders (Friedman, (1953) 1970).
A Rod. All the time.
Man, I just can’t wait to see what happens to A Rod! Will he sign with the Yankees or go free agent?! It's all so very exciting!
Hey, is there any other news in baseball this week?
October 29, 2007
A news item courtesy of my former student Andrew C.:
An Oregon man was been arrested after fleeing police across a Snake River bridge into neighboring Idaho — only to reverse course near the stateline because he reckoned Oregon jails would be better than those in Idaho.
Revolutionizing war c. 1907
From the October 29, 1907 NYT:
How War Will Be RevolutionizedThis is an eerily familiar statement. Perhaps if the objective function of the politicians who initiate warfare were consistent with the objective function of those who prosecute warfare, the simple biplane would have been the end of war as we know it. Alas, our good Major mistakenly ignored or failed to realize that the biplane was not the end of this technology - indeed, only the beginning.
"I have been serving for the past ten years at Fort Leavenworth, the headquarters of the three service schools of the army. The military authorities there have shown the deepest interest and the firmest belief in the future of military aeronautics. Its radical influence on the methods of warfare will compare only with the invention of gunpowder and the tactics of Frederick the Great.All of this is true, if the other country doesn't have airplanes as well.
The Major recognizes the value of the plane in terms of a "terror" weapon but fails to recognize that those who are "terrorized" might not sit still for it:
Add to this the possibility of airships dropping high explosives on a defenseless people and their importance becomes at once apparent. It is possible,even now, to tow a load of high explosives with a dirigible balloon and drop the destructive load at such points as desired. Against such an attack there is no effective resistance, save by waging an aerial warfare, air fleet against air fleet. The possibilities are unlimited and they mean the revolutionizing of military methods with the result that decisive victories may be gained with a minimum loss of life.I am not sure what would be required for the good Major's prediction to come true, but two world wars and about 30-40 million people (mostly civilians) would die despite these "scientific principles" aimed to reduce the motivation of war would come to fruition - at least in as much as the nuclear bomb reduces the motivation for total war.
While mutually assured destruction might preclude military engagement, it is obvious that hopes that the biplane would lead to an era of peace was misplaced. Moreover, the biplane seems to be only the first in a long procession of tit-for-tat technological advances which today conntinues apace.
October 28, 2007
Musings c. 1907
From the October 27, 1907 NYT:
Biofuels and food
So, someone at the UN now recognizes that we might want to postpone some global-warming amelioration, according to this report.
Jean Ziegler, who has been the United Nations' independent expert on the right to food [who knew such a position existed?], called for a five-year moratorium on biofuel production to halt what he called a growing "catastrophe" for the poor.
October 27, 2007
Thesis Printing on Demand
For those in need of having theses or dissertations bound, I recently used Thesis on Demand. I found their prices to be quite reasonable and the quality was excellent. The really nice thing is you just upload the .pdf and pay by credit card and 4-6 weeks later you get a really nice, well bound, thesis or dissertaion in the mail.
October 26, 2007
Pre-Season Hoops poll
My how times have changed. Here's a Texas A&M fan (me) all excited about pre-season basketball rankings. (Thanks for nothing Fran!).
A&M is #14. A Durant-less t.u. is #16. Kentucky is #22. Full rankings here.
Of course, pre-season rankings are meaningless and sportswriter polls are filled with biases. Here's Noel Campbell on football polls and televised games.
And here's another Lopez getting suspended for skipping classes.
October 25, 2007
College football notes c. 1907
From the October 25, 1907 NYT:
My how things have changed.
October 24, 2007
Korean Currency Idol
The Bank of Korea has narrowed the field of finalists from ten to four. The two winners will appear on new designs the 50,000-won or 100,000-won banknotes. Which two will be voted off next?
Is it just my imagination, or are those cars with bumper stickers that command us to "Stop Road Rage" among the most irritatatingly driven cars on the road?
That's the three-letter airport code for Sioux City, Iowa.
SIOUX CITY, Iowa (AP) - City leaders have scrapped plans to do away with the Sioux Gateway Airport's unflattering three-letter identifier - SUX - and instead have made it the centerpiece of the airport's new marketing campaign.
Now if only I had a reason to go to Sioux City.....
HT: Sarah Skwire at Liberty Fund.
Worst Chart of the Day
Bushies might claim that much of the spending growth is for military purposes, but take a look at Reagan who also spent much on strengthening the military. Source here.
October 22, 2007
The Ultimate Resource to air on PBS
I received this in the inbox this week. If your PBS channel is carrying the show I highly recommend it. I've seen it and it's great.
Hello. Thank you again for giving us coverage on the Milton Friedman biography which aired on PBS in January. We alerted you earlier in the year to our new program The Ultimate Resource. I am pleased to announce the program is scheduled to broadcast on PBS starting November 2, 2007 at 8PM EST. A list of broadcasting stations is available here: http://www.freetochoosemedia.net/production/ultimate_resource/press/ur_station_listings.pdf
October 20, 2007
Musings of the Greenwood Lake Philosopher c. 1907
From the Oct. 20, 1907 NYT:
Masonomics in Action
Arnold Kling's recent essay on George Mason's economics department has received much publicity on econ blogs. An excerpt:
Masonomics sees market failure as a motivation for entrepreneurship. As an example of market failure, let us use a classic case described by a Nobel Laureate, which is that the seller of a used car knows more about the condition of the car than the buyer. Masonomics predicts that entrepreneurs will try to address this problem. In fact, there are a number of entrepreneurial solutions. Buyers can obtain vehicle history reports. Sellers can offer warranties. Firms such as Carmax undertake professional inspections and stake their reputation on the quality of the cars that they sell.
For an example of Masonomics in action, consider this paragraph about a local used car dealer specializing in lending to people with poor credit histories:
Nice Cars Inc., like other used car companies, installs devices on their vehicles that disable the engine if payment stops. Before the shutoff is triggered, the device alerts the driver with a series of noises for a day or two beforehand.
If this innovation seems mean, I bet the company is willing to sell/lend to many more folks (and at better terms) than it might if such a device had not been invented.
In a similar vein, GPS is now used to monitor rental cars, truckers or fleet vehicles, and teenage drivers.
October 19, 2007
Homo Economicus: Redneck Edition
The abstract of a clever paper from Michael Conlin, Stacy Dickert-Conlin, and John Pepper:
To control the deer population, the Pennsylvania Gaming Commission regulates the gender and age of deer that can be legally harvested. These regulations, however, might have an unintended effect on hunting related accidents by changing the care a hunter takes in firing his rifle -- a moral hazard effect – or changing the composition of hunters. To test if and how these regulations affect accidents, we use a unique panel dataset of hunting accidents in Pennsylvania counties from 1990 to 2005 that allows us to distinguish between accidents related and unrelated to the care a hunter takes in firing his rifle. We find that harvesting restrictions substantially decrease the probability of a related accident but slightly increase the probability of unrelated accidents. While the composition of hunters is likely to affect both types of accidents in a similar manner, the differential effect of these law changes on related and unrelated accidents provides compelling evidence that hunting regulations affect the care hunters take when firing their rifles in a manner consistent with moral hazard. Thus, in the case of deer hunting, we find that regulations restricting the types of deer that can be harvested increase the level of care and thus had a positive safety externality.
RE the title of the post: Of course all hunters aren't rednecks. Lighten up.
October 18, 2007
Is there a GMU economic way of thinking?
The gist is that the GMU economic way of thinking emphasizes methodological and ethical individualism.
If you want to be a Masonomist, you have to lose the we. When people use we in today's politics , they are doing two things.
I like that gray eminence line. I dislike always seeing Gordon Tullock's name in parentheses when following that of Buchanan.
The implication of the gist of methodological and ethical individualism, a la the GMU economic way of thinking, is to favor markets over governments. I very much admire the pithiness of Arnold's characterization here:
At the University of Chicago, economists lean to the right of the economics profession. They are known for saying, in effect, "Markets work well. Use the market."
Overall the essay seems to try to make sense of "what is going on" at GMU Economics, and perhaps more importantly, what will come of the ideas currently being tossed about and refined at GMU. That's a tall order. Especially since it's impossible to "abandon the we" when talking about a group of free thinkers, however like-minded and mutually affectionate they may be.
October 17, 2007
Wisdom from George Will
John Edwards, too, has puzzling ideas. For the entertainment of Iowans, he has reinvented himself as a 19th-century Kansan -- Mary Elizabeth Lease, the prairie populist who urged farmers to "raise less corn and more Hell." In August, Edwards urged an Iowa audience to throw off Washington's yoke: "We need to take the power out of the hands of these insiders that are rigging the system against you."
On automobile innovation c. 1907
An interesting concept car is described in the October 17, 1907 NYT:
The autocycle runs upon four wheels, but the position of the wheels is totally different from that of any other vehicle. The front wheel is situated directly in the centre and partially under the forward part of the machine, and the rear wheel is in direct line with the forward one, as in the case of a bicycle. The wheels are placed further apart, however, and on each side are two wheels, known as the balance wheels, connected by an axle with steering knuckles.
October 16, 2007
The next big thing c. 1907
The NYT of October 16, 1907 reports a Homer Simpson 'Doh!!' moment:
The semi-official Temps this evening, referring to a dispatch from New York saying that the Wright brothers had sold their aeroplane to an Anglo-American syndicate which is negotiating with European Governments, says.
In "Frost Warning" William Voegeli offers the following summary statement regarding the debate about the boy who became the poster child for SCHIP:
[T]he New Republic ... conceded that "going without health insurance is often a matter of choice," and "it's clear the Frosts have made [a] choice to invest in property and a business, but not in private health insurance." Now that a tragedy has left their children with serious medical conditions, private insurance is prohibitive. It's mean-spirited, however, to suggest the Frosts were feckless for not securing insurance before disaster struck — that, indeed, this is the whole point of insurance.
This is preface to a larger issue raised by Peter Huber, whether health insurance (whether private or socialized) as we know it is becoming obsolete.
Lipitor is a lifesaver for 600,000 genetically unlucky Americans who harbor a bad-cholesterol gene or two on chromosome 19, and for another 100 million victims of our supersize-me culture. Fourteen billion dollars is a bargain for problems as pernicious as these. Or is it? Let’s blame the victim. The human body is so comfortable with fat that it rarely complains about a cholesterol glut in the blood until seconds before things crash. Many who should be worried never even get their blood checked. Many who do check it fail to take their Lipitor. None of us really needs the pill anyway—just lose the ice cream, shed the pounds, stop smoking, and exercise regularly.
Congratulations Garvey Essay Winners!
The 2006-07 Garvey Essay topic was
Is foreign aid the solution to global poverty?”
A 2005 United Nations report called for a doubling of foreign aid to poor countries as the means to reduce poverty. Yet the 2006 Nobel Peace Prize was awarded to a for-profit microloan bank and its founder, an apparent vindication of the ideas of Peter T. Bauer, Henry Hazlitt, Deepak Lal, and others. As Bauer wrote, “Development aid, far from being necessary to rescue poor societies from a vicious circle of poverty, is far more likely to keep them in that state.…Emergence from poverty requires effort, firmly established property rights, and productive investment.”
Congratulations to the winners.
Junior faculty winners are Peter Leeson, Jason Sorens (University at Buffalo), and Art Carden (Rhodes College).
Student winners are John Parker (U. of Alabama), James Estes (Pittsburgh Theological Seminary), and Juan Ramon Rallo (U. de Valencia).
The contest drew 600 applicants from 48 countries. Details, including prize amounts and webbed essays, are here
I spent a few days last week attending a Liberty Fund conference organized by Aeon Skoble. A fantastic experience--thanks for the invitation and thanks to Liberty Fund for its generosity. Also attending were friends Ed Stringham and Elizabeth Hull.
In his review (WSJ, Oct 11) of Marcus Rediker's The Slave Ship, Fergus M. Bordewich writes:
Mr. Rediker's provocative and briny account chronicles what he calls the "golden age" of the slave trade, from 1700 to 1808, when at any given time hundreds of slavers cruised the African coast between Gambia and Angola, trading firearms, textiles, metalware, brandy and other goods for human cargo. At first, European slave traders simply stepped into "preexisting circuits of exchange" with African chieftains and entrepreneurs. Over time, though, the demand for vast numbers of slaves in the Americas transformed slave-hunting into a major West African industry. Slave ships were thus an essential part of one of the first truly global industries and the development of modern capitalism. [emphasis added]
Nope. Capitalism--modern or otherwise--is not the sale of human beings. Instead it is voluntary, mutually beneficial, interaction among free people.
Perhaps Mr. Bordewich should read Levy and Peart's article on the origins of the term "dismal science."
BTW, co-blogger Bob suggests we use the word "laborism."
Good Reading in Today's WSJ
While we celebrate the brilliance of Messrs. Hurwicz, Maskin and Myerson, we should also remember that Hayek's challenge provided their inspiration. Hayek concluded that the private-property rights that come with the rule of law, freedom of contract, and freedom of association is still the one mechanism design that mobilizes and utilizes the dispersed information in an economy. Furthermore, it does so in a way that tends to capture the gains from trade and innovation so that wealth is continually created and humanity is made better off.
The message of Ayn Rand's "Atlas Shrugged" is that people of talent and ability who produce value for others are constantly harassed, taxed, vilified and exploited by moochers and parasites who use politics to get what they can't achieve through voluntary means of trade and persuasion ("Capitalist Heroes" by David Kelley, editorial page, Oct. 10). No better illustration of that could be given than the rest of your Oct. 10 editorial page, especially the stories on the demand for higher taxes on private equity firms and the destructive political wrangling over CAFÉ rules for automakers.
October 15, 2007
The beef with beef
Maybe we have the wrong sort of CAFE standards, according to this LA Times piece:
All told, livestock are responsible for 18% of greenhouse-gas emissions worldwide, according to the U.N. -- more than all the planes, trains and automobiles on the planet. And it's going to get a lot worse. As living standards rise in the developing world, so does its fondness for meat and dairy. Annual per-capita meat consumption in developing countries doubled from 31 pounds in 1980 to 62 pounds in 2002, according to the Food and Agriculture Organization, which expects global meat production to more than double by 2050. That means the environmental damage of ranching would have to be cut in half just to keep emissions at their current, dangerous level.
October 14, 2007
The Gentle Cynic c. 1907
A few of the days I did not get a chance to read the NYT from a hundred years to the day contained the musings of the anonymous "gentle cynic." Here are a few of his/her(?) better quips:
October 12, 2007
Cool Cover of a Bastiat Translation
This is the cover to the Montenegrin version of Bastiat's "What is Seen and What Is Not Seen" is pretty cool. Courtesy of the Institute for Strategic Studies and Prognoses.
Economic Commentary by Mike Hicks
Ball State economist Mike Hicks, whose book on Wal-Mart I have mentioned before, writes weekly economic commentaries which are archived here. His latest article is on the declining influence of labor unions, where he mentions my favorite insurance order, the International Order of Odd Fellows.
Mises in Italy
I just got back from Italy, where I presented a paper at the fourth annual Mises Seminar conducted by Instituto Bruno Leoni. Although 44 hours of travel for two days in the Italian Riveria was tough, it was worth it as the folks at IBL put together a very nice conference full of interesting work by young scholars from all over Europe and the United States.
Instituto Bruno Leoni puts on an extremely nice seminar and I would urge any young scholars (under 35) to consider applying to present at the 2008 seminar. IBL works hard to defray all the costs of young scholars presenting at the conference, for which I thank them. Unfortunately, I only have a hard copy of the call for papers for next year's conference, but as soon as I see an electronic version I will alert DOL readers to it.
Throwing Stones in Glass Houses
PETA: Cobb shelter illegally euthanized animals
I guess PETA would rather give animals lethal injections and dump them in dumpsters.
The Inconvenience of Truth to Myth
Yesterday the Heartland Institute released an email "media advisory" on the decision by Britain's high court that Al Gore's An Inconvenient Truth is essentially worthless from an objective, scientific point of view.
(Chicago, Illinois – October 11, 2007) British High Court Justice Michael Burton has ruled Al Gore's film, An Inconvenient Truth, represents "partisan political views." He determined schools will have to warn pupils before they show the controversial film.
Hat tip: David Hart of Liberty Fund.
On the World Series c. 1907
the 1907 World Series is underway in early-mid October, with the Chicago Cubs beating the Detroit Tigers on Oct. 11, 1907 to take a commanding 3-0 lead in the best of seven series. Tigers fans are deflated that their team was unable to grab a victory in Game 3 and the Oct. 12, 1907 NYT reports on many aspects of the event:
I'll be away for a couple of weeks to (1) give a talk at the International Policy Network in London, (2) attend and give a couple presentations at the annual Economic Freedom Network meeting held this year on the Adriatic Coast in Budva, Montenegro, and (3) give a talk for the Liberalni Institut in Prague.
I'll also find some weekend time to hike in the Durmitor Mountains of Montenegro where I hope to summit Bobotov Kuk (8274').
On Running Efficiency
From the NYT:
IN her prime, Joan Benoit Samuelson, one of the best female distance runners, should have been faster than Alberto Salazar, one of the best male distance runners.
Public Schools and Others
This report from Yahoo News by Nancy Zuckerbrod, AP Education Writer, is fairly typical:
WASHINGTON - Low-income students who attend urban public high schools generally do just as well as private-school students with similar backgrounds, according to a study being released Wednesday.
Of course, this is not what the report from the "nonpartisan" CEP says. The actual report is based on a set of regression equations in which 8th grade tests are the major predictors of 12th grade test results. Thus, at most the report tells something about how much the students gain between the 8th and 12th grades. Even this is problematic, as the body of the study concedes (p. 19): "Just as it is possible in the NAEP research that private schools attract higher achieving students to begin with, it is possible in this study that private schools promote greater
No F scores are provided for non-comprehensive public schools as a group, and none are provided for parental characteristics as a group. For some of the school types, the number of observations appears to be quite small (Report, p. 26: "No type had fewer than 25 NELS survey participants for this analysis.")
Back to the AP story:
[T]he new study not only compared students by income levels but also looked at a range of other family characteristics, such as whether a parent participates in school life. "When these were taken into account, the private-school advantage went away," the report states. The study looked at 1,000 low-income students from cities who are part of a nationally representative sample of kids surveyed over a period of years, along with parents and teachers, as part of a federal research effort.
In fact, the estimated impacts of these family characteristics as measured by beta coefficients is quite small and not always with the "right" sign. And the sample used in this study is anything but "nationally representative" as the report (p.26) says: "This subset amounted to 1,003 students. By focusing on this subset, the study limited private school comparisons to those affecting inner-city populations...."
October 11, 2007
Another Entrepreneur Serving Customer Needs
As the world's top condom experts convene this week to update international standards, one American entrepreneur has a simple message: Size matters.
Cyclical Marginal Revenue Product?
Some lines of research are more interesting than others. Consider:
Last month, biologist Randy Thornhill challenged the orthodoxy that women do not undergo regular bouts of hormone-induced oestrus ... when they are at their most fertile - something most female mammals experience (New Scientist, 15 September, p 18). Now a study of the tips men give to lap dancers, conducted by a colleague of Thornhill's, lends further support to the argument for oestrus.
Letter in WSJ
My contribution to today's WSJ:
Sen. Bernie Sanders ("Letters" Oct. 4) asserts that Mexico's "agricultural sector has been decimated by cheap exports from American agribusiness." To the contrary, Mexico's agricutural markets have been roiled by high corn prices caused by our subsidy-fueled demand for ethanol. Earlier this year, the Mexican government imposed price controls on tortillas because of sharp price increases caused by American corn demand.
Sen. Sanders's letter is here (sub req). About two weeks ago, I sent a letter that the WSJ did not run; it is below the fold.
Read More »
Clark Havighurst and Barak Richman ("Who Pays for Health Insurance?", editorial page, Sept. 6) commendably call for "expos[ing] consumers to the true cost of health insurance" by passing a reform such as that proposed by President Bush. Oddly, however, they complain that "[a] significant fraction of the cost individuals incur for health coverage goes not to pay for care that they and their families receive, but to support ... medical education and research and the building of costly facilities." Just as part of the true cost of paying for, say, plumbing services involves covering the plumber's training and capital expenses, the true cost of medical services includes the cost of training medical personnel, researching new treatments, and building hospitals. Odder still, Mssrs. Havighurst and Richman argue that premium payers should pay for training and capital expenses "in proportion to their income or ability to pay" even though it is unlikely that the "true cost" of medical services is proportional to income.
The Havighurst and Richman op-ed is here.
« Close It
Do as we say
From Cooler Heads Digest, 10/10/07:
Hypocrite of the Week
October 10, 2007
Frontiers in economic illiteracy
Sen. John McCain during yesterday’s debate:
I'm glad that -- whenever they cut interest rates. I wish interest rates were zero.
Don’t Just Whip Inflation Now, Falsify the Numbers: Argentine President
Outgoing Argentine President Nestor Kirchner has a problem: inflation is at 20 percent and rising. He cares because his wife is running to succeed him as President. What is he doing to address the problem?
Restraining money growth? C’mon, get serious, he’s a post-convertibility neo-populist. For public relations, Kirchner has lately been urging consumers: “Don't buy from those who are trying to make excessive profits.” More seriously, behind the scenes earlier this year he began replacing personnel at the government bureau that measures inflation. The market for inflation-indexed Argentine bonds reacted in a large way to the falsification of the index. Bloomberg.com reports:
Yields on Argentina's 5.83 percent inflation-linked peso note due in December 2033 have soared to 7.65 percent from 5.3 percent on Feb. 1, soon after Kirchner began making the personnel changes.
In other words, the market raised its estimate of the dishonesty in Argentina’s official inflation measure by 235 basis points.
Private note-issue to the rescue
Longtime readers may recall former DOLer Ralph Frasca and others posting on rebates. Now California's legislature has passed a bill requiring that ads feature the pre-rebate price rather than the price net of rebates. Apparently Rhode Island and Connecticut have similar laws in effect.
Institutions Matter: "African Time" Edition
From Reuters via the Freakonomics blog:
Poor punctuality is such a brake on Ivory Coast's economic development that the West African country has come up with a novel way to combat tardiness: win a house if you demonstrate you can turn up on time.
Ayn Rand love chimps
If you had to pick some emotionless scientists, of course they would be Germans. German scientists have discovered that chimps choose more rationally than humans do.
In the game, a human or chimpanzee who receives something of value can offer to share it with another.
Not much else is revealed about the game (one shot? random determination of who gets the thing of value? etc). It obviously points to the presence of "fairness" (if not magnanimity) in human utility functions, however defined. Chimps seem unencumbered by desires of fairness. How to square the fact that humans behave less in their self-interest than chimps? Where's your Darwinism now?
This from a recent press release (HT: NCPA): New Data: Top 1% Pay Greater Dollar Amount in Income Taxes to Federal Government than Bottom 90%. Data also show incomes growing across all percentile groups.
The full study has a wealth of data. I did a little mining and discovered the following (all data 1987 - 2005):
I also looked at a couple of trend lines in the ratios. Results:
Markets in Everything: Beam Me Up Scotty Edition
A few months ago, co-blogger Larry posted on caskets and urns with major league baseball logos. Now Eternal Image, the company with the mlb licensing agreement, is offering Star Trek urns and caskets.
HT: The Locker Room
From John Leo's column on the political leanings of professors:
Although business school professors are believed to be predominantly conservative, professors of business voted 2-1 for Kerry. These professors were barely more conservative than liberal.
I don't how one can describe a group that voted 2-1 for Kerry as being more conservative than liberal.
October 09, 2007
Re: The hell that is Zimbabwe.
1. Estimated population in 2000: between 12.5 and 13 million. 2. Current estimates indicate the population could be as low as 8 million.
Pollution a positive externality?
From the NYT (and written by the son of a good friend of mine):
Death sits on the east side of this city, a 40-billion-gallon pit filled with corrosive water the color of a scab. On the opposite side sits the small laboratory of Don and Andrea Stierle, whose stacks of plastic Petri dishes are smeared with organisms pulled from the pit. Early tests indicate that some of those organisms may help produce the next generation of cancer drugs.
Stop me before I choose again!
I have just spent an hour (an hour in the middle of the freakin workday no less) "instant watching" an episode of HEROES via Netflix. I feel guilty. I worry that I'm worse off because I now have the option of watching tv on my computer at work.
But damn that's a good show--and I'd not have even bothered to watch if it wasn't for the Netflix option.
Scott Jagow: The country's economic minister [is] proposing a $1,500 tax break for young Italians who rent.
October 08, 2007
Good News for Beer Drinkers
A Coasian Solution Would Have Been Better
Evidently property rights were poorly defined or transactions costs were too high:
A Texas man is accused of stabbing his roommate to death because the man complained about his "stinky feet," local media reports.
The World Freedom Atlas
Check out the World Freedom Atlas.
The World Freedom Atlas is a geovisualization tool for world statistics. It was designed for social scientists, journalists, NGO/IGO workers, and others who wish to have a better understanding of issues of freedom, democracy, human rights and good governance. It covers the years 1990-2006.
October 07, 2007
Thankfully it wasn’t another Ruby Ridge or Waco
Tax refuseniks Ed and Elaine Brown, convicted in January of tax evasion and later sentenced in absentia, had been holed up on their property in New Hampshire since February, armed and refusing to surrender. The Feds cut off the electricity, but the Browns had on-site solar and wind power. On Thursday, Federal agents finally got onto their porch by posing as supporters bringing food. (Four actual supporters have been arrested in recent weeks on charges of obstruction of justice.) The couple was taken away without gunfire.
Elaine Brown, writing on the couple’s own official website before the arrest, apparently believed she had what Herbert Spence called “the right to ignore the state”:
Title 28 USC defines the United States as a federal corporation. If you are not a part of that corporation, i.e., you have no contract with it, you are not employed by it, you are accepting no benefits from it, then by the ‘right of association’ clause of the first amendment, you are not required to obey any of its dictums; it has no jurisdiction over you.
Ed Brown apparently had what can charitably be called a deep conspiracy theory of government. A news story reproduced on the site notes that “Ed Brown, for his part, has named [trial Judge] McAuliffe as a possible target for his followers on several occasions, identifying him as part of a "Zionist Illuminati" plot to rob Americans of their freedoms.”
King of Bollywood
In the New York Times today, Charles Taylor reviews Anupama Chopra’s new book King of Bollywood: Shah Rukh Khan and the Seductive World of Indian Cinema. As Taylor notes, it’s remarkable that a book on a foreign movie star, virtually unknown in the US outside the South Asian community, is being published by a major US press (Time Warner).
Taylor writes: “At the moment no one represents Bollywood more than Shah Rukh Khan. It’s not just that this epitome of Hindi cinema is a Muslim, which makes Khan an unusual star. Part leading man, larger part buoyant goofball, Khan looks something like the offspring of John Stamos and Jerry Lewis.” I agree with the first and third sentences. But a Bollywood star being Muslim isn’t so unusual. It's less unusual than (say) a Hollywood star being black. Consider just the list of other leading men surnamed Khan: Aamir, Feroz, Saif Ali, Salman, Sohail, Zayed.
This is a matter of taste, but I think Taylor also errs in calling SRK’s most famous film, Dilwale Dulhania Le Jayenge (1995), “wonderful”. It’s a sappy romance with far too much mugging by Khan and pouting by his co-star Kajol. The most vital films in Bollywood, for my money, are the gangster flicks.
Anupama Chopra was the author of Sholay: The Making of a Classic, a well-written book that I had to import from India (via eBay). Even though I’m not a fan of SRK, I look forward to being able to buy her new book domestically.
Incentives Matter: Campaign Fundraising Edition
College students looking for some extra spending money can earn a good chunk of change (plus “cool prizes”) if they raise more than $1,000 for Mitt Romney’s campaign.
Bad News for Beer Drinkers
More blowback from the ethanol boondoggle:
That six pack of high-brow beer is about to come at a higher price, thanks to the sharpest surge in decades in the cost of the hops and barley that give each brew its distinctive taste.
I'm drinking much less beer these days but folks who feel more pain from the beer price increase might consider entering the North American wife carrying contest. The winner receives his wife's weight in beer and five times her weight in dollars.
HT: my wife
October 06, 2007
Reviewing The Shock Doctrine
First, a couple of lines from Cowen (not part of Moffatt's excerpt):
It's probably the most effective brand of emotional nonfiction to be published this year. But when it comes to the underlying message, and the standards of evidence used to support it, "The Shock Doctrine" is a true economics disaster.
I really want to like the work of Naomi Klein. She's a terrific writer, a Canadian, and I believe the west needs a thoughtful critic of conspicuous consumption. But so far in her career, Ms. Klein has refused to engage in any kind of intellectual debate, instead focusing on taking cheap-shots at people who are no longer around to defend themselves (Friedman). The sad reality is that the works of Thorstein Veblen, which are over 100 years old, have more current relevance than Shock Doctrine which came out last month.
October 05, 2007
Upward-sloping supply of amnesia
CHARLESTON, S.C. - A former economist pleaded guilty Friday for his role in swindling investors out of an estimated $90 million, which authorities said he used to purchase a half-dozen homes, swanky cars and jewel-encrusted pens.
Even economists, it appears, respond to incentives:
At a hearing in May, a psychiatrist testified that Parish suffered amnesia resulting from extreme stress, but she also said Parish's memory improved after he learned amnesia was not a defense to the criminal charges.
Principal-agent problem: Bronx Bombers edition
Documents Just Released Show New York Yankees Entertaining at Taxpayers' Expense
Posted by Craig Depken at 01:15 PM
On centralization c. 1907
From a letter to the editor of the October 5, 1907 NYT:
While Mr. Roosevelt is interested in the later days of the Roman Empire, could you not call his attention to the fact that one chief reason of its disintegration and its easy final "fall" was the gradual weakening of local governments and the centralizing of these old local powers in the capital city? When the centre became weak there was no strength left elsewhere.
On (not) stopping global warming
Steven Milloy reports that the Low Carbon Economy Act of 2007 "would cost taxpayers more than $1 trillion in its first 10 years and untold trillions of dollars in subsequent decades." Further, "This week, the EPA sent its analysis of the bill’s impact on climate to Bingaman and Specter. Now we can see what we’d get for our money, and we may as well just build a giant bonfire with the cash and enjoy toasting marshmallows over it." [Milloy does not examine the global-warming implications of the bonfire.]
Using IPCC formulas, Milloy estimates the implications of the EPA's estimates for the earth's temperature. (The EPA does't make these computations. Milloy suspects that's because the results would be embarrassing to the Act's authors.) Milloy's estimates:
Under the no-action scenario (718-to-695 ppm), the IPCC formulas indicate that the multitrillion-dollar Bingaman-Specter bill might reduce average global temperature by 0.13 degrees Celsius. Under the maximum regulation scenario (514-to-491 ppm), Bingaman-Specter might reduce average global temperature by 0.18 degrees Celsius.
Foreign Affairs carries the article, "Why Climate Change Can't Be Stopped," that suggests the approach with highest payoff: "Dollar for dollar, the most efficient way to cut global greenhouse gas emissions would be, in theory, to invest hundreds of billions of dollars to improve China’s energy efficiency. But Congress would never support such an approach." That last sentence might be the understatement of the century.
Rodrik on Economic Freedom
He is more favorable to us than I'd expected, but does criticize us for overselling the case,
El Salvador is a prime example of the "build-it-and-they-will-come" fallacy: all you need to do is to get the basics right, and then markets will do the rest.
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This criticism may have some merit. I do tend to believe that if a group of people (e.g., a nation state) gets the institutions and policies consistent with some notion of economic freedom, then that group of people will grow and prosper economically. I don't believe this is a "day follows night" kind of thing however, and freely admit that some countries could do well for a time without a lot of economic freedom and some with a lot of economic freedom could do poorly. There are long and variable lags and other things matter.
But having said that I see El Salvador differently. First, I see a nation with a history of low economic freedom and political stability with little credibility in the eyes of domestic and foreign investors. It has only recently begun to stabilize and improve its economic institutions. I would not expect it to grow quickly immediately. These things take time. I would predict things to improve only after some degree of credibility is earned. In El Salvador's case, this could take a long time.
Second, maybe El S will never grow for some reason. Maybe the culture is messed up. Maybe the climate is a killer. Maybe God hates them. I don't know. Maybe El S will defy my world view that economic freedom leads to growth and prosperity. I doubt it (see the first point) but it could happen. Does this invalidate the general model? Sure a lot of examples like El Salvadors would force us to question the general model, but there are very few exceptions to the general rule that economic freedom and growth/prosperity are related.
Part of the problem is the construction of the one graph from our book that he cites. It relates the level of economic freedom with growth. We are careful in the book to qualify these graphs accordingly,
we are not necessarily arguing that there is a direct causal relation between economic freedom and the variables considered below. In other words, these graphics are no substitute for real scholarly investigation that controls for other factors. Nonetheless, we believe that the graphs provide some information about the contrast between the nature and characteristics of market-oriented economies and those of controlled economies. At the very least, these figures suggest potential fruitful areas for future research.
I wouldn't argue that the level of economic freedom alone correlates with growth. I would include the change in economic freedom and other variables too. Statistically, there is a lot of evidence that economic freedom, especially increases in economic freedom, is powerfully related to economic growth.
Outliers like El Salvador may exist but citing them is hardly evidence that an important general pattern doesn't exist.
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A short podcast of yours truly is up at the Buckeye Institute. Just a few minutes talking with Buckeye President David Hansen about economic freedom.
October 04, 2007
A Masochist with a Sense of Humor
That's George Will's description of Chicago economist and Obama advisor Austan Goolsbee. An interesting paragraph:
Economics is the only academic discipline that in recent decades has moved in the direction that America and much of the world has moved, to the right. Goolsbee no doubt has lots of dubious ideas -- he is, after all, a Democrat -- about how government can creatively fiddle with the market's allocation of wealth and opportunity. But he seems to be the sort of person -- amiable, empirical and reasonable -- you would want at the elbow of a Democratic president, if such there must be.
Technology plays a part, but taste and competition do as well: Too many bad corks have been ruining too much perfectly good wine. For a couple of hundred years, winemakers and wine drinkers understood that the wine in a small percentage of bottles -- as much as 3% to 5% -- would suffer from the contamination of bad corks (and, sometimes, bad barrels). The culprit was a chemical called tricholoanisole, or TCA. It caused wine to become "corked" -- that is, to smell like a moldy pile of damp cardboard. The TCA problem -- apparently originating at the early stages of cork harvesting -- seemed to get worse over the past few decades. But the cork industry, dominated by a handful of big companies in Spain and Portugal, refused even to acknowledge the problem, let alone do anything about it.
The second article is about our old favorite--WalMart. Excerpts are below the fold.
Read More »
And across the landscape, numerous rivals are using a form of competitive jujitsu to keep the Bentonville behemoth off balance.
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An Awkward Introduction
MR. DOOCY: More on this waste with an expert.
Although the introduction could be interpreted (and was intended) to mean that Rep. Royce opposes government waste, I bet he'd prefer not to be introduced as an expert on government waste. For what it's worth, Royce had a score of 84 (rank of 21) on the Club for Growth's 2006 House Scorecard.
October 03, 2007
To have, or not to have
I got through a bit of Bryan Caplan's The Myth of the Rational Voter, where he describes some of the systematic errors the general public makes in analyzing economic issues. One he mentions is pessimistic bias, where people always think things are getting worse despite reams of evidence to the contrary. Of course, this is hard for most economists to understand since material standards of living have only gotten better in the long run.
But, true to form, via Fark I was led to this Yahoo story about a Pew poll (whew, too many references) that says the amount of people who consider themselves "have nots" has doubled since 1988, from 17% to 34%. Know what else doubled over a little less than that period ('88 to '04)? Nominal median family income, according to the Stat Abstract. Real per capita GDP rose 36.4% from '88 to '05. Real disposable personal income per capita rose 55% from '88 to '05. And on it goes.
Let's say that half of the population are haves and half are have-nots. In 1988, 50% of families had real income below $50,000 (2004$); in 2004, only 45.9% of families had real incomes below that. For households in 1988, 58.7% had real incomes below $50k while in 2004 only 55% were below $50k. Add to that the fact that a dollar today buys you better quality stuff than it could in 1988 (I'm trying to think of examples but I was only 13; soccer shoes?).
Which leads to the question: do you want some cheese with that whine?
On foreign remittances c. 1907
From the October 3, 1907 NYT:
Remittances home by Norwegian immigrants to this country and Canada, according to the report of Consul F. S. S. Bergen, must be increasing at the rate of considerably more than $1,000,000 annually; 55,00 of these remittances to relatives and friends amounted in the first quarter of 1907 to $1,374,840, exceeding by $268,054 the remittances of the first half of 1906. This is part of the tax America pays for its European immigration. But it is an excellent investment, even supposing that a good share of it were not used to ring over more immigrants.
TR vs. GWB c. 1907
This headline from the Oct. 3, 1907 NYT, describing a speech President Teddy Roosevelt gave in St. Louis, could easily describe the current political environment:
USE VAST FEDERAL POWER - ROOSEVELTThe entirety of the speech is printed in the paper, with the following section headings:
"Who is heterodox?" redux
The discussion of how the economics profession treats “heterodox” economists, and what it means to be a “heterodox” economist, continues in an article by Andy Guess in Inside Higher Education today. Finally, a journalist gives serious play to the empirical research on the politics of economists by my Econ Journal Watch colleague Dan Klein. Guess cites several of Dan’s articles in EJW on the sociology of the economics profession.
Earlier this year I commented on how writers for The Nation and The New York Times had credulously accepted false claims by mainstream interventionists like Alan Blinder that they are brave “heterodox” critics of a free-market “orthodoxy”. Guess quotes Klein rightly disputing these claims.
October 02, 2007
On class warfare c. 1907
The October 2, 1907 NYT editorial discusses the differences between the United States and Roman Republic:
There were rich and poor in Rome as there are in the United States, but there is in our Republic no dividing line between the two general classes so sharply drawn as in Rome. From the poorest to the richest the gradations are many, and from one gradation to another the change is slight. Nor was there in Rome any such chance for the citizen to pass from one to another along the whole line. These facts which we are afraid Mr. Roosevelt does not always keep as clearly in his mind as he might. Perhaps they are a little complicated, and do not readily lend themselves to the emphatic mode of speech to which he has accustomed himself.
October 01, 2007
The Shock Doctrine
I am mystified by much of what I see in Stiglitz's review of "The Shock Doctrine." First, he accepts and amplifies her representation of Friedman's "complicity" with the Pinochet regime. Pete Boettke represents Friedman's involvement thusly: "Friedman did not design any policies for Chile, nor was he a close advisor to the General. He spoke plain truth about monetary policy and the need to fight inflation, and he talked to students about the dangers of socialism and collectivism and the benefits of a free market economy." Greg Mankiw does not question the historical assertion regarding Friedman's involvement, but does suggest that such involvement would have been ethical, whatever one thinks of Pinochet.
This passage in the Stiglitz piece puzzles me: "Afraid of scaring off foreign investors, [the African National Congress] took the advice of the I.M.F. and the World Bank and instituted a policy of privatization, spending cutbacks, labor flexibility and so on. ... The average growth rate has been a disappointing 5 percent (much lower than in countries in East Asia)...." Why compare South Africa's growth to those in East Asia; why not compare it to other African economies or to its own past? Looking at the United Nations Development Report, I find that per capita GDP fell at an annual rate of 0.5 percent for 1975 - 2004, but rose by 0.6 percent for the later sub-period 1990 - 2005.
His review contains this bizarre sentence: "In the 1950s, as Cameron was conducting his experiments, the Chicago School was developing the ideas that would eclipse the theories of Raul Prebisch, an advocate of what today would be called the third way...." The reference to Cameron involves CIA experiments that probably provide the inspiration for the Bourne novels, but have nothing to do with economics. Anyway, Prebisch's main prescription, if my memory serves, was for import substitution and did not yield very satisfactory results.
Re: Mike's post below. There's nothing wrong with calculating deadweight loss triangles, but when I teach about the sugar quota I conduct a blind taste test among my students with Mexican Coke (made with sucrose) and our stuff (made with HFCS). I tell them that they can actually "taste protectionism".
Ben Powell, to whom I owe this idea, has a paper forthcoming about this teaching exercise in the Journal of Private Enterprise.
An Actual Economic Education Article
An interesting excercise, for econ students.
A little dated now, but still.
Provides a classroom exercise using the restrictive tariffs on sugar to examine issues of protectionism and international trade. Discusses related issues such as the North American Free Trade Agreement and the formation of large regional trading blocks. Includes a hands-on calculation of the economic impact of the quota on consumers.
Posted by Michael Munger at 09:40 AM
The Economics of Latness
I predict you will recognize someone close to you.
Unfortunately, that "someone" may be in the mirror. What are ya DOIN'?
Generally, we measure and manage any resource more carefully as it becomes valuable. We measure lettuce by the head, and store it in big bins. We measure diamonds by carats (that's .0071 ounces), and display them in glass cases on black velvet.
Well, "busy" means time is valuable. So, rational busy people should measure time more accurately, and manage it more efficiently. Hence, competent busy people are rarely late.
Posted by Michael Munger at 09:27 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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