Division of Labour: February 2008 Archives
February 29, 2008
to my soon-to-be colleages at Auburn, Steve Caudill and Dan Gropper*:
AUBURN - Economics faculty at Auburn University achieved high rankings in a newly published study in the Southern Economic Journal** that examined research productivity and impact in the area of economic education from 1991-2005.
* Congrats also to Dan for recently being awarded the David and Meredith Luck Professorship at Auburn.
** The SEJ study was co-authored by Frank Mixon who has just moved from Southern Miss to Auburn. I am very much looking forward to working with Frank as a part of the Economic Freedom Initiative.
February 28, 2008
Building Brand Equity: Ethics and Development
My paper "Christian Ethics, Formal Institutions, and Economic Growth" is online.
Posted by Art Carden at 06:32 PM
Admittedly, I usually get creeped out most of the time while listening to NPR's Morning Edition. But today was especially creepifying. The headline on the website sounds great: "Creative Play Makes for Kids in Control." Unfortunately, the actual story is about stifling creativity:
In a normal preschool, playing bookstore would be a pretty casual affair. They would just pick up some books, set the shiny toy cash register on the table by the blackboard, and get down to business.
But this isn't a normal school. It's based on the Tools of the Mind program. In other words, it's a school where almost every moment of the day is devoted in some way to teaching the kids — mostly low-income children who live in the poor surrounding community — how to regulate their behavior and emotions.
So before Emmy and Zee even think about picking up a toy, they sit down with their teacher at a small classroom table and fill out some paperwork.
Basically, the kids write out a plan of what and how they are going to play. I know, the "plan" part seems to diminish the "play" part. Am I wrong to be creeped out by the idea that kids may feel obligated to get permission or seek assurance from an authority figure before they can satisfactorily play?
"Regulating behavior." "Play plans." I know Hayek is dead, but he did win a Nobel. I guess the idea of unregulated socities resulting in spontaneous order is passe.
February 27, 2008
More bad news on inflation, and yet Bernanke signals faster money growth
Consumer prices last year surged 4.1 percent, the most in 17 years, spurred by higher fuel and food costs. A government report yesterday showed the 12-month increase in wholesale costs accelerated to 7.4 percent in January, the biggest jump since 1981.
Federal Reserve Chairman Ben S. Bernanke signaled the U.S. central bank is prepared to lower interest rates again even as inflation accelerates. ... Traders anticipate the central bank will lower the benchmark rate by at least half a point by the end of the next meeting, on March 18, futures prices show. Officials have lowered the rate by 2.25 percentage points since September, to 3 percent.
Note that, using the year-over-year CPI as a measure of current inflation, the Fed funds rate is currently negative in real terms: 3.0 - 4.1 = -1.1. Not surprisingly foreign investors are dumping short-term dollar assets with the result that, as Forbes headlined, "Dollar slumps to new all-time euro low as Bernanke hints at rate cuts".
So if part of Bernanke's objective is to help revive house sales by lowering long-term interest rates, how's that going? Not well, the AP reports:
The 30-year [Treasury] bond fell 6/32 to 95 16/32 with a 4.68 percent yield, up from 4.67 percent.
Guess what? Cutting the Fed Funds rate -- even threatening to do so -- raises inflation expectations, which raises long-term interest rates. 10-year Treasury bond yields have also risen since mid-January.
Building Brand Equity: Helping People Lose Weight
Division of Labour is now helping Mike Moffatt lose weight. No word yet on what we'll spend our $100 on if we "win."
Posted by Art Carden at 06:12 PM
Building Brand Equity: Division of Labour at Public Choice
Several contributors to Division of Labour are on the program at next week's Public Choice Society meetings. Mike Munger and I (both Wash U PhDs, incidentally) will take part in Friday night's plenary symposium on The Myth of the Rational Voter. I also saw Josh Hall, Robert Lawson, Tim Shaughnessy, and Ed Lopez on the program. I fully expect that a good time will be had by all.
Those Who Fail to Learn from History ...
... write articles in The Chronicle of Higher Education calling for common property bicycle programs. Case in point, this article (sub req) from one William Jefferson Clinton:
Over the course of history, students and universities have played important, often transformative roles in guiding us toward a healthier, more equitable, sustainable, and prosperous global community....
Over the course of history (to borrow a phrase from Mr. Clinton), there have been many failed bike programs.* (Examples here.) The students attending CGI U. would be better served by teaching them about property rights.
Students would also be well-served to learn about how entrepreneurs and technology can overcome tragedy of the commons problems. For example, bike programs work well if they require bikes to be checked out with a credit card or cell phone. (Example here.)
*I have also heard of one program that both appears to work and to be a true open access program. It is the white bikes program in the Netherlands' Park De Hoge Veluwe. I'd welcome any info that readers might have on the program. Does it truly work (in the sense that it is open access but doesn't have problems with theft or abuse)? If so, why?
HT: George Leef and Shawn Regan
The value of a concscience c. 1908
From the Feb. 27, 1908 NYT:
A $12,000 pearl and diamond necklace was reported to have been lost this afternoon in Poinciana Garden, and a $500 reward was this evening offered for its return to "Frank of New York."I wonder how that worked out. Perhaps it was not advisable to advertise the value of the necklace along with the substantially lower reward.
The alias might have been an attempt to avoid a black-mail situation, but revealing the value of the necklace [about $270,000 in 2006 dollars] would seem to have invited whoever has the necklace to ask for a higher reward or to fence the item at a value between $12,000 and $500.
William F. Buckley died today. This is a sad day for me. He was my first introduction to conservative/libertarian thought thanks to a friend's willingness to let me read his National Review magazine back in high school.* Already a budding anti-communist, Buckley opened my eyes to the importance of economic liberalism as part of the the American tradition. Buckley was a great uniter among libertarians and conservatives in the 1970s and 80s.
Yes, I know Buckley was no Rothbardian anarcho-capitalist, and my own views have traveled far from those high school days. I didn't always agree with him then and found my views moving farther away from Buckley's over time. Still I will allow myself a moment to honor the man who helped me get where I am today.
Sadly, Buckley's passing is symbolic also of the death of the libertarianism in the American conservative movement. I'm afraid there aren't too many conservatives left who would sail out to international waters to try some pot (or rather few who'd admit to it).
*Reading The Freeman, at the instigation of a high school teacher, was my first intro to real libertarian thought.
Addendum: I also read and enjoyed most of his spy novels. Not high literature by any standard, but good for the genre.
Developing Markets in Ethiopia
This morning's Wall Street Journal carried an article about attempts to establish a commodities exchange in Ethiopia. The article is gated, but here is Eleni Gabre-Madhin speaking about her plans for the commodities market. We will discuss the role of futures markets in econ 101 later this semester, and we will focus on this case in particular.
Posted by Art Carden at 10:43 AM
Socializing risk, ex post
Holman Jenkins in today's Opinion Journal [link here, thanks to Richard Reinsch for the pointer]:
Any debate about a housing bailout can be put aside -- the bailout is underway... No, the perverse effect won't be a replay of the '30s, or even Japan's decade of stagnation in the '90s, but the latter is your model, with a little inflation thrown in. The goal: avoid foreclosures and slow the fall of home prices to market-clearing levels.
As for the "little inflation thrown in," SJSU's Barstool Economists have this:
Warren Gibson queries:
According to the BLS wizards at http://www.bls.gov/news.release/cpi.nr0.htm the housing component has been rising at a annual rate of about 3%, though not quite that fast in the last couple months. Can anyone tell me why, with house prices declining, the housing component of CPI continues to rise? What am I missing here? I know they assume homeowners are renting to themselves, and maybe BLS isn't "marking to market" existing houses.
Jeff Hummell replies:
Not since 1982 has the CPI included house prices, nor is there any logical reason that it should. It is after all, a "consumer" price index, and the purchase of a house is primarily an investment. About 40 percent of the CPI comes from housing costs, which includes actual and imputed rents (30 percent), fuel and other utilities (5 percent), and household furnishings and operations (5 percent). Do you know any tenant who has seen a decrease in rents over the last year? I certainly don't. Rents are imputed for owner-occupied housing from the actual market rents of similar propertis, so you are right, they are not marked to the market value of the house, in either the CPI or the National Income and Product Accounts. Imputed rents should only noticeably fall with a decline in house prices if they noticeably rose (faster than other goods and services) with an increase in house prices.
Back to Jenkins and the policy question:
Making the hole even harder to climb out of in tough-love fashion, government policy itself played a big role in creating the bubble, on the bipartisan theory that homeownership begets "social stability."
So that clears things up, huh?
February 26, 2008
A Failure to Stimulate
Bill Shughart weighs in on the so-called stimulus:
If our elected representatives truly were interested in jumpstarting a sluggish economy, they would have acted to reduce uncertainty about future tax bills by cutting marginal income tax rates now and forevermore. Predictably, they chose political grandstanding instead.
Is the Starving Man Free?
Modern liberals say no. Ben O'Neill replies.
The freedom craved by Sir William Beveridge (1879–1963) and other modern liberals is freedom from their own bodies, freedom from their nature.
"Capitalism without failure is like religion without sin—it just doesn’t work."
Allan Meltzer is trenchant in explaining the malincentives that created the subprime crisis.
As they say...
This is nothing new but interesting, I hope. I've recently been reading different sorts of parables. I'm struck by the economics and policy implications in many of them.
Some of my favorites:
Tyler Cowen's favorite Haitian proverbs offer similar implications.
Menken speaks to Art's post below about systematic voter beliefs.
A good Chinese proverb for the classroom:
A couple of Mexican proverbs I managed to retain,
The Bartleby Dictionary of Cultural Literacy has a nice introduction in its entry on Proverbs:
Well, back to work. As they say, it's best to make hay while the sun shines.
Do you have some favorites, comments open.
February 25, 2008
Systematic Voter Errors
Posted by Art Carden at 02:12 PM
I bought an iPod about a year ago; it really opened my eyes to a world of pedagogical possibilities. Two of my favorite online resources are EconTalk and TED (more on both in future posts). Today's EconTalk podcast with Thomas Sowell on his new book Economic Facts and Fallacies is especially excellent. (HT: EconLog). FYI, Bryan Caplan's talk at Rhodes on Thursday was fantastic; we're going to try to get the audio and video online. Watch for updates.
Addendum: I was emailed a link to the first of a series of five interviews with Sowell on NRO's "Uncommon Knowledge."
Patience c. 1908
It is interesting to read about the prohibition movement and its success in the South during the mid nineteen-aughts. Of course, within a decade the rest of the country will jump on the prohibition wagon (as it were). An important lesson from that episode is the amazing amount of patience and persistence the prohibitionists displayed. Today, there are similar groups with patience and persistence and the empirical question is whether their policies would be any better than those of the past.
The Feb. 25, 1908 NYT has the following information:
Representative E. F. Acheson now proposes to give Congress an opportunity to put itself on record on the question of National Prohibition. Many of the members of Congress, including several from Pennsylvania, have declared that they are in favor of National prohibition, but are opposed to State and local option, as it cannot be enforced.Whether Acheson was the first or not, such suggestions ultimately led to this:
Haven't I Heard This Somewhere Before?
Recently, the Mrs. and I caught a snippet of Barack Obama calling for "a leader who can end the division in Washington." One of us asked the other didn't Bush run to be a uniter not a divider or some such pablum? Indeed he did (maybe Hillary should try to sniff out some plagiarism). Actually, I'm with Kevin "Gridlock is Good" Grier--bipartisanship is vastly overrated (think stimulus package).
Enhanced by Ethanol
That's the claim made on the gas pumps at Wal-Mart. They have cute little cardboard green and yellow ears of corn on the hoses. Just one problem--saying gasoline is enhanced by ethanol is like saying a swimming pool is enhanced by pee. Since ethanol reduces gas mileage and can increase deposits in engines, a more accurate word would be contaminated or diluted.
Just for the record--no one should worry that I'm getting wobbly on Wal-Mart. :-)
February 24, 2008
An exercise in interpretation
Square this statement:
Democracy is reasonably good at some things: pushing scoundrels out of office, checking their worst excesses by requiring openness, and simply giving large numbers of people the feeling of having a voice. Democracy is not nearly as good at others: holding politicians accountable for their economic promises or translating the preferences of intellectuals into public policy.
with this statement from the same author:
we live in 2008 and our ability to monitor and control central banks is unparalleled.
I’m not playing “gotcha” here: I really would like to know if there is a plausible way of interpreting these statements that makes them not inconsistent. Comments are open.
It is with sadness that I heard that Jim Bennett was retiring as editor of the Journal of Labor Research. My first professional publication was in the JLR. While I didn't understand it at the time (being a naive masters student), that experience spoiled me. Not only did we receive quick and excellent referee reports, we received very clear comments from Bennett himself.
It seemed to me that Jim Bennett was an editor who took his property right in the journal very seriously. Not only did he have a good eye for what was interesting research, he took great pains to cultivate papers that had a good idea but just needed work. Anyone who was on the receiving end of his red pen can surely attest to that! As a result, I think the JLR was always an interesting journal to read and I wish him the best of luck in the future.
Bruce Kauffman has a (gated) tribute to Bennett in the current issue of the Journal of Labor Research. It can be found here. Comments are open for those who would like to comment on Jim Bennett as an editor, author, or teacher.
February 21, 2008
Questions and answers about gold and credit
1. If the U.S. was currently on the gold standard, would we still be
It can't be claimed that a different monetary standard would mean that mortgage lenders would never make errors. But to the extent that the recent errors were encouraged by inappropriate Federal Reserve policy one can say that under a gold standard, without a central bank, mistakes would be fewer and less clustered than they have been in the subprime mortgage mess. Fed policy has been inappropriate in two ways. First, it has inflated recent asset price "bubbles" by using overly expansionary monetary policy to hold interest rates too low for too long. Low interest rates, caused by expansionary monetary policy, raise the relative prices of interest-sensitive long-term assets. When monetary expansion makes the inflation rate rise and thus interest rates rise again, asset prices crash. Bernanke's statements indicating an overly strong bias against deflation, and his recent hyperactive rate-cutting, suggest that he will continue to make this kind of mistake. Secondly, the Fed has encouraged moral hazard by promising and acting to ease interest rates to diminish investor losses when asset bubbles deflate. This second policy used to be known as the "Greenspan put"; it seems alive and well in Bernanke's emergency rate-cutting to shore up stock prices and battered subprime mortgage portfolios.
2. Taking that first question further -- if the gold standard was in
Some ebb and flow in housing prices is inevitable. But the recent housing bubble was pumped up in large measure by overly expansive Federal Reserve policy. A gold standard constrains money creation, so it would not exacerbate swings in the housing market the way the Fed has.
3. Realistically, what are the chances of the U.S. going back to the
Realistically? Approximately zero as long as inflation stays in single digits. But just as Ecuador switched to the US dollar standard when inflation got out of hand, the US could switch to a gold standard if inflation got out of hand. I hope that the Fed knows better than to pursue a policy that makes that happen, but the gold standard is an option waiting on the shelf if it does happen.
On Prohibition c. 1908
An article concerning the march of prohibition across the South from the Feb. 21, 1908 NYT includes the following poem:
Lay the jest about the julep in the camphor ball at last,
Fun v. Danger
One of my favorite games growing up was lawn darts, a.k.a. jarts. For those of you under 30, you probably don't know the game. The object of the game was to throw a metal dart through the air landing it within a plastic ring. Lots of fun. The problem was that drunken July 4th backyard parties and flying metal spikes were not a happy combination. Many people, mostly kids, were injured and three kids were killed over about a 20 year period. Ultimately in 1988 the CPSC banned the sale of jarts and led a campaign to eradicate the game from this here land of the free.
Commissioner Anne Graham said, "What limited recreational value lawn darts may have is far outweighed by the number of serious injuries and unnecessary deaths. This week another child was severely injured by a lawn dart. She is now in critical condition. There are numerous alternatives to lawn darts, and I would urge adults who have lawn darts to throw them away now."
I've used this example in class to highlight the trade-off between safety and other values (i.e., fun!). Somewhat shockingly I ask my students, "Ok, we have a game that provides millions of hours of fun and enjoyment for hundreds of thousands of people. Unfortunately, a few kids get maimed and maybe even killed. That's a price I'm willing to pay!" If they recoil in horror at my inhumanity, as they often do, I remind them that this isn't that different from saying, "Ok, we have this device that provides us with the incredible ability to get from place to place quickly. Unfortunately, tens of thousands of us will get killed and many more injured each year using it. I'm talking about cars. How many of you want to ban cars?" The issue is that we have to make trade-offs. Should you be able to make those choices yourself or should the Commissioner Graham's of the world be able to make those decisions for you?
Btw, this company claims to be able to sell the parts of the game separately without violating the law. I've been in the market for a set to show my students since few of them anymore have even heard of the game. Heck, it might be fun (and dangerous!) to go play the game during class.
Meanwhile, thanks to the CPSC, today's generation is stuck playing a modern variant: Cornhole. Wimps.
February 19, 2008
Lemon socialism in banking
Legislation to nationalize Northern Rock Plc cleared all its stages in the lower chamber of the U.K. Parliament.
Earlier the UK government rejected two private offers to take over the bank, one of them from Richard Branson’s Virgin Group.
Has anybody in the UK ever heard of the Continental Illinois Bank case? The Fed and FDIC panicked when the bank failed in 1984 and no other bank accepted the FDIC’s offered payment to take over the bank and assume the obligation to repay its depositors. Rather than liquidate the bank and give the uninsured depositors a haircut, the FDIC nationalized it. It was the “too big to fail doctrine” at its worst. After a few years they reprivatized the bank – but recovered only a fraction of the capital they’d pumped in to make it solvent again. The FDIC ended up with a recorded loss of $1.1 billion.
An Awfully Short Memory
Late this afternoon, I received a call from a textbook rep trying to pitching me principles texts for next year. Less than 30 minutes later I received the following email from him:
The Economist needs a banking fact-checker
There are some £2.9 billion-worth of Scottish banknotes in circulation and £1.5 billion of Northern Irish. Issuing banks are currently required to deposit assets equalling about 95% of their notes with the central bank—but only from Friday to Sunday. The rest of the week the deposits are off earning interest elsewhere, and there is no financial backing for Scottish and Ulster banknotes. If an issuing bank went belly-up then, its notes would be so much lavatory paper.
The last two sentences amount to taking at face value the Chancellor of the Exchequer’s rubbish press releases. In fact, from Friday to Sunday, the Scottish and Ulster banknotes are fully backed by very safe non-earning assets (required holdings of Bank of England liabilities). The rest of the week they are fully backed by very safe earning assets. If an issuing bank went belly-up, which is equally unlikely on any day of the week, noteholders would have the same priority in claiming repayment out of the bank’s assets, no matter which day of the week it was.
Bryan Caplan at Rhodes
Bryan Caplan, author of The Myth of the Rational Voter, will be speak at Rhodes on Thursday night at 8:00 PM in Hardie Auditorium. The lecture is free and open to the public; more information can be found here. This is particularly interesting in light of Fidel Castro's resignation, which President Bush hopes will lead to "a democratic transition."
Castro Steps Down
Posted by Art Carden at 05:34 PM
The War on Cold Relief
I caught a slight cold last week (perhaps from handling unclean sippy cups). Thursday morning, I went to our local Kroger in search of relief. I headed to the self-checkout with a box of the store-brand DayQuil knockoff and tried to check out. I was carded. For cold medicine. Apparently, one can use acetameniphen, destromoethorphan HBr, or phenylephrine HCI to cook meth. I wonder if there are any epidemiological effects of drug-war increased transaction costs in the market for cold medicine. Comments are open if anyone knows of studies.
And, for purposes of comparison, my better half and I went to Lowe's last night and bought, among other things, a chainsaw and an axe (I bought a couple of machetes there over the summer). No ID required.
February 18, 2008
On inside jobs c. 1908
The "9/11 Truthers" contend that the attacks of that day were an "inside job" designed to "lead the U.S. to war." The Feb. 18, 1908 NYT reports on the "Maine Truthers" (from Spain):
The Diario Espanol, the organof the ultra-Spanish element, in a leading article to-day referring to the special celebration by Americans of the tenth anniversary of the blowing up of the battleship maine, says:
I'm an idiot: Marathon Edition
My friend Scott and I ran an official 3:34:51 yesterday at Last Chance for Boston Marathon Last Chance is so named because this is the last weekend you can qualify for this year's Boston Marathon. (I qualified back in September though so this was just a tune-up run.) The course is a one-mile loop which would seem boring except that it has the feel of a big race because everybody is compressed on the course so there's a lot of people around you all the time.
We ran with a pretty even pace throughout except for a 15:25(!!) last mile (mile lap times below). You see we screwed up at the end. They weren't calling out lap counts (at least not for us) and we lost track. We stopped after the 25th lap thinking we were finished, got the medal, turned in the timing chip, started to walk to the car and everything. But then we got to thinking that our "time" seemed a bit too good for our pace. "Shoot, we better check..." Sure enough we were short a lap. So we had to go collect our chips out of the bucket, run the last lap (clutching medal in hand), and finish. We would have had a 3:27 or so had we not stopped for all this time.
I am a bit perturbed at the organization for not calling out everyone's laps (like they did last year) and several other people I talked to complained about this too. Oh well. 3:27...3:34...it really doesn't matter I guess. All in all we had a nice tune-up marathon for Boston.
February 16, 2008
APEE Essay Contest Winners Announced
The winners of the 2007 APEE Essay Contest have been announced:
* First Prize ($2500): Brad Taylor (University of Canterbury, New Zealand), "Prosperity and the Freedom to Cooperate."
February 14, 2008
Big Business Versus Mom-and-Pop
Not yet, unfortunately, but I have a guest post on Sabernomics. I compare the Macon Braves move to Rome in 2003 to the upcoming move of the Richmond Braves to Gwinnett County.
Speaking of Sabernomics, the paperback edition of JC's book is will be out on February 26.
Thinking at the Margin
Today's WSJ contains the following letter from yours truly:
Your editorial "Equity and Health Care" (Feb. 4) correctly notes that President Bush's health insurance proposal would both decrease the regressivity of the current subsidy and remove the bias favoring employer-provided health insurance. However, you overlook an important aspect of the proposal.
Although the Bush proposal is far from being a truly free market in medical care, I think it is one of the most economically sound policies to come out of the Bush administration (not much of a hurdle to clear, I realize). The proposal addresses the issue of affordability while simultaneously giving people an incentive to shop more carefully for medical services.
February 13, 2008
Stossel quotes me!
As I'm waiting for the swelling of my head to subside (by the way, it's hard to keep your tongue in your cheek when your head is swelling), I'll just say that Stossel's column is, as usual, much more instructive and entertaining than is mine. And, as usual, I didn't say anything original anyway. Since the title of Stossel's article is "Stimulating Nonsense," the fact that I just posted this shows that the article title was prophetic.
Trade Creates Wealth
We had an interesting discussion about presidential candidates' stances on trade before my 11:00 AM class yesterday. Trade is an issue that definitely cuts across economists' ideological spectrum. Here's Greg Mankiw on Barack Obama's anti-NAFTA stance, including an instructive quote from his colleague Larry Summers on NAFTA's success. Here's Paul Krugman on "Ricardo's Difficult Idea." Finally, here's Brad DeLong explaining why comparative advantage is the most misunderstood concept in economics.
"Trade Promotes Economic Progress" is #4 among the "Ten Key Elements of Economics." Cast of Characters Below the Fold.
Read More »
Mankiw: economist at Harvard, former chairman of W. Bush's Council of Economic Advisors.
Summers: economist at Harvard, former Secretary of the Treasury under Clinton.
DeLong: economist at Berkeley, former Deputy Assistant Secretary of the Treasury under Clinton.
Krugman: economist at Princeton, staff member of CEA under Reagan, current New York Times columnist and critic of the W. Bush administration, and blogger/author of "The Conscience of a Liberal."
« Close It
[HT: Kate Sheehan]
The Consumption Inequality Kerfuffle
One of the Cox/Alm critics argues:
To understand the serious issue of relative inequality, you would not look at technological toys (unless you were idiots). Rather, you would consider the consumption of necessities -- Shelter, food, medical care, clothing, education, transportation. Not only that, but you would not simply review the quantity, but also the quality of the products that get consumed.
Pure gasbaggery--to adopt the quoted blogger's over the top rhetoric. Showing that virtually all households have dvd players etc. isn't enough--we need to look at housing, food, and other "necessities." But what makes it someone else's problem or some failure of the U.S. economy if some folks choose "toys" instead of necessities? Likewise, what makes it someone else's problem or some economic failure if people choose junk food over healthy food (especially if, as I suspect, junk food such as potato chips cost more than healthy food such as potatoes)? And it seems downright perverse to tax someone who chooses not to buy a cell phone (e.g., me up until less than 3 years ago) or someone who doesn't use a clothes dryer (me again) to redistribute to someone who chooses to purchase a cell phone or other toys instead of necessities.
BTW, as I noted in the comments to Art's post, I don't care for the title ("Your Are What You Spend") on the Cox and Alm piece. It's actually rather offensive and it plays to the critics of "consumerism," "materialism," and the like. I assume, as is usual newspaper practice, that NYT editors supplied the title.
Finally, for a good cleansing just keep repeating "Income is earned, it's not distributed."
I have accepted an offer to join the faculty at Auburn University as a tenured Associate Professor in the Department of Finance in the College of Business. I will also serve as Co-Director of the newly-created Center for International Finance and Global Competitiveness where I will direct the Economic Freedom Initiative working with a team of faculty and students working on research and educational outreach related to the economic freedom project.
Anyone want to buy my house?
February 12, 2008
Don't we know this already?
One of the struggles that economics has, which it doesn't appear to me afflicts many other disciplines, is the constant need to reiterate and re-prove points or ideas that the public always seems to forget. Part of this seems to be the familiarity that people have with economics: I've had jobs in the past, so that must mean that my knowledge of the effects of minimum wage laws is equal to this academic who has studied impersonal "data."
None of us would claim to have as valid an opinion of how a surgical procedure should be performed than would a doctor. We would never say "I don't care how many times you've done this, the incision goes over here!" But how often do you hear people dispute basic economic ideas that have been validated with tons of experience? Free trade is bad, tariffs help, etc.
Glenn Beck has a column at cnn.com where he suggests the stimulus package should take the form of expiration-dated debit cards. It can't be saved, and the expiration date will ensure it gets spent soon. Thus comes our salvation. No matter how much evidence there is that increased spending is a result of long-term growth, not its cause, and that the cause of growth comes precisely from the saving that Beck disapproves of, people still believe the "consume our way to prosperity" nonsense. Hmm, isn't that how we got into this problem in the first place? People buying too much with their subprime loans...
A second commonly-held belief is that the middle-class is losing ground. Lou Dobbs, basically all of the Presidential candidates, and our current President himself, all seem to buy into this (or at least do so publicly). Drew Carey hosted a reason.tv video that helps to demolish this myth. It stars the empirically-supported optimist, Michael Cox, and would probably be a good supplement to a discussion on economic growth, per capita income, or price indexes.
I guess I should support the public's amnesia on these issues. It guarantees that economists will be in demand.
Good Work Dan
My former student Dan Alban has co-authored a brief in the DC gun ban case before the Supreme Court. Read it here.
February 11, 2008
Looking Out the Window: Epidemiology and Sippy Cups
My lovely wife and I are expecting our first child in early August, and one way I’m preparing for fatherhood is by volunteering in the preschool ministry at church. It has been challenging but delightful, so far, and I’ve learned a lot in just a few short weeks (mostly about how much I still don’t know). It has also been an interesting exercise in “looking out the window” in accordance with Ronald Coase’s famous admonition. Yesterday’s adventures reading storybooks and dispensing saltines to one-year-olds got me thinking about three e’s: epidemics, externalities, and evolution.
As I understand it, illness spreads like wildfire among groups of small kids. We take a lot of precautions (hand sanitizer for everything, each child’s belongings carefully labeled), but this can only be so effective. Contagious illness may create a negative externality through direct transmission, but a more subtle problem might exist when we consider the fact that as bacteria and viruses are passed from host to host, they mutate and become progressively more resilient. The fact that one kid might make everyone else sick is only half the story; even once everyone gets better, there is likely a newer, ever-so-slightly-more-powerful bug floating around.
Trying to match kids with their individual reusable sippy cups brought this into high relief. Spill-proof sippy cups are definitely drops in the prosperity pool, but failure to match kids with cups or failure to properly sterilize the cups may transmit germs. That got me to thinking about the role of disposables. On one hand, disposables are held up as an example of avarice and waste, and to the extent that some of the costs of using disposables can be socialized, an externality may exist (though I hasten to add, following Walter Block, that this is not a “market failure” but rather a failure by the state to adequately specify and enforce private property rights). At the same time, disposables might reduce disease transmission and, therefore, slow down the rate at which bacteria and viruses evolve.*
The negative externalities from production can be resolved by clarifying property rights; if anything, disposables could produce positive externalities.* Has anyone examined this rigorously? Comments are open if someone can provide a link. I got to thinking about this in part because of an article in Friday’s Wall Street Journal about furor in China over disposable chopsticks.
*-Notes below the fold.
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*A colleague who read the first draft of this made two points. First, someone failing to wash a reusable mug between uses might infect himself/herself repeatedly. Second, if there are positive externalities from use of disposables, the “optimal” policy according to the textbook models would be to subsidize use of disposables.
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Why property grabbers should be wary of supporting transfers by eminent domain.
Exhibit A, from last Friday's Palm Springs Desert Sun:
Palm Springs Mayor Steve Pougnet's first State of the City address Thursday announced new customer service programs, desert landscape projects, eminent domain in downtown and groundbreakings for two hotels.
Exhibit B, from theday.com (Connecticut):
Affordable-housing activists in Brooklyn, N.Y., are proposing eminent domain be used to seize a prime piece of New York real estate from Pfizer Inc.
On rebuilding after disaster c. 1908
From the Feb. 11, 1908 NYT concerning the rebuilding of Chinatown after the April 1906 San Francisco earthquake:
The rebuilt Chinatown of San Francisco contains substantial new buildings as picturesque as those destroyed by the fire and earthquake, but more convenient and sanitary...I am admittedly not well versed in the history of Chinatown(s) - my suspicion is that they are/were a form of segregation. However, what is striking is the rebuilding is ostensibly completed in less than two years and without a hint of government assistance mentioned in the story.
One wants to make comparisons with another disaster area in this country, even if to do so is not completely honest.
Environmentalists and Economists: Common Ground?
Tomorrow night, Mike Hammock and I are leading a "High Table" discussion for Rhodes first-year students on the relationship between environmentalism and economics. Here's what we're asking them to read or watch:
1. Part 6 of The Economics of Public Issues, 14th Edition
Jeffrey Tucker offers an interesting perspective on child labor laws:
Let's say you want your computer fixed or your software explained. You can shell out big bucks to the Geek Squad, or you can ask — but you can't hire — a typical teenager, or even a preteen. Their experience with computers and the online world is vastly superior to that of most people over the age of 30. From the point of view of online technology, it is the young who rule. And yet they are professionally powerless: they are forbidden by law from earning wages from their expertise.
Wal-Mart for the Nobel Peace Prize?
Read Steve Horwitz.
February 10, 2008
Myths of Rich and Poor authors W. Michael Cox and Richard Alm take on income-based measures of inequality here. Here's Don Boudreaux. Greg Mankiw offers a useful excerpt. Critics tend to point to trends in income shares as a proof of the "injustice" of the market economy--note the popular slogan "the rich get richer while the poor get poorer"--but there's a larger point that must be recognized. Channeling my inner Thomas Sowell, people don't buy food, clothing, and shelter with percentage shares. They buy them with real income. And, as Russell Roberts points out, that has been increasing, too.
Posted by Art Carden at 05:04 PM
February 09, 2008
Markets in Everything--Text Messages to Yourself Edition
With Text-a-Day, you can get personalized text messages delivered to your mobile phone every day.
Nod to MR for the markets in everything concept.
Reply to Tyler Cowen on gold
Tyler Cowen says “OK” to the claim in my Cato Briefing Paper that a gold standard isn’t a crazy idea. He grants that “over the broad sweep of world history, commodity standards have outperformed paper money”. Yet he would not “push the button” for a gold standard because
we don't live in the broad sweep of world history, we live in 2008 and our ability to monitor and control central banks is unparalleled.
Monitor, yes. But control? Who is this “we” that controls central banks? “We” inflation hawks, or “we” the people clamoring for low interest rates and monetary stimulus? Why is CPI inflation currently above 4% and rising if we have such firm control?
Tyler adds: “The central banks of the wealthier nations work pretty well.” They work better than they used to, as I note in the Cato paper. But surely today's inflation is worse than what a gold standard produces.
My main worry with the gold standard is simply the pro-cyclicality of the money supply and for all its talk of money demand the paper doesn't much address this concern. For instance would you really want a contracting money supply in today's environment? And yes credit crunches of this kind happen in market settings too so you can't blame it all on Alan Greenspan.
I take it that Tyler is here referring to pro-cyclicality of the inside money stock (bank liabilities) due credit crunches and bank runs, not of the stock of gold. (The gold mining industry is actually counter-cyclical: a high price level reduces mining output. The price-specie-flow mechanism is likewise counter-cyclical.) The paper does try to address that concern in its argument that US banking panics in the gold standard era were due to weak banking (in turn due to legal restrictions) and not due to inherent instability. I would be grateful if someone could point me to evidence that countries with sound banking systems (e.g. Canada) had bigger problems with cyclical banking under the gold standard without a central bank than we have today. Yes, in principle a central bank can act counter-cyclically, but what’s the success rate in practice, even among the wealthier nations? Worse than break-even, I would submit.
Musings c. 1908
From the Feb. 9, 1908 NYT:
On bridge tolls c. 1908
For our friends in the Northeast (and elsewhere) who face dramatic increases in road and bridge tolls in the near future, a letter to the editor from the Feb. 9, 1908 NYT:
Now that the Thaw trial is over, please turn your attention to a free Brooklyn Bridge topic and let me know why I should pay 10 cents [$2.26 in 2006 dollars] to drive across the [Brooklyn] bridge, who gets the money, and such other information as will explain why, after I have crossed the bridge, I can drive free over several hundred miles of paved, cleaned, and lighted thoroughfares, that cost many millions of dollars to build and cost ten times as much to maintain as both bridges?
February 08, 2008
The Art of Economics: Biofuel and Indonesian Rain Forests
A colleague brings the Indonesian palm oil industry to my attention. The problem? Apparently, Indonesians are “logging, draining, and burning” rain forests (and releasing copious amounts of carbon dioxide in the process) to facilitate the cultivation of oil palms, which are being planted in response to “a surge in global demand for biofuels.” Quotes are taken from a November 16, 2007 AP article. According to my colleague, this morning’s Wall Street Journal Report said that apparently it would take 480 years for the reduced emissions from palm-based biofuels to match the carbon put in the atmosphere by clearing the rainforests. I can’t find the report online; comments are open if anyone has a link.
“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences not merely for one group, but for all groups.” --Henry Hazlitt, Economics in One Lesson; been there, done that, bought the t-shirt.
Have a Student Interested in Intensive Language Study?
My institution hosts eight-week long intensive language classes in Arabic, Chinese, Japanese, and Russian for college students. These classes are the equivalent of a year's worth of language studies. There are several scholarships available. Plus you get to eight weeks in Wisconsin!
More information about the program and scholarships can be found at www.summerlanguages.com.
Posted by Joshua Hall at 02:32 PM
Hiking for Dollars
A few years ago one of my favorite students came in to ask me to sign off on his early (December instead of May) graduation form. I began to launch into my "why the heck would you want to leave college early--don't you know the real world sucks" lecture, but he stopped me short by saying he wanted to hike the 2175 mile Appalachian Trail and needed to start in March. Oh. Now that's a good reason to graduate early! I signed his form eagerly. He completed the hike and then moved to "do good" work in Oregon.
Now he wants to hike the 2650 mile Pacific Crest Trail that runs from the Mexico border through California, Oregon, and Washington. Here's a section from his letter to friends:
If only I had been mature enough to listen to my advisor Dr. Lawson, and pursue a Master /PH.D in Economics and trust that my faith would always be there for me to explore later. Yet, my naive ears did not listen. As many of you know I left Capital for the wonders of the world, exploring the east coast as I hiked the entire Appalachian Trail the summer after my graduation... I joined the Jesuit Volunteer Corp and worked for joy and love, having all my material needs provided for through this program and given a monthly stipend of $80.00.
He's trying to raise $2650 ($1 per mile) for charity along the way.
Who am I to say he chose wrong? He sounds plenty wealthy to me.
I sent this letter to the Capital University student newspaper today,
Gold for your ears and eyes
Today’s Cato Daily Podcast features yours truly attempting to explain -- in under 9 minutes! -- why the gold standard is not a crazy idea. Cato has also published today a Briefing Paper in which I scrutinize the arguments against a gold standard.
The news that the pols have reached a vote buying deal brought this cartoon by RJ Matson of the St. Louis Post-Dispatch to mind. The cartoon correctly ridicules the spend more to save the economy notion, but I'd like to put some digital "white out" over the bit about cheap credit from China.
More on Sports Pork
In today's AJC, JC Bradbury takes on the Gwinnett Braves deal. Well done JC!
A previous post on the Gwinnett give away is here.
February 07, 2008
Could mutual funds issue currency?
A correspondent asks: “Why couldn't a mutual fund for example, issue a currency or notes based on its own portfolio of stocks? Or, theoretically, what is to prevent people from purchasing and trading certificates or notes of this nature?”
My reply: Good question. Note that money-market mutual funds today already do allow check-writing on their accounts, which is the next closest thing to currency issue. A MMMF redeems the checks out of a bank account it holds (a small fraction of the fund portfolio) for that purpose, topping up the account as necessary by selling stocks out the portfolio. There's no reason in principle why it couldn't also issue a limited amount of currency notes redeemable out of the same account. If MMMFs were allowed access to the interbank clearing system directly, they could hold their own clearing reserves instead of clearing through banks.
Legally, the imagined hybrid MMMF-noteissuer is today no doubt illegal in the US under some combination of the laws that restrict banks from holding equities and the laws that restrict banks from issuing currency.
Pre-election antics c. 1908
An article in the Feb. 7, 1908 NYT puts our current primary antics in some perspective:
ST. AUGUSTINE, Fla. - The wildest scenes of disorder characterized the proceedings of the Republican Convention here to-day, which elected two complete delegations to the National Convention, one in favor of Taft and the other uninstructed.
Why Fashion? Paris gets clothed.
Would you wear this?
Okay, let me rephrase. Do you think you'd see anyone wearing this in public?
What you see is part of Carolina Herrera's fall 2008 collection shown Monday in New York. Here are some more moderate examples based on the same ideas. And here are some other design goodies of various wearability.
As Carolina Herrera said in a related interview, fashion week is not about every day life. For her it is about "fantasizing." Yes, mass market apparel has little resemblance to runway offerings, especially during the showcase that is fashion week. However, the experiments that occur at that high level of abstraction--those ideas--are crucial to the designs that appear in stores the following season.
High-level, abstract ideas can at first only be appreciated by niches of expertise and taste. Through analysis, imitation and reformulation, such abstract ideas can be diffused to broader and in some cases eventually mass populations.
I don't understand any of the programming that makes this blog possible. To me it's as difficult to comprehend as it would be to see a woman on her morning commute wearing Herrera's feather tweed hat. But the fact that programming-dummies like me click at the keyboard, as I'm doing now, is the sole motivator of the experts at MovableType. The consuming public doesn't think about spontaneous orders, but those abstract ideas matter to "how Paris gets fed." Cell phone users don't know the difference between a Becker-DeGroot-Marshak and a Vickery auction, but these made over 200 million cellular subscribers possible.
With fashion, we get a visual on the general relationship between the abstract and the concrete. Tracing ideas "from the catwalk to the sidewalk" offers clues for how ideas matter generally and for social change more broadly. Because fashion ideas enjoy little intellectual property protection, the imitative force is very strong. Many of the design ideas that are now appearing at fashion week will not take long to cascade down through the boutiques, department stores, and eventually big boxes. Even a modest income can afford to have a look that is both in taste and in fashion. Paris gets clothed, too.
Whenever I get the bright idea that I might want to write something, you know really write something real, not a journal article or book that no one cares about, but something interesting that real people might want to really read, I read something by James Lileks, and crawl sheepishly back into my dark cave.*
Hundreds of snippets of derisive snark. You can picture the satisfied little grins on the authors’ faces; you can imagine the whole tableau – the computer (which most people in the world will never touch, let alone use, let alone own) the TV in the corner connected to a network that has channels catering to every taste, the iPod stocked with music hoovered up free of charge without consequence, the fridge stocked with food – the light comes on when you open the door, too, unless it’s burned out, and then you go to the store and get another one; they always have another one. The soft bed, the coffee machine, the well-fed pet, the vast panoply of free information and unfettered opinion flowing 24/7 from the internet. You can drink alcohol without being sentenced to death; you can be a girl alone in a room with a man without earning a public stoning; you can stand up in a room and argue for the candidate of your choice without being arrested; you stand in a society that allows for astonishing amounts of freedom, comfort and opportunity. But.
*nice run-on sentence dontchathink?
February 06, 2008
ABBA to Zeppelin in Local Fishwrap
A local reporter for the Beloit Daily News did a nice story on my use of music in the classroom. Sorry Bob and Dirk, while I mentioned you two by name several times, the reporter decided to just call you 'two men.' C'est la vie.
BTW, Welcome Art!
"The Division of Labour Gradually Becomes More General..."
"Originally confined to the narrowest circles of people, to immediate neighbours, the division of labour gradually becomes more general until eventually it includes all mankind." Ludwig von Mises, "Socialism," II.19.1
Greetings and Salutations. I'm Art Carden, I teach economics at Rhodes College, and I was recently assimilated by the DoL. In this space you will find commentary, teaching notes, helpful hints, money-saving coupons, and additions to my favorite blogospheric memes (channeling my inner Dave Barry, "Blogospheric Memes" would be a great name for a band). More is coming to an RSS reader near you very soon.
Posted by Art Carden at 02:38 PM
John Baden on cheap transportation for the third world:
By giving affordable independence and mobility to the workingman, [the Model T] changed the world. Now, 100 years later, Tata Motors of India announced the Nano, a car far superior to the T, for a mere $2,500. . . .
This is a joint posting with co-blogger Wilson; it's possible to select multiple categories but not possible to select multiple bloggers.
Tyler's MR post (a reproduction of this post by Bryan Caplan) on job safety reminded us of the chart below (source; scroll down to Figure 34.1). If the authors had not inserted the vertical line, there would be no way to tell that OSHA came into existence in 1970. OSHA did nothing to change the existing downward trend in workplace deaths.
Political hot air c. 1908
From the Jan. 6, 1908 NYT:
The eagle which has perched upon the top of the historic mace at the right hand of the Speaker of the House of Representatives these sixty-seven years, since John Tyler was President, is sick.
Individualism and the Long Arc of Fashion
If you are a man working in business today, you don't wear the same dark suit, dark tie and dark fedora as every other man at the office. If you are a woman working in business today, you are allowed to wear pants. Not so in times past. Fashion provides a window on increasing individualism in western society.
Here is Alfred Marshall at the turn of the 20th century (Principles of Economics, 8th ed., Book III, Ch. 1.).
But in dress conventional wants overshadow those which are natural. Thus in many of the earlier stages of civilization the sumptuary mandates of Law and Custom have rigidly prescribed to the members of each caste or industrial grade, the style and the standard of expense up to which their dress must reach and beyond which they may not go; and part of the substance of these mandates remains now, though subject to rapid change. In Scotland, for instance, in Adam Smith's time many persons were allowed by custom to go abroad without shoes and stockings who may not do so now; and many may still do it in Scotland who might not in England. Again, in England now a well-to-do labourer is expected to appear on Sunday in a black coat and, in some places, in a silk hat; though these would have subjected him to ridicule but a short time ago.
Here is Paul Nystrom in 1928 (The Economics of Fashion, p.9):
If any reader of this should doubt the power of fashion, let him try a simple experiment and note his own reactions. Let him put on clothes or even a hat such as worn by a past generation and then go out as casually as he can among his acquaintances or in fact among strangers and note, first, their reactions toward him and then his feelings toward himself. There will be quizzical looks, doubtful stares and critical estimates. He will be thought queer. He will be judged as lacking in brain power and, perhaps, as an undesirable person. If he persists in his experiment, he will, if he is an employee, lose his job. He will lose his customers if he is a salesman. He will lose his votes if he is a politician. He will lose his custom if he is a doctor or lawyer. He will lose all of his friends.
And here is Virginia Postrel at the turn of the 21st century (The Substance of Style, 2003, pp.63-4):
Until relatively recently, social convention restricted the aesthetic play of imagination and technology. Forget hip-hop flamboyance and punk transgression. In the 1960s, nice girls didn’t dye their hair or get their ears pierced. Michael Jordan’s tailored but body- and fashion-conscious dress (not to mention his earring) would have been too conspicuous, a reminder of black men’s too unseemly pride in their personal style. As recently as 1983, a leading fashion critic could describe Armani suits as representing “a style that is decidedly homosexual,” and thus of limited appeal to mainstream professional men, who feared being thought effeminate unless they chose clothes that go unnoticed. The extension of liberal individualism—the primacy of self-definition over hierarchy and inherited, group-determined status—has changed our aesthetic universe… Instead of a single dominant standard, then, we see aesthetic fluidity. Individuals recombine styles that please them, and those combinations in turn create ever more ideas and categories that can be further recombined.
February 05, 2008
Scotland’s and Northern Ireland’s private banknotes under Westminster threat
Back in July 2005 when he was Chancellor of the Exchequer, Gordon Brown threatened to squeeze the Scottish and Northern Irish banks of issue for an additional £80 million a year in seigniorage by making the 100% reserve requirement (in non-interest-bearing Bank of England liabilities) against their banknotes continuously binding. Today Brown is Prime Minister, and his Chancellor, Alistair Darling, has renewed the threat with the spurious rationale that it would “protect customers from failing financial institutions”. (News story here.) So much for the proud tradition of Scottish and Northern Irish banknotes. Scotland's first minister is vowing to fight the change.
And some "consumer protection" measure: with zero seigniorage left for the issuing banks, the banks would be forced to start imposing fees for note withdrawals from cash dispensers or ATMs (fees are currently zero because the banks want the float from non-interest-bearing notes in circulation). Would that make consumers better off?
APEE buzz has reached freakish proportions
Steven Levitt plugs APEE communicators contest with the following tease:
If there were a prize given for the best economics lecture at the University of Chicago in a year, I know who would have won it last year. I brought in a very high-priced call girl to guest lecture at my undergraduate Economics of Crime class. The next day, I asked my students whether they liked the lecture. More than one-third of them said it was the single best lecture they had attended in their four years of college. I had to agree with them.
Hat tip: the "totally awesome" Ed Stringham.
John Stossel at APEE
Cool news from today's inbox:
The Association for Private Enterprise Education and Market-Based Management Institute are proud to announce that ABC's John Stossel will be on the panel of judges for the finals of this year's Economic Communicators Contest. The panel will judge the contest's three finalists at APEE's Annual Conference to be held at Harrah's Las Vegas Hotel & Casino April 6-8, 2008. You can still register to attend to see John Stossel speak, or you can still enter the contest for your chance to be evaluated by John Stossel and win cash prizes.
February 04, 2008
"The poor souls"
I received this note from an economist friend in Nairobi, Kenya whose home is close to one of the areas of the unrest:
I am unable to sleep, I have called all the police numbers, called intelligence agents, newsrooms-nobody is rescuing the poor souls. I am watching from my window, impotent and enraged.
For his safety, I will not reveal his name. He is now trying to move his family and staff to safer digs. Donations (501c3 deductible thanks to his American friends) are being accepted. Contact me directly for details if you're interested/able to help.
[No, this is not a scam. I know the guy and this is real.]
Klein on Coordination
Recommended new podcast: Russ Roberts of Econ Talk talks to my Econ Jounal Watch colleague Dan Klein about Coordination and Cooperation.
According to a survey of 3000 UK residents taken by UKTV Gold television,
nearly a quarter think Winston Churchill was a myth while the majority reckon Sherlock Holmes was real. … 23 percent thought World War II prime minister Churchill was made up. The same percentage thought Crimean War nurse Florence Nightingale did not actually exist. … Meanwhile, 58 percent thought Sir Arthur Conan Doyle's fictional detective Holmes actually existed …
Hat tip: Fleeman
Biofuels for fun and profits
George Will on biofuels. The Riady story needs to be repeated as often as possible.
The political importance of corn-growing, ethanol-making Iowa is one reason that biofuel mandates flow from Washington the way oil would flow from the Arctic National Wildlife Refuge if it had nominating caucuses.
Some pot in every chicken?
Steve Chapman on Obama's stance(s) regarding marijuana:
Recently, he had told a New Hampshire newspaper, "I'm not in favor of decriminalization."
CCC at the state level c. 1908
From the Feb. 4, 1908 NYT:
With the unanimous consent in the [New York] Senate to-night, Senator McCall of the Sixteenth District introduced a bill authorizing the Park Board of New York to spend an additional sum of $1,500,000 for the development of parks and driveways.Unmentioned is that such an expenditure "for the benefit of the unemployed" came at the expense of the employed (at least to some degree).
February 03, 2008
Some Super Bowl Economics
1. News reports of ticket scalping for today's Super Bowl in Arizona, reminded me that ASU profs Stephen Happel and Marianne Jennings have done some interesting work on scalping. Here's a Cato piece; here's a post from the ASU business school blog.
2. Yesterday's WSJ reports that Rep. Heath Shuler (NC) and the Rutherford Institute are threatening legislation and litigation, respectively, to force the NFL to loosen its rebroadcast restrictions for churches showing the Super Bowl. It seems like an attempt to violate the NFL's property rights, though the WSJ article does quote an intellectual property attorney who suggests that the NFL's policies encroach upon fair use.
3. Just in time to serve as an antidote to claims that the Super Bowl is a bounty of riches for the host city, the current issue of the Southern Economic Journal features an article by Baade, Baumann, and Matheson examining the relationship between sporting events and taxable sales. (Ungated version here.) The abstract:
Professional sports leagues, franchises, and civic boosters, have used the promise of an all star game or league championship as an incentive for host cities to construct new stadiums or arenas at considerable public expense. Past league-sponsored studies have estimated that Super Bowls, All-Star games and other sports mega-events increase economic activity by hundreds of millions of dollars in host cities. Our analysis fails to support these claims. Our detailed regression analysis of taxable sales in Florida over the period 1980 to 2004 reveals that on, average, mega-events ranging from the World Cup to the World Series have been associated with reductions in taxable sales in host regions of $5 to $10 million per month. Likewise, strikes in Major League Baseball, the National Hockey League, and the National Basketball League, each of which has resulted in the cancellation of large parts of entire seasons, appear to have also had no demonstrable negative effect on taxable sales in host cities.
Fashion Cycle, Business Cycle
When less is more.
Fashion is one of the greatest forces in present-day life. It pervades every field and reaches every class. Fashion leads business and determines its direction. It has always been a factor in human life but never more forceful, never more influential and never wider in scope than in the last decade, and it gives every indication of growing still more important.
I'd bet even the fashion statement-making New York Giants wouldn't guess what year those words were published. The quote is the opening paragraph of the preface of The Economics of Fashion by a Professor Paul H. Nystrom, published in 1928. A decade after the end of war, and nearing the end of a 21-month economic expansion on the eve of the depression. Any recession coming up is likely to be pretty mild historically. Our current expansion is going on 75 months and the one before that was 120. But still. Nystrom's words seem to ring pretty solid today.
Is the fashion industry procyclical? Of course it is. Fashion is a luxury good, so demand for it moves in the same direction with income. Everyone expects a recession. Consumer confidence is down. Job growth is dead in the water. Luxury brands are in for lean times, just like people are expecting lower spending on vacations, cosmetic surgery, and domestic help. So designers are competing for slices of a shrinking pie. But couldn't this easily spur even greater creativity and innovation, so that despite being in an economic slump the fashion cycle is booming? At fashion week, necessity is all that (!), plus the mother of invention.
Certainly, less business will be done than usual, and some designs will be muted, industry experts say. But at the same time, some designers will interpret the financial downturn as an excuse to turn up the fashion excess.... Just when you would think things would be more conservative, there are likely to be more lavish, extreme displays on the catwalk, Aguiar said. "If anything, people will be more desperate to get attention that they think is going to generate business,"...
Does anyone know what spending on fashion is annually, or maybe how cyclical it is?
Thanks to Jim Gwartney ...
... and all of the folks who helped with Friday's "Creative Teaching Ideas" workshop at FSU. Here's a suggestion from the seminar--check out presenter Dirk Mateer's web page for some innovative uses of movies and music to communicate economic principles.
Kickin' It Around Berry College
My former student Ryan Simmons made this YouTube video of Berry. My favorite scenes are the one with the cows and the one in the president's office.
February 02, 2008
The anchor rope is fraying
From the Wall St. Journal blog, evidence that inflation expectations – as reflected in the difference between indexed and unindexed bond yields – have risen in response to the Fed’s recent rate cuts. As expected.
February 01, 2008
The Economics of Repugnance
What determines whether market exchanges are taboo? The New York Times (interestingly, in the Arts section) lays out some of the issues.
“It’s very hard to predict what’s repugnant and what’s not,” Mr. [Alvin] Roth said. Paul Bloom, a professor of psychology at Yale, agreed. He conducted a two-year study to try to get at why people consider athletes who take steroids to be cheating, but not those who take vitamins or use personal trainers. He and his team offered different possibilities: What if steroids were completely natural? Or were not at all harmful? Or were only effective if the athlete had to work harder than before?
Never mind non-money incentives. I guess those are a new invention, too.
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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