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.

Economics departments were ranked on total citations and citations per author. Auburn ranked 14th, just ahead of such noted institutions as Princeton and the University of Toronto. The top three ranking universities for research in this discipline were Vanderbilt, Indiana and Wisconsin.

The study also reported the top 50 individual faculty members in the world, ranked on research productivity in this area. John Siegfried of Vanderbilt and William Becker of Indiana University were the most highly cited individual researchers. Steven Caudill and Daniel Gropper of Auburn were tied for 12th with Peter Kennedy of Simon Fraser University and Charles Holt of the University of Virginia. The study reports 14 Auburn-affiliated authors publishing research in this area; citations to Caudill and Gropper’s work accounted for 77 percent of the total citations that Auburn researchers received.

* 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.

My paper "Christian Ethics, Formal Institutions, and Economic Growth" is online.

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.

As Bloomberg.com reports:

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.

And yet,

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.

Division of Labour is now helping Mike Moffatt lose weight. No word yet on what we'll spend our $100 on if we "win."

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.

... 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....

To tap into [students'] enthusiasm, optimism, and passion for change, I have started the Clinton Global Initiative University...

Like each member of CGI, each participant at CGI U. ... will be responsible for making a commitment to take action. ... Student groups might mobilize large numbers to advocate for human rights, create microfinance funds for young entrepreneurs in the developing world, or create citywide bike-share programs.

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

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."

There seems to be a good deal of mystery about the affair.

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.

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.

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 much for subsidizing our way to greater "social stability" by luring marginal borrowers into debt to own a home. The truth today is that politicians are rushing to prop up house prices not to rescue the poor from the ignominy of renting, but to get past the next election without affluent voters having to confront a realistic decline in the market value of their main assets.

So that clears things up, huh?

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.

ATSRTWT.

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.

Allan Meltzer is trenchant in explaining the malincentives that created the subprime crisis.

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:
-Absence makes the heart grow fonder (diminishing marginal utility).
-A bird in the hand is worth two in the bush (depends on your discount rate).
-Don't cry over spilt milk (sunk costs).
-Don't put all your eggs in one basket (diversify your portfolio).
-Don't throw out the baby with the bathwater (heterodox schools of thought).
-Don't lock the stable door once the horse is gone (sometimes it's better not to rebuild).
-The game isn't worth the candle (information costs).
-Good fences make good neighbors (property rights).
-Life is short; art is long (structure of production).
-There's no accounting for tastes.
-Too many cooks spoils the broth (diminishing marginal product).
-You can't have yoru cake and eat it too (opportunity cost).
-You can't make an omelet without breaking eggs (creative destruction).

Tyler Cowen's favorite Haitian proverbs offer similar implications.

Menken speaks to Art's post below about systematic voter beliefs.
"Noone ever went broke underestimating the intelligence of the American people." (Of course, we know it's the low costs of being wrong, not intelligence, at issue.)

A good Chinese proverb for the classroom:
-He who asks is a fool for five minutes, but he who does not ask is a fool forever.

A couple of Mexican proverbs I managed to retain,
-Hay mas tiempo que la vida (there is more time than life).
-Salud, amor, dinero, y tiempo para gustarlo (health, love, money, and time to enjoy)

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.

Via Greg Mankiw. Bryan Caplan explains the policy implications.

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."

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.

Mr. Acheson introduced a resolution to-day for an amendment to the Federal Constitution providing that the sale, importation, and manufacture of intoxicating liquors, including beer, ale, wine, and of opium, cocaine, or other narcotic drugs, except for medicinal and mechanical purposes shall be prohibited in the United States and all the Territories.

Whether Acheson was the first or not, such suggestions ultimately led to this:

Amendment XVIII

Passed by Congress December 18, 1917. Ratified January 16, 1919. Repealed by amendment 21.

Section 1.

After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.

Section 2.

The Congress and the several States shall have concurrent power to enforce this article by appropriate legislation.

Section 3.

This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of the several States, as provided in the Constitution, within seven years from the date of the submission hereof to the States by the Congress.

Thanks.

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).

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. :-)

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.

An email exchange with a reporter. My view is informed by the observations of Jerry O'Driscoll and George Selgin.

1. If the U.S. was currently on the gold standard, would we still be
experiencing the current credit crunch that resulted after the collapse
of the subprime mortgage market?

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
place, would there have been the disastrous rise and fall of the housing
market and the mortgage-backed securities attached to it? Or was that
scenario an inevitable happening?

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
gold standard?

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.

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,
For the miracle has happened and the olden days are past,
That which made Milwaukee famous doesn't foam in Tennessee
And the lid in Alabama is as tight locked as can be
And the comic paper Colonel and his cronies well may sigh,
For the mint is waving gaily
And the South is going dry.

By the stillside on the hillside in Kentucky all is still,
And the only damp refreshment must be dipped up from the rill.
North Car'lina's stately Governor gives his soda glass a shove,
And discusses local option with the South Car'lina Gove.
It is useless at the fountain to be winkful of the eye,
For the cocktail glass is dusty,
And the South is going dry.

It is water, water everywhere and not a drop to drink.
We no longer hear the music of the mellow crystal clink
When the Colonel and the General, and the Major and the Judge
Meet to have a little nip to give the appetite an edge,
For the eggnog it is nogless and the rye has gone awry,
The punch bowl holds carnations,
And the South is going dry.

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.

Bloomberg.com reports:

Legislation to nationalize Northern Rock Plc cleared all its stages in the lower chamber of the U.K. Parliament.

The House of Commons passed the bill on a vote of 293-167, paving the way for the government to have the power to nationalize the bank.

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.

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:

Professor,

Good Afternoon. I’m sorry I missed you today. I can’t wait to talk to you regarding your Economics courses for Fall. Please let me know how I can assist you in creating the course environment you desire.

[Publisher name redacted] has a variety of textbooks and levels to fit your needs.

The Economist magazine on the (previously noted here) current Westminster threat to Scotland’s and Northern Ireland’s private banknotes:

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, 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."

Brad DeLong says it all. Arnold Kling says a little more: markets are optimistic about post-Fidel Cuba. Humberto Fontova talks about Fidel and Che. Che grabs a Coke and a Smile.

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.

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:

"This commemorates the blackest blot on American history, the world, including honest Americans, believing that the ship was blown up by direct orders from the War Department for the purpose of justification in the plan to despoil Spain of Cuba."

The paper adduces as "convincing proof" that the officers of the Maine attended the funeral of the victims in full dress uniform, which showed that they must have sent their uniforms ashore "in anticipation of the explosion," and alleges that the reason the wreck has not been raised is that it would conclusively demonstrate that the explosion was in the magazine.

More here

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.

50 334 Robert Lawson 40 M Bexley OH 3:34:51
1: 10:22 10:22
2: 7:49 18:11
3: 7:52 26:02
4: 7:43 33:45
5: 7:51 41:35
6: 7:51 49:25
7: 7:44 57:09
8: 7:55 1:05:03
9: 7:50 1:12:53
10: 7:59 1:20:51
11: 7:51 1:28:42
12: 7:51 1:36:32
13: 7:50 1:44:21
14: 8:34 1:52:55
15: 7:53 2:00:47
16: 7:56 2:08:43
17: 7:48 2:16:31
18: 7:59 2:24:29
19: 8:00 2:32:28
20: 8:01 2:40:29
21: 7:40 2:48:08
22: 7:33 2:55:41
23: 7:55 3:03:35
24: 7:50 3:11:25
25: 8:02 3:19:26
26: 15:25 3:34:51

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."

* Second Prize ($2000): Emily Rose, (Bethel College), "What Causes Prosperity: The Estonian Example."

* Third Prize($1500): Gennady Stolyarov II (Hillsdale College), "Enabling Ethical Behavior Through Markets."

* Top High-School Entry ($500): Will Simpson (Homeschooled, Mountain View, Arizona ), "Ethical Ideas and Consequences."

Honorable Mentions ($250): Ojo Adekunle B. (United States International University, Nairobi, Kenya), Chris Kuiper (Dordt College), Vrinda Maheshwari (National Law School of India University), Abigail Martin (Wheaton College), Josef Mladek (University of Economics, Prague, Czech Republic), Ryan Musser (Houghton College), Joel Runyon (Bethel College), Joseph W. Siler (The George Washington University), Neville Tirimba (Masinde Muliro University of Agriculture and Technology, Kakamega, Kenya), Raluca Mihaela Ursu (Wesleyan College).

Via a June 6, 2001 article from The Onion.

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.

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.

Since Mr. Bush's health insurance deduction is a flat $15,000 per year regardless of the price of a medical insurance plan, all people (not just those with "gold-plated" policies costing more than $15,000 per year) will have an incentive to bargain for less expensive insurance. People will discover that bargaining for a policy that costs, say, $1,000 less will result in $1,000 of savings that can be spent on other goods and services.

Unlike the existing system, the amount of the health subsidy does not increase for any spending beyond the first dollar. Choosing a $1,000 less expensive insurance policy in the existing system leads to significantly less than $1,000 to spend on other things. The Bush plan is a commendable step toward reducing medical inflation by motivating consumers to bargain for less expensive medical insurance and services.

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.

Exhibit A:
February 12, 2008
"...increased spending is a result of long-term growth, not its cause..."

Exhibit B:
February 13, 2008
"Yes, consumer spending is 70 percent of GDP, but consumption is the result -- not the cause -- of economic growth. You can't consume what hasn't been produced."

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.

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.

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[HT: Kate Sheehan]

Tyler posts on some of the criticisms of the Cox and Alm piece in the NYT. (Art posted on it a few days ago.)

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.

Compare the top and bottom quintiles: Who is consuming fatty, high carb foods, and who is eating lots of protein, fresh fruits and vegetables? What about medical care? Do they have reliable access to any sort of family physician, regular check ups, doctor visits, ongoing treatments, preventative care -- or is their medical consumption on an emergency room basis? What is the quality of their housing like -- safe neighborhoods, with access to good schools? Or something less desirable?

If we are going to use consumption as a measure of economic equality, then look at the quality of essentials; measuring toys ain't the way to go . . .

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."

It's official.

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?

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.

My former student Dan Alban has co-authored a brief in the DC gun ban case before the Supreme Court. Read it here.

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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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.

Palm Springs won't go to war with Wessman Development, but eminent domain will be considered if the developer doesn't submit its project in the next two months, Pougnet said.

"The city can ill afford to not move forward on the project," he said.

With the $200 million to $500 million that will be invested into the new Spa Resort Hotel and Casino, downtown will suffer if the Fashion Plaza doesn't get an overhaul, he said. When Pougnet said he would look into eminent domain to take over the property, the crowd applauded. Developer John Wessman sat quietly in the back row.

"I will look at any and all options," Pougnet said. "Either with Wessman Development or without them."

Pougnet said he didn't like reading in Thursday's Desert Sun that Wessman takes threats from the city with a "grain of salt."

"That grain of salt is being rubbed in the open sore of our downtown," Pougnet said.

Eminent domain is legal and Pougnet said he will use it if he needs to.

"When I say something, I mean it," he said.

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.

Pfizer is the same company that inspired economic-development plans in the Fort Trumbull neighborhood of New London after the pharmaceutical giant started building its Global Research & Development headquarters there nearly a decade ago.

“Ah, irony,” says Scott Bullock, senior attorney with the Washington, D.C.-based Institute for Justice, the group that defended Fort Trumbull resident Susette Kelo as the lead plaintiff in Kelo v. City of New London — the property-rights case that went all the way to the Supreme Court. The city won the case three years ago.

“It shows that once the power goes to government to take properties on behalf of private parties, the tables can easily be turned on you ... if you're out of favor with the powers that be,” Bullock said.

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...

The Oriental aspect of the Chinese quarter is carefully preserved for good business reasons...

Fully 15,000 Chinese have returned to San Francisco from Oakland and other places of refuge. they have not yet reestablished their temples, as they feared the gods would not be contented at the scene of the great disaster. But this year the cornerstones of new temples are to be laid, and many more Chinese will return, taking their gods with them.

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.

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
2. This WSJ article about disposable chopsticks in China.
3. James Hamilton's link to a NASA photo of Chinese air pollution (HT: Brad Delong)
4. Arnold Kling's post on "Dogs and the Environment" (HT: Russell Roberts, Tyler Cowen)
5. Al Gore's TED Talk on climate change
6. Bjorn Lomborg's TED Talk on the Copenhagen Consensus
7. David Deutsch's TED Talk on how we are equipped to solve problems

Suggestions?

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.

Might these folks have something to offer the workplace? And might the young benefit from a bit of early work experience, too? Perhaps — but we'll never know, thanks to antiquated federal, state, and local laws that make it a crime to hire a kid.
. . .

By the time this legislation passed . . . it was mostly a symbol, a classic case of Washington chasing a trend in order to take credit for it. Youth labor was expected in the 17th and 18th centuries — even welcome, since remunerative work opportunities were newly present. But as prosperity grew with the advance of commerce, more kids left the workforce. By 1930, only 6.4 percent of kids between the ages of 10 and 15 were actually employed, and 3 out of 4 of those were in agriculture.

The first advocates of keeping kids out of factories were women's labor unions, who didn't appreciate the low-wage competition. And true to form, labor unions have been reliable exclusionists ever since.

Opposition did not consist of mining companies looking for cheap labor, but rather parents and clergy alarmed that a law against child labor would be a blow against freedom. They predicted that it would amount to the nationalization of children, which is to say that the government rather than the parents or the child would emerge as the final authority and locus of decision-making. To give you a flavor of the opposition, consider this funny "Beatitude" read by Congressman Fritz G. Lanham of Texas on the US House floor in 1924, as a point of opposition to a child-labor ban then being considered:

Consider the Federal agent in the field; he toils not, nor does he spin; and yet I say unto you that even Solomon in all his populous household was not arrayed with powers like one of these.

Children, obey your agents from Washington, for this is right.

Honor thy father and thy mother, for the Government has created them but a little lower than the Federal agent. Love, honor, and disobey them.

Whatsoever thy hand findeth to do, tell it to thy father and mother and let them do it.

Six days shalt thou do all thy rest, and on the seventh day thy parents shall rest with thee.

Go to the bureau officer, thou sluggard; consider his ways and be idle.

Toil, thou farmer's wife; thou shalt have no servant in thy house, nor let thy children help thee.

And all thy children shall be taught of the Federal agent, and great shall be the peace of thy children.

Thy children shall rise up and call the Federal agent blessed.

Read Steve Horwitz.

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.

With Text-a-Day, you can get personalized text messages delivered to your mobile phone every day.

One quick phone call and you’re getting daily text messages about the stuff you care about. Sports, jokes, horoscopes, inspiring thoughts, and so much more—it’s your choice. And we’re adding new cards all the time.

Just pick up a card at your local retailer today. They’re a great value and make a great gift for anyone with a mobiile phone!

Nod to MR for the markets in everything concept.

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.

From the Feb. 9, 1908 NYT:

Poets are born, not paid.

Too many cooks spoil the intelligence office.

All things come to those who wait on themselves.

Be careful how you grasp a red-hot opportunity.

Sometimes an exploded theory doesn't even wake up the theorist.

An expert is a man who is able to impress us with how little we know.

The philanthropy of some men consists of a willingness to pass the hat.

Pride goeth before a fall, and it doesn't soften the bumps any at that.

The trouble with some people is that they believe twice as much as they hear.

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?

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.

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.

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,

Dear Editor:

Professor Dyck (February 7 letter) is willing to sacrifice people on the alter of the social good as defined apparently by him and/or the democratic majority. I am not so sanguine about the wisdom of the majority, nor do I personally presume to divine what the “social good” is. This is our difference. Professor Dyck thinks he (or a majority of voters) can know how society should operate and is quite willing to force people to subsume their personal wishes to that vision; in contrast, I think people can discover the best way to organize society only through their free and peaceful interactions with each other.

With respect,

Robert Lawson
Professor of Economics & George H. Moor Chair

This was in response to his letter in this week's paper, which in turn was a response to my letter the week before.

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.

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.

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.

The MMMF notes so issued would only be "based on" or "backed" by the fund’s stock portfolio in the same indirect sense that ordinary banknotes are "based on" or "backed" by the issuing bank's loan portfolio. In a direct sense, the MMMF notes would be fractionally backed by the funds' reserves (today, its bank account; alternatively, its cash). In holding the notes, you'd be taking the risk that the fund would be unable to redeem. But since MMMFs are more stable than banks (non-run-prone even in the absence of deposit insurance), MF notes might be an attractive product in the absence of government guarantees for banknotes.

There's a limit to how many notes a MMMF could issue while retaining its greater stability, however. The greater stability comes from the fact that a MMMF issues only equity shares, not debt claims, hence can't become insolvent. (Debt liabilities can’t exceed assets when there are no debt liabilities.) But fixed-value currency notes are debt claims. A MMMF that financed (say) 80% of its portfolio with debt claims would have become a bank with 20% capital.

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.

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.

For several weeks there had been a threatened departure from the expressed wishes of the Administration forces, who had been laying plans for the indorsement of the Administration and the sending to the National Convention of a delegation favoring Taft.

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.*

Check out Lileks' latest about a contest at Freakonomics to create a six-word motto for the U.S.:

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?

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!

"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.

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. . . .

Private autos involve sociology and anthropology as much as engineering and metallurgy. They are freedom machines and individuals believe access to them dramatically improves everyday life. The evidence supporting this is compelling and remarkably consistent across time and cultures.
. . .
The Nano and its competitors will force those concerned with global warming to confront an important fact; 15 percent of the world's population, the West and Japan, own two thirds of its vehicles. China has the same ratio of vehicles per capita as the US did in 1918, and India only half of that. This implies a huge pent up demand in nations whose economic growth, nearly 10 percent, doubles in a decade.

If one assumes that anthropocentric CO2 causes global warming, and that on balance this is harmful, policymakers face huge and unprecedented problems. The atmosphere is a giant commons in which individual and collective rationality diverges. And not all problems have acceptable solutions.

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.

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.

For all these years the eagle has withstood the onslaughts of eloquence. It sat there calmly through the thunders of war statesmen. The slavery question was debated in its presence, and after the war it heard Conkling, Blaine, Lamar, Sunset Cox, and a long line of orators, even down to the present time of John Wesley Gaines, all without a quiver. But this week has been too much for it.

The spread-eagle speeches which have shaken the rafters not only of the Capitol, but of the country, have at last aroused the emulation of the silver eagle, and it decided to stretch its mighty pinions for a flight. But, alas! like so many other flights of the week, it fell flat.

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.

Earring indeed! How about spacers or scalpelling? Yuk.

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?

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.

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.

Mr. Stossel will also be receiving APEE's Thomas Jefferson Award, given to honor an individual whose public service has embodied the Jeffersonian ideal. It is bestowed on those who have dedicated their careers to establishing and maintaining the ideal government. It highlights the efforts of an individual who has demonstrated a desire to truly put the public interest first by providing, life, liberty, and the pursuit of happiness, for all.

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.]

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

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.

ANWR's 10.4 billion barrels of oil have become hostage to the planet's saviors (e.g., John McCain, Hillary Clinton, Barack Obama), who block drilling in even a tiny patch of ANWR. You could fit Massachusetts, New Jersey, Rhode Island, Connecticut and Delaware into ANWR's frozen desolation; the "footprint" of the drilling operation would be one sixth the size of Washington's Dulles airport.

Americans can still drill for … water. Water rights (T. Boone Pickens has bought 400,000 acres of them in the Texas Panhandle) are becoming more valuable as ethanol production, which is extremely water-intensive, puts pressure on supplies.

To avoid drilling for oil in ANWR's moonscape, the planet savers evidently prefer destroying forests, even though they absorb greenhouse gases. ... The destruction of forests is one reason European governments are rethinking their biofuel enthusiasm. The European Union has awakened to the fact that growing crops (which requires diesel fuel for tractors, and nitrogen fertilizer made with natural gas) and turning them into biofuel (transporting them to energy-devouring manufacturing plants) takes a toll on the environment

If the argument for ethanol is that domestically produced energy should be increased, there are better ways of doing that. On the outer continental shelf there is a 50-year supply of clean-burning natural gas . . . that the government . . . will not allow to be extracted. But, then, consider what was done in 1996 by the dominant half of today's Clinton tandem presidential candidacy.

Bill Clinton, by executive edict, declared 1.7 million acres of Utah to be a national monument. Under those acres are the largest known deposit—more than 60 billion tons—of low-sulfur, clean-burning coal. The second largest deposit, the value of which rose because of Clinton's action locking up an alternative supply, is in Indonesia and is owned by a member of the Indonesian Riady family, of fragrant memory, which was generous to Clinton's 1992 campaign.

Steve Chapman on Obama's stance(s) regarding marijuana:

Recently, he had told a New Hampshire newspaper, "I'm not in favor of decriminalization."

This episode reveals that as a candidate, Obama is more fond of bold rhetoric than bold policies. But it also proves the impossibility of talking sense on the subject of illicit drugs during a political campaign. That course of action would mean admitting the inadmissible: that the prohibition of cannabis has been cruel, wasteful and fraudulent.

Cruel because it leads to the arrest of nearly 700,000 people a year for mere possession of a substance that is comparatively benign. Wasteful because it expends billions of dollars in police, court and correctional resources that could be deployed against dangerous predators. Fraudulent because it hasn't solved anything: According to the federal government, nearly 100 million Americans have tried the stuff.
. . .
Had we enforced our statutes more vigorously, of course, Bush, Clinton and the others would never have been elected anything, because they would be ex-convicts. Yet Bush, Clinton and the others were happy to put people behind bars for crimes they themselves committed.

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.

"Fourteen years ago," he said, "a law was enacted permitting this expenditure for the benefit of the unemployed. The need for such relief is greater now than it was fourteen years ago. It is estimated that 130,000 skilled mechanics and 15,000 men without trades, are without employment in New York today."

Unmentioned is that such an expenditure "for the benefit of the unemployed" came at the expense of the employed (at least to some degree).

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.

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?

... 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.

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.

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.

HT: Greg Mankiw's blog

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?

The only change that caused the interviewed subjects to alter their objections to steroids was when they were told that everyone else thought it was all right. “People have moral intuitions,” Mr. Bloom said. When it comes to accepting or changing the status quo in these situations, he said, they tended to “defer to experts or the community.”

Often introducing money into the exchange — putting it into the marketplace — is what people find repugnant. Mr. Bloom asserted that money is a relatively new invention in human existence and therefore “unnatural.”

Never mind non-money incentives. I guess those are a new invention, too.