Division of Labour: March 2008 Archives
March 30, 2008
No, all economics isn't akin to a root canal. Dental economics seems to be an active niche for research. Our own Josh Hall has a forthcoming paper examining interstate variation in tooth loss. Now there's a new NBER WP "The Economic Value of Teeth". Coming soon to a journal near you--a dynamic GE model of cavities.
Mile-high rent seeking
The four-day Democratic National Convention in August is expected to pump $160 million directly into the regional economy. The economic shot-in-the-arm, whatever the total actually ends up being, will be a welcome boost. But we're beginning to question whether the short-term benefit is worth the long-term expenses.
Don't know where the $160 million number came from, but almost certainly some bogus "multiplier" has been applied and any displacement of other activities by the convention has been ignored.
March 28, 2008
Pubs Ban British Treasury Chief After Alcohol Tax Hike
Earlier this month, treasury chief Alistair Darling raised taxes on cars and cigarettes, but it is his new alcohol duties — which raised the price of a pint of beer — that have gotten Britons' backs up.
The Secret to Making Poor Nations Rich
The Independent Institute's David Theroux informs me of this upcoming event:
I am delighted to alert you to an airing on C-SPAN2's "Book TV" of our recent event "The Secret to Making Poor Nations Rich" this Sunday, March 30 at 4:30 p.m. Eastern time, 1:30 pm Pacific, featuring Independent Institute fellows.
I'm currently running a highly successful undergraduate seminar based on the book and we've had visits from 5 of the contributors (Ben Powell, Scott Beaulier, Jim Dorn, Randy Holcombe, and Pete Boettke).
NB: Chapter 5 is the best chapter!
March 27, 2008
Cutting Taxes in GA
The Georgia General Assembly is considering three tax cut plans: eliminate the car tax, eliminate taxes on retirement income, and an across the board cut in income tax rates. I weigh in on the options in this article for the Georgia Public Policy Foundation.
Posted by E. Frank Stephenson at 10:34 PM
What would Smith say?
I finished reading Skousen's "The Making of Modern Economics," and one of the underlying themes is how Adam Smith's promotion of prudence and thrift being economically beneficial was questioned by Keynes and others, who stressed the necessity of spending and, well, imprudence.
A new stage of the debate has begun with "Freegans." If you're a vegan, even a level 5 vegan (don't eat anything that casts a shadow; that's for Josh), you have nothing on Freegans, who find the very act of purchasing things, even food, distasteful. And, fret not, if you have access to a computer (whether bought or borrowed), you can get these handy tips:
Curious about Dumpster diving? Freegan.info keeps a city-by-city listing of prime Dumpster locations, from bakeries to bookstores. Large chain stores in wealthy neighborhoods are particularly prone to tossing edible foods, Nelson says.
Of course, the current "prime" locations will only maintain their monopoly positions for so long. Freegan.info's well-intended publicity will lead to these prime Dumpsters being liquidated more rapidly by other Freegans.
If you go, she advises, bring a friend (in case the lid closes on you) and wear gloves to protect your hands from glass and other sharp objects. Ask your local police department first whether it's OK -- some cities have criminalized Dumpster diving. Don't salvage things that need to be refrigerated or show traces of mold, and thoroughly wash any food you've taken from a Dumpster before consuming. It's also a good idea to conduct a smell test of any food you may take; if it smells bad, it probably is spoiled and should be avoided."
I don't have a lot of Dumpster experience, but are the lids that heavy that you need the buddy system? How does that conversation start? "Thanks for the tea, Rose. Are you busy tomorrow afternoon? Publix tosses out their rolls at 3:00 and I could use a hand."
Nelson says freeganism has nothing to do with income. She says many divers, herself included, have at least moderate incomes: "It's really about boycotting the consumerist system."
Hmm, doesn't freeganism depend on consumers to produce the trash/recycled food? Unless Barack or Hillary get elected, we haven't yet achieved a society where we can all live off of each other.
The bailout mentality is becoming ingrained in people's beliefs (if it's not already). One prominent pundit articulates what many are thinking.
While complaints of unfairness can always be raised, government bailouts can generally be defended when the government's failure to act could have dire consequences on society or the nation's financial system, said William Galston, a former domestic policy adviser to President Clinton and now a senior fellow at Washington's Brookings Institution.
Article "More government bailouts may be on way".
A Tale of Two Teachers
My good friend Dirk Mateer has an interesting article about his and his wife's non tenure-track faculty positions at Penn State. A taste:
This amounts to a sizeable paradigm shift from the idea of a faculty member who balances teaching, research, and departmental service, to a model based on employees who are specialists. By increasing the specialization and division of labor among the faculty, universities are transforming how the institution functions. Highly trained specialists now exist on two tracks. The research track offers the possibility of tenure while the teaching side has a growing pool of lecturers carving out rewarding positions that focus on instruction. The two models complement each other and allow faculty members to focus on their comparative advantage, either in the classroom or in research.
March 26, 2008
Rogoff on Zimbabwe's Hyperinflation
From this afternoon's "All Things Considered" on NPR; listen here.
What's the alternative?
I second Frank's kudos to Will Wilkinson's radio commentary identifying the central-planning problem with central banking. I only wish that Will had been given another few seconds to identify the institutional alternative to central banking ...
Space Tourism II
Wired carries the AP story:
New Entry in Space Tourism Industry (By JOHN ANTCZAK Associated Press Writer) Mar 26, 2:03 PM EDT
Which will eventually be a very cool thing. But in the meantime, it's an excuse to not so randomly quote the second funniest movie ever, Airplane II: The Sequel.
[in a montage of news reports] Buffalo Anchorman: Our top story Tonight, Four-alarm fire rages through Downtown Buffalo. Also in the news, Lunar Shuttle heads for the Sun, and certain disaster. Tokyo Anchorman: Our top story Tonight, Four-alarm fire rages through Downtown Tokyo. Also in the news, American Lunar Mission locked in death struggle. Moscow Anchorman: [with a gun pointed to his head] A Four-alarm fire in Downtown Moscow clears way for a glorious new tractor factory. And on the lighter side of the news, Hundreds of Capitalists are soon to perish in Shuttle disaster.
If it sounds too good to be true?
This slipped by my spam filter today. I thought the list of what the offer IS NOT would make an interesting principles of microeconomics discussion:
You are invited to take advantage of an amazing money making opportunity. This opportunity is unique, real, honest, and NOT A SCAM! This opportunity is also NOT:
Is the double negative intentional?
Also, can there be an economic return without any risk?
A New TR?
Like many country-first, party-second military officers who began second careers in Washington, Mr. McCain is often mischaracterized as a politician without any identifiable ideology. But all of his actions can be seen as an attempt to use the federal government to restore your faith in ... the federal government. Once we all put our shoulder on the same wheel, there’s nothing this country can’t do.
Gravel 2008: All over the map
Former senator (D-Alaska) a gadfly Democratic presidential candidate Mike Gravel announced yesterday that he is joining the Libertarian Party and will be seeking its 2008 nomination for president. Fox News reports:
In an e-mail to supporters, Gravel, 77, wrote, “I look forward to advancing my presidential candidacy within the Libertarian Party, which is considerably closer to my values, my foreign policy views and my domestic views.”
The same report also notes, however:
Last month, Gravel endorsed Green Party presidential nominee Jesse Johnson. [According to a spokesman,] Gravel didn’t see any reason “why not” to offer his backing since “voting party line is not smart” and he agrees with Johnson’s message as well as the Green Party’s approach of “direct democracy, mobilizing at a grassroots level, working with people one-on-one and enabling citizen democracy.”
The LP national convention will be held in May. 14 announced candidates are already in contention for the nomination. Apart from Gravel, the only candidate I've heard of is ... wait, I haven't heard of any of them.
"The Beatles and Economics"
The Pork Barrel
This morning's Wall Street Journal had a fascinating front-page article on the plight of British pork producers. The article touched on a lot of things we have talked about and will talk about in econ 101.
It raises an interesting issue in dynamic cost-benefit analysis: everyone is poorer if British pork producers are able to obtain subsidies and other protections. At the same time, however, the British pork lobby has produced--albeit unintentionally, I presume--an excellent and entertaining suite of teaching tools that will improve the way economists teach about competitive markets and political economy. They've made it all available online, including the fantastic song "Stand By Your Ham," a parody of Tammy Wynette's "Stand By Your Man." The music video is here. Finally, the campaign is an excellent exercise in branding: after watching the video, I'm a tad dismayed that I can't find a way to order British ham and bacon online. Really finally, this illustrates the power of unintended consequences. The US decides to subsidize biofuel production, so grain prices go up. Feed prices increase, and a lot of British pig farmers find themselves on the brink of bankruptcy. And now we have "Stand by Your Ham."
An Econ 101 question: according to the website, the British pig industry is losing six pounds every second. If that's true, what should British pig farmers do?
Best Paragraph I Heard on the Radio This Morning
The problem here isn't that the guy in charge [of the Fed] isn't smart enough. The problem is that there's a guy in charge at all. We've put a central planner at the beating heart of our market system, but we've known for decades that central planners rarely have the information they need, or the incentive to use it correctly.
Tax Freedom Day
This year it's April 23, three days sooner than last year. From this Yahoo news story.
Americans will have to work on average 74 days to cover federal taxes, and another 39 days to cover state and local taxes, the group said. Housing costs require 60 days of work, while health care requires 50 days and food 35 days, it said.
The report and cool graph are here.
Tax Freedom Day is the cow bell, but elsewhere the Tax Foundation does some very good work, and has for over 70 years now.
March 25, 2008
Economists Who Run
I've started a Facebook group for "all economists (defined broadly to include public choice/political scientists, policy wonks, experts in finance, etc.) who like to run."
Houston, we have a development takings problem
Joy Ford is what textbooks in law and economics call a holdout problem. Owner of Country International Records, Ms. Ford is something of a Nashville institution, a card-carrying member of the old school music scene. So is her business property, pictured here.
According to Sunday's Nashville Tenneseean [article here]
The Metro Development and Housing Agency, the arm of the city government that oversees urban redevelopment, has signed an agreement with the Houston-based Lionstone Group to buy Ford's property, then sell it to Lionstone at cost. Backed with the possibility of eminent domain, city officials hope to persuade Ford to sell and clear the way for Lionstone's $100 million plan for a two-building commercial and residential complex.
Here's a rendition of the proposed development.
Ms. Ford has turned down Lionstone's offer of $600,000. Her announced asking price is $12 million. The Tennesean quotes her as saying, "I told them, 'I don't want to sell my property, but if you really have to have this property … here's the price."
From an economics perspective, I can think of three important issues at play here. 1) public choice vs. property rights; 2) subjective value vs. opportunism; and 3) private vs. public development. See below the fold if you are interested. Thanks.
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1. Public choice: Kelo defers to the states to define public use and protect property against development takings. An interesting question is, how are rights protected when left to legislative majorities?
Like too many of the 34 new state laws after Kelo, Tennesee's new statute has a lot of bark with little bite. While it states that "public use" does not include economic development (or jobs or enhanced tax base), there are numerous exemptions. If the property has been blighted, or if the develoment is for an industrial park, or if the property owner has previously refused the government's offer of fair market value, then it's a green light. Protections are embodied in vague language such as "it is the intent of the general assembly that the power of eminent domain shall be used sparingly, and that laws permitting the use of eminent domain be narrowly construed..." What little property protections in the law will degrade over time. With any regulation, even the slightest loopholes tend to get mined over time. It's no wonder the legal scholar Jed Rubenfeld described the public use clause as being "of nearly complete insignificance."
In the summer of 2007, the Institute for Justice published a "50-state report card" on development takings. The report calls Tennessee's situation "deeply disappointing" and assigns a grade of "D-" (a three-way tie for second to last; nine states got "F" grades). In a new workign paper, Andy Morris [link forthcoming] breaks down the empirical determinants of the IJ report card. Ilya Somin argues the political reasons for legislation to leave broad takings powers [paper here].
My paper with Noel Campbell and Todd Jewell is the first to empirically analyze the new state laws. Our qualitative analysis finds that 12 of the 34 new laws have no bite--they are symbolic or obfuscating in nature. But the other 22 have susbstantive bite. Our paper asks what are the observable determinants of whether a state updates at all, whether the update is symbolic or substantive, and how soon after Kelo a state updates. Race and income inequality matter a lot. So do economic freedom and the value of new housing being built. Paper is here.
2. Subjective value vs. utilitarianism: Where does subjective value end and strategic opportunism start?
When developers first started poking around Ms. Ford's property in 1999, the surrounding area had already declined. The Country Music Hall of Fame had relocated, and the tourist shops and had restaurants followed. It doesn't sound like there was much going on there at that time. Things aparently started to turn around in 2004 when the city built some new infrastructure and a developer build a new nine-story office building. Developers have apparently always had some interest in the area, gradually buying out all of Ms. Ford's neighbors. Yet Ms. Ford has been resisting buyouts the whole time. She argues that her business is location sensitive. The musical acts she signs, mainly upstarts it seems, benefit from being able to network on Music Row, and her building provides a hang out where artists can gather to get their creative juices flowing. On the other hand, who's to say a different entrepreneur won't lease some space in the new development and provide these benefits even better? It doesn't sound like Ms. Ford's company has evern been a big success in music. Lionstone's attorneys say she's simply against any development in the area.
It doesn't sound like a strategic hold out case to me. She would have played that game through by now. But it doesn't sound like a pure subjective value case either. Maybe she's being ideological about it, like her opponents claim. In which case, the city will proceed to force her out and she'll likely get less than $600,000 and she'll have imposed much higher transaction costs on society. From a utilitarian perspective, she clearly needs to go. Of course, from a rights perspective the costs and benefits don't really matter. But how far do her rights extend? This is a puzzling case, I think.
3. Development without eminent domain: Eminent domain has famously (and rightly, IMO) been called the "despotic power."
Lionstone's offer of $600,000 is based on the value they paid for nearby properties. If done legitimately, the city's determination of fair market value would come very close to that figure. So why involve the city? The only difference is its coercive bargaining power, which Lionstone does not have.
One thing is, without Tennesee's bark-no-bite law, none of this would be an issue because eminent domain wouldn't be on the table. If the developers wanted it bad enough, they'd build around her. More likely, she'd sell if they offered enough. For their bottom line, it's less costly to get the government involved, and that should be troubling from any perspective.
Clever and determined developers can almost always find a way to assemble parcels of land (my op-ed on this here.). In a series of papers (try here and here), Bruce Benson explains more and describe the historical development of how we got here.
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Mercedes Benz - Janis Joplin
I've got a new song lyric assignment up over at the Abba to Zeppelin site.
Oh Lord, won’t you buy me a Mercedes Benz? My friends all drive Porsches, I must make amends.
March 24, 2008
Candy Prohibitions ...
... work about as well as drug and alcohol prohibitions:
With candy sales banned on school campuses, sugar pushers are the latest trend at local schools. Backpacks are filled with Snickers and Twinkees for all sweet tooths willing to pay the price.
Another Bush Failure
From today's WSJ:
George Mason University's Mercatus Center reveals in a soon-to-be released study that every measure of regulatory activity is up in recent years -- agency staffing, budgets, pages of rule making and compliance costs. Those numbers contradict the stream of attacks against this Administration for "weakening" federal consumer and environmental protections.
Excluding homeland security regulations, the budgets of Uncle Sam's 50 largest agencies, such as the Federal Communications Commission and the Consumer Products Safety Commission, are up almost one-third since 2001. There are now some 200,000 full-time government employees writing and enforcing federal commandments.
What a dismal eight years, not that Gore or Kerry would have been any better.
Steve Horwitz on Wal-Mart
As you have probably seen on TV and elsewhere, in September 2006, Wal-Mart launched its $4 prescription program. Now, 18 months later, it reports that it has saved consumers over $1 billion (yes, billion) as a result of that program. That's $1 billion that poorer consumers have to spend elsewhere on the things they need (or that is reducing insurance costs and premiums), not to mention they can now buy prescriptions they might not have been able to afford before or not have to cut pills in half to save money. Moreover, that program prompted Wal-Mart's competition to create similar programs, the benefits of which can be placed on top of that $1 billion. For some strange reason, the major media didn't cover this story when Wal-Mart's press release went out last Friday.
Wal-Mart also plays a prominent role in Steve's superb Mercatus policy paper on lessons that can be learned from the private sector's response to Hurricane Katrina.
March 23, 2008
"[H]ome-schooling" is a misnomer, really. Most of it doesn't even take place at home, and the schooling has little in common with what goes on in school. [...] What home-schoolers most readily reflect are the virtues of the old American frontier settlement or the Amish barn-raising -- we co-operate in self-reliance. My wife and I have been teaching our children ourselves for more than 15 years, and we've found that home-schooling opens doors that schools leave closed.
March 21, 2008
Brad DeLong's Morning Coffee
"Brad DeLong's Morning Coffee" on YouTube. Particularly interesting are his discussions of Karl Marx.
March 20, 2008
Education in Africa: Science and Entrepreneurship
Here's Neil Turok's talk on his entrepreneurial efforts in African education:
And here's Patrick Awuah, founder of Ashesi University, discussing his vision for liberal arts education in Ghana:
March 19, 2008
Investors cheer lending rate cut, but professor casts warning
So read the front page of today's local fishwrapper. Yours truly is said egghead and here are my comments about the Fed's rate cut yesterday:
There are strong indications, most notably the decreasing international value of the dollar and the rapid rise in prices of commodities such as oil and gold, that the Fed’s monetary policy is already overly inflationary. Today’s rate cut further exacerbates the likelihood of 1970s levels of inflation, inflation that carries more long-term harm than short-run gain for the economy.”
Debauching a currency is no way to make a country prosperous.
Chris Coyne at Rhodes, 3/24
After War author Christopher J. Coyne will speak at Rhodes on Monday, March 24 at 7:00 PM. More information can be found here. This will be the third of four speakers generously sponsored by the Charles G. Koch Charitable Foundation.
Posted by Art Carden at 10:07 AM
March 18, 2008
Fooled By the Randomness of March Madness
It's that time of year: March Madness. I've watched parts of two NCAA games this year (UT-Memphis and Duke-UNC), but that hasn't stopped me from joining James Hamilton's Econbrowser group at ESPN.com's Tournament Challenge or from creating a Division of Labour Group. The DoL is limited only by the extent of the market, so all are welcome.
Update: I'm told the DOL bracket link doesn't work. Here's the long way around. Register for an ESPN.com account and search the group directory for "Division of Labour."
March 17, 2008
This and That
I was in DC over the weekend for an excellent IHS workshop on "Liberty and the Art of Teaching." A couple of quick observations about Julian Simon, iPods, and commerce are below the fold.
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The Ultimate Resource in Georgetown: I took a walk through Georgetown on Saturday afternoon and saw a sign at a frame shop reading "the possibilities for creativity are endless." True dat: we discussed the famous Simon-Ehrlich wager in econ 101 last week. Here are Google results for further inquiry. Simon's genius was twofold. First, he offered Ehrlich the opportunity to profit from his apparent higher wisdom. Second, he derived the testable implications of Ehrlich's theory and determined the kinds of evidence we would need to see to know whether Ehrlich was right or wrong (Ehrlich was spectacularly wrong).
iSolitude: I bought an iPod about a year ago, and I think it will ultimately be one of the better purchases I've ever made. First, it offers a chance to tune out background noise (a Godsend in airports). Second, you can carry the cultural, spiritual, and intellectual achievements of the world around in your pocket. Watching Sheila Patek's TED Talk on mantis shrimp made my 2.5 hours in the center seat of the next-to-last row of a packed flight yesterday much more bearable, if not outright enjoyable. Critics have sniffed that the iPod has created a subculture of socially disconnected "pod people." I don't buy the claim that we're somehow culturally impoverished because we can listen to Rachmaninoff on the DC Metro (if you've read the "pod people" link, I also happen to think Nickelback's "Rockstar" is a great song). People are fundamentally social beings, but I think we're better off because we have a greater ability to choose the "who, what, when, where, why and how" of our engagement with the social environment. I'll take my iPod playlist over loud, pre-recorded exhortations to keep up with my carry-on baggage, and the people next to me can have a private conversation with the assurance that I'm probably not listening. We're all better off.
Commerce = Community Service: Saturday was beautiful, but the sun was really bright. And yet there was a group of benevolent souls ready and willing to provide me with a pair of sunglasses for the low price of $9.99 plus tax. God bless them.
Coase on the Family: Finally, I did some reading on the economics of the family in grad school, but to tbe best of my knowledge I never came across an explicitly Coasean transaction-cost based theory of marriage and the family. Comments are open if someone can provide a link.
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Friedman made my car not start today!
Paul Krugman's screed (dated last year) actually blames Milton Friedman for food poisoning. Seriously, I quote,
That’s why I blame the food safety crisis on Milton Friedman, who called for the abolition of both the food and the drug sides of the F.D.A.
No doubt like thousand of other Americans, I woke up to a dead battery in my car today. That damned Friedman! I mean if it weren't for wild-eyed libertarians like him, we'd have a federal dead battery protection agency (FDBPA) to stop this dead battery crisis in its tracks. I mean were talking about thousand of dead batteries every day! Oh the humanity!
March 16, 2008
George Will has (apparently) coined a nifty term for corporate welfare. An example:
For example, suburban Scottsdale's City Council has given $1.5 million for 19 automobile dealerships -- some of them owned by companies with revenues in the billions -- to spend on marketing.
March 14, 2008
Eliot Spitzer Night at the Ballpark
You knew this was coming:
The Macon Music announced today that the team will host “Eliot Spitzer” Night on Friday, June 13th 2008 when the Music play host to the Aiken Foxhounds.
Anthony Downs was on to something
In the U.S., third parties and anti-establishment folks groan about the two-party dominance that is American politics. Today's Iranian elections provide a little perspective. Reuters has the full story here. A few key excerpts.
By Zahra Hosseinian and Parisa Hafezi.
When this much makes it into the press, you know it's only the tip of the iceberg. Without meaningful political competition, democracy collapses toward autocracy.
Kudos to Mike Munger ...
... for getting to participate in the North Carolina gubernatorial debate in October (he's the Libertarian candidate). The debate will be held in Charlotte--maybe Craig can live blog it for us.
Looking for some supreme swag--then donate to Mike's campaign. Logo t-shirts, collector's quality coffee mugs, and more--all for a modest donation. It's the best $50 I've spent today ...
Sunday Beer Sales and Baseball Attendance
The GA legislature is currently considering a bill that would allow the Gwinnett Braves (the relocated Richmond Braves) to sell beer at their stadium on Sundays. Unlike Sunday sales for the Rome Braves which were allowed by a city referendum in 2004, the Gwinnett matter must go before the legislature because its stadium is in an uncorporated area rather than a city. If the legislature doesn't approve Sunday sales the Braves apparently have the right to renegotiate or even pull out of their commitment to move to Gwinnett in 2009. More background here.
The legislative kerfuffle over Sunday beer for Gwinnett brought to mind my recent IJSF paper (with math colleague Ron Taylor and former student Andrew Chupp). Rome's 2004 referendum created a natural experiment for us to assess the effect of alcohol availability on attendance. We compared the Rome Braves 2003 and 2004 Sunday attendance (before beer sales were allowed) to their 2005-2006 Sunday attendance when beer was available. (We controlled for lots of other factors that might influence attendance--promotions, rehab appearances by Chipper Jones, ...) We found that allowing Sunday sales resulted in a small (2%) and statistically insignificant increase in attendance. Attendance does seem to be influenced by cheap beer--the team offers two for one beverages on Thursdays and draws about 8% more fans than on other weeknights. While Rome's experience may not carry over to other communities, our paper does call into question the conventional wisdom about beer and attendance.
A footnote: In the Gwinnett Daily Post article linked above, Georgia's mercantilist Gov. Sonny Perdue refers to the Gwinnett stadium as an "economic development project." Hey guv--saying it's so, doesn't make it so.
ADDENDUM: I left something out of the initial post. Even if beer sales have a weak effect on attendance, they can be an important source of revenue for teams. Using some information on the amount of beer taxes the Rome Braves paid to the city of Rome, my co-authors and I did some back of the envelope calculations and estimated the team gets an additional $40,000 or so per year in beer revenue from Sunday sales. A correspondent indicates that a large professional event can draw $1m in concession revenue with half being attributable to beer.
March 13, 2008
Elephant Vasectomies, Who Knew?
After a successful trip to Southern Africa in 2006 to control its growing elephant population, a team of veterinary experts led by Disney's Animal Kingdom have returned to the area for 10 days to perform laparoscopic vasectomies on six to 10 bull elephants in the Songimvelo Reserve in the Mpumalanga Parks Region, Africa until August 3, 2007. The surgical procedure proved to be productive last July when the Disney team and other animal experts performed the same procedure on four male elephants at the Welgevonden Game Reserve in South Africa.
A bit of puzzle here--these places probably have private property rights in elephants, but why don't they use trophy hunters to control the population?
HT: Melissa Yeoh
At the Public Choice Society meetings last weekend, I had an interesting chat with Francisco Rodriguez, former Chief Economist of the Venezuelan National Assembly and currently Assistant Professor of Economics and Latin American Studies at Wesleyan University (which just hired my grad school friend Pao-Lin Tien). We discussed Hugo Chavez, and he sent me his recent contribution to Foreign Affairs. The punchline: Hugo Chavez isn't good for Venezuela's poor. In Rodriguez's words:
Neither official statistics nor independent estimates show any evidence that Chavez has reoriented state priorities to benefit the poor. Most health and human development indicators have shown no significant improvement beyond that which is normal in the midst of an oil boom. Indeed, some have deteriorated worryingly, and official estimates that income inequality has increased. The "Chavez is good for the poor" hypothesis is inconsistent with the facts.
Posted by Art Carden at 06:09 PM
Overlooking the Obvious Question
My former student Dan Alban points me to a WaPo article on sidewalk food vendors in DC. Apparently a long time wholesale supplier of vendors is facing some new competiton from Zipcar entrepreneur Gabe Klein. The article details the back and forth between WG, a firm that has held a large share of the market for years, and Klein. While it is amusing to know that WG's owners refer to Klein as the backpack guy and Klein refers to WG as the hot dog guys (because their carts peddle hot dogs instead of more modern fare such as hummus) the article completely misses an obvious question--why has WG held such a large market share for so many years? Could it be that, just maybe, there are some provisions in DC's complicated regulartory regime that created frankfurter monopoly? That's my bet, but the article contains only the vaguest hints.
Home schooling news
My trolling of Catholic blogs brought up two stories I'm guessing are of interest to DoL readers (who are probably Friedman fans, himself a staunch supporter of more choices in education). First, Jimmy Akin directs to this story about a California state appelate court case on the credentials of home-schooling parents:
"Parents do not have a constitutional right to home school their children," wrote Justice H. Walter Croskey in a Feb. 28 opinion signed by the two other members of the district court.
The inevitable question is whether it is in the best interest of the child to be insulated from beliefs, ideas and values outside of what his parents allow. To say it more accurately, should the state stand by and allow children to be raised in accordance with their parents‘ biases and prejudices? Or does the state, in accordance with its own right to preserve itself, have the right to intervene, even to the point of infringing on parental authority, in order to provide the child with a more holistic view of the world and humanity?
Call me a conspiracy nut, but is it that hard to believe that, perhaps, parents who hold dissenting views on human-caused global warming, the benefits of redistribution programs, political correctness, or heck, even the logic of Social Security, might be deemed unfit to teach their children outside of state supervision? I take a medium-size tinfoil hat, please.
March 12, 2008
"Interesting" piece on GMU econ
Doublethink, from America's Future Foundation, has an "interesting" feature based on interviews with GMU economists (article here). The writer is a Dartmouth student.
At an Asian noodle joint in Fairfax, I asked faculty member Alex Tabarrok what he meant by “interesting,” to which he replied, “Initial surprise, followed by obviousness.” [...] I asked Tabarrok if GMU wanted to engage the world out of an impulse toward public service. He agreed but added that “we’re also honestly interested in the stuff we do with it. There’s a certain freedom that comes with setting aside other people’s ideas of what you’re supposed to do and just doing what seems interesting. You accept a little dissing, I guess.”
Other interviewees include Robin Hanson, Bryan Caplan, Ilia Rainer, Pete Leeson, Arnold Kling, Tyler Cowen.
As a rule, great film directors are far, far better at directing films than they are at giving interviews. There is some carry over here. But if you find the GMU approach...well...interesting, then it's a worthwhile read.
Interesting article, especially given the author's identity. Its title is "Why I Am No Longer a 'Brain-Dead Liberal,'" but Gary Roseman says I must use the word Statist.
I wrote a play about politics, ... [a]nd as part of the "writing process," as I believe it's called, I started thinking about politics, ... which is to say, about the polemic between persons of two opposing views. The argument in my play is between a president who is self-interested, corrupt, suborned, and realistic, and his leftish, lesbian, utopian-socialist speechwriter.
NPR Piece on Financial Privacy
Yesterday Larry pointed out that the way Spitzer was busted reveals how little financial privacy we have. This morning NPR had a story on how banks monitor customer activity and notify the police if they think a person's financial transactions are suspicious.
Another Nanny State Republican
Yet another example of why I'm a libertarian:
A proposed law currently making its way through the Florida legislature ... would be a mandate that all eating establishment must have enough toilet paper when you go into the restroom.
One of my favorites is in the area of forest conservation which we heavily rely on for oxygen. I propose a limitation be put on how many squares of toilet paper can be used in any one sitting. Now, I don't want to rob any law-abiding American of his or her God-given rights, but I think we are an industrious enough people that we can make it work with only one square per restroom visit, except, of course, on those pesky occasions where 2 to 3 could be required.
Posted by E. Frank Stephenson at 02:08 PM
March 11, 2008
Krugman on Interstellar Trade
I forget where I was reading recently about the possibility of interplanetary/intergalactic trade, but this essay by Paul Krugman on the theory of interstellar trade got my attention, especially since Mike Hammock and I are leading a discussion of the economics of Star Wars this evening. The first link goes to the blog post, the second to the paper (HT: Paul Krugman).
Posted by Art Carden at 05:00 PM
"The retirement savings of millions are meanwhile gradually being confiscated."
[Addendum: via email Frank notes the connection to Bryan Caplan's nice post comparing Rothbard to mainstream on inflation. In short, the Fed doesn't control inflation, it creates inflation.]
That's Gerry O'Driscoll in yesterday's Opinion Journal (article here, HT: Richard Reinsch).
With a deft insider hand and historical perspective, Gerry deconstructs the Fed's use of core inflation and grimly highlights the dangers of lagging indicators.
The Federal Reserve now confronts a serious economic problem with limited scope for action. Asset prices, especially those linked to housing, are falling. Financial institutions are capital-constrained and risk-averse, and are not lending. Economic growth is flagging. The classic response would be first to reflate the banking system and then the economy. But current inflation is rising. Excess money creation will translate quickly into even higher inflation.
Gerry's outlook is a bit dramatic, in my opinion (for effect probably). Still, the policy message is spot on. Every macroeconomics student should read this piece of commentary.
Rich, beautiful, shameless
Malcolm Forbes is supposed to have said, "Nepotism's OK as long as it's kept in the family." In that vein, NPR's "Steve Inskeep talks to [Scott] Simon, host of [NPR's] Weekend Edition Saturday, about his book, about growing up in Chicago and about the simultaneously selfless — and self-absorbed — enterprise of politics."
On the last point, Simon approvingly quotes his principal character: "Of course, the system isn't fair. It favors the rich, and the beautiful, and the shameless. But everyone gets a chance in the end."
That bit of praise sounds like a succinct statement the condemnation that statists use when calling for "regulation" of markets. Doesn't it occur to them that, given the levers available in both the market and the political system, the rich, the beautiful, and shameless are even more likely to prosper than if "regulation" were absent?
Happy 400th to John Milton
By email from Emilio Pacheco, COO of Liberty Fund:
John Milton born in 1608 is celebrated in two exhibitions, at the Bodleian Library at Oxford University, and the University of Cambridge Library. The links below will take you to the websites for these exhibitions.
The latter has a series of worthwhile yet breezy essays on Milton's influences. The little section on Milton's and today's pop culture is interesting. I found a nice connection to one of my favorite novels and novelists:
Several modern novelists have also drawn a lot of inspiration from Milton's work. Pullman aside, the poet has also deeply inspired the American novelist Paul Auster, whose postmodern New York Trilogy (1985-86), picks up several Miltonic themes including the nature of Paradise and the relationship between words and things (both works are haunted by the idea of a perfect language).
I first read Paradise Lost in its entirety for a Liberty Fund conference. A conference on Milton and Auster would be a good one. Hmmmm....
The sobering side of the Eliot Spitzer story
It’s always good sport to see an anti-capitalist moral crusader brought down by a capitalist act between consenting adults. But the buzzkill in the Eliot Spitzer case is what the way he was caught reveals about how little financial privacy we have left. Spitzer’s large cash withdrawals to pay high-priced hookers were apparently flagged as “suspicious,” leading to the wiretaps that snared him.
A Coasean Solution for Crummy Schools?
Critics who say unions block education reforms and make it virtually impossible to fire bad teachers will offer 10 instructors it deems the nation's worst $10,000 to quit their careers.
March 10, 2008
Berry Bikes on Capitol Hill?
Dubbed “Wheels4Wellness,” the new program will initially place 30 bikes at three locations around the U.S. House offices on Capitol Hill and will be available for free to the House’s 7,000 DC-based employees. Beard also announced that a second phase of the program will extend the locations to major transit hubs, like the train station at L’Enfant Plaza which is a popular hub for Capitol Hill commuters.
HT: Shawn Regan
Administrators know demand curves are downward sloping?
Often it seems that academic administrators (among many other groups) are adamant that demand curves are not downward sloping or, at the very least, the price elasticity of demand is very small. Yet, it seems this is not true:
So starting this year it is trying something different to lure applicants: participating in a regional program resulting in lower tuition for students from Washington, Oregon, Montana and a dozen other Western states.
More in this interesting article. Another graph I found interesting:
University officials acknowledge that their use of pricing to attract out-of-state students is a break from the past. “This is a very unique philosophical shift,” said Don Betz, chancellor of the University of Wisconsin-River Falls.
The "unique philosophical shift" is only for a certain group of people. Raising tuition rates seems to be a knee-jerk reaction to a threatened or actual decline in university-wide revenues. However, every principles of microeconomics textbook provides a chapter on price elasticity of demand which explains that if price elasticity is greater than one in absolute value, raising price will reduce total revenues.
Whether the price elasticity of demand for smaller regional schools has been changing over time or if it is only now being recognized or intuited as being relatively high is an interesting question.
March 08, 2008
The Greenwood Lake Philosopher c. 1908
From the March 8, 1908 NYT:
March 07, 2008
On Cherokees and Former Slaves
The Atlantic summarizes an interesting paper by University of Michigan doctoral student Melinda Miller. Based on The Atlantic's summary (not the article which I have not read in its entirety), I have a couple of questions.
First, the summary states:
In a new paper, a University of Michigan economist examines the fortunes of slaves freed after the Civil War by the Cherokee Nation. As Cherokee citizens, these freedmen were granted the right to “claim and improve any unused land in the Nation’s public domain.” Analyzing farm data from 1880, 15 years after emancipation, the paper finds that a black freedman in a Cherokee community was five times as likely to be a landowner as the typical African American in the former Confederacy. The average black Cherokee man owned livestock worth 80 to 90 percent as much as the livestock of a nonblack Cherokee citizen, whereas the typical Southern black’s livestock was worth only 45 to 60 percent as much as the livestock of the average white man.
While these figures do suggest that freedmen did better in Cherokee communities, couldn't the differences be attributable to different denominators rather than different numerators? For example, the 80-90% vs 45-60% bit about livestock holdings in the last sentence could result from differences in livestock holdings of Cherokee citizens compared to white men rather than differences in how freedmen fared in the two environments.
Second, the summary states:
And the data suggest that Cherokee blacks were more likely to make savvy long-term investments: in 1880, 60 percent of Cherokee freedmen farmers had planted peach and apple trees (which take three to seven years to bear fruit), compared with only 5 percent of black landowners in the South. This evidence, the author concludes, vindicates General O. O. Howard, the superintendent of the Freedmen’s Bureau, who claimed that “more might have been done to develop the industry and energy of the colored race if I had been able to furnish each family with a small tract of land to till for themselves.”
There's at least one other interpretation. It might be the institutional environment (security of property rights, equal treatment before the law) rather than land endowment per se that caused freedmen in Cherokee communities to be more likely to plant fruit trees than other blacks. Giving freed slaves free land might not have led to great fruit tree planting if they thought the Jim Crow hostility was such that they would be unlikely to enjoy (ahem) the fruits of their investment.
Two related works come to mind: Co-blogger Art's work on lynching and the rule of law and this paper on land titling in an Argentine squatter community.
On labor supply c. 1908
From the March 7, 1908 NYT:
MONTCLAIR, N.J. - James Reysons of West Orange, who was arrested here to-day as a mendicant, has solved, to his own satisfaction at least, the problem of economics relating to the amount of wages the individual should earn.
Reyson's response highlights the Chief's obvious mistake in confusing an individual's equilibrium level of begging and the revenue maximizing level of begging. The former recognizes both costs and "benefits" from begging whereas the latter recognizes only the "benefits." Most likely the two levels are different for most people, just as Reysons indicates.
The story finishes by pointing out that Reysons was discharged upon "promising to leave town in five minutes." Five minutes!?! How fast could Reysons run?
While Haitians Eat Dirt ...
... containers of food rot in Haitian ports. Why? Because:
While millions of Haitians go hungry, containers full of food are stacking up in the nation's ports because of government red tape - leaving tons of beans, rice and other staples to rot under a sweltering sun or be devoured by vermin.
The article contains lots more, though it will likely make you angry.
BTW, Haiti ranks a miserable 101 out of 141 countries in Economic Freedom of the World rankings.
March 06, 2008
A Quibble with ...
... this part of Allen Sanderson's essay on incentives:
For example, given that the Chicago Bears can sell out Soldier Field constantly, and the National Football League (NFL) shares its television revenues equally across members of the cartel, it is not surprising that the owner of the Bears is willing to do without a costly high-quality quarterback—payroll would rise but any effect on revenues would be shared with all the other teams.
True enough, but what if a better quarterback (which means almost anyone since the imcumbent is Rex Grossman) allowed the Bears to charge higher ticket prices while selling out Soldier Field? This source indicates that stadium "gate" revenue is spilt 60-40 between the home and visiting teams, respectively. Thus, even a team could reap a large, though not complete, share of revenue generated by a QB upgrade.
George Will Channels Hayek
A snip (with emphasis added by me) from Will's splendid column on Castro:
Communism of any stripe is afflicted by terminal ignorance. Having no market, which is an information-generating mechanism, communism cannot know what things should cost.
March 05, 2008
Building Brand Equity: Memphis Entrepreneurs
School disasters c. 1908
On March 4, 1908 in Cleveland, Ohio, a fire at Lake View school in Collinwood killed 165 children and 2 teachers (one died while guiding some children to fire escapes). The entire student population was 310 children, thus more than half died in the fire.
The story unfolds much like we have come to expect. The fire started in the basement from an unknown source (perhaps arson), the fire gong was sounded but everyone acted as if it were only a drill. Thus, only those on the first of three floors were able to get out of the building in time. It is claimed that the doors opened inward and therefore the press of panicked students from the upper floors precluded opening the doors.
All drills had used the front door as the primary exit, but the front door was inaccessible by the time the kids from the upper floors reached the first floor. This, in turn, made progress to the back door of the school somewhat chaotic. Then, it turns out the rear door was locked. Those children who made it to the bottom of the stairs tried to return to the upper floors but were met with more students coming down the stairs. The article points out "[w]hat happened at the foot of that first flight of stairs will never be knwn...[a]fter the flames had died away, however, a huge heap of little bodies, burned by the fire and trampled into things of horror, told the tale."
The paper provides a list of those children who had been identified. In total, they listed 120 of which 100 had ages reported. Here are the descriptive statistics and a histogram:
Variable | Obs Mean Std. Dev. Min Max -------------+-------------------------------------------------------- age | 100 9.97 2.341781 6 15
Thank goodness these type of events are incredibly rare.
Wikipedia Entry (with pictures) here: The Wikipedia entry reports that the doors didn't open inward. The original NYT article suggests that the building was designed with doors that opened outward but that it was not clear how the doors had been installed.
Baptists and Bootleggers
It will be interesting to see how this goes down: "the Tennessee Grocers and Convenience Store Association today launched its own statewide push for legislation allowing wine sales in food stores in the state." As I read the article, the legislation would still require licensing and multiple levels of government approval, leaving ample room for rent-seeking. This quote was revealing:
"For years in Tennessee, the state’s politically powerful liquor wholesalers and retailers associations have blocked legislative efforts for grocery store wine sales. When the bill failed last year, the wholesalers’ veteran lobbyist, Tom Hensley of Jackson sat on the front row of the Senate committee and after the bill failed to elicit a motion for approval, he told reporters, 'If it ain’t broke, don’t fix it.'"
Posted by Art Carden at 02:46 PM
March 04, 2008
A Thomas Sowell Professorship
March 01, 2008
Buckley's "Ultimate Resources"
From Rich Lowry's appreciation:
Back in 1959, Buckley excoriated the flabbiness of thought that attended an invitation to Nikita Khrushchev to visit the United States. He concluded: "Khrushchev cannot take permanent advantage of our temporary disadvantage, for it is the West he is fighting. And in the West there lie, however encysted, the ultimate resources, which are moral in nature. In the end, we will bury him." Throughout the decades, with his intellectual pickax, Buckley uncovered those ultimate resources.
What Hayek said during the 1970s, re-emphasized for the benefit of a forgetful Fed
Allan H. Meltzer in the Wall St. Journal:
A country that will not accept the possibility of a small recession will end up having a big one when the politicians at last respond to the public's complaints about inflation. Instead of paying the relatively small cost of a possible recession, the public pays the much larger cost of sustained inflation and a deeper recession. And enduring the deeper recession is the only way to convince the public that the Fed has at last decided to slow inflation.
Hat tip: Bayesian Heresy
Among the "Four Wrong Reasons for Pessimism":
Want to know the truth about business journalists? Most of us are failed sportswriters. . . . Think about what it takes to be a first-rate business journalist. One must be facile with numbers and financial statements and have the confidence to talk to CEOs, high-level executives, board members, analysts and so forth. One must delve deeply into the industry one writes about--what is the competitive landscape, what are the technological disruptions on the road ahead? It is also critical that one have a coherent global economic view to be able to put a story into context. And one must be a good storyteller.
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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