Division of Labour: December 2007 Archives
December 31, 2007
Running/Hiking Year in Review
I had a very good year of running in 2007 with no injuries and several fun races:
I also had a pretty good year bagging mountains: Kilimanjaro (19340') in March, Turtlehead Peak (6324') in March, Charleston Peak (11918') in July, and Mt. Washington (6288') in December.
Government waste c. 1907
The December 31, 1907 NYT reports a government outrage:
OKLAHOMA CITY - Twenty-three hundred barrels of beer, valued at $17,500 and belonging to the New State Brewery to-day were emptied into the sewers by Internal Revenue Collector Charles Howard.The horror.....the horror.
Count the cliches!
Peter Goodman at the NYT thinks the free market is a false idol. Ho hum.
Here's a game to play: Count the cliches in his piece. E.g.,
Throughout history, regulation has tended to gain favor on the heels of free enterprise run amok."
Man if this is the best argument the NYT can conjure up against the free market, then we free market supporters have nothing to worry about.
UPDATE: A commenter, Ryan, writes in:
Considering the article you cite in the NY Times, I guess those who distrust the unfettered free market are watching too much "Bruce Almighty". Remember, his problem was that he could not answer the prayers the old-fashioned way, so he directed them to e-mail or the internet. Since this technology is available, should those who want the command economy be available by way of e-mail when the rest of us want to make an economic decision? Should I e-mail Jared Bernstein every time I go to Walmart? (I use him since he was quoted in the article.) Would he know if I should buy a half gallon of milk or a whole gallon of milk? Swiss or provolone? Old Milwaukee or Great Lakes Beer? Oh the questions? Woe is me who does not know how to make economic decisions for myself. A poor commoner am I.
December 30, 2007
Smoking policy c. 1907
On January 1, 2008, the state of Illinois will ban almost all smoking in enclosed public spaces, including private restaurants and bars. Moreover, it will be illegal to smoke a cigarette in a car in which children less than 18 years of age are riding (enforcement issues would seem to abound with this one) [more state laws going into effect 1/1/08].
In the December 30, 1907 NYT there was a rather different policy concerning smoking:
On New Year's Eve "all ladies" may smoke cigarettes in any of the rooms of the restaurant [Cafe Martin], at Twenty-sixth Street and Fifth Aveneu, and this privelege may become permanent thereafter, if all goes well. With his shrewd eye on his guests, Mr. Martin will determine whether New York is ready to follow the precedent of Paris and London...
December 29, 2007
RE Stranger Life Insurance
Bob's post on stranger life insurance reminded me of a piece (pdf) on so-called janitors insurance that I wrote for The Independent Review a few years ago. Janitors insurance was the practice of companies taking out insurance policies on their employees without benefit to the employees or knowledge of the employees. In the TIR piece I argue that such practices must be driven by tax preferences since the loss of rank and file employees (unlike corporate officers) should not be too disruptive to a large comany and because insurance is actuarily unfair such policies would not seem to be economical.
Sorry this is so brief; I'm spending some family time at Kitty Hawk NC.
December 28, 2007
Krugman vs. Krugman, Again
Don Boudreaux points out yet another conflict between columnist Krugman and economist Krugman. In doing so, he links to a really nice essay by Krugman. The last paragraph is pertinent to anyone teaching undergraduate economics as well as to anyone debating a noneconomist:
Justify modeling: Do not presume, as I did, that people accept and understand the idea that models facilitate understanding. Most intellectuals don't accept that idea, and must be persuaded or at least put on notice that it is an issue. It is particularly useful to have some clear examples of how "common sense" can be misleading, and a simple model can clarify matters immensely. ... None of this is going to be easy. Ricardo's idea is truly, madly, deeply difficult. But it is also utterly true, immensely sophisticated -- and extremely relevant to the modern world.
Market in...Stranger Life Insurance
"Viatical" sounds like something Bob Dole would peddle on TV, but it refers to an insurance-industry practice that state Rep. Jay Hottinger (R-Newark) believes ought to be changed.
I think I'll stick with TIAA-CREF.
December 27, 2007
Factoid from George Will: "McDonald's has made more millionaires, and especially black and Hispanic millionaires, than any other economic entity ever, anywhere."
December 24, 2007
Government and alternative fuel subsidies c. 1907
The argument for government being involved with the development of alternatives to petroleum based energy seems novel but it turns out the government has been mucking around with energy policy for quite some time.
Early in the development of the automobile, gasoline engines competed with engines that burned alcohol and even electric cars. The alcohol-burning engines were actually more efficient than the gas burning engines (in the early 1900s) and alcohol was a lot cheaper than gasoline. However, pre-income tax the U.S. government was funded on excise taxes and tariff revenue, and one of the excise taxes was on alcohol.
The distillers and the fledgling auto industry lobbied the government to reduce the tax on denatured alcohol to make it affordable as an alternative to gasoline. However, the government chose not to reduce the taxes on denatured alcohol, which, in turn, made gasoline cheaper (by about 15 cents per gallon or $3.32 in 2006 dollars) and the automobile industry went with gasoline rather than the "renewable" fuel. What is only slightly ironic is that one hundred years later the U.S. government and activisits proclaim that consumers, who do not understand negative externalities of gasoline, make it so that the government (which one?) should, once again, decide the winner in a new new-energy game.
The December 24, 1907 NYT reports another twist in the early battle between gasoline and alcohol:
Representative Cary has introduced a bill awarding a bounty [subsidy], extending over five years, of 15 cents upon each gallon of proof alcohol produced by farm distilleries with a daily capacity of not over 100 gallons...only ten stills, the Commissioner of Internal Revenue reports, have been set up to produce denatured alcohol from farm waste at a cost, thus far, far greater than was promised."
The first paragraph suggests that, rather than reduce the tax on the cheaper renewable fuel (yesterday alcohol, today imported ethanol) the government will provide a subsidy for every unit produced without the benefit of economies of scale.
The second paragraph establishes much of the political economy of the United States over the past century. In many cases, it is easier to appeal to government for "regulation" (of whatever form), than to tackle a problem using free-market solutions (to include health care, environmentalism, etc.).
The last paragraph would seem just as important today than in the past. Government is not very good at choosing winners, or at least at avoiding the unintended consequences (whether one year, one decade, or one century later) of doing so.
Woe for the ice farmer c. 1907
From the December 24, 1907 NYT:
Ice-cutting operations in Maine during the present Winter will be on a smaller scale than for some years. The Summer was not at all favorable to the ice industry, and all the big companies have stock enough on hand to last them through an average year without cutting at all.A cooler summer of 1907 meant less demand for ice and therefore less reason to cut ice during the winter months? Interesting.
Why no Congressional calls for subsidies for ice farmers? Oh yeah, in 1907 the United States hadn't yet experimented in a big way with the narcotic effects of government subsidies.
Speaking of commodity currencies
It isn’t exactly the e-gold model, and it isn’t yet relevant to ordinary Americans, but this announcement from Standard Chartered Bank represents an interesting step:
Corporate, SME and Institutional Clients of Standard Chartered Bank in the UAE are now able to trade physical gold accounts through On Line Treasury (OLT), Standard Chartered's comprehensive Request for Quote FX service ….
In other words, if you qualify, you can move funds between your gold-denominated account and your accounts denominated in any of the leading fiat currencies, at the current exchange rate, with the click of your mouse. This is an extension of Standard Chartered’s OLT service which already allowed online foreign exchange (FX) trading. I've looked at the online demo, and it looks as easy as making a "Buy It Now" purchase on eBay.
How long before this sort of thing becomes available to retail customers in the US?
December 23, 2007
Legislative restraint c. 1907
The Dec. 23, 1907 NYT reports on legislative restraint on the part of Confederate veterans:
BIRMINGHAM, Ala. - United Confederate Veterans, of this city, yesterday by unanimous vote went on record in opposition to the bill introduced by Congressman Hobson providing for pensioning Confederate veterans. The resolution concludes:
It would be refreshing if some today would show similar restraint.
Christmas scams c. 1907
From the Dec. 23, 1907 NYT:
Residents of Newark, N.J. have been made the victims of a Christmas swindle in the last few days. The trick consists of collecting charges on worthless packages. Men appear at houses with bundles addressed to persons living at the addresses, and state that there is a special delivery charge of 50 cents of $1. The amount is nearly always paid without question, in the belief that the package contains a Christmas gift. When opened the box or pacel contains only old papers.It would seem a) the sender would pay the delivery fee; b) you wouldn't accept a package without some indication about who sent it. Perhaps it was much different one hundred years ago.
December 22, 2007
d(cold)/d(booze) < 0
I got this New York Times article from social-networking-benefits-of-booze expert, Ed Stringham:
THE BOTTOM LINE: Alcohol will not help cure a cold, though moderate consumption may reduce susceptibility.
I'm in Western New York with family and most of us have colds. Not me, though..... Bartender!
Basket ball c. 1907
Just how bad was basketball in the early days? The Dec. 22, 1907 NYT reports on the Penn-Army basketball game from the night before:
By a score of 22 to 21 the University of Pennsylvania defeated the cadet basket ball team here to-day. With five seconds to play and only one goal needed to give the soldiers the lead, the excitement was intense, both teams playing frantically.How painful was that to watch? How painful would it be to watch a game like that today?
Marginal benefit < Marginal cost c. 1907
From the December 22, 1907 NYT:
KINGSTON, N.Y. - After practically wrecking the interior of the Ontario & Western station in this city in their efforts to open the cash drawers, burglars early to-day finally obtained 8 cents and then lost 3 of them while making a hurried escape.
Corporal punishment c. 1907
From the Dec. 22, 1907 NYT:
According to a special committee of the Board of Education, which is investigation the advisability of restoring corporal punishment in the schools, there is a strong feeling among Superintendents, Principals, and teachers that the use of the rod should be permitted. Of about 1,000 opinions received by the committee, the majority take this view of the question.I wonder about the results of a similar survey given today.
From a Competitive Enterprise Institute posting: "It seems the [Washington] Post believes that if an emission drops and no bureaucrat was around to mandate it, it didn't really drop. ... Under any relevant modern baseline, e.g., the year Europe made its Kyoto promise (1997) or thereafter, U.S. emissions have risen far more slowly than those of its noisiest antagonists. For example, International Energy Agency data show that over the past 7 years (2000-2006), the annual rate of increase for U.S. CO2 emissions is approximately one-third of the EU's rate of increase. Indeed, over the same period even the smaller EU-15 economy has increased its CO2 emissions in actual volume greater than the U.S. by more than 20%, even while the U.S. economy and population also grew more rapidly."
More on the Mitchell Report
An examination of the data on the players featured in the Mitchell report suggests that in most cases the drugs had either little or a negative effect.
They do offer a caveat:
It is possible (but not addressable by these data) that one effect of drugs is to help players compensate for decline as they age, and thus to extend their careers. But there is no evidence in these data for performance enhancement above previous levels.
HT: JC Bradbury
December 21, 2007
Why not competing commodity currencies? Comment on McArdle
Over the past week the well-known and quasi-libertarian blogger Megan McArdle has offered several critiques of the gold standard, and particularly Ron Paul’s case for it. Pete Boettke has kindly suggested that she should read what George Selgin and I have written on the topic of competitive monetary regimes, so forgive me for jumping in.
McArdle seems to believe that a parallel gold standard is already fully legal. Unfortunately, it isn’t so. One cannot, in fact, “buy a bunch of gold and melt it down to coins” without legal trouble. The Liberty Dollar folks tried that. The US Mint declared their production of coin-like gold and silver pieces illegal, and the feds raided the operation. The E-gold folks tried providing a gold-based online deposit-transfer system, and they were busted, charged with violating money laundering statues and with operating a money transfer service without the proper licenses.
If you tried to use gold or silver coins as a medium of exchange, you’d be subject to capital gains taxes as the nominal dollar price of gold or silver varied.
Even if these legal barriers didn’t exist, McArdle’s put-your-money-where-your-mouth-is challenge would still be a non sequitur:
So why haven't you done this? If you say, because no one would spend it, you've hit on the reason for government money; it massively reduces transaction costs to have a single accepted currency.
Yes, a single monetary standard does reduce transactions costs. That’s the reason why there is a strong tendency to converge on a common standard. But it isn’t the reason for government money – that’s an entirely different question. An analogy: a standard sized building brick reduces construction costs. That’s not a reason for government to specify the dimensions of the brick, much less to produce bricks.
Historically, we owe the achievement of a common monetary standard to medieval banks, which learned to denominate their notes and deposits in uniform silver units for the convenience of their customers. Not to governments, which undermined uniformity by debasing their coins.
Strong convergence is why parallel currencies have a hard time getting a foothold today, except where the incumbent currency is very bad. The post-Volcker fiat US dollar, granted, is not very bad. Thus US citizens are not adopting other currencies. That doesn’t show that the dollar is better than the Swiss Franc. Or better than gold.
For anyone who's interested in my medical saga: I'm scheduled to receive a kidney transplant on January 8, pending last-minute tests. The donor is my first cousin. I guess my parents actually had my long-run best interests in mind when they dragged me to all those family reunions.
On prohibition c. 1907
The temperance movement is alive and well in 1907 (Georgia and Alabama, at least, went dry Jan. 1, 1908). Historical perspective indicates that the war on liquor didn't work out very well and the Dec. 21, 1907 NYT contains a statement to this end by the president of the Distiller's Securities Corporation:
With reference to the prohibition movement, it is unnecessary to go into details, but it can be stated as a fact, based upon long experience and statistics, that all attempts to regulate the traffic by statute and enforcement of restrictive legislation have invariable resulted in an increase in the per-capita consumption in the State affected. The effect of Prohibition laws is only to change the channels and methods of distribution.Without prohibition, we might not have NASCAR?
Wildcat football c. 1907
From the Dec. 21, 1907 NYT:
Intercollegiate football, which has been barred from the Northwestern University two years, will be resumed at the opening of the season of 1908. The decision of the Trustees was read to-day by President Harris in the presence of 1,500 students, and was greated with cheers. The annual football contests, however, are to be limited to three intercollegiate games.Northwestern's record in 1908? 0-2 in the Western Conference, tied for dead last with Iowa, and 2-2 overall.
In the ensuing years (1908-2004), Northwestern amassed an overall winning percentage of 0.391 (900 games, 340 wins, 536 losses, 24 ties).
December 20, 2007
What color is in your laundry chute?
When Baby New Year pops on the scene, what fashion statement will his swaddling garments make? That depends partly on color, at least if we can take seriously this New York Times fashion article, Pantone's Color of the Year Is....
At least one color authority, Pantone, has taken the plunge and announced its favorite color for 2008. [...] In a statement, Leatrice Eiseman, the executive director of the Pantone Color Institute, said: “Blue Iris brings together the dependable aspects of blue, underscored by a strong, soul-searching purple cast. Emotionally, it is anchoring and meditative with a touch of magic.”
Uhm.... Okay. Somehow I sense that Pantone realized "hey, no one else is doing this" and took the opportunity. Which is cool. But so what?
It's nearly tautological that colors come and go with fashion. But it's empirically interesting to ask which colors and why? For starters, is Pantone actually the leader it's posing to be, or does the designation of blue iris reflect the net leanings of fashion's myriad of tastes and designs?
There has indeed been a surge of blue on the runways in the last year, beginning last February with Raf Simons’s dresses and pantsuits, in an Yves Klein blue, for Jil Sander and extending into the spring 2008 collections with Nicolas Ghesquiere’s explosive floral prints for Balenciaga. Mr. Elbaz used a deep lagoon blue in his spring Lanvin show, and one found lighter but no less robust shades in collections by Marni and Chloé, and in the men’s lines of Prada and Alexander McQueen. Dolce & Gabbana called its new fragrance Light Blue. And JWT, the advertising and marketing company, just named blue as one of the top 10 trends for 2008, saying that “blue is the new green”...
Never mind all the name dropping. I think this is interesting because it suggests (albeit mildly) a catallactic understanding of trends--that trends, like market prices, can be traced to the points where individual actors make choices among alternatives. More on this to come.
More on "canned" music c. 1907
The December 20, 1907 NYT has a letter to the editor, penned by one Thomas K. Henderson of the General Music Supply Company of New York, addressing some of the concerns on the part of music composers about so-called "canned" versions of their works, which were being played on so-called "player pianos" and the like:
So far as the alleged decline in the sale of sheet music is concerned, I am assured by the best authorities that composers who write anything of merit are finding a ready sale for their works, and that if there is any decrease it is in the case of those who persist in flooding the country with the veriest trash. Perhaps this is due to the fact that the American taste is becoming more cultivated through the use of the player-piano, which makes easy the playing of the music that is worth while - the music of the old masters, that will live forever.The last paragraph proved prophetic. As for the first paragraph, one wonders if there is a similar argument for much of today's "music."
December 19, 2007
A Not-So-Freaky Link?
The Freakonomics blog links to a chart (published by the Milwaukee Journal-Sentinel) which reports that 46 of the players named in the Mitchell Report improved their performance in one or both of the two years after they supposedly started taking steriods. There are a lot of issues that can be raised here--is the Mitchell Report correct? what if these players were taking roids before the date cited by Mitchell? wouldn't some of the players improve because they had not yet hit the peak age of 28 or so? isn't it a stretch to claim that the juice helped some players in the second year after they started using but not in the first?--but here's a more fundamental issue: The Mitchell Report named 86 players so finding 46 (a mere 54%) that improved might well nothing more than random chance. Indeed, 46 is less than one standard deviation (4.6) away from 43 for a binomial distribution with n=86 and p=.5. Could it be that the Freakonomics guys have been, ahem, fooled by randomness?
Boettke on Frum on Paul
Peter Boettke goes off on David Frum's ill-conceived critique of Ron Paul and "his self-taught monetary views, which amount to a rejection of everything taught by modern economists from Alfred Marshall to Milton Friedman. Huckabee and Paul have not the faintest idea of what they are talking about."
My, my. A bit nervous are we? The tone of Frum's attack suggests so. (Whole thing is worth a quick read.)
Boettke, a former tennis pro, throws an overtly McEnroesque fit. And he supports it with an economic volley that leaves Frum fumbling for his racket.
David Frum, a political commentator with no economics background whatsoever, chides Ron Paul for being self-taught on economics...
There is much more in both, well in Boettke's anyway. Contra Frum's title, I think we ought not take Frumism too far!
Let's repeal scarcity
... at least for the entitled:
As protesters gathered at colleges around the country to criticize federal budget cutbacks that would raise the price of subsidized birth control at student health services, one University of New Mexico student described the imminent horror to Albuquerque's KFRQ-TV: "(Students shouldn't) have to make a choice between their birth control and their cell phone bill or their birth control and their gym membership ..." [KRQE-TV, 11-12-07]
Another Way to Waste Time
Test your vocabulary on FreeRice.com. I made it to level 47.
Buy This Book
Don Boudreaux's Globalization is now available--it'll be tightly-argued and well-written. I hear it even makes a nice gift for your pets!
Other book tips if you're looking for last minute Christmas presents:
JC Bradbury's The Baseball Economist
Brian Doherty's Radicals for Capitalism
UPDATE: Another fine present would be Ben Powell's edited volume Making Poor Nations Rich. Co-blogger Bob is among the contributors.
December 18, 2007
Incentives Matter: Pretrial Release Edition
Compared to release on recognizance, defendants on financial release were more likely to make all scheduled court appearances. Defendants released on an unsecured bond or as part of an emergency release were most likely to have a bench warrant issued because they failed to appear in court.
December 17, 2007
In Praise of Capitalists c. 1907
The December 17, 1907 NYT reports on a speech by James E. Day, Chancellor of Syracuse University, which, if given today, might well have led to his ouster (a la Larry Summers):
Chancellor James E. Day of the Syracuse University was unexpectedly called upon to address the Methodist ministers' meeting at yesterday's session, and at once launched upon his favorite subject, the status of the rich and the poor of this country...
Hot Stove League c. 1907
From the Dec. 17, 1907 NYT:
It is announced in Washington that the fans there will not have a chance to see the Senators in uniform until the opening game of the season, which should be a matter of satisfaction to National Capital fandom. Manager Cantillon will again lead his troupe of alleged players to Galveston, where he will sift out their baseball knowledge for a month and then play minor league clubs on the return trip to Washington.Ouch, with love like that it's a wonder it took the team another 53 years to relocate (ultimately to Minneapolis, MN in 1961).
Representative of the shady dealings before the era of free-agency began (again) in 1976:
Chicago White Sox say they were double crossed in a deal for Ira Thomas, one of the Yankees catchers, who was obtained by Detroit. They fail, however, to say how the double crossing was accomplished.
Getting a Liberal Education
Tyler Cowen gives a thoughtful list here. The gist is to learn to evaluate various forms of information, from marketing to information to knowledge to judgment. While Tyler gives some hard suggestions (date foreigners, for example). I would add:
1. Study logic.
If all else fails, remember the song "Not the Sunscreen"by Safran John, opening lines below:
Ladies and gentleman of the class of '98 people often ask me if I have any advice to offer and when they do, I tell them this:
Ahh, the heady 1990's....
December 14, 2007
Spend, spend, spend
Listening to NPR's All Things Considered yesterday, there was a story about consumer spending with commentator Frank Langfit (sp?). It includes this gem:
"...and why consumer spending is so important is it makes up 70% of our gross domestic product. I mean, we truly are a consumer-driven economy."
The host and Frank seemed surprised that people were still spending even with the housing market down. No HTs to Milton Friedman and permanent income. Oh well.
But I digress. Why didn't Frank say that international trade is harmful since net exports is usually negative? I don't really see how the distribution of GDP among C, I, G, and NX tells us much about how the economy is doing, or which category is important. Of course, I'd like to see more I and less G.
It kind of annoys me when "experts" keep claiming that spending is the economy's salvation. No one seems to recognize that spending is the result of a good economy, not its cause. No one recognizes that the cause is more efficient production, to which the latest productivity numbers /a> are reassuring.
I guess it's easy to think that the economy is driven by spending during the Christmas buying season.
December 13, 2007
"Christmas Cheer" recipes c. 1907
The Dec. 15, 1907 NYT has three recipes for "Christmas Cheer." I wonder if any of these really taste all that good?
To make a gallon of this eggnog will require a pound and a quarter of pulverized sugar, twelve fresh eggs, a quart of cognac, half a pint of champagne, two quarts of fresh milk, one quart of rich cream, and about a tablespoon of powdered nutmeg. Mix these ingredients thoroughly, then incorporate with them the yokes of the dozen eggs that have already been beaten to a froth. Stir persistently and steadily until the blend is perfect; pour the result into the well-chilled punch bowl.
Punch with a punch?
The "Van Cortlandt recipe" has been constantly used since 1775. It may, therefore, be said to have stood the test of time:
An "ordinary" punch:
If it is merely an ordinary punch that is to be prepared, however, here is a recipe that has been served by one New England family every Christmas for more than fifty years...
Malthusian economics of Christmas trees c. 1907
From the December 15, 1907 NYT:
It is not an unmixed evil that the supply of Christmas trees in the New York markets is short this year. It means that the woodsmen in Maine and New Hampshire, anticipating a bad market, have not played so great havoc as usual in the forests. There is an enormous destruction of trees annually for Christmas decoration, and it is well to have some idea of the extent of that destruction fixed in the public mind.Bah Humbug.
Cynical Yuletide Musings c. 1907
From the December 15, 1907 NYT (I know, I am reading ahead a couple of days but I am heading out of town until next Monday and I will be off the grid):
Like most of the other DoLers I've been quiet for the last week as final grading as been upon us. I'm looking forward to the break this year. Aside from the usual research time, I'll be running a 50k this weekend, doing a three-day winter mountaineering course that hopefully will culminate in a summit of Mt. Washington in NH, and then another 50k on Dec 30.
Yes, yes, I know, I know, yo soy muy loco. Just in case you don't know how loco, check out the current temps on the Mt. Washington summit. It's a balmy 9 degrees F and 40 mph winds as I write this. This morning it was -10F with 80 mph winds though. Yikes! I give us a 50-50 shot.
Free Minds, Free Markets, Squatters, and Stolen Electricity?
Jesse Walker approvingly posted ("22 Floors of Freedom") a tale of squatters taking over an abandoned building in Brazil:
But after a two-decade absence, the original owners apparently wanted it back. I'm sure there's more to this story than I now know, but based on what I've read so far, I'd say cases like this are why adverse possession laws are a good idea, despite their occasional abuses.
Commenters have responded with disapproval; e.g.,
An army of vagrants, drunks and hobos steals a valuable property from its lawful owner, and this get labelled as "freedom"? Good call comrade.
Maybe Walker's right in this instance (Your thought? I've opened comments for a day or two), but he seems to have a fondness for such activities. To wit, he previously wrote approvingly of "neighborhood assemblies" (communes?) in Argentina stealing electricity (Dec 2002 edition of Reason):
The most famous of these are the neighborhood assemblies that have sprouted in the cities, especially Buenos Aires, as an alternative to normal party politics. The function and makeup of these bodies vary from one assembly to another. They have naturally attracted the usual would-be vanguards of the socialist revolution, and many are, in the words of The Economist, mere "talking shops for bearded leftists."
That bit about tinkers reconnecting people who've fallen behind on electric bills translates to allowing people disconnected for nonpayment to steal electricity from the grid. That's theft.
On intellectual property rights c. 1907
From the December 13, 1907 NYT:
The composers of music whose product is used in the "records" of self-playing musical instruments and talking machines, or phonographs, certainly have a fair cause for complain, if, as they assert, their music is "canned" for storage without their consent and without payment to them. If music is good enough, or popular enough, to be profitably used in these records, its composers are surely entitled to payment. Probably they could be protected by some other law than that relating to copyright.The argument of the Times is essentially the "sampling" argument used today in the context of digital music on-line, which suggests that some individuals who download a song on-line end up purchasing a legitimate copy of the work. Thus, whether "pirating" or "canning" music on-line provides a net benefit to all artists (or perhaps only certain artists) is an empirical question.
It seems the current writer's strike has much to do with the "canning" of television and movie productions and how much writers will be compensated from revenues generated through "new media." I am not sure the writers have the potential to enjoy the same "sampling" benefit as music composers, yet the parallel between old and new media and how compensation should be structured is interesting.
On government corruption c. 1907
From the December 13, 1907 NYT:
CHICAGO - Far-reaching effects of the great snowstorm of January, 1905, were uncovered last night by the City Civil Service Commission. The phenomenon discovered was that 1,100 street laborers still are employed by the city for the removal of that remarkable snowfall. Notwithstanding the scientific interest developed, the commission unanimously decided that from reasons of economy, a new rule be enacting limiting to five days the period for which emergency street cleaning laborers may be employed in Chicago.Excellent.
December 11, 2007
Crack Baby Steps
Reuters carries the big story today: Judges given leeway in crack sentencing
WASHINGTON - The Supreme Court ruled Monday that federal judges can impose shorter sentences for crack cocaine crimes, making them more in line with those for powder cocaine...
How 'bout ZERO? Well, crack baby steps I guess.
Keeping track of Subprime
Arnold Kling is offering pointers and analysis with almost daily briefings. Some highlights.
1a. We need some perspective. From Dec. 5:
I am inclined to disagree with the last paragraph [" ...This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001."]. The tech bubble created trillions in illusory wealth. I am pretty sure that the amount of illusory wealth in the housing market is smaller.
1b. But we also need some perspective! Dec. 7: Aggregate home equity is just above 50%, the lowest figure on record (data to 1945).
2. There's potential for serious consequences in banking:
Bank capital standards may be counterproductive at this point. I worry about this scenario: Every bank has to mark down some of its securities, and this means that they need more capital. So they all start selling securities, which means that the prices go down, which means more markdowns, more need to raise capital, etc. I'm not sure that such a vicious cycle truly can occur, but it seems like a possibility worth worrying about.
3. But the best option is not a regulatory intervention that forestalls the inevitable, but a market correction.
The way to stop it, of course, is to loosen up the capital regs for a bit, under the assumption that the banks really are solvent if the market is given time to recover in an orderly fashion.
The political economy story behind the Bush plan is intriguing. I've been thinking about this a bit this past week and I still don't have an answer I'm comfortable with. Part of it is we don't know the types of voters who are in these 1.2m ARMs. Another part of the problem is we can't lump homeowners together here a la Fischel. Is it divide and conquer? Is it a Rove-like moderately awful solution in order to cut off a drastically awful one? A political bargain a la steel tariffs? Is it old fashioned capture? I doubt it, but Kling hints that the financial industry trade association is behind the splitting of ARMs into three categories. As Steve McCroskey would say, "Looks like I picked the wrong week to stop sniffing glue!"
December 10, 2007
This BBC report calls into question declaring polar bears endangered.
"We have this specimen that confirms the polar bear was a morphologically distinct species at least 100,000 years ago, and this basically means that the polar bear has already survived one interglacial period," explained Professor Ingolfsson.
Pearls of Wisdom ...
Next year, more candidates than ever will have the funds needed to get their messages to voters. That's because 2008 is shaping up to be the best-financed campaign in history.
How to Live Green: Pull a Kangaroo's Finger
I missed this article, from last Wednesday, on research to make cows "spell relief" more like kangaroos.
SYDNEY (AFP) - Australian scientists are trying to give kangaroo-style stomachs to cattle and sheep in a bid to cut the emission of greenhouse gases blamed for global warming, researchers say. Thanks to special bacteria in their stomachs, kangaroo flatulence contains no methane and scientists want to transfer that bacteria to cattle and sheep who emit large quantities of the harmful gas.
A year ago Frank posted a relevant cartoon by Mike Lester on the Cattle-lytic converter.
December 09, 2007
Big Boxes to the Rescue
In cases of extreme weather and natural disasters, some of the nation's largest retailers now behave like municipalities -- sometimes better.
Delong on Schumpeter
This Chronicle piece is interesting, though I think a bit revisionist. Was Schumpeter's concern that, "Capitalism, however, inevitably generates these mammoth inequalities through creative destruction. ... He did not think governments could maintain enough social insurance to counter the destructive part of capitalism without strangling the sources of rapid growth." Or was it that those in positions to influence the referee that Delong sees as essential would fix the rules in ways to inhibit farther innovation?
Nice quote: [I]f Keynes was the most important economist of the 20th century, then Schumpeter may well be the most important of the 21st."
Mike Lester Channels John Lott
From today's Rome News-Tribune.
December 08, 2007
From Today's Inbox: Academics for Paul
In Case You Haven't Noticed, It's Already Here
A headline from the AJC:
Single women could usher in big government
December 07, 2007
Hear me talk for two hours
I just discovered that the Mercatus Center has made available here (scroll to the bottom of the page) podcasts of two talks on monetary policy I gave in 2004, together with two talks in the same series by Steve Horwitz. We gave the talks on Capitol Hill to Congressional staffers, so they don’t assume economics training.
I don’t remember if it was 2004, but one year when I gave a similar talk on the future of money I held up a Mondex pre-paid “smart” card. The card had been issued by Chase Manhattan and test-marketed at Burger King restaurants on Long Island, so it was branded with the Burger King logo. A clever Congressional staffer immediately commented: “Aha! It’s backed by the power of the crown!”
Hat tip: Greg Ransom
RE: I say fix their rates, but make them give back the Lexus
Q: But, Bob, lenders made lots of loans to people with crummy credit, didn't require down payments or verification of income, etc. Isn't it the lenders' fault for making loans to people who shouldn't have been getting them?
A: Probably so, though I'd like to give consumers a bit more credit for being sentient humans rather than sheep. But guess what? Not bailing out people who shouldn't have had loans will cause lenders who made unwise loans to get exactly what they deserve--a haircut. Borrowers who made no down payment and got a cheap "teaser" loan for a few years won't be significantly harmed. They didn't put much into the house so they don't lose much when they're foreclosed; it's basically a wash for them. As Tyler suggests, moving from a house to an apartment is hardly a great national crisis.
College Football Head Coach Salaries
This year, for the first time, the average earnings of the 120 major-college football coaches hit $1 million, a USA TODAY analysis finds.
I'm sure the sports econ guys are already all over this, but for a casual observer like me, this is really neat.
USA Today has a detailed report on college head football coach compensation. My buddy Ravi writes, "Hit the "Click Here" near the top of the article for an interactive spreadsheet with salaries AND CONTRACTS for all the Division I-A college football coaches. Lots of surprises - who'd have guessed Joe Pa would be on the bottom end of the list?" (Note: requires Macromedia Flash.) Stoops is on top, of course, at $3.62m. Auburn's Tubberville is way up there, too, and that's before his recent extension. A&M's new hire, Mike Sherman, will be at $1.8m. There is an option for dollars per win, too.
Ladies and gentlemen, start your regressions.
I say fix their rates, but make them give back the Lexus.
I'm sure the blog world is aflutter with discussion of President Bush's plan to
I have one and only one question: When do all the people who bought into subprime ARMs have to give back the fancy cars, swimming pools, and vacations they took with all the money they "saved" during the early days of those mortgages? Seriously. I want to know.
December 06, 2007
Domestic use of the Army c. 1907
From the Dec. 6, 1907 NYT:
WASHINGTON - President Roosevelt to-night instructed Gen. Funston to dispatch a sufficient force of regulars to Goldfield, Nev., to control the situation there. This action was taken upon receipt of a telegraphic request from the Governor of Nevada. The troops will proceed from San Francisco and the strength of the expedition is left to the judgement of Gen. Funson.
The Politics of Truth
Why do politicians lie?
The traditional public choice answer is "because they can." Once in office incumbents enjoy an electoral advantage because rational ignorance creates some slack between voter-principals and politician-agents. Politicians with enough reputational capital can afford to indulge in prevaricating rhetoric, wealth transfers to special interests, and perhaps even the occasional tryst, because democratic institutions are inefficient. Incentives matter, dammit!
The new generation of public choice invokes systematic biases in the beliefs of voter-principals deviating from political truth, as revealed by scientific method. For all the much deserved attention to Bryan Caplan's The Myth of the Rational Voter, the lesser-known yet equally forceful book, Rational Choice and Democratic Deliberation, by political theorists Guido Pincione and Fernando Teson, is well-suited to explaining systematic lies in politics and the democratic failure that results. One voter bias, due to epistemic rational ignorance, is a preference for vivid information over opaque explanations. Vivid information is
"a) emotionally interesting, b) concrete and imagery-provoking, and c) proximate in a sensory, temporal, or spatial way." For example, we will feel more indignant about a heinous crime if we watch the gory details on the evening news. If the newscaster also tells us that the suspect was out of prison on a "technicality," we will overstate the relevance of the crime as confirmatory evidence for the theory that heinous crimes are due to the leniency of the justice system. [Pincione and Teson, p.23, omitting footnotes]In contrast, we spurn opaque explanations like invisible hand, spontaneous order, comparative advantage, reputational self-regulation, and broken window fallacies. People adopt vivid beliefs by default and confirmatory biases put a premium on vivid information that reinforces the default. So false stories can become ingrained, and [p]oliticians have an incentive to spread vivid explanations, for the public will believe them given their default views" (p.35).
Take Al Gore, who is flying to Stockholm (a shocking carbon waste!) to receive his piece of Nobel history on Monday. Yesterday's WSJ.com Opinion Journal has Holman Jenkins on "The Science of Gore's Nobel", which was "awarded for promoting belief in manmade global warming as a crisis." Jenkins invokes the same cognitive psychology that supports political failure arguments of Caplan, Pincione & Teson, and others like Tyler Cowen on voter self-deception. Voter bias finds root in anchoring effects like cognitive-cost-minimizing people choosing to adopt views that are the most available or accessible. Jenkins:
[Kahneman and Tversky's] insight has been fruitful and multiplied: "Availability cascade" has been coined for the way a proposition can become irresistible simply by the media repeating it; "informational cascades" for the tendency to replace our beliefs with the crowd's beliefs; and "reputational cascade" for the rational incentive to do so.
Falsely claiming consensus behind one's views is a form of political deception, which as Pincione and Teson point out, commits the argumentum ad populum fallacy. Logic be damned. Rather, "citing agreement of others is, in short, a particularly vivid (and often fallacious) way to argue in politics." (p.43)
What this all amounts to is a refinement of government failure theory. Throw cognitive biases together in large numbers and systemic failures pop out. Pincione and Teson:
Discourse failure as a social phenomenon results...from the mutually reinforcing interaction of rational ignorance and posturing against the background of redistributive politics. Political actors who stand to gain from spreading certain kinds of information will be helped by citizens who are willing to do their share, as it were, in the acquisition of confirmatory evidence of the default vivid beliefs. In other words, the cost of supplying convenient information is reduced by ingrained cognitive errors, and correspondingly, those who want to change public opinion in the direction of opaque theories will face higher costs. Not only will they have to argue against vivid views that the public holds by default; they will also have to counter the psychological biases just discussed. (p.44)Politicians lie because they can, yes, but also "because they have to!" Incentives yada yada. Perceptions matter too, dammit!
Hat tips to:
Incentives Matter: Danish Income Tax Edition
As a self-employed software engineer, Thomas Sorensen broadcasts his qualifications to potential employers across Europe and the Middle East. But to the ones in his native Denmark, he is simply unavailable.
Full story here.
December 05, 2007
Eliminate the Federal Gas Tax
If a part of the climate change policy mix is a carbon tax, this article makes a strong case for returning revenues to the general fund. The article and comments on it argue that the Federal tax and transfer system has resulted in roads being used where trains make more sense and vice versa. Also, it has fueled the pathology of overbuilding structures and then not properly maintaining them. And this is based on a tax of "just" 18.4 cents per gallon.
December 04, 2007
And Taxpayers Foot the Bill
According the the article Mother Nature feels the pains of divorce,
Divorce can be bad for the environment. In countries around the world divorce rates have been rising, and each time a family dissolves the result is two new households.
Who'd've thought? And who would have paid?
The research was funded by the National Science Foundation, the National Institutes of Health and the Michigan Agricultural Experiment Station.
Cry Me a River
CINCINNATI (AP) — Two college students say the high cost of tuition led them to rob a bank.
December 03, 2007
On the forward pass c. 1907
From the Dec. 3, 1907 NYT:
Walter Camp, Yale's athletic adviser, to-day came out against the present rule in a statement in the Yale Daily News, in which he said:Thus, even legends have bad ideas from time to time.
On the other hand, the current BCS format seems to include an "element of chance" and evidently folks outside of Ohio and Louisiana aren't satisfied.
Disclaimer below the fold.
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I'm a twice decorated veteran of the University of Georgia, so I am not pleased with the outcome. Specifically, I am not happy we play Hawaii because if we win, everyone expects it, and if we lose, we look like chumps (see Oklahoma c. 2007).
I thought Oklahoma and Virginia Tech would make more sense for the Championship game or Oklahoma and LSU - if you penalize UGA for not playing the extra game, why reward the Buckeyes? Especially when (as you must) you look at the strength of schedule. come on - Youngstown State? Really?
Perhaps OSU puts it together this year and, if they beat LSU, will be a reasonable national champion. On the other hand, another drubbing as they took against Florida last year and we might be that much closer to the BCS + 1 format:- play the big bowls and the top two on Jan 2 or 3 play two weeks later at a location to be determined.
« Close It
Higher (general) education c. 1907
From the Dec. 3, 1907 NYT:
President Woodrow Wilson of Princeton University, speaking on Friday at the College of the City of New York said: "I have always contended that every university should have a Professor of Things in General.
You've come a long way, baby c. 1907
From the Dec. 3, 1907 NYT:
Women who smoke cigarettes in public are still generally accounted vulgar, if not actually wicked, in a land where the prejudices of Puritanism still survive...Customer-based discrimination may have been a reason to ban smoking (at least of women) in 1907, much like it seems to be a reason to ban smoking in 2007. However, the key statement is that the bans were voluntary on the part of the restaurant and hotel managers; the bans were not legislated by local, state, or federal officials.
I would wager that most of today's temperance movements, whether directed toward narcotics, cigarettes, smoking, or trans-fatty acids for that matter, would not admit to "Puritan prejudices." However, the similar outcomes of yesterday and today, i.e., limiting the actions of other people, offer food for thought.
Is there another source of temperance movements beyond "public opinion"? Or has it always been "public opinion" but this "opinion" is "formed" by different organizations or incentives in different eras?
But do like Southern Mississippi's "Freeing the Power of the Indvidual".
Brother can you spare a visa?
An article in Business Week about the nightmare that is America's immigration policy:
Signs with the words "U.S. citizens and permanents only" greeted students at employers' booths at a recent career fair at Duke University, where I teach. In previous years only government jobs requiring security clearances were labeled off-limits to international students.
Sigh. I will never understand the importance that so many people place on silly lines that politicians draw on maps.
Dictators in Glass Palaces
Venezuelan President Hugo Chavez thinks it's curtains for America as a world power. "By the crash of the dollar," he says, "America's empire will crash."
Tyler Cowen's suggestion that currencies are not markers of economic success notwithstanding, I hope Chavez's theory that declining currencies signal the end of regimes is correct. If so, this piece from the IHT suggests we may soon be rid of Senor Chavez:
The bolivar has tumbled 30 percent this year to 4,850 per dollar on the black market, the only place it trades freely because of government controls on foreign exchange. That compares with the official rate of 2,150 per dollar set in 2005.
Hugo must be proud of himself--he's managed to depreciate his currency some 30% against a currency that has itself fallen by 20%. Sheer genius!
While we're on the topic of Chavez and Venezuela, kudos to the fine folks of Venezuela who voted no yesterday.
December 02, 2007
Organized vagrants? c. 1907
An interesting story in the Dec. 2, 1907 NYT:
"Doc" Reitman, a victim of "ambulatory automatism," has struck town...He is the President of the Chicago branch of the Brotherhood Welfare Association, the National organization of the people in this country without visible means of support.
Musings of the Gentle Cynic
From the Dec. 1, 1907 NYT:
Army-Navy c. 1907
The Dec. 1, 1907 NYT reports:
NAVY TRIUMPHS OVER ARMY, 6-0;
On Dec. 1, 2007, Navy beats Army 38-3.
On economic slowdowns c. 1907
While reading the paper from 100 years ago, I have read through a number of articles concerning the 1907 financial crisis in the United States. I cannot report that the articles have made it clear what, exactly, happened during the crisis and why it occurred (I suppose Larry White is the most qualified amongst DoLers to comment on that), but the aftermath has been interesting to read.
The December 1, 1907 paper reports on a speech given by French economist/banker M. Dupont:
"To my mind," said M. Dupont, "there is only one fundamental cause of the present crisis in the United States, and that is the abuse of credit, the disproportion which exists between the country's development and its financial resources. All active countries are subject to crises.
M. Dupont goes on to suggest that with greater development comes greater variability in economic activity:
"The more a country develops the more subject it is to regular economic disturbances. America and Germany are striking examples of this. In order that a country be free from such disturbances it development would have to be normal - that is to say, its business enterprises would have to be in exact proportion to its monetary wealth. You cannot expect from an entire population the unity of knowledge possessed by a single experienced businessman.
The M. Dupont goes on to suggest that the United States, in particular, is prone to economic crisis because of selection bias:
"Then there again enters the question of racial temperament. It would seem that there is an inevitable relation between the temperament of a race and the needs of the country it inhabits. Americans comprise the most active, i may say the boldest, elements of old Europe.
Then M. Dupont characterizes the American business spirit of then and now (perhaps to include house-flippers and day traders):
The American works for success, and when he undertakes any business it is to be the most successful of its kind. So convinced is he of this that he not only puts all his own money into the stock that he has just created, but all the money that he can borrow. He perpetually commits the same mistake - takes upon his shoulders too great a burden and falls before he reaches his goal.
December 01, 2007
If you want mass-market candy reviews that read like fine wine reviews, accompanied by excellent photos, check out Candy Blog. A sample:
The flavor of Good & Plenty is more complex, I think, than some of the European pastilles. First, the sugar coating doesn’t completely contain the licorice flavor so when you stick your nose into a movie-sized box of Good & Plenty and you get a woodsy whiff of anise. The sugar shell isn’t very crunchy, in fact, it’s a little grainy, but it works pretty well for Good & Plenty, letting the flavor permeate. The licorice itself has a high sweet overtone and then the molasses hits, dark and slightly burnt and with a light salty bite. After it’s gone there’s a lingering sweetness and clean licorice/anise flavor ... until you pop the next few in your mouth.
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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