Division of Labour: June 2008 Archives
June 30, 2008
Internment Camps and You: Partners in Freedom

I've heard David Beito shows this video in some of his IHS history lectures:

Posted by Art Carden at 08:36 PM in Politics

Hans Rosling on Global Poverty

During an informal discussion of poverty while students were in discussion groups, Hans Rosling's "Gapminder" software came up. Here are Rosling's TED Talks on Gapminder. The first, from February 2006:

And the second, from March 2007:

And finally, here is the link to the Gapminder website.

Posted by Art Carden at 12:20 PM in Economics

Building Brand Equity: Stuff in Print

My forthcoming paper "Inputs and Institutions as Conservative Elements" and my forthcoming review of Benjamin Powell's edited volume Making Poor Nations Rich are both available online. The abstract for "Inputs and Institutions":

Ludwig von Mises argued that capital goods were “conservative
elements” that constrain future production decisions. Similarly, social capital and
institutions also constrain future production decisions. These insights are applied to the institutional transformation of the post-Reconstruction American South. It is argued that the structure of social capital that developed in the South was
inappropriate to the formal institutions that emerged as a result of the Civil War
and Reconstruction. The tensions between institutions and social capital are
examined in the context of racist lynching.

I also wrote today's Mises.org Daily Article on the role of the Mises Institute in spreading good ideas.

I was also mugged by co-blogger Josh Hall during his IHS lecture on education and externalities. I assure you, this gross injustice will be avenged.

Posted by Art Carden at 11:40 AM in Economics

June 29, 2008
On the Road: Notes from the Northeast

I'm at the IHS "Liberty and Society" seminar this week. A few notes on the last couple of days:

1. Special collections librarians are awesome. Thanks to the staff at UMass-Amherst for help with the collections on Friday.

2. The pizza at Antonio's in Amherst is truly excellent. For those who lament the allegedly homogenizing consequences national/global integration, I have to wonder what would be lost, socially, if Antonio's were to open a location in Memphis.

3. The drive from Great Barrington to Bryn Mawr (mostly through eastern NY) is beautiful. We tried to find a gas station at an exit for FDR's birthplace and presidential library yesterday; unfortunately the station identified by our Garmin no longer exists (coincidence?).

4. We paid over $4.50/gallon for gas yesterday. My back-of-the-envelope estimate of the optimal (additional) Pigou tax is no more than $0.00.

5. At the end of my "Economics in One Lesson" talk last night, I asked student discussion groups to make economic cases for and against recycling. All the groups made excellent points. The more I think about it the more I am convinced that recycling programs constitute very costly ways to achieve ambiguous (or negative) environmental benefits. To the extent that we produce too much waste, I'm inclined to believe that it is because garbage collection isn't priced efficiently. One could make plausible public good and natural monopoly arguments for government garbage collection, but one could make the same argument for government-provided lawn care.

Posted by Art Carden at 10:48 AM in Economics

June 28, 2008
The Greenwood Lake Philosopher c. 1908

From the June 28, 1908 NYT:

  • The black sheep of the family may really be a blonde.
  • Don't waste your time. You will need it all before you die.
  • It seems as though only the wealthy can afford to have no manners.
  • We all know a sure cure for the other fellow's ills.
  • Wise is the man who wants no more than he can get.
  • The eleventh commandment might very well be, "Mind your own business."
  • Posted by Craig Depken at 08:17 PM in Culture

    Pigou Club, and Rejection of, in Nutshells

    The Pigou Club in nutshel via Greg Mankiw, from Tim Kane at Kaufman Foundation:

    And when the time comes to balance the budget, we should aim to tax the bad things (noise, gasoline, trash, violent crime, evil foreign dictators) and untax the good things (homegrown profits, employment, innovation).

    My rejection in a nutshell: The knowledge of which things are good or bad, in which circumstances of time and place, and to what dollar amount, are beyond the reach of anyone including policymakers; but even absent the knowledge problem, the incentive problem ensures that the enacted policies would be diverted by compromise from what little we do happen to know of the public interest.

    In short, Hayek and Buchanan trump Pigou. I know, I know. I'm a total party pooper. But hey. If you don't want to take my word for it, here's Coase (Sec. VI, "The Problem of Social Cost"):

    [T]here is no reason to suppose that the...regulations made by a fallible administration subject to political pressures and operating without any competitive check, will necessarily always be those which increase the efficiency with which the economic system operates... [I]t follows that direct governmental regulation will not necessarily give better results than leaving the problem to be solved by the market or the firm. ... Pigou seems to have had a faulty view of the facts of the situation. But it also seems likely that he was mistaken in his economic analysis.
    Posted by Edward J. Lopez at 04:47 PM in Economics

    Crimes Against ... Whatever

    So who's the criminal? According to James Hansen, it's greedy CEOs:

    CEOs of fossil energy companies know what they are doing and are aware of long-term consequences of continued business as usual. In my opinion, these CEOs should be tried for high crimes against humanity and nature.

    According to an unnamed UN adviser, it's those pushing ethanol:

    But several aid agencies and analysts have warned of the possible downside of biofuel crop cultivation.

    One UN adviser went as far as describing biofuels as a "crime against humanity".

    In both cases, it's pretty loose talk.

    HT: CEI's "Cooler Heads Digest" 6/27/08

    Posted by Wilson Mixon at 02:37 PM in Politics

    June 27, 2008
    Party platforms c. 1908

    The June 27, 1908 NYT reports on what is expected to be in the Democratic Party's platform, to be introduced by William Jennings Bryan, the party's nominee that year.

    It is fascinating that the next 100 years, during much of which the Democrats were in control of Congress (and occasionally the White House), the party platform has changed very little, suggesting that they haven't been very successful in implementing their goals. Whether this is an indictment of Democratic leadership or of their opposition, I am not sure.

    Here is a paraphrased list of what the paper suggests will be in the Democratic party's agenda:

  • "A few general declarations in which the Republican Party is arraigned for having subordinated the Government to the favor-seeking corporations."
  • Insisting on a "government of the people, by the people, and for the people."
  • The establishment of equal rights, and the abolition of special privileges.
  • Laws prohibiting the pass and rebate [in railroads]
  • Making it unlawful for corporations to contribute to campaign funds
  • Requiring publicity of contributions before election, "of all individual contributions above a reasonable minimum."
  • Centralization of power through judicial concentration is opposed.
  • Constitutional authority of the General Government to prevent monopoly must be exercised via the Interstate commerce clause.
  • Laws to compel foreign corporations to submit their legal disputes to the courts of the States in which they do business.
  • The election of U.S. Senators by direct vote of the people.
  • Private monopoly must be made impossible.
  • Enforce the laws against trusts and trust magnates.
  • Immediate reduction of trade duties
  • Articles competing with trust-made articles should be duty free.
  • Constitutional amendment authorizing a tax upon individual and corporate incomes.
  • A national inheritance tax to reach the "swollen fortunes."
  • Immediate declaration of intent to recognize the independence of Philippine Islands "as soon as a stable Government can be established."
  • Powers of the National and State Railway Commissions should be expanded to protect people against discrimination and extortion.
  • Railroads should be forbidden to engage in any business that will compete with their shippers.
  • Railroad rates should be reduced until they reach a point that will leave only a "reasonable return on the present value of the roads."
  • Postal savings banks are favored as are rules protecting bank deposits.
  • An employer's liability law and an eight-hour day.
  • "The admission of Asiatic immigrants who cannot be amalgamated with our population is opposed."
  • A stricter enforcement is demanded of immigration laws.
  • Certain planks have moved from one part to the other, but as far as populist agenda items go the current Democratic party might have be very similar.

    Posted by Craig Depken at 02:35 PM in Politics

    June 26, 2008
    It Can Still Be Useful Even if It Is Thrown Away

    I'm going over a number of sources for a lecture on "the limits to growth" that I'm giving at an IHS "Liberty and Society" seminar next week, and I came across the following quote from Meredith Baxter-Birney, an actress on Family Ties:

    "The earth has limited resources, and if we don't recycle them we use them up."

    The quote is from John Tierney's 1990 article on the Ehrlich-Simon bet. It reminded me of co-blogger Mike Munger's EconTalk prediction that someday people would be mining former landfills for resources. As many environmentalists are fond of pointing out, stuff doesn't disappear forever if we throw it away. One man's trash today might literally be another man's treasure tomorrow.

    So what is the practical implication for someone (like myself) who enjoys environmental quality? In my opinion, today's resources are probably better spent finding ways to turn trash into treasure than by encouraging inefficient recycling programs. Rather than elaborating further I'll add another link to Mike's interview and the accompanying resources for good measure.

    Posted by Art Carden at 02:27 PM in Economics

    June 25, 2008
    Dey Tuk ehr Jehrbs!

    Here's Drew Carey on Trade and Technology (HT: Arnold Kling):

    And here's a South Park episode that provides a great commentary on the economics and politics of immigration; the episode is at least rated R, so exercise discretion.

    Posted by Art Carden at 05:22 PM in Economics

    Building Brand Equity: Paper on Biases

    Mike Hammock and I just submitted our paper "The Truthiness Hurts" to the Socio-Economic Review. Here's the abstract; the paper is available on SSRN:

    This essay summarizes and applies some of the key insights in Bryan Caplan’s The Myth of the Rational Voter. We discuss the relevance of cheap signals in increasingly-complex political systems as well as the relevance of ideas in public policy with “rationally irrational” voters. We also add a fifth bias, “stick-it-to-the-man bias,” to Caplan’s proposed anti-market, anti-foreign, make-work, and pessimistic biases. We apply these biases to current debates in environmental policy. Combined, these biases give us cause to be skeptical of attempts to correct market failures through the political system.

    Posted by Art Carden at 02:28 PM in Economics

    Building Brand Equity: Articles on Price Controls and Rent-Seeking

    My article on price controls during and after natural disasters is today's "Daily Article" from the Mises Institute. I also have an article on rent-seeking in the latest issue of AIER's Research Reports (print only, subscription required).

    Posted by Art Carden at 10:43 AM in Economics

    Reduce Your Expenses by Slowing Down

    Everyone knows that your gas mileage falls considerably once you reach high speeds, but how much? Bryan Caplan links to a number-crunching exercise by Jim Hamilton: the tax-free increase in incomes from slowing down to 65 instead of 75, under certain assumptions, could be about $20/hour, tax-free.

    Caplan correctly points out that the stress of commuting is often what really matters, but I would guess that some of this would be alleviated if freeway leadfoots were to slow down. I find that the constant braking and accelerating that I have to do because of high variance in highway speeds is the most stressful part of driving--to say nothing of the traffic snarls that occur because of accidents. I took a forecasting class from Walter Enders during his first semester at Alabama; one of the things he said that has stuck with me is "speed doesn't kill. Variance kills." Thus, if the variance of highway speeds were to fall, we should also expect traffic accidents to fall.

    I agree with Hamilton's claim that spreading the information about savings from slowing down is a public service (hence this post). Suppose there are two kinds of drivers, tortoises and hares. Tortoises are already slow drivers and have very little to gain from changing their highway speeds. Hares, who are sacrificing gas mileage for speed, have much more to gain from slowing down. Since hares should be more responsive to new information about savings from slowing down, we should expect to see lower variance in highway speeds and, therefore, less commuting stress and fewer accidents. If anyone has tested this (or plans to), please let me know. Mrs. Carden and I are driving from Great Barrington to Bryn Mawr, PA on Saturday (and then from there back to Memphis next weekend), and I know that this information is going to change our driving habits. The policy implication--again assuming that we can't end what Walter Block has called "road socialism"--is that perhaps we should re-evaluate the penalties for breaking speed limits. This, of course, then has direct bearing on our estimates of the correct Pigou tax.

    UPDATE: A reader points out that the original title, "Increase Your Income by Slowing Down," isn't technically accurate.

    Posted by Art Carden at 10:13 AM in Economics

    June 24, 2008
    Underpants Gnomes, Care Bears, and Economic Development

    A few years ago, co-blogger Larry had a post discussing development policy in the context of the South Park "underpants gnomes" episode. Below is the clip where they explain their business model (PG-13, the language is a bit salty).

    Along similar lines, I propose what we might call a "Care Bear Stare" theory of economic development: if we all get together, and express our concern for our fellow man by transferring resources to poor countries, development problems will fix themselves. I'm pretty sure this would be insufficient, though.

    Posted by Art Carden at 03:36 PM in Economics

    June 23, 2008
    George Carlin

    Pour a little out for George Carlin, who died of heart failure Sunday. The link is to a long article carried by Reuters:

    Known for his edgy, provocative material developed over 50 years, the bald, bearded Carlin achieved status as an anti-Establishment icon in the 1970s with stand-up bits full of drug references and a routine called "Seven Words You Can Never Say On Television." A regulatory battle over a radio broadcast of the routine ultimately reached the U.S. Supreme Court.

    In the 1978 case, Federal Communications Commission vs. Pacifica Foundation, the top U.S. court ruled that the words cited in Carlin's routine were indecent, and that the government's broadcast regulator could ban them from being aired at times when children might be listening.


    Carlin wrote three best-selling books, won four Grammy Awards, recorded 22 comedy albums, headlined 14 HBO television specials, and hosted hundreds of variety shows. One was the first episode of "Saturday Night Live" in 1975, when he was high on cocaine.

    Ordinarily I probably wouldn't blog this, but I recently invoked Carlin in a post on innovation and the environment that I titled after one of his lines, "The Earth...plus plastic." The Earth will miss you, George.... Or not.

    Posted by Edward J. Lopez at 02:33 PM in Culture

    Kelo redux.....(not)

    From SCOTUS blog:

    A new vote for property rights?.

    The Supreme Court refused on Monday, amid a flurry of orders, to reopen the heated controversy over the power of government to seize private property for a new economic development project, but owners of property appeared to have picked up a potential new ally on the Court. Justice Samual A. Alito, Jr., was the only member of the Court to note that he would have granted review of a significant Second Circuit Court ruling on property rights in the face of a massive new project in the Prospect Heights section of Brooklyn, N.Y.

    Posted by Edward J. Lopez at 01:39 PM in Law

    Falaschetti et al. on Firm Governance

    One of the best presentations I saw at ISNIE over the weekend was by FSU-Law's Dino Falaschetti on auditor independence. The takeaway points as I understand them: first, auditor independence matters. Second, it matters so much that firms are already doing it; therefore, some of the SARBOX provisions are superfluous. Here's a link with title/abstract/author info:

    Auditor Independence and Earnings Quality: Evidence for Market Discipline Vs. Sarbanes-Oxley Proscriptions

    Dino Falaschetti, (FSU College of Law and Hoover Institution)
    James Brown, (Montana State University)
    Michael Orlando, (Economic Advisors, Inc.)

    Abstract: "Does auditor independence improve earnings quality and, if so, is regulation necessary to realize such improvements? Popular characterizations of recent governance scandals answer “yes!” but lack support from scholarly investigations. This disagreement motivates our investigation of whether auditor independence affects earnings quality in ways that prior research would have missed, and what any such effect means for the efficiency-consequences of related governance regulations. 1. We relax a priori data-restrictions that ignore the potential for auditors’ dependence on consulting fees to enhance earnings quality. 2. We measure unexpected accounting fees in a more defensible manner, and develop a matching estimator to examine whether fee disclosures improve asset-pricing efficiency; and 3. We empirically evaluate the potential for governance externalities to rationalize proscriptive regulations. Our results offer some support for auditor independence improving earnings quality. Importantly, however, they also suggest that mandated fee disclosures exhausted any regulatory opportunities to improve this dimension of corporate governance, and thus speak more directly than does the literature against Sarbanes-Oxley’s proscription on jointly producing audit and non-audit services."

    Posted by Art Carden at 12:31 PM in Economics

    June 22, 2008
    The Barr Factor

    Will Libertarian Party presidential nominee Bob Barr be a factor in '08? Probably not, but don't discount the idea completely: at least some polls show Barr polling in the six percent range nationally. Third party support typically falls off close to election day, but in some crucial states. notably Georgia, which Barr represented for most of a decade in Congress, there is reason to believe he can hold most of his support, which has neared the 10 percent level in some polls.

    Barr's fundraising has been so-so: he's raised about $50,000 a week, on average, since gaining the Libertarian nomination four weeks ago. But his media coverage has been impressive. He's done, among others, Fox News (at least twice) and CNN, the hip Colbert Report on Comedy Central, a full hour on Glen Beck's TV show on CNN, and Geraldo. This week he'll be doing some major talk radio, including Dennis Miller on Monday and Bob Grant later in the week.

    If this is not quite Cadillac coverage, it's better than any Libertarian candidate has ever gotten before. A Lexis/Nexis search finds 427 stories referencing "Bob Barr" in the four weeks since his nomination on May 25 - by comparison, a Lexis search finds just 49 stories mentioning 2004 LP nominee Michael Badnarik in the four weeks after his nomination on May 27, 2004.

    He's also got the requisite meet up groups going at Meetup, Facebook, and MySpace, and other web sites.

    The obstacles to Barr's success - or that of any third party or independent candidate - are enormous. Ballot access laws force minor parties to spend large sums just getting on the ballot, whereas the Republican and Democratic Parties typically get automatic access in all 50 states. Campaign finance laws work against third parties, by limiting the amounts that can be contributed (historically, new parties, because of their smaller base of support, are more reliant on large donors) and by scaring away donors (I know of at least three people who have intentionally donated less than $200 to Barr's campaign in order to avoid having the names disclosed, as required by law for donors of $200 or more. Surely there are many more who limit their support or don't donate at all. For business and political reasons, many supporters, especially those active in politics or with business before the government, are afraid to make their support public). As Michael Munger has learned in his run for North Carolina Governor, it is almost impossible for even the most credible third party candidates to get into public debates. Most of all, the winner take all system of voting used in the U.S. (which I support) will always make it very difficult for a new party to break the two-party monopoly.

    Still, Barr may be the is the strongest Libertarian nominee ever, and almost certainly since the articulate Ed Clark, funded by his wealthy running mate David Koch, picked up a bit over one percent of the vote in 1980. With many small government Republicans dismayed over the nomination of John McCain, there is an opening for Barr to gain meaningful numbers of votes and to draw attention to the need for and benefits of limited government.

    Posted by Brad Smith at 10:40 PM in Politics

    June 20, 2008
    Obama Moves to the Middle

    I'm in Toronto for the ISNIE meetings, and I caught this story in today's Toronto Star. Apparently, Obama's sound and fury about NAFTA a few months ago was exactly what everyone thought it was.

    Posted by Art Carden at 11:24 PM in Politics

    Cross Price Elasticity of Demand: Push Reel Mower Edition

    From the AJC we see more margins on which people adjust their behavior in response to high gas prices:

    When Eric King moved from his apartment in Pittsburgh to a single-family home with a lawn, he bought a manual lawn mower instead of the usual gas-powered kind. He figures he's putting money in his pocket and saving trips to the filling station.

    He's got plenty of company. Sales of manual — or push reel — mowers with the cartwheeling blades are on the rise this year. Officials attribute the surge to increased environmental concerns because of emissions from gas-powered mowers, the faltering economy that makes the generally less expensive push reels more attractive, and $4-a-gallon gasoline.

    "With the way gas prices are going through the roof and are going to stay there or increase even further, that was the main reason I considered one," said King, 29. "I don't consider myself an environmentalist; I consider myself an economist."

    American Lawn Mower Co., a Shelbyville, Ind., manufacturer of manual and electric lawnmowers, says sales are up 60 percent to 70 percent over last year.

    "It's unbelievable," said Teri McClain, inside sales administrator. "I think gas prices are playing a part in this."

    McClain estimates that about 300,000 push reel mowers are sold annually in the United States. That's about the same number of electric mowers that are sold. Though growing, sales of both still are dwarfed by the roughly 6 million typical gas-powered, walk-behind mowers purchased every year.

    Push reel mowers have evolved from those heavy iron beasts of the past into lighter (19 to 34 pounds), easier-to-push models with widths up to 20 inches and cutting heights that can be adjusted quickly. Accessories include grass catchers and sharpening kits.

    Clean Air Gardening, a Dallas, Texas, retailer that sells push reel and electric lawn mowers as well as composters, rain barrels and organic fertilizers, said sales are up 27 percent this year, while sales of electric mowers made by Towson, Md.-based Black & Decker Corp. have increased more than 20 percent this year.

    People Powered Machines, an Ipswich, Mass.-based Internet store, has seen a 25 percent rise in the sale of push reel and electric lawn mowers so far this year.

    "The increasing price of gasoline is one of the bigger factors," said spokesman David Temple.

    Instead of trading in gasoline mowers, other people have opted to cut back on how often they cut their grass.

    Randall Fullam now mows his lawn in the Dayton suburb of Riverside once a week instead of twice ...

    NB--I'm on the road for the next couple of weeks--expect light blogging.

    Posted by E. Frank Stephenson at 10:30 PM in Economics

    Up with Campaign Finance
    "It's not an easy decision, and especially because I support a robust system of public financing of elections," Obama told supporters in a video message Thursday. "But the public financing of presidential elections as it exists today is broken, and we face opponents who've become masters at gaming this broken system."

    I don't know about you, but sounds to me like he not only rejected the system, but also denounced it.

    Seriously, though. The move wasn't unexpected, and neither are the critics who decry privately financed campaigns. The New York Times said it risks "setting a dangerous precedent of fully scrapping public financing." Public Citizen said the taxpayer-financed "system provides a hefty $84.1 million grant to each of the general election nominees for the two-month-long general election campaign - plenty of money to run successfully." Echoing that, today's editorial in USAToday asks, "Shouldn't that be enough?"

    Plenty of money? Really? Compared to what? Consider two ratios.

    1. In 2000 the federal government spent about 1.8 trillion (~18% of GDP), and total campaign expenditures on all federal elective offices was about $1.85 billion (about $1b on congressional races, $0.35b on presidential, and $0.5b in soft money). So federal public sector advertising was 1/1000th of federal public spending. Ratio 1 = 0.001.

    2. In 2000 the private sector share of GDP was about $7.5 trillion (after federal, state and local spending net of intergovernmental transfers), and total private sector advertising, according to Advertising Age, was $240 billion (Statistical Abstract Table 1251). So private advertising was 3.2% of private spending. Ratio 2 = .032.

    By this comparison, private sector advertising is more than thirty times greater than the amount we spend on federal elections trying to make sure we get the right person for the job. Given how much we expect from our federal government, isn't it surprising that campaign spending isn’t twice, or even ten times, more than it is right now?

    Granted, much valuable information slips through the cracks of these aggregates. (BTW, I could not find as reliable aggregates for the 2004 federal elections, but the ratios are in the same ballpark.) And I'd much rather see the two ratios come closer together by reducing the government's share of GDP spending. But Obama’s decision clearly is a good sign for a campaign finance system that—I’m here to say it—needs more money flowing through it.

    For research summaries of what we don't know about what contributions buy, see my chapter on Campaign Finance in the Encyclopedia of Public Choice, and especially Thomas Stratmann's excellent meta-analysis and literature survey in 2005 Public Choice.

    Posted by Edward J. Lopez at 01:58 PM in Economics

    There is no liquidity crisis

    There is a subprime mortgage loss-resolution mess, and financial institutions of doubtful solvency are in trouble, to be sure, but regulators and commentators should stop calling such problems a "liquidity crisis". A liquidity crisis is characterized by an excess demand for liquidity, that is high-powered money, at normal interest rates. Either the interest rate rises sharply (as in a classic nineteenth century financial panic), or the central bank injects high-powered money. Neither has been happening in recent months. Short-term rates have fallen, and have fallen without the Federal Reserve expanding the monetary base.

    Posted by Lawrence H. White at 09:05 AM in Economics

    June 18, 2008
    Shortage Time
    President Felipe Calderon announced that prices for goods such as cooking oil, flour, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until Dec. 31.

    "This is a measure that will positively and directly benefit the finances of millions of Mexicans," said Calderon, flanked by representatives of Mexico's business chambers. "This reflects the commitment of Mexican businessmen to the country and to price stability."

    The Mexican leader has blamed high food costs on rising global energy prices, soaring food demand in China and India and the use of corn for ethanol production.

    Source. We should probably run a contest to guess the date that the first article on shortages will appear.

    Posted by E. Frank Stephenson at 04:08 PM in Economics

    June 17, 2008
    South Park Online

    I just gave a "Brain Candy" talk to students at the Rhodes summer Writing Institute on an economics lesson from the Simpsons episode in which Homer tries to gain weight so he can qualify for disability. At the end, I mentioned the fact that all South Park episodes are now available online, at no charge, with very short commercial breaks during the episodes.

    Posted by Art Carden at 10:18 PM in Culture

    Working Family Gibberish

    As much fun as I've had with the Berry Bikes, my favorite contribution to The Freeman is "Working Family Gibberish" co-authored with co-blogger Wilson. We contrast hours worked by income quintiles with politicians' rhetoric about "working families."

    In a paper for NCPA, David Henderson gives a more detailed and more current treatment of the same issue. He finds:

    --A whopping 81.4 percent of families in the top quintile have two or more people working, and only 2.2 percent have no one working.

    --By contrast, only 12.6 percent of families in the bottom quintile have two or more people working; 39.2 percent have no one working.

    --The average number of earners per family for the top quintile is 2.16, almost three times the 0.76 average for the bottom quintile.

    --Census data also show a large difference in full-time work. Of the 15.69 million families in the bottom quintile, less than one-third (5.36 million) have a head of household working full-time; in the top quintile, more than three-fourths (12.38 million) of families do.

    Posted by E. Frank Stephenson at 05:28 PM in Economics

    Soccer > Opera in Vienna

    Here's an example of sports crowding out other economic activity*:

    The renowned Vienna State Opera canceled one performance and complained about dismal attendance at another, blaming the European soccer championship being played in the Austrian capital.

    Performances are usually nearly sold out, but the opera house said 29 percent of its seats went unsold for its most recent event, Verdi's "La forza del destino." The opera house also said it had decided to cancel a ballet evening June 29, the day when the final is played in Vienna.

    Officials said in a statement Tuesday that would-be visitors fear negotiating through masses of soccer fans in downtown Vienna.

    I'm betting that if an economic impact study of the European soccer tournament was done it didn't net out lower opera attendance and canceled opera performances.

    *I think this idea is attributed to Phil Porter.

    Posted by E. Frank Stephenson at 04:26 PM in Sports

    More on Jarts

    A funny bit from Reno 911 about my favorite game!

    [HT: Josh]

    Posted by Robert Lawson at 02:35 PM in Funny Stuff

    Yard signs revisited

    A few years ago I commented on my city's ban on political yard signs until 30 days before an election. I got the city attorney to admit that the law was unconstitutional.

    Harrison, Ohio is being sued over their law.

    Posted by Robert Lawson at 02:31 PM in Politics

    Gaseous Admissions

    From an AACSB newsletter (LH column; scroll down):

    Oberlin College created a sustainability house called "SEED," which stands for Student Experiment Ecological Design. Students work to combat global warming by finding ways to reduce carbon admissions in their own lives.

    As if carbon emissions aren't bad enough, we now have to deal with carbon admissions. Mon dieu!

    Posted by E. Frank Stephenson at 01:18 PM in Misc.

    Impact fees in the news

    Well, if public radio's "Marketplace" can be considered news. But, hey, it's a good day when you hear about your dissertation topic in the news.

    Of course, the story begins by re-scaring us about the housing slump:

    Officials at cities all over the country will be paying close attention. They're being squeezed as falling property values crimp tax revenues. Lack of income has stalled infrastructure projects and in some cases, it's killed entire communities before they're even built.

    EVERYBODY PANIC! The issue of impact fees crops up later in the story:

    Sugar Grove was counting on fees from those new homes to pay for a new police station and village hall. Those projects are now postponed indefinitely.

    The purpose of impact fees is to make new development shoulder the burden of building new police stations and village halls, new schools and roads, etc., rather than spreading the cost across the entire community via property taxes. Of course, a new school in the north side of town won't be used by residents of the east, south, or west sides of town, so they object to their property taxes going up. Hence, impact fees. But then, the public choice aspects come out:

    But like other cities around the country, Sugar Grove's wounds may be self-inflicted...Sugar Grove sabotaged itself by setting impact fees too high. Developers...pass the costs on to homebuyers...At about $32,000 a house, the village's impact fees are three times the national average. That scared buyers away.

    Indeed. For background, you can read the published chapter of my dissertation.

    Posted by Tim Shaughnessy at 12:38 PM in Economics

    The Division of Labor is Limited by the Extent of Tolerance
    "In general, I think product differentiation expressive of differing values is a very good thing for a free, pluralistic society... If we can have 20 different brands of toothpaste, why not a few different conceptions of how pharmacies ought to operate?"

    That's Loren Lomasky as quoted in a Washington Post article on the marketization of conservative Christian beliefs through drug stores that don't sell contraceptives and such. Indeed, as the article describes, an abundance of choice is apparently emerging in the marketplace.

    Some pro-life pharmacies are identical to typical drugstores except that they do not stock some or all forms of contraception. Others also refuse to sell tobacco, rolling papers or pornography. Many offer "alternative" products, including individually compounded prescription drugs, as well as vitamins and homeopathic and herbal remedies.

    Would that it were as simple as critics valuing a plurality of choice. One shrill critic:
    "I'm very, very troubled by this," said Marcia Greenberger of the National Women's Law Center, a Washington advocacy group. "Contraception is essential for women's health. A pharmacy like this is walling off an essential part of health care. That could endanger women's health."
    . Another outburst: "We're talking about creating a separate universe of pharmacies that puts women at a disadvantage." And another: "Why do you care about the sexual health of men but not women?" asked Anita L. Nelson, a professor of obstetrics and gynecology at the David Geffen School of Medicine at UCLA. "If he gets his Viagra, why can't she get her contraception?"

    Several states have passed or are considering legislation.

    Posted by Edward J. Lopez at 11:15 AM in Culture

    June 16, 2008
    Detractors of the Ricardian Equivalence Theory fall Victim to the Tragedy of the (Income Tax) Commons

    After reading Gregory Mankiw’s blog posting of June 12, 2008, I have concluded that he really needs to (re)read more Public Choice theory. Citing a Commerce Department report about how consumer spending rose almost one percent when the tax rebate checks came through this spring, Mankiw uses this as evidence to question the validity of Robert Barro’s theory of “Ricardian Equivalence.”

    Before jumping to such a conclusion, Dr. Mankiw might first consider these two facts (verifiable from the National Tax Foundation:

    1) Those U.S. taxpayers who made more than $75,000 individually (or $150,000 jointly) received very little or no IRS tax “rebate.”

    2) Yet, the richest 10% of the U.S. population (basically, those individuals earning more than $103,000 per year) pay over 70% of the total federal income tax burden, despite commanding only about 46% of the total adjusted gross income (AGI).

    So, if a typical Joe Six-pack finds a nice IRS tax rebate stuffed in his mailbox, what would he do: spend it or save it? (Hint: Joe Six-pack strongly suspects--and with good reason--that he ain’t payin’ for these rebates!)

    Need more proof? The poorest 75% of the population, which is comprised of those who earn less than $62,000 (clearly Joe Six-pack’s income domain), pays only about 14% of the total income tax burden, despite commanding about 33% of total AGI.

    When those tax payers with a disproportionately small share of the tax burden are given direct access to a spending a portion of the collected income tax revenues, this creates a common pool resource problem. If the tax burden were uniformly applied with the same marginal tax rate across all income brackets (flat tax), each taxpayer would know precisely how much to set aside for the anticipated increase in the tax burden the following year. Given our progressive income tax system, how would the richest income taxpayers know precisely how much less to spend (how much extra to save) in order to account for next year's higher income tax bill? The magnitude of that tax burden increase on the richest 25% depends on the magnitude of spending made by the remaining 75% (all those Joe Six-pack families).

    I’d say that the Ricardian Equivalence “straw man” has survived this particular piece of evidence used in support of Mankiw's critique.

    Mike Stroup

    Posted by Mike Stroup at 03:28 PM in Economics

    Quick Thoughts

    1. The US Open has an 18 hole playoff today. Earlier today I heard on sports talk radio that neither the US Women's Open nor the US Senior Open play 18 hole playoffs. I'm not going to take the time to google for Nielsen ratings but I bet higher tv ratings is the reason the men's tournament hasn't gotten rid of the 18 hole playoff. Another 18 holes of the men's tournament--especially if Tiger Woods is one of the players--can probably generate much more revenue than a Monday playoff for the senior or women's tournaments.

    2. Also from my drive today--I heard this sentence from NPR's David Welna:

    McCain is even proposing new tax cuts, with the biggest benefits going to the top one-tenth of 1 percent of households and little relief for the bottom three-fifths of taxpayers.

    I suspect Welna means something more like the bottom three-fifths of wage earners or income earners. Since most of those folks don't have any tax liability already, what he's really bemoaning is McCain's unwillingness to confiscate earnings from some folks and transfer the tax proceeds to people who already pay little or no federal income taxes. (The table here shows that the bottom 50% of tax returns by AGI paid just over 3% of federal income taxes in 2005.)

    3. Another example of gas prices and cross price elasticity of demand:

    When the Segway Personal Transporter came out in 2001, inventor Dean Kamen said the self-balancing vehicles would revolutionize short-distance travel. At first, however, they appealed mostly to police, mall security crews and airport personnel.

    With gas prices escalating, sales in the U.S. are growing. One Segway dealer identified as one of its top five in the U.S. — Riva Motorsports of Pompano Beach, Fla. — sold almost 200 in 2006, 250 in 2007 and 175 in the first five months of 2008, said Riva spokesman Matt Sermarini.

    "Anything that seems to be economical on fuel or doesn't use fuel at all, people are definitely researching and buying," Sermarini said.

    4. One for complements instead of substitutes:

    Even comedians have gotten into the act, complaining that rising drink tabs meant fewer people coming to see them perform and pouring wine and liquor into a river in a mock restaging of the Boston Tea Party.

    The 10 percent drink tax, in effect since January ...

    Posted by E. Frank Stephenson at 03:10 PM in Economics

    What Should the Pigou Tax Be?

    I've wondered for some time about whether I should apply for membership in the Pigou Club, and I should be able to answer after the ISNIE meetings in Toronto next weekend. After looking over the papers people will present at the conference, I was glad to see that a draft of (my advisor) John VC Nye's paper "Finding the Right Pigou Tax in a World of Imperfect Coasian Bargains" is available on the conference website (scroll down to find the paper). The abstract:

    This paper calls into question the economic justification for Pigovian taxes and argues that existing empirical work is inadequate to justify the standard policy recommendations. In particular, it calls into question claims that the identification and measurement of a Pigovian externality is a sufficient condition for determining the optimal level of the tax. A claim about the optimal Pigou tax is a joint claim about the size of the externality and about the optimality of observed outcomes, not just the externality. Measuring the size of the observed Pigovian externality – even if done perfectly -- is not a reliable guide to the proper level of the Pigovian tax because in a world of efficient transfers we will still observe some externalities. Hence the debate about externalities should be about whether those compensating factors exist and not about measuring the externality itself. Contrary to received wisdom, we do not have strong evidence that any positive gas tax in the current economy is advisable, let alone information about what its level should be.

    Posted by Art Carden at 02:32 PM in Economics

    Responding to Higher Gas Prices

    Mike Hammock offers a very good summary of the economics of higher gas prices and on how diffusion of technology like the Toyota Prius will affect the other predicted effects of higher gas prices. His conclusion:

    To the extent that cars like the Prius shield consumers from higher gas prices, they will slow the other forms of transition. If automotive technology gets good enough, fast enough (or if people all shift to really small cars) then the other more structural changes may occur very slowly, or not at all. People may keep living out in the country, but all drive small hybrid cars instead of pickup trucks (or maybe someone will come up with a small hybrid pickup truck to allow a rural citizen to maintain his or her country credibility). It's difficult to forecast exactly what will happen, since it depends greatly on peoples' preferences--their willingness to substitute between different ways of dealing with higher gas prices.


    UPDATE: Today's episode of EconTalk is with Don Boudreaux, discussing energy prices. I'm looking forward to listening to it.

    Posted by Art Carden at 12:49 PM in Economics

    A monitoring problem c. 1908

    How do the principals of an organization ensure that agents put forth efficient effort, don't embezzle funds or property, or otherwise do a "good" job for the principals? There have been a number of theories bandied about over the years about how to better align the incentives of agents with principals, primarily focusing on how to reward agents based on output when inputs such as effort cannot be directly observed.

    An alternative, which seems to have become somewhat easier over the past twenty-five years or so, is to increase or improve monitoring. Technology, from closed-circuit television to keystroke monitoring of office computers, has improved the ability for principals to monitor agents effort.

    The June 16, 1908 NYT has an interesting story concerning monitoring in a church in Worcester, Mass:

    Announcement was made to the parishioners of St. Casimir's Church to-day by the new parish priest that Bishop Beaven had turned down their application to have an Auditing Committee for church funds, but instead had ordered that cash registers be installed in the church.

    The registers will be placed at all the church entrances before next Sunday, and then the churchgoers may drop their dimes at the door, paying as they enter, and see their money rung up. In this way the Bishop expects to do away with the tangles, financial and otherwise, in which the new priest found the affairs of the church on his arrival here a week ago.

    The article doesn't make it clear if the principal-agent problem has the parish as the principal and the money-counters as the agent, or the other way around.

    If the parish is the principal, then there might have been embezzlement during an earlier administration. Because funds are typiclaly raised by "passing the plate" it would be difficult for the parish, individually or as a group, to confirm how much money was actually contributed on any given Sunday. Person A might know what he contributed, and might have an inkling of how much cash was in the plate as it passed through his hands, but that individual would not necessarily have the information about what others gave throughout the church.

    This problem is exacerbated if individuals are able to make their contributions via sealed envelope. In this system, individuals can retain some secrecy about how much, or how little, they pledge/donate, but because the envelopes tend to identify the contributor, it is easier for the church to confirm if the pledged amount has been contributed. All of this leads to a situation in which the individuals counting the money in the back room might take a little off the top, especially from cash donations, and much of the parish would be unaware of the problem. If individuals grew suspicious, something like an Auditing Committee might have been necessary.

    On the other hand, perhaps the parishioners were the agents and the church was the principal. Because of the aforementioned ways of gathering contributions, it would have been (and still is) easy for individuals to free-ride on the amount they contribute. Whether an Auditing Committee would have focused on trying to reconcile pledged donations with actual contributions is unclear from the article. However, cash registers would definitely be an example of monitoring via technology.

    However, such monitoring would not be free and might actually cause a reduction in overall contributions. Why? Cash registers at every entrance would increase the fixed cost of attending church (although if there were no collection during the service, perhaps the overall length of the service might decline?). This, in turn, might reduce the spiritual and social "profit" of attending that church versus a competitor and fewer people might show up to St. Casimir's. Furthermore, the fact that it would be harder to free-ride at St. Casimir's relative to St. Whomever would increase the likelihood that people might substitute away from St. Casimir's. Whether the social ties that bound St. Casimir's parish were strong enough to resist these incentives is, of course, not known by me.

    However, as a monitoring tool cash registers would make every person's contribution at the door public knowledge to those around them. This might reduce free-riding among the parishioners who continued to attend. However, public information can be used for nefarious reasons, which our society is trying to deal with 100 years later in the Internet age. Those around a particular contributor might gain information that could be used as gossip fodder, which can impose cost to the victim. Because different people would enter by different doors, not everyone would be able to confirm the information spread by Person A about Person B's contribution.

    This problem could be addressed via receipts. If Person B has a receipt, Person A would have little motivation to lie about Person B's contribution, yet this would increase the transaction costs of each contribution, thereby increasing the fixed costs of attending church.

    Whether the cash registers were ultimately used or if they were simply a "shot across the bow" to whomever was the free-riding agent, the thought experiment is interesting.

    Posted by Craig Depken at 11:42 AM in Economics

    June 15, 2008
    Munger Excluded From Debates in NC

    Some background, on the decision of five different organizations "independently" to exclude me from the gubernatorial debates. What are the odds of THAT happening, do you think?

    An interesting exchange, worth reading in its entirety, on Steve Newton's blog.

    Some thoughts:

    1. I announced my candidacy in May 2006. I have been included in MANY forums and debates, and have appeared three times on the same stage as Bev Perdue and Pat McCrory at forums. Admittedly, these were serial, rather than simultaneous, appearances, but it was within minutes.

    2. The success of the Libertarians in getting on the ballot was known in March, and was official in May. Furthermore, this is the 8th time the Libertarian candidate for Governor will be on the ballot, officially. This is not new, either in terms of history over 30 years, or formal process this election cycle.

    3. The NC Bar Association is a private organization, and as far as I can tell the event will not be televised externally. That means that this is NOT an in-kind contribution to the candidates. So, as a matter of principle I would defend the right of that organization to choose the folks who will appear at their convention. But, to paraphrase Glenn Close in "Fatal Attraction," I'd have more respect for the NCBA if they'd just tell me to frig off. "We didn't know", if true, means that these people are way too dumb to be trying cases in state court. Fortunately, it's just not true. I think you would rather have a lawyer who is a good liar, compared to an idiot, right?

    Posted by Michael Munger at 10:07 AM in Politics

    June 13, 2008
    WHO's kidding whom?

    A summary of some of the sources of bias in WHO's health care quality index:

    Michael Moore made great sport in his film "Sicko" of pointing out that the World Health Organization (WHO) ranked US health care a lowly 37th in the world, considerably below France and Canada. But, much like Mr. Moore himself, the rankings are far from impartial or empirically sound. [. . .] But an examination of the index tells us more about the ideology of the authors than it does about the quality of American healthcare. [. . .] The most obvious bias is that 62.5% of their weighting concerns not quality of service but equality. In other words, the rankings are less concerned with the ability of a health system to make sick people better than they are with the political consideration of achieving equal access and implementing state-controlled funding systems.

    One of the five factors in the calculations is called "Financial Fairness". This favours systems that charge richer people more health tax, irrespective of how much, or little, health service they use. Colombia comes top. This measure has nothing to do with the quality of healthcare, yet it counts for a quarter of the weighting.
    [. . .]
    The rankings include measures for "health level" and "responsiveness." "Health Level" is their way of saying life expectancy, while "responsiveness" refers to a survey based on "respect for persons" and elements such as speed of service, convenience and choice—yet even in these cases half the weighting is determined by considerations of equality. Thus a country with a poor level of "responsiveness" throughout the population will score higher than a country with a good level in some parts and an excellent level in others.
    [. . .]
    Americans generally believe that whatever the other problems with the US healthcare system, its standards of care are high. In the details of the rankings there is evidence to support this belief. It shows the USA as having the most responsive health system in the world but this measure makes up only a small part of the overall rankings.

    Posted by Wilson Mixon at 06:45 PM in Politics

    Orthodoxy and Heterodoxy in Academia

    In a few weeks, I'm giving a short talk for the graduate fellows at AIER about my reflections on academic life two years out. Basically, I'm going to give them a first-hand perspective on my successes, failures, and mistakes.

    Given my offbeat interests, I don't think I really appreciated or internalized the core material in grad school as much as I should have. I don't have data on this, but I think that a lot of people outside of the mainstream of their disciplines make the same mistake.

    A book I'm reviewing contains this sentence, which I take to heart as I develop as a scholar: "Jackson Pollock could draw like a camera, but instead he chose to splatter paint in a wild manner that pulsed with emotion." I've heard the same about Picasso and others. Their abstract expressions become much more meaningful, and they gain more credibility, when one considers them against the backdrop of their technical mastery.


    Posted by Art Carden at 12:43 PM in Misc.

    NY Times Praises Rugged Individualism Groupism

    Once more, the NY Times and the paternalist state:

    On the plight of household workers:

    Theirs is an unusual labor struggle. Domestic workers enjoy few if any protections. They have no right to unionize under federal or state law. Laws on job discrimination and occupational safety do not apply to them, and they cannot take time off under the Family and Medical Leave Act.

    Rugged groupism to the rescue:

    But instead of waiting, Cinderellalike, for supernatural aid, they are standing up for themselves and rescuing one another. One goal has been to push for passage in Albany of the Domestic Workers’ Bill of Rights, which would guarantee health benefits, paid time off, overtime and cost-of-living raises, among other things.

    Posted by Wilson Mixon at 10:16 AM in Economics

    June 12, 2008
    Markets in Too Much Information Everything: McCain and Obama Condom Edition

    NYC Company Markets Obama & McCain-Themed Condoms

    Posted by E. Frank Stephenson at 11:24 PM in Economics

    The Paternalist State

    The Grey Lady wants you to be taken care of. Today's editorial on tomatoes ends:

    "Industry, as well as consumers, need much better protection. They should not have to wait until the next food scare before Washington comes to the rescue."

    Meanwhile, the FCC held hearings today on whether to prohibit early termination fees charged by mobile phone carriers. Public choice founder, James Buchanan, has argued that the State has supplanted God as the bearer of ultimate responsibility. Stand by for new sex legislation that people may only shout “Oh state, oh state, oh state!!!”

    Posted by Edward J. Lopez at 05:14 PM in Politics

    Global Warming: Incremental Analysis

    I've been looking for something like this article, to get some idea of what difference policy can make. Mostly the warming alarm is all-or-nothing: Stop it or suffer the consequences.

    I can't evaluate the numbers below, but this is the right approach.

    But let's look at the modelled temperature increases associated with each scenario. "Agree and ignore" sees temperatures rise by 4.85C by 2100 (with a 90% probability); for "Kyoto plus", it's 3.31C; and "step change" 2.89C. This is the depressing bit: no politically plausible scenario we could envisage will now keep the world below the danger threshold of two degrees, the official target of both the EU and UK. This means that all scenarios see the total disappearance of Arctic sea ice; spreading deserts and water stress in the sub-tropics; extreme weather and floods; and melting glaciers in the Andes and Himalayas.

    If all of this is true, we're going to incur some hellacious sunk costs, but sunk costs are just that and should play no role in policy analysis. The real question, again, assuming that the numbers are right, is: What are the differences between the net costs associated with warming (yes, there will be some benefits) for each of these scenarios, and what will it cost to realize each of them? The author comes to the right conclusion, I suspect:

    Hence the need to focus far more on adaptation: these are impacts that humanity is going to have to deal with whatever now happens at the policy level.
    Posted by Wilson Mixon at 04:51 PM in Economics

    Taxes and Government

    I’m cleaning out documents that have accumulated on my USB drive, and I came across something short I scribbled down a few years ago while listening to “Broadway Spotlight” on KFUO-FM in Saint Louis. They were playing a Sondheim musical called Anyone Can Whistle that “missed” (they said it apparently spent a total of 9 days on Broadway). It contained a pretty good exchange on the nature of government. I can’t remember the characters’ names, so we’ll just call them “Bob” and “Joe.”

    Bob: “you say anyone who makes something he doesn’t use is crazy, right? Where does most of your money go?”

    Joe: “Taxes.”

    Bob: “And what does the government do with it? They make bombs, which presumably they don’t use. So you’re using your money to make something you don’t use, so you’re crazy. Of course, maybe the government is going to use them and you’re paying to have yourself killed. You’re mad.”

    Posted by Art Carden at 11:36 AM in Funny Stuff

    The Depravity of Modernity: Rocking Out to Pachelbel

    With every passing day I become more convinced that we are in a cultural golden age: more artistic output of higher quality is available to more people at lower prices than ever before. I'm particularly interested in the processes by which knowledge and cultural forms are re-combined to create new cultural output. A friend showed me this video of someone giving a virtuoso performance of Pachelbel's Canon on electric guitar; it has close to 45 million Youtube views. So I ask: is it art? Comments are open.

    Posted by Art Carden at 11:25 AM in Culture  ·  Comments (14)

    LiveBlog on Supreme Court Decisions

    SCOTUSblog has real time coverage of Supreme Court rulings as they are being issued, followed by analysis soon thereafter.

    Posted by Edward J. Lopez at 09:57 AM in Law

    Leak: Deadweight Loss from the Minimum Wage

    I've had a great time in Great Barrington, Massachusetts while I've been visiting the AIER. It's absolutely beautiful up here, but I was at a coffee shop yesterday when I noticed a sign saying "please bus your own tables" (I paraphrase). I saw a similar sign at an ice cream place last week; I interpret both as examples of the deadweight loss from the state's $8.00 per hour minimum wage. Someone somewhere might be willing to bus tables at coffee shops for $7.00 per hour, but they are prevented from doing so by state law.

    Granted, cleaning my own table at a coffee shop is at best a trivial inconvenience, and it's something I usually try to help with anyway. However, when you add up the number of possible mutually-beneficial trades that are ruled out by government fiat, then you're dealing with potentially substantial leakages from the prosperity pool.

    Posted by Art Carden at 09:21 AM in Economics

    On "Market Idolatry"

    Yours truly in today's WSJ:

    In decrying "market idolatry" because it results in CEOs and other business leaders being regarded as "the truly enlightened Americans," Thomas Frank ("Obama Needs a Better Reading List," June 4) commits the common mistake of assuming that the "righteousness of markets" is the same thing as being pro-business. To the contrary, markets that are not constrained by predatory politicians in cahoots with businesses seeking special favors force firms to compete with one another by serving consumers with better value. The result is entrepreneurs such as Bill Gates who get rich by creating useful products rather than rent seekers like Carlos Slim who get rich by obtaining legally protected monopolies.
    Posted by E. Frank Stephenson at 09:16 AM in Economics

    June 11, 2008
    Dilbert on Presentation Skills

    I gave a talk this afternoon at AIER about some of our Wal-Mart research. My slides have gotten much better since the monstrosities I made through undergrad and grad school. Here's a Dilbert strip that illustrates presentation skills quite nicely (HT: Organizations and Markets).

    Posted by Art Carden at 04:43 PM in Economics


    The candidates from the "major" parties have organized their own private election, with just two people invited: Bev Purdue and Pat McCrory. Five debates, only two candidates will be allowed.

    Here's the strange thing: It's really hard to get on the ballot in North Carolina. The Libertarians did what the state required. It wasn't easy, but we did it.

    Why doesn't that translate into being included in the debate? Why do the state-sponsored parties get away with this? It's because you, the voters, are indifferent.

    It's not the media; you can't blame them. Having me in the debate is MUCH more interesting, and would improve ratings. You can count on the media actually preferring that I be included.

    But I'm not. Because the Dems and Repubs don't want even a whiff of competition to affect their cozy cartel.

    Where's the outrage?

    UPDATE: A snippet from the press release that will go out soon....

    North Carolina has very restrictive ballot access laws. Simple fairness requires that every party crossing that very high threshold must be admitted to the debates. Let's be very clear: the General Assembly established a criterion for inclusion, and the Libertarians passed that test.

    Yet the Libertarians have been excluded from participation, without explanation. The political elite of our state has made a decision to put its own convenience over the obvious will of the citizens.

    As H.L. Mencken said, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard." When you watch a debate where one legally qualified party is excluded, you are watching North Carolina "democracy" in action. Is this the kind of democracy that you want to live in?

    Posted by Michael Munger at 02:54 PM in Politics

    The devil is warming up the snow blower

    Dianne Feinstein, D-CA, wants to privatize a government-run operation.

    I'll give you a second to wipe the coffee off of your keyboard.

    The loss of $2 million this year by the Senate Dining Room has led this stalwart Dem to follow the House's lead and privatize the food service.

    The coffee all wiped up? Okay, well here is another quote from her:

    Candidly, I don’t think the taxpayers should be subsidizing something that doesn’t need to be. There are parts of government that can be run like a business and should be run like businesses.

    Here's hoping that her party might be able to make the connection that privatization works not just with food delivery, but also health care and retirement planning.

    I would write more about this story, but I just saw a pig fly by my window.

    HT: Boortz

    Posted by Tim Shaughnessy at 12:47 PM in Economics

    Building Brand Equity: Wal-Mart and Social Capital

    This morning, I received word that my paper with Charles Courtemanche and Jeremy Meiners entitled "Does Wal-Mart Reduce Social Capital?" was accepted by Public Choice. An earlier version is available at SSRN, and our touched-up version should be available soon. The paper considers the argument that communities trade off quality-of-life in order to get Wal-Mart's low prices. We use the data Robert Putnam collected for his 2000 book Bowling Alone to show that there doesn't appear to be an identifiable, systematic relationship between Wal-Mart penetration and social capital.

    Posted by Art Carden at 10:01 AM in Economics

    Francisco Marroquin University

    This is Liberty Plaza, the physical and cultural heart of campus at Francisco Marroquin University in Guatemala City. 050728-2.jpg

    Translating from the concepto page on its web site, Liberty Plaza and its adjacent museums and event center exist as "an homage to the human betterment that liberty provides by allowing man to think, to create, to act, to live, to be expressed…"

    What is a libertarian cultural center doing on a university campus in the heart of a socialist country? Perhaps a question that motivates this L.A. Times feature on Manuel Ayau and Francisco Marroquin University, which he founded in 1971.

    "The poor are not poor just because others are rich," said Manuel Francisco Ayau Cordon, a feisty octogenarian businessman, staunch anti-communist and founder of the school. "It's not a zero-sum game."

    Welcome to Guatemala's Libertarian U. Ayau opened the college in 1972, fed up with what he viewed as the "socialist" instruction being imparted at San Carlos University of Guatemala, the nation's largest institution of higher learning. He named the new school for a colonial-era priest who worked to liberate native Guatemalans from exploitation by Spanish overlords.
    Some leftists deride him as a lackey of the ruling classes, dishing up neo-liberal dogma to rich kids in a nation where a few powerful families still call most of the shots. Conservative elites chafe at his op-ed harangues about their cozy oligopolies and government protections.

    Ayau delights at the potshots coming his way from both ends of the political spectrum: They signal that someone is listening.

    "Ideas are powerful," he crowed recently, showing a visitor an auditorium named for the late American free-market economist Milton Friedman. "We're making progress."

    I've visited UFM several times. Its beatiful campus of red brick sculpted into lush green lawns is reminiscent of what Howard Roark might design. Every undergraduate student takes an economics course, with Mises and Hayek being the focus of the syllabus. The University has a center for the study of public choice economics, and a Henry Hazlitt Center for study of Austrian economics. Many of the faculty have their own talk-radio programs, broadcast nationally. And its current president, economist Giancarlo Ibarguen, was a key figure in Guatemala's 1996 privatization of the frequency spectrum (see, among others, Giancarlo's papers here and here). UFM's use of technology is cutting edge (easily surpassing "most wired" campuses in the U.S.). Check out the scores of videos at their New Media Center, which includes the entire Free to Choose video series among lots more.

    Posted by Edward J. Lopez at 09:43 AM in Economics

    June 10, 2008
    Where Economics and Political Philosophy Meet

    Frederic Sautet offers an excellent post about the economic prerequisites for coherent political philosophy. My brief summary: if your political philosophy is inspired by your understanding of economics, and if your understanding of economics is incorrect, then your political philosophy is likely flawed.

    For example, I'm at AIER trying to finish up a few papers about Wal-Mart. In the process of studying the company, I've come across a lot of claims about Wal-Mart's hiring practices that are inconsistent with what we know about how labor markets operate. I'm no economic parochialist--I think economics and economists have a lot to learn from other disciplines--but polemics criticizing economic phenomena discredit themselves when they are not based on sound economic theory and evidence. On this I can do no better than Murray Rothbard:

    It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a "dismal science." But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

    Posted by Art Carden at 11:44 AM in Economics

    Building Brand Equity: Another Paper about Wal-Mart

    Charles Courtemanche (fellow Wash U PhD, just started at UNC-Greensboro) and I submitted our paper "Wal-Mart, Leisure, and Culture" to Contemporary Economic Policy this morning. The abstract:

    This essay contributes to the debate about the alleged spillover effects associated with Wal-Marts growth. Combining county-level data on Wal-Mart entry and location from 1985 through 1998 with individual-level data on leisure activities, we estimate a positive relationship between Wal-Mart penetration and participation in activities involving inputs that can be bought at Wal-Mart. The relationship between Wal-Mart penetration and activities that do not involve inputs that can be bought at Wal-Mart is negative in most cases, but may be positive or zero for cultural activities such as attending classical music concerts and visiting art galleries. The evidence is consistent with the thesis that deeper Wal-Mart penetration expands consumption possibilities.

    Posted by Art Carden at 11:19 AM in Economics

    We're all Keynesians price gougers now!

    I love NY...the land of rent control provides so much classroom fodder.

    More than 85% of milk sellers in the city are charging illegally high prices, a new report says


    Posted by Robert Lawson at 08:56 AM in Economics

    June 09, 2008
    Selgin's Good Money

    Available now for pre-order (and you can also view the swank book cover): George Selgin's new book on private token coinage during the Industrial Revolution, Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821. I've read much of it, and it's not only important scholarship, but it's a thoroughly entertaining history of an important episode that til now has been undeservedly obscure.

    Posted by Lawrence H. White at 10:44 PM in Economics

    Bruegmann on Sprawl

    A great quote from architectural historian Robert Bruegmann from the June 2006 issue of The American Enterprise:

    Most urban change, no matter how wrenching for one generation, tends to be the accepted norm of the next, and the cherished heritage of the one after that.

    I'm reminded of a joke I think I first saw in a "Pickles" comic strip once:
    Q: What did people call "the good old days" when they were happening?
    A: "These trying times."

    Posted by Art Carden at 01:23 PM in Economics

    Flooding the Market With Cheap Goods: Defending the Undefendable

    Walter Block's Defending the Undefendable is a true jewel of a book. It offers entertaining, crystal-clear discussions of how government policies often hurt exactly the people they are supposed to help. All of Block's conclusions are derived from the simple libertarian principle of "non-aggression against non-aggressors." A PDF is also available at a price of $0.00 from the Ludwig von Mises Institute. Isn't this predatory pricing, though? Shouldn't the DoJ step in to thwart Block and the LvMI in their nefarious attempt to monopolize the market for books applying economics and libertarian political theory to difficult questions?

    (HT: Organizations and Markets)

    Posted by Art Carden at 12:14 PM in Economics

    The cost of an Olympian c. 1908

    The June 9, 1908 NYT reports that the U.S. Olympic team had been selected the day before in New York City:

    Seventy-six athletes were selected yesterday to represent the United States at the Olympic games in London next month. A supplemental list of fifty-eight men has been added to the regular list, and it is probably that many of these will be added before the team sails. The committee wrestled with the selection problem for nearly ten hours at the Astor House before a decision was reached.
    How much was it expected to cost for each Olympian?
    The minimum subscription which will be accepted to defray the expenses of sending any one entrant to the games was fixed at $325.
    In 2006 dollars, this comes to $7,345.

    In 2000, the United States spent approximately $400m (in total) for Olympic sports. I haven't been able to track down exactly how much is spent on taking the team to the Olympics, but my guess is that it is considerably more than $7,300 per athlete.

    An interesting tidbit is the amount of lobbying by the US Olympic Committee reported by OpenSecrets:

    Notice the up-tick in lobbying efforts the year before an Olympics, most noticable before a summer Olympics.

    Posted by Craig Depken at 11:19 AM in Sports

    The birth of a "special interest" c. 1908

    The June 9, 1908 NYT has an interesting article concerning the brewing industry, which at that time was beginning to realize that the temperance movement was gaining ground thus making the future of brewing a bit cloudy:

    "The most important question before the convention is not prohibition, but local option laws. These laws will make it necessary for brewers in self-protection to get into politics. The brewers are engaged in a legitimate business, and local option laws afford a constant means for intermeddling."

    National Secretary Hugh F. Fox of the association says the greatest undertaking which the brewers will have to confront in fighting the prohibition wave will be to clean up the disreputable saloons.

    Local option laws would eventually be bypassed by a Constitutional amendment. The naivete of the brewers seems quaint today: "if we only clean up the saloons the temperance movement will leave us alone."

    It is an interesting thought question for the anti-lobbying crowd. Why are there lobbyists in Washington or your state capital? Is it because there is largess to be obtained? Is it because the law can be used to raise the costs of actual and potential rivals? Is it because the law can be used to ensure economic profits? Or is at least some lobbying an effect, rather than a cause, of the attempts of non-corporate (read, non-producer) groups trying to use the law for their own agendas?

    Posted by Craig Depken at 11:05 AM in Economics

    Stick-it-to-the-Man Bias

    Regarding Friday's post about regulation, Mike Hammock just sent me an email pointing out that what Will identifies is similar to what Mike and I are calling "stick-it-to-the-man bias," which is to say that "it surely won't cost me anything to force this guy to do this thing for me via regulation." People notice taxes, but the costs of regulation are harder to see. I wish we could take credit for the name, but "stick-it-to-the-man bias" is the brainchild of Mike's wife, Liz.

    Posted by Art Carden at 10:30 AM in Economics

    June 07, 2008
    Musings of the Gentle Cynic c. 1908

    The June 7, 1908 NYT has the following quips:

  • Few men believe they are working for all they are worth.
  • It is hard to be an enthusiast without being something of a liar.
  • "Joy cometh in the morning," but not if you've been making a night of it.
  • Many a man's popularity begins and ends with himself.
  • In looking ahead some people are entirely too previous.
  • It's a safe plan to believe only half you hear, and then forget most of that.
  • When a man complains that he is unable to collect his thoughts it may be because there are none coming to him.
  • and these from the "Dyspeptic Philosopher":

  • The man who is long-headed is seldom short-sighted.
  • It is better to swallow your pride than to chew the rag.
  • Revenge is sweet, when it isn't an instance of sour grapes.
  • Posted by Craig Depken at 09:11 PM in Culture

    The Locavore's Dilemma: Think Globally, Act Globally?

    The abstract of Christopher L. Weber and H. Scott Matthews, 2008, "Food-Miles and the Relative Climate Impacts of Food Choices in the United States," Environmental Science and Technology 42(10):3508-3513:

    Despite significant recent public concern and media attention to the environmental impacts of food, few studies in the United States have systematically compared the life-cycle greenhouse gas (GHG) emissions associated with food production against long-distance distribution, aka “food-miles.” We find that although food is transported long distances in general (1640 km delivery and 6760 km life-cycle supply chain on average) the GHG emissions associated with food are dominated by the production phase, contributing 83% of the average U.S. household’s 8.1 t CO2e/yr footprint for food consumption. Transportation as a whole represents only 11% of life-cycle GHG emissions, and final delivery from producer to retail contributes only 4%. Different food groups exhibit a large range in GHG-intensity; on average, red meat is around 150% more GHG-intensive than chicken or fish. Thus, we suggest that dietary shift can be a more effective means of lowering an average household’s food-related climate footprint than “buying local.” Shifting less than one day per week’s worth of calories from red meat and dairy products to chicken, fish, eggs, or a vegetable-based diet achieves more GHG reduction than buying all locally sourced food.

    HT: Marginal Revolution.

    Posted by Art Carden at 05:23 PM in Economics

    Irony: Internet Shopping

    A few minutes ago I clicked an ad (?!) at www.adbusters.com for a really cool shirt, but the $34 price tag was way too much for me. The other shirt in the Adbusters shop was only $29, but it wasn't nearly as clever. By comparison, here's the Bureaucrash shirt store, with better selection, prices that are about half of what Adbusters is asking, and more sizes (I prefer XXL; Adbusters only goes up to XL). I might need to pick up something to complement one of my favorite shirts. If I actually make a few bucks with the futures market trading I mentioned yesterday, I might have to get this. I wonder what Ayn Rand would say?

    Posted by Art Carden at 02:50 PM in Culture

    June 06, 2008
    My Inner Julian Simon: Putting My Money Where Their Mouths Are

    Futures markets are one of my favorite subjects to teach in econ 101. There's some new terminology, but the basic principles are familiar (or they should be) by the time we get to that part of the semester. It's also a great exercise in deciding what we should and shouldn't worry about and who we should and shouldn't believe. A few weeks ago, I read a round of prognostications about $150-a-barrel oil and resolved to test the theory by putting my part of our "economic stimulus" money in oil futures. After all, if the doomsayers are right and we are "running out of oil," then the price has nowhere to go but up. I haven't actually bought the contracts yet--I'll get to why not in a second--but July futures are at $138/barrel right now.

    I've often said that you can tell whether prognosticators really believe what they're saying by looking at their portfolios (NB: our portfolio is very equity heavy and consists mostly of index funds; we're playing it by the book). Someone who is genuinely, completely, totally convinced that oil will be $200/barrel in December should act on their wisdom, load up on December crude oil futures (currently $137/barrel), make an absolute killing, and then use the money for whatever they want, like alternative fuel research.

    I haven't actually bought the contracts yet because actually setting up an account has been a painfully slow process. The transaction costs are pretty high, but we should have all that straightened out over the weekend. The transaction costs prevent some people from entering the market, but the principle still stands: if you've been blessed with information that everyone else doesn't have, you should act on it and move the prices back into line with the fundamentals. I'll have more to say when I've actually bought the contracts.

    Posted by Art Carden at 05:34 PM in Economics

    Will Wilkinson on Production and Distribution

    Will Wilkinson has a great post on European regulatory and redistributive institutions. Politically, people support redistribution through the regulatory system because it doesn't feel like redistribution. A choice passage:

    The structure and regulation of an economy is conceptually separable from tax and transfer policy. Of course, it is really all one system, and taxes and transfers affect economic performance by affecting labor supply, etc., but this is relatively distinct from the body of law that defines the parameters and rules of the economic game. You could in principle have buck-wild laissez faire together with fairly high taxes and lavish social insurance. Nobody does do this, exactly, but it’s possible. Optimize the basic economic structure for maximizing wealth creation, not for creating a pattern of distribution, and then use the political institutions to take care of redistribution after the wealth is created. Because then there will be more wealth.


    Posted by Art Carden at 09:02 AM in Politics

    June 05, 2008
    Powell on Sweatshops

    I'm in the middle of a great article by Ben Powell on sweatshops (HT: Don Boudreaux). This passage describes the harsh reality of low wages very accurately:

    Wages are low in the third world because worker productivity is low (upper bound) and workers' alternatives are lousy (lower bound). To get sustained improvements in overall compensation, policies must raise worker productivity and/or increase alternatives available to workers. Policies that try to raise compensation but fail to move these two bounds risk raising compensation above a worker's upper bound resulting in his losing his job and moving to a less-desirable alternative.

    In this light, t is hard not to agree with Jagdish Bhagwati, who said that "requiring a minimum wage in an overpopulated, developing country, as is done in a developed country, may actually be morally wicked."

    Posted by Art Carden at 04:50 PM in Economics

    Bryan Caplan Calls Our Bluff

    People with economics degrees make more than people who major in other stuff (the hard sciences excepted). Economics is hard, but I'm not sure it's as difficult as engineering or other majors. I remember a t-shirt engineering majors wore at Alabama listing the top ten reasons to major in engineering, with #1 being "this four-year degree will be the best five or six years of your life." There's also a lot of room for "on the other hand..." in economics. There's no such thing in engineering. I recall reading--I think in Reader's Digest several years ago--about someone asking about partial credit in an engineering class. The professor denied the request:

    "Partial credit?! You build bridge. Bridge fall down. You get partial credit?!"

    Posted by Art Carden at 03:26 PM in Economics

    Randy Kroszner watch: his transformation

    Yours truly is quoted in a USA Today story about Randy Kroszner's surprising new role -- given his past as an advocate of free banking -- as "point man" for the Federal Reserve Board on financial regulation as it has "crafted the most sweeping consumer-protection regulations in its modern history".

    The reporter called me for a comment because three years ago I'd blogged here and here about my amazement that someone with his apparently laissez-faire views could get nominated to the Fed Board. I now see three possibilities: (1) His views had moved toward the mainstream already before the Fed nomination, say while he was a member of the Council of Economic Advisors, and this was known to the administration, (2) his views have changed during his time at the Fed, or (3) he's been fighting for the least restrictive regulations possible under the circumstances. I would like to believe (3), but I'm afraid that none of the news stories I've seen supports that take.

    HT: Sheldon Richman, via Jeff Hummel and Ed Stringham

    Posted by Lawrence H. White at 02:11 PM in Economics

    Steal This Book: Capital-Based Macroeconomics

    I can't remember if I've mentioned this before, but the Mises Institute is offering Roger Garrison's Time and Money for the absurdly low price of $24. It's a clear and concise guide to Austrian Business Cycle Theory placed in the context of classical and Keynesian approaches to macroeconomics. I apply some of these insights to the housing market here, and you can get some of Garrison's excellent Powerpoint presentations on ABCT at his website.

    Posted by Art Carden at 11:37 AM in Economics

    Drip: Matthew Sweet

    I just added Matthew Sweet's album "100% Fun" to my iPod. When I worked at Camelot Music in high school, this was one of my favorite albums to put on in-store play. This illustrates a couple of interesting complications associated with measuring changes in standards of living over time.

    I just bought it for $9.99. Adjusted for inflation, the Camelot "Hot Sheet" price of $12.88 in 1995 would have been $17.52 in 2007. The real price of the music has fallen by about 43% in thirteen years.

    But that's only part of the story: the shopping technology is fundamentally different. Thirteen years ago I would have had to go out and buy a CD. Today, I was able to download it without leaving my desk. Also, if I had wanted to buy a thirteen year-old CD and didn't have access to online downloads, I would have had to find a music store in or near Great Barrington, MA and hope they have it.

    This is one reason why comparing standards of living across time is so difficult. In his book Entrepreneurship and Economic Progress (which I finally finished reading a few days ago and which I am reviewing for Economic Affairs) Randall Holcombe explores these themes in greater detail. Economic progress isn't just "more of the same;" it's "more, and better." Even "the same stuff" changes: "Matthew Sweet's '100% Fun' Album" on CD in 1995 and "Matthew Sweet's '100% Fun' Album" via iTunes download in 2008 differ in important ways that are very hard to capture in conventional inflation measures.

    Posted by Art Carden at 10:40 AM in Economics

    June 04, 2008
    The Art of Economics: Recycling and the Equal-Marginal Principle

    Last summer, co-blogger and NC gubernatorial candidate Mike Munger wrote a very interesting article and did a very interesting podcast on the quasi-religious aura surrounding recycling. I have green sympathies, but as I understand it, recycling a lot of stuff (paper, green glass, etc.) actually creates net environmental damage. Meanwhile, the case for recycling electronics, batteries, and printer cartridges is both environmentally and economically sound (I get what little knowledge I have of this from Mike, who teaches environmental econ). Public policy, however, encourages wasteful recycling while discouraging more efficient recycling. My hunch is that the marginal benefit of each dollar spent on recycling batteries, electronics, and printer cartridges is higher than the marginal benefit of each dollar spent on recycling paper, plastic, and glass. I realize that incomplete property rights and politics make this a pretty complicated issue, but I wonder if we might Pareto-improve by shifting resources away from recycling paper, plastic, and glass and toward recycling electronics. Comments are open if anyone has any thoughts on this.

    Posted by Art Carden at 09:40 AM in Economics  ·  Comments (1)

    June 03, 2008
    Unintended Consequences
    Jeffrey Washington drives the freeways of Los Angeles giving away free gas. There's a catch: You have to run out of gas on the freeway.

    It happened today to one woman, who said: "Then this guy came and helped me - and it's amazing."

    She really did run out. But Washington finds more and more drivers who just claim their tank is empty.

    "It happens way more than it used to," said Washington, who works for the freeway service patrol.

    Across the country, services that provide a gallon or so of free gas to get people safely off the highway are getting more calls than ever.

    "We're heading to a triple a call that is possibly out of gas," said Robert Innisfree, who drives a AAA tow truck in Santa Rosa, Calif.

    Members out of gas can get up to four free gallons. His calls are up 16 percent over last year.


    Posted by E. Frank Stephenson at 08:59 PM in Economics

    Fast-Food Feedbags

    Here's The Onion on a product to fit our sedentary, high-calorie American lifestyles. In light of recent findings on the relationship between fast food and obesity, I'm not sure this would actually contribute to the "obesity epidemic." Extra credit: watch the scrolling ticker at the bottom of the screen for an interesting question about the labor market.

    New Wearable Feedbags Let Americans Eat More, Move Less

    Posted by Art Carden at 04:57 PM in Funny Stuff

    Best Sentence I've Read Today
    After all, Father's Day is a luxury good (whereas Mother's Day is a necessary good) and therefore should be sensitive to the amount of money being spent on necessities such as food and gasoline.

    That is Craig Depken, blogging over at Heavy Lifting.

    Posted by Joshua Hall at 11:03 AM in Economics

    Drip: K-Cups

    The prosperity pool is deeper than I thought. Keurig's single-cup brewing system makes very good, very fresh coffee available with little effort and little mess. While single-cup coffee brewers have been around for a while, I wasn't aware of the Keurig system until yesterday. Premium coffee continues its diffusion to the masses: it's another very small, barely-perceptible step toward a better world.

    Posted by Art Carden at 09:43 AM in Economics

    Cross-Price Elasticity of Demand: Scotch Edition
    "We've seen somewhat of a decline in on-premise [scotch] consumption at restaurants, in particular, and bars," says Frank Coleman, spokesman for the Distilled Spirits Council, a national trade association. "When gas prices get so high, people aren't going out for dinner."

    Nonetheless, scotch prices have risen. Why? Input prices:

    Blame the usual suspects for the price rise: a cheap dollar that makes imports more expensive, higher transportation and raw material costs and an upsurge in consumption by China, India and Russia.

    Distillers say grain prices — barley and corn — have doubled the past year. Glass for bottles costs more. Even the prices for wood and copper to build the casks to age the whiskies have risen dramatically.

    Note to student readers: This baby has exam question written all over it. Source.

    Posted by E. Frank Stephenson at 08:55 AM in Economics

    Is the Missouri Plan Good For Missouri?

    That is the title of a recent study I co-authored with Russ Sobel for Missouri's Show-Me Institute. In the study, we look at how a state's method of judicial selection is associated with measures of legal system quality. While most studies of judicial selection merely look at the difference between elected and appointed states, we look at the following selection methods: (1) nonpartisan elections; (2) partisan elections; (3) legislative elections; (4) gubernatorial appointment with a nominating commission; (5) gubernatorial appointment with a nominating commission and legislative confirmation; (6) gubernatorial appointment with legislative confirmation only; (7) gubernatorial appointment with approval by some form of executive council.

    Our conclusion:

    The data show that states using Missouri’s current system, on average, rank significantly higher than states using partisan elections, nonpartisan elections, and gubernatorial appointment with council approval alone. We also find no other method of selection resulting in average scores or rankings that are statistically higher than Missouri’s current system. Based on our analysis, Missouri’s current system is far superior to several of the alternatives.

    In related news, Russ and I had a letter to the editor (ungated here in .pdf) in the NY Times on Saturday.

    Posted by Joshua Hall at 07:25 AM in Economics

    New Book: Lessons from the Poor

    The Independent Institute has an new book out called Lessons from the Poor: Triumph of the Entrepreneurial Spirit edited by Alvaro Vargas Llosa. Russ Sobel and I have a chapter in the book titled "Freedom, Entrepreneurship, and Economic Growth" that summarizes some of the research on the relationship between economic freedom, entrepreneurship, and economic growth. While I haven't had the opportunity to read the rest of book, the remainder of the volume seems interesting.

    Here is the blurb from the Independent Institute:

    Half the people in the world live on two dollars or less per day and roughly 600 million live on no more than one dollar per day. With thousands of international relief organizations, strategic government programs, and billions of dollars in foreign aid, why do so many underdeveloped countries remain unable to grow their economies beyond mere survival?

    It is this issue that internationally acclaimed political analyst Alvaro Vargas Llosa and a select group of economists examine in a series of case studies from around the world. These studies reveal that entrepreneurial energy can be a persistent catalyst for change. But unfortunately in societies dominated by political corruption and unnecessary regulation, men and women seeking to innovate must hurdle a series of challenges. Wealth transfer, favoritism, excessive taxation, and lack of institutional security all conspire against progress. Our contributors examine real world examples of entrepreneurship and argue that instead of redistributing existing wealth, developing countries should start working to create it.:

    Posted by Joshua Hall at 07:02 AM in Economics

    June 02, 2008
    Speaking of the Southern Economics Meetings

    I've signed on for a panel session at the SEA meeting, organized and chaired by Jim Gwartney, who evidently has a twisted set of humor. Come see what promises to be a marathon of disambiguation between me and my near-namesake, Lawrence J. White of NYU. (When I was also at NYU, you'd best believe that we used to trade a lot of mail and phone messages.)

    “Recent Federal Reserve Policy: An Evaluation”

    W. Scott Frame
    Federal Reserve Bank of Atlanta

    Wayne Angell
    former member of the Board of Governors of the Federal Reserve

    James A. Dorn
    Cato Institute and Towson University

    Lawrence H. White
    University of Missouri, St. Louis

    Lawrence J. White
    New York University

    Posted by Lawrence H. White at 04:06 PM in Economics

    X-prize c. 1908

    The June 2, 1908 NYT reports on an "X-prize" for flight, not space flight mind you:

    Lazare Weiller today confirmed the report previously cabled to THE NEW YORK TIMES that Wilbur Wright is here with the intention of selling his machine for $100,000.

    Weiller offers this amount to Wright if the American inventor succeeds in making two flights, each of fifty kilometers, within an interval of one week. The machinist must carry two persons and enough gasoline to allow of a flight of 200 kilometers, or equivalent ballast. The trials are expected to take place within a month.

    The 1908 prize structure is very similar to the X-prize offered in 2004 for space flight. The 1908 prize was worth approximately $2.1 million in 2004 dollars, whereas the 2004 prize was for $10m. It is an interesting thought experiment as to whether space flight innovation is truly worth only five times terrestrial flight innovation.

    The broader lesson is that tournaments can and do work, as the PGA/LPGA shows every weekend. If the U.S. government wants innovation in transportation, energy delivery, or energy sources, then X-prize type tournaments would likely yield more tangible, practical, and timely, although less politically beneficial, results than mandates from on-high.

    Posted by Craig Depken at 12:35 PM in Science

    2008 Meeting, Society for Development of Austrian Economnics

    The SDAE will host 12 sessions and a Soceity dinner at this year's meetings of the Southern Economic Association, where it has met for something like 13 years now. This year's SEA meetings are at the Grand Hyatt in Washington, DC, November 20-23. PDF file of the SDAE sessions is here. Membership info is here (just 20 bucks--if it weren't Austrian, that'd be a lot of consumer surplus!).

    I highly encourage attending the SDAE & SEA conference. There is an APEE-like vibrance to it, which is especially fun and valuable for young scholars. Great exposure to research that people are currently working on, and great networking.

    Posted by Edward J. Lopez at 11:50 AM in Economics

    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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