Division of Labour: July 2008 Archives
July 31, 2008
A Coasian Solution? Inappropriate Use of Tax Dollars? Both?
We report, you decide:
Cafe Risque was a little more true to its name than residents of a small northeast Georgia town could take.
Economic Growth: If It Wasn't Positive, It'd Be Negative
The American economy is in a recession, SunTrust Banks’ chief economist told the Rotary Club of Rome today.
Golly gee--if economic growth wasn't positive it'd be negative. And if the queen had ..., she'd be king. The GDP number for the 4th quarter of last year was revised to be a negative 0.2 percent, and the NBER isn't bound by the negative growth in two quarters rule of thumb when dating recessions. On balance, however, Phil Gramm is right that this is mostly a mental recession. Even for some economists.
On the Minimum Wage, Part Deux
Art raises some good points about the minimum wage providing an impediment for disadvantaged. Earlier this summer Wilson and I wrote a paper (now under review--fingers crossed) on factors influencing reduced summer employment for teens, a trend that has gotten much media publicity (previous post here). Not surprisingly, we find a negative relationship between the minimum wage and the teen employment/population ratio.
Thinking libs who want interventionist anti-poverty policy should support the EITC which is targeted at low income workers and doesn't reduce the quantity of labor demanded. Non-thinking leftists, by contrast, support the minimum wage.
On the Minimum Wage
The minimum wage went up last week. Among the stories I read about it I don't think I saw a single story about the unintended consequences. So I wrote this. The closing paragraph:
During this period of economic downturn, the actual effects of the minimum wage become obscured and support for an increase is gathered. Instead of recognizing the negative consequences for what they are, many pundits and politicians erroneously point to the struggling economy as evidence of how badly change is needed. While the minimum wage regulation is intended to be a boon for low-wage workers, economic evidence clearly indicates the opposite. If we are serious about providing opportunities for the disadvantaged, the minimum wage should be repealed altogether.
Here is a Van Gogh you haven't seen before
The deal is, scientists in Amsterdam have produced a "color X-ray" of Van Gogh's "Patch of grass" (1887) and found an earlier painting that the artist rejected. From the Reuters story:
"It is estimated that one third of Vincent van Gogh's early paintings have been painted on top of existing ones. Van Gogh literally recycled his own canvasses," scientist Joris Dik of the Delft University of Technology said.
Here is greater detail, including speculation that the rejected painting is tied to "The Potato Eaters."
Question: Why would Van Gogh "recycle"? Was canvas relatively expensive? Or was it driven by the artist's preferences? In Tyler Cowen's break out book, In Praise of Commercial Culture (1998), he writes on point (pp. 19-20):
Falling prices for materials have made the arts affordable to millions of enthusiasts and would-be professionals. In previous eras, even paper was costly, limiting the development of both writing and drawing skills to relatively well-off families. Vincent Van Gogh, an ascetic loner who ignored public taste, could not have managed his very poor lifestyle at an earlier time in history. His nonconformism was possible because technological progress had lowered the costs of paints and canvas and enabled him to persist as an artist.
Cowen's over arching theme is that the arts generally benefit from technological progress. French Impressionism, no less, would not have been possible without the invention of small lead tubes that allowed painters to take their studios outdoors, where the effects of different lighting were studied. But none of this directly answers why Van Gogh would recycle, much less why one-third of his canvases.
If the canvas isn’t right, Nozkowski simply reworks it. “I don’t like tinkering. Whenever I go back to a painting, I try to open up the entire surface—you know, run a wash of color over it, or I’ll scrape it down, or I’ll rub it off with a rag—so that everything is back in play,” he says. “They can change pretty radically. I’ve always felt that probably the good stuff will keep coming back.” (To avoid that “Oh s---” sinking feeling that can arise from erasing something good, Nozkowski keeps paper handy to quickly re-create images worth saving before they fade from memory.) Traces of what came before are often left visible, like haunting memories or jumbled-up dreams. “It’s like character in somebody’s face,” Nozkowski says.... “I believe that what I’m doing is actually very close to our normal way of looking at and thinking about the world,” Nozkowski says before getting up to stir the roasted red pepper and white bean soup he’s cooked up for lunch. “We slowly build up a whole web of associations and meanings.”
July 30, 2008
That's some fine police work, Lou
Our local dog trainer photocopied an AP story, including these snippets:
Louisiana has lost nearly 16,000 jobs since China entered the World Trade Organization in 2001 ...
Well, everyone knows how biased the Bureau of Labor Statistics is, but here are their numbers:
In 2000, LA total nonfarm jobs (NSA) was 1917.7k, in '06 it was 1853.2k, in '07 it was 1920.6k, and in June '08 it was 1950.9k. Total private workers in LA? In 2001 it was 1541.6k and in June '08 it was 1586.2k.
In the US in 2000, 131.8m total nonfarm jobs, and in June '08 138.6m jobs. The total private numbers are 111m and 116.2m. So,
I guess even the AP doesn't feel compelled to double-check these things. Wait, I guess I left out a relevant section of the news article:
That's according to a study released by the Alliance for American Manufacturing, which blames the loss on the U.S. trade deficit with China.
One of these days I'm going to get Congress to force Papa John's Pizza to pay me restitution, because I have a huge trade deficit with them.
Ratings everywhere, everywhere ratings
1. My new home of Auburn-Opelika, AL scored in the top five in Inc.com's best small cities to do business.
2. Once again the alma maters of DoL bloggers were well represented on Princeton Review's party school list. Josh and me: Ohio U. (#5). Tim and me: FSU (#10). Josh: WVU (#4). Craig: UGA (#7). Mike & Art: Alabama (#19). Did I miss anyone?
Why the airlines don't really mean it against oil speculators
J. D. Foster at Heritage writes:
Speculators accept risk that somebody else doesn't want. And speculators are rewarded for accepting risk if they prove right, and they lose money if they get it wrong.
This from the National Post (Canada):
One way or another, you probably caught the news last week that girls have caught up with boys in average scores on standardized math tests in the United States... . [...] In its story on the study by Ms. Hyde et al., the Los Angeles Times took the opportunity to gloat that the results "undermined the assumption -- infamously espoused by [Mr. Summers] -- that boys are more likely than girls to be math geniuses." Unfortunately, journalists of both sexes tend to not be math geniuses.
The Future is Now
There is at least one Julian Simon Award. Aptera's 300-MPG hybrid looks like a clear winner if it is commercially viable.
HT: Radley Balko.
Best Sentence I've Read This Morning*
Reproducing a list compiled by John Tierney, here's Jeff Tucker on the Mises.org Blog:
You have to turn to the Science section of the New York Times to find out that most of what the front page has said for years is entirely bogus.
*Meme: Marginal Revolution.
July 29, 2008
Fresh from FEE: A boatload of economics lectures on mp3
The Foundation for Economic Education (FEE) has posted dozens of lectures from its 2008 summer seminars here, including yours truly's "Is the Gold Standard a Viable Policy Option?" and "The Subprime Lending Crisis". I spoke at their "Applying Liberty" seminar about three weeks ago. You can downloand them as mp3 files, or stream them.
I also recommend Jeff Hummel's "Why Fractional Reserve Banking is More Libertarian than the Gold Standard".
Review of Richard Land, The Divided States of America
I've written a rough draft of a review of Richard Land's interesting The Divided States of America? What Liberals AND Conservatives are Missing in the God-and-Country Shouting Match. Comments welcome.
The Shock Doctrine Gets Taken Apart
By The New Republic's Jonathan Chait. A few choice quotes from the review are below the fold.
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"Klein repeatedly implies that there is something immoral about using crises to advance the right-wing agenda without explaining why this is so. After all, Friedman wanted to overhaul the New Orleans public education system because he believed, rightly or wrongly, that vouchers would work better. If you thought your house was horribly designed, and a tornado flattened it, would you rebuild it exactly as before?"
"The notion that crises create fertile terrain for political change, far from being a ghoulish doctrine unique to free-market radicals, is a banal and ideologically universal fact."
"...she is conscientious enough to provide readers with facts that blow her thesis to smithereens, yet at the same time she is deluded enough not to notice the rubble of her thinking on the floor."
"It ought to be morbidly embarrassing for a writer to discover that the central character of her narrative turns out to oppose what she identifies as the apotheosis of his own movement. And Klein's mistake exposes the deeper flaw of her thesis. Firedman opposed the war because he was a libertarian, and libertarian conservativsm is not the same thing as neoconservatism. Nor are the interests of corporations always, or even usually, served by war."
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Puckish Minor League Baseball Promotions
Here's a list of 10 including Britney Spears Baby Safety Night, Jose Canseco Juice Box Night, and Terrell Owens Unappreciation Night (featuring 81 cent hot dogs).
On border control c. 1908
A July 29, 1908 NYT article concerns the militarization of the southern border of the U.S.:
Tired of being made the recruiting ground for filibusters the United States is taking steps to put an end to the hatching of conspiracies against the peace and welfare of its neighbors. The State Department is using every resource of the Government to prevent such violations and to punish the infringement of the neutrality laws. A stop is to be put in this country to such plotting as preceded the uprising in Northern Mexico...
Oh, the irony.
Building Brand Equity: Economics in One Lesson With Grandmaster Flash
Thoughts on the broken window fallacy are here, courtesy of the Mises Institute. At the end of the article I mention that Naomi Klein's The Shock Doctrine is on my "to read" list. I picked it up from the library last night and am about halfway through it. I'll write up something more detailed when I'm finished, but here are a few initial thoughts. It's well-written and hard to put down; I find myself eager to get back to it. It could have been a real contribution if she had laid aside her zeal to find blood on Milton Friedman's hands and focused on the more general relationship between conflict and large-scale institutional change, but it is so permeated with fundamental errors of fact and interpretation that it is hard to take seriously.
July 28, 2008
Building Brand Equity: the XM/Sirius Merger
Inspired by Myth of the Rational Voter author and satellite radio enthusiast Bryan Caplan's blog post, here are my thoughts on the XM-Sirius Merger. An excerpt:
After seventeen months of deliberation, investigation, and debate, it appears that the federal government will finally allow satellite radio providers XM and Sirius to merge. The regulatory hurdles the companies had to overcome were ostensibly in place to protect consumers, but the effect of the regulations were to waste resources and delay a merger that will benefit consumers. Regulatory barriers are an impediment to growth in poor countries. They are also an impediment to growth in the United States.
According to economic theory, monopolies are bad for consumers because they produce too little and charge too much. These regulations are supposed to preserve competition and protect consumers. Regulations passed by the Federal Trade Commission, the Federal Communications Commission, and other agencies are allegedly "pro-consumer," but as George Mason University economist Bryan Caplan suggests, the XM-Sirius merger debate is "a classic case of Orwellian 'pro-consumer [regulations] that discourage innovation and equate 'the public interest' with 'that which does not interest the public.'"
Bush or Batman?
An interviewer challenges folks in the street: did the following anti-evildoer quote come from George W. Bush or from the 1960s TV version of Batman? Great fun, and harder than you might think!
Best Sentences I've Read Today*
Glen Whitman takes Coase seriously with respect to internalities:
Given the reciprocal nature of the problem, and having no further information, we could just as easily conclude that the long-run self imposes internalities on the short-run self that require correction. Perhaps we should tax weight-loss clinics.
Even among "normal" individuals, studies show that excessive self-control efforts can lead to underconsumption of desirable things. Perhaps we should subsidize Krispy Kreme. (p. 5)
*--MR, as always.
Playing the Game
One morning. Two rejection notices. I comfort myself with a lunch of beef-flavor Nissin Cup Noodles--cheap, tasty, and probably much healthier if you remove the "beef" chunks and replace them with almonds--but I also remain sanguine. Why? I paraphrase Mike Munger: a finished paper on my desk or in my filing cabinet is rotting. A finished paper on an editor's desk is moving forward. Both papers will go back out today or tomorrow.
Bruce Wayne, meet Anthony de Jasay
In the second half of The Dark Knight we learn that Bruce Wayne, aka Batman, feels bad about being a private law-enforcer. (I hope this is not a plot-spoiler for anyone.) He thinks that the citizens of Gotham City should trust their government to be the sole provider of enforcement services. He even throws a fund-raiser to further the political career of the District Attorney.
Bruce should read Anthony de Jasay's article, "On the Monopoly of Rule Enforcement" in the Spring 2008 issue of The Journal of Private Enterprise. Then maybe he'd feel better about his own caped crusading.
De Jasay could be describing Gotham City before Batman's arrival:
[S]tate monopoly of rule-enforcement leads to soft, sluggish, and ineffective punishment. As a consequence rules will be poorly enforced, and public order and the security of person and property undermined.
Of course, the thorough corruption of the police force by organized crime, as depicted in The Dark Knight, only reinforces these problems.
Further on, outlining the possibilities for re-introducing private law enforcement, de Jasay could be describing Batman's unofficial cooperation with Police Commissioner Gordon:
There would be no need ... for any explicit acknowledgment that the state is turning a blind eye. Success would be more likely if the rise of private enforcement happened by tacit occupation of the ground by private initiatives and by its tacit acceptance by the former monopolist.
And then there's this remark, which could be describing The Dark Knight himself:
It must, of course, be borne in mind that private enforcement of public rules requires some private muscle, some private willingness to bear the inconvenience and risk of self-help and reciprocal aid, and no doubt also certain social skills in carrying out enforcement and imposing punishment.
Two more comments (spoiler alert) on the movie below the fold.
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If Batman had learned not to concede the exclusive right of punishment to the state monopoly, he wouldn't hesitate to kill the Joker when he has the chance. Killing the Joker would be completely justified, the Joker having demonstrated beyond all doubt that he is a standing lethal threat to each and every other Gothamite. Not to mention that he can escape any prison (or asylum).
The late Heath Ledger as the Joker is a shoo-in for Best Supporting Actor.
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Wal-Mart, Obesity, and the Battle of Los Angeles
The recent decision in Los Angeles to impose a moratorium on fast-food outlets has sparked a discussion of the root causes of obesity. Radley Balko links to an article discussing Wal-Mart's impact on prices and LA politicians' unwillingless to let the "Beast from Bentonville" into the city. Charles Courtemanche and I are working on a paper about Wal-Mart and obesity that should be finished by the end of the summer at the latest. The takeaway point is that Big Box retail and "Every Day Low Prices" do allow people to "Save More. Live Better:" they reduce obesity. A very early version the paper, which can be taken with numerous grains of salt, is here. A new and improved version of the paper (with a better title) will be available soon.
July 27, 2008
Heterogeneous Human Capital
Via Radley Balko, here is Rush playing "Tom Sawyer" on Rock Band.
July 26, 2008
Size Matters: Cell Phones and Cancer
WebMD reports on the ambiguous research on the alleged link between cell phone use and cancer risk. Pages of commentary: four. Mentions of magnitude: zero. All of the quantiative relationships are described in terms of associations, increases, and decreases, and there is no real discussion of tradeoffs. My fear is that the debate will be driven by sign-and-significance statistics with at best passing reference to magnitude, and a heavy load of regulation will come down the pipe if researchers find a "positive and significant" relationship between cell phone use and cancer. This is particularly interesting in light of Ziliak and McCloskey's The Cult of Statistical Significance. I'm reviewing it for Economic Affairs, and the review should be done soon.
Speaking of Alcohol...
The Onion outdoes itself (NB: salty language). It also teaches an important lesson about correlation and causality. So which is higher:
P(celebrated|alcoholism) or P(celebrated|great author)?
P(great author|alcoholism) or P(alcoholism|great author)?
P(John Updike Knows Who You Are|alcoholism) or P(John Updike Knows Who You Are|great author)?
I've read that great artists did their best work while sober. There's an economics lesson for the aspiring artist, here, as well: a steady regimen of pills, powders, needles, and bottles is likely to have a negative effect on artistic productivity. At the margin, aspiring great artists should reduce the amount of time they spend participating in all-night drug binges and increase the amount of time they spend practicing. Remember the misadventures of Towelie (NB: search results are PG-13 for drug humor): getting high creates more problems than it solves. And take it from Mr. Mackey: drugs are bad, m'kay.
July 25, 2008
Alcohol costs and benefits
Ed Stringham defends laissez-faire for alcohol on San Francisco public radio (The Costs of Alcohol Abuse, scroll down a bit). It is a spirited dialogue that winds up matching Ed against the host (a self-described quasi-teetotaler), other guests and callers all lined up with the paternalistic, moralistic, prohibitionist, statist views. Hat tip: The Barstool Economists.
The Man from ACORN
Sobering piece by Steven Malanga:
Meeting last November with the leaders of the Association of Community Organizers for Reform Now (Acorn)—the nationwide network of left-wing community groups that taps government money for a host of causes—Obama declared: “I’ve been fighting alongside Acorn on issues you care about my entire career,” including representing Acorn in a court case in Illinois. Acorn members apparently reciprocated by working hard to turn out voters for Obama’s Illinois campaigns, according to a 2003 piece in the magazine Social Policy by a Chicago-area Acorn organizer. After the candidate’s November appearance, Acorn’s affiliated political action committee endorsed Obama for president.
On deposit insurance c. 1908
An interesting thought from the July 25, 1908 NYT:
COLORADO SPRINGS - George E. Roberts, President of the Central National Bank of Chicago, and ex-Director of the Mint, was the principal speaker at to-day's meeting of the State Banker's Association. He said in part:
Masses vs. Classes c. 1908
An interesting quip from the July 25, 1908 NYT:
The "masses" and the "classes" in England differ in this - the former are to be bought with a drink, the latter with a dinner.The same could be said of the masses and the classes of the United States today.
On inventions c. 1908
Here's are the first and last paragraphs from an article in the New Scientist from May 2005:
A gun that spits out ball bearings after spinning them to extreme speeds is being developed by a US inventor. The novel design has already caught the imagination of some defence industry experts.
But Abrahams finds the idea outlandish. "Anything that seems so far beyond anything else is worth a moment's thought before you completely gulp it down," he told New Scientist. "It is way out on the side of the scale that deals with high levels of imagination."
All of this sounds intriguing until you read the July 25, 1908 NYT:
The science of war will be revolutionized and standing armies vastly reduced if a rapid-firing gun invented by William Patten of 270 West 136th Street can duplicate in the field the work of a ten-inch model which Mr. Patten has built and is demonstrating.
More Handiwork of Pres. George W. Bailout
Rent Extraction on K Street
It’s tough to be a lobbyist these days, baby. It’s not all capture and vote-buying as the populists would have you believe. As Kimberly Strassel writes in today's Opinion Journal, politicians have no reason not to use what leverage they do have back against you.
As most of Washington met last week to fret over the economy, Harry Reid was attending a less-noticed summit. The Senate majority leader had summoned the titans of more than a dozen industry trade groups to a Capitol Hill meeting, where he delivered a crisp message: Get with our program, or get demolished.
It’s called “rent extraction” in the public choice literature. Fred McChesney did most of the work on it, culminating in his 1997 book, Money for Nothing. A variant of rent extraction is so-called “milker bills,” where legislators “float” a regulatory proposal that would harm industry or firm X, who is supposed to get the hint that a few extra campaign dollars could help get the proposed bill onto the back burner. Another variant is so-called tax farming, where the politicians play nice with tax base X while finding indirect ways to tax them. One indirect mechanism that’s become increasingly popular in recent decades is tort law. Take big tobacco, for example. Most of the monies that states have collected under the $246 billion master settlement have simply substituted for general tax dollars. A New York Times study did some of the bean counting, and found that 95 percent has gone to fund public works projects or property and sales tax relief. On this point, Jeffrey Haymond has a chapter in my forthcoming book, Law without Romance, titled "Class Action Rent Extraction." Torts, of course, are a kind of hidden broad-based tax. The Council of Economic Advisors in 2002 estimated the annual “tort tax” (higher prices imposed by business sector to cover costs of litigation) at nearly $200 billion. These lobbyist shenanigans—the K Street Project—aren’t much different.
So from a public choice perspective, the so-called "K Street Project Part Blue" isn't much of a shock at all. Sure, it is vaguely sordid to see pols strong-arm the hiring decisions of Big Lobby. But the article misses the larger point that rent seeking is socially costly in the first place, and rent extraction only furthers and compounds those losses.
Thanks to Richard Reinsch for the pointer.
Tax Dollars at "Work"
A former student sends me this article on a summer "jobs" program in Washington DC:
Samantha Baskin gets paid to be patient. One of thousands of students across the District who had pay problems in the summer youth jobs program last week, Samantha, 14, said that she doesn't actually do anything at the Washington East of the River Academy.
Just a hunch, but I bet some of the adults in three-generation households who are not earning salaries might have picked up a few of their "life skills" and "job readiness" in previous summer "jobs" programs.
Brett Favre Baseball Promo
The [Augusta, GA] GreenJackets will make fun of the retired, maybe now un-retired, quarterback legend, by giving away flip flops in honor of the flip flopper.
Story here; HT to Skip Sauer.
Ontario School Choice and the Benefits of Competition
The province of Ontario has two publicly funded school systems: secular schools (known as public schools) that are open to all students, and separate schools that are open to children with Catholic backgrounds. The systems are administered independently and receive equal funding per student. In this paper we use detailed school and student-level data to assess whether competition between the systems leads to improved efficiency. Building on a simple model of school choice, we argue that incentives for effort will be greater in areas where there are more Catholic families, and where these families are less committed to a particular system. To measure the local determinants of cross-system competition we study the effects of school openings on enrollment growth at nearby elementary schools. We find significant cross-system responses to school openings, with a magnitude that is proportional to the fraction of Catholics in the area, and is higher in more rapidly growing areas. We then test whether schools that face greater cross-system competition have higher productivity, as measured by test score gains between 3rd and 6th grade. We estimate a statistically significant but modest-sized impact of potential competition on the growth rate of student achievement. The estimates suggest that extending competition to all students would raise average test scores in 6th grade by 6-8% of a standard deviation.
July 24, 2008
Bifurcated Man Paradigm(s) and the Media
These musings gathered after reading many good economic blogs recently.
The newspapers are filled with articles describing how gasoline price increases are causing a financial burden on American families. They describe how households are substituting away from luxurious but thirsty SUVs and into thrifty but uncomfortable compact cars as households exhibit the substitution effect of a price increase. They bemoan how the American family is responding to the financial pain from their lower effective income by spending less money on food, clothing, entertainment, etc. as households exhibit the income effect of a price increase. The pundits state that economically burdensome gasoline price increases must therefore be rolled back because any perceived “market failure” automatically justifies market intervention, so they call for various actions effectively resulting in our government imposing a price ceiling. (Apparently, they forgot that it was government price ceilings that caused the gas shortages and long waiting lines at gas stations during the 70s “oil crisis.”)
Yet, the same newspapers are filled with articles describing how the latest increase in the minimum wage will produce an economically painless benefit that will help poor households headed by undereducated and inexperienced workers. They never consider that employers will respond to the imposed increase in labor costs by substituting away from unskilled and inexperienced laborers and into more automated production processes as businesses exhibit the substitution effect of a price increase. They also ignore how employers will respond to the financial pain of effectively lower profits by offering less of the customer service that was previously provided via unskilled laborers and investing less in future business expansion that would otherwise provide for more future jobs as businesses exhibit the income effect of a price increase. The pundits still conclude that financially burdensome low wages for unskilled workers must be propped up because any perceived “market failure” automatically justifies market intervention, so they applaud our government imposing a price floor. (Apparently, they forgot that it was government subsidies to raise the price of corn used for ethanol that made corn used for food to be more scarce and more costly in the U.S., as well as in many developing countries.)
Then I remember having once read a James Buchanan quote coining the phrase “Bifurcated Man” to describe the paradoxical paradigm often adopted by many Political Science models used to compare government versus private market allocations: Individuals making resource allocation decisions in the marketplace were assumed to reflect only selfish interests and ignore the public good. Yet, when these same individuals would make the such choices in the political realm of a democratic republic, they were assumed to suddenly sprout the “wings of angels” as they drew closed the curtains of the voting booth, denying themselves as they make decisions only promoting the public good. Both assumptions were used to justify calls for a greater level of government involvement in our economy.
However, I think I have discovered Bifurcated Man paradigm, version 2.0, which must be a paradox upgrade in vogue with today’s media pundits: When individuals organize themselves as family households, their rational responses to the severe and unfair economic realities of life can be perfectly described by basic economic principles, and the significant magnitude of harm done to the public good can be readily observed. However, when these very same individuals organize themselves as businesses, their responses to the economic realities of life can only be characterized as irrational, rendering basic economic principles impotent in describing their behavior. Yet the significant magnitude of harm done to the public good can still be readily observed. Both assumptions are then used to justify a greater level of government involvement in our economy.
So in the end, it seems that whatever the problem is, more government is always the proper solution... always.
Cue gravelly voiced actor Sam Elliot: “Rationalization—it’s what’s for dinner.”
I sent this article to the Jewish World Review in response to Dick Morris's column condemning speculators. I never heard from them, so I posted it on the Mises Blog. The opening paragraph:
In a July 21, 2008 column in the Jewish World Review with a shouting headline of STOP OIL SPECULATION NOW!, Dick Morris and Eileen McGann argued that the government should take action to restrict trading in futures markets. They are mistaken, however, in their assessment of oil speculation. Speculation is an important part of the supply and demand process.
If you want, RTWT.
You're fired. It's only "fair".
Today's local fish wrapper inteviewed a local fast food owner about today's minimum wage increase.
“It’s going to be costly to all retailers,” Ferrell said. “But I don’t disapprove of it. I feel like we need to be as fair as we can with employees …
Cross-Price Elasticity of Demand: Length of School Week Edition
Another margin on which people are responding to high gas prices:
NEW YORK (Reuters) - Facing a crippling increase in fuel costs, some rural U.S. schools are mulling a solution born of the '70s oil crisis: a four-day week.
Baseball transaction c. 1908
The July 24, 1908 NYT reports on a deal between the Cleveland and Washington baseball teams:
It was announced today that the Cleveland American League Baseball Club has purchased the release of Pitcher Falkenberg and Third Baseman Altizer from the Washington club. The consideration is said to have been $10,000. The two men named will, it is expected, join the Cleveland Club at once.
Baseball-referenc.com reports Mr. Altizer's statistics for the 1908 season were not steller (indeed for his entire career): .224 batting average with Washington and a .213 BA with Cleveland; .274 on base percentage with Washington, .278 OBP with Cleveland, and so forth. Altizer moves on to the White Sox in the next year.
What about Falkenberg? He plays for Cleveland through the 1913 season with an ERA below 3 (except for 1911 when he had an ERA of 3.11) and he wins 23 games in 1913 before moving on to Indianapolis in the Federal League (oops).
Transportation costs and hotels c. 1908
An interesting claim was reported in the July 24, 1908 NYT:
The Earl of Bessborough, presiding today at the annual meeting of the Gordon Hotels Company, took a very pessimistic view of the London hotel situation...
A blank check from the taxpayer
Jerry O’Driscoll in the New York Post gives the lowdown on the Treasury’s bailout plan for Fannie and Freddie:
Paulson has asked Congress for a blank check from the taxpayer to pay off investors for losses already incurred and likely to be incurred in the next few years.
Read the whole thing here. It’s short.
Oh, and here's a cartoon to go with it.
July 23, 2008
Best Sentences I've Read Today*
This kind of crisis of confidence occurs every time the economy temporarily heads south — which it inevitably does from time to time. What does this tell us? It tells us that people do not understand the economy very well. And what do stories like Gosselin’s tell us? That most journalists don’t either.
I found this especially interesting in light of Stephen Dubner's recent post on financial literacy (see below). Will's post is excellent. ATSRTWT.
*Meme: Marginal Revolution.
A friend from college has started a blog where he's collecting five-item lists, which he ultimately plans to turn into a book. I just added a couple of lists of things I learned from 80s rock songs and a list of favorite condiments. Merlin Mann's 5ives is also interesting.
Who would want to be Vice President?
"My country has in its wisdom contrived for me the most insignificant office that ever the invention of man contrived or his imagination conceived."That, of course, was John Adams, first Vice President and second President of the United States, writing to his wife Abigail during his stifling tenure as Veep.
Even with succession, the office hasn't come very far. Here's a quick list of what you get as VPOTUS:
I think that's about it. Otherwise you basically have no power, especially in the Administration unless your president wants to involve you. Cheney is effectively a cabinet member under W., but that's the exception. The Clintons had to find something just to keep Gore busy (remember National Performance Review?). And Dan Quayle, well....
A little public choice here. Assume politicians maximize power--maybe for legacy, maybe to really do good for society, the ends don't necessarily matter. Notice that the list above generally consists of expected benefits--things that might happen. So, the question is: what type of politician would accept the V.P. nomination? The answer, generally, is one who has accumulated relatively little political capital compared to other politicians of national recognition.
A junior senator or new governor make sense because a youngish pol may be willing to take a chance on (2) and (4) rather than sticking it out in the Senate or Statehouse. The benefits are uncertain on either path. Although committee assignments matter less in the Senate than the House, junior Senators can get stuck on low-value or "burden" committees while their senior colleagues sit tight on the Finance, Armed Services, Labor, and Judiciary committees (see paper by Tim Groseclose and Charles Stewart). But a high-powered senator has too much to lose. Politicians like to invest their political capital, not convert it into sunk costs. An ex-governor also makes sense, especially in a term limited state, because his political capital isn't tied to state politics. But generally any "rising star" will do because, well, he or she hasn't risen yet.
CNN is hyping McCain's upcoming trip to Louisiana, where he'll meet with Gov. Jindal. But Intrade has Jindal tied for 4th with Minn. Gov. Tim Pawlenty at 11%, trailing Alaska Gov. Sara Palin at 13% and leader Mitt Romney at 31%. For Obaman, Kansas Gov. Kathleen Sebelius, Indiana Senator Evan Bayh, and Delaware Senator Joe Biden are all trading above 15%, and Hillary Clinton is at 13.8%.
My story here, and history, suggest not betting on Biden or Clinton. If you don't need a stepping stone, you're not going to be interested in being Veep.
Addendum: by email from Tim Groseclose:
Here's a fact that someone might want to mention on a blog. Yesterday, according to Intrade.com, John Edwards' chance of being the Dem VP was about 6.5%. Today, after Drudge and the National Eqnquirer present evidence that he has a mistress and love child, his chance is about 9%!
The abstract of a new REStat paper from Benjamin Jones and Benjamin Olken:
This paper investigates the remarkable extremes of growth experiences within countries and the changes that occur across growth transitions. We find two main results. First, virtually all but the very richest countries experience both growth miracles and failures over substantial periods. Second, growth accelerations and collapses are asymmetric phenomena. Collapses typically feature reduced investment amidst increasing price instability, whereas growth takeoffs are primarily associated with large expansions in international trade. The results show that even very poor countries regularly grow rapidly, but sustaining growth is difficult and may pose a very different set of challenges than starting it.
So crummy monetary policy is the likely culprit for killing growth (btw, what does US monetary policy look like these days?) and increasing trade openness creates growth (btw, what's up with Lou Dobbs lately?) I wonder how well negative shocks to economic freedom (monetary policy being only one part of it) correlate with growth failures.
July 22, 2008
Joe DiMaggio Was Great and All...
Spot the inconsistency: Al Gore on offshore drilling
The Wall St. Journal reports that Al Gore is urging Congress “not to overturn a federal ban on offshore drilling”. It quotes a Gore speech thusly:
"The larger point for me is that it has nothing to do with short-term relief from gas prices, and probably nothing to do with long-term relief," he said of calls to lift the moratorium. "You take an oil deposit right off the coast of California -- that's more likely to be sold to China."
Never mind the fallacious claim implied by Gore’s second-quoted sentence, that a rightward shift in the supply of oil from California won’t affect the US price of gasoline if that oil is sold to China.
Let’s focus on the first part of the first quoted sentence: “The larger point for me is that [offshore drilling] has nothing to do with short-term relief from gas prices”. If that’s supposed to be an argument against lifting the ban on offshore drilling, then Gore is suggesting that it isn’t worth undertaking any cost today for a benefit that won’t arrive for ten years. Isn’t this the same Al Gore who says we need to start taking costly steps today to slow global warming, in order to save us from rising sea levels, etc., that will otherwise arrive in thirty to fifty years?
July 21, 2008
Best Sentence I've Read Today*
Bryan Caplan on voting, relevant to my post from earlier today on whether or not one should rock the vote:
Apathy may not be a virtue, but it's a lot better than the activism of the irrational.
Thoughts? Comments are open.
*Meme: Marginal Revolution.
I now have a reason to cry myself to sleep tonight. I answered the quiz questions correctly; my answers to Dubner's three questions are:
Leave Ronald McDonald Alone!
After double-checking to see whether I blogged about this paper last month, here's the abstract for Michael L. Anderson and David A. Matsa's interesting paper "Are Restaurants Really Supersizing America?", which argues that restaurants are not, in fact, to blame for rising obesity. Casting personal liberty aside, these results suggest that anti-restaurant policies aren't even justified on paternalistic utilitarian grounds. Here is the abstract; let the debate commence. Comments are open:
Regulating specific inputs into health and safety production functions is unlikely to be effective when optimizing consumers can compensate along other margins. This paper examines the implications of this principle in the context of economic policies targeted at reducing obesity. Well-established cross-sectional and time-series correlations between average body weight and eating out have convinced many researchers and policymakers that restaurants are a leading cause of obesity in the United States. But a basic identification problem challenges these conclusions: do more restaurants cause obesity, or do preferences for greater food consumption lead to an increase in restaurant density? To answer this question, we design a natural experiment in which we manipulate the effective price of restaurants and examine the impact on consumers' body mass. We use the presence of Interstate Highways in rural areas as an instrument for the supply of restaurants. The instrument strongly predicts restaurant access, and robustness tests support its validity. The results find no evidence of a causal link between restaurants and obesity, and the estimates are precise enough to rule out any meaningful effect. Analysis of food intake micro data suggests that although consumers eat larger meals at restaurants than at home (even after accounting for selection), they offset these calories at other times of day. We conclude that public health policies targeting restaurants are unlikely to reduce obesity but could negatively affect consumer welfare.
Building Brand Equity: Wal-Mart Op-Ed
The Independent Institute is distributing my recent op-ed on Wal-Mart's expansion plans. In this case, Wal-Mart is looking to build an experimental new superstore in one of the Memphis suburbs. Fans of Hernando de Soto's work on regulatory barriers to business expansion will find much that is familiar in the case. One disclaimer on something that slipped by during the editing process: I don't know for certain that no use of eminent domain is involved and tried to qualify that in an earlier version. The article's strong claim about eminent domain is completely my fault; if eminent domain is involved, please let me know and I will be sure it is corrected. Eminent domain isn't the central issue, however. It's a pretty standard NIMBY battle over Wal-Mart's expansion.
Development Takings, Alive and Well
Scott Bullock and Bert Gall, both attorneys at the Insitute for Justice, have a timely op-ed in today's Nashville Tennessean. At issue is the city's plan to condemn a small business on music row owned by a woman name Joy Ford, and replace it with an office building. I posted about Ford and her little building back in March. I've concluded that she's a principled hold out. The city has filed the condemnation proceeding, so she is very likely to pay significant economic costs for holding to her principles.
I think it's interesting that this is even happening. Afterall Tennessee, like 42 other states, reformed its eminent domain law after the Kelo ruling. Even Massachusetts has now proposed new legislation to curb develoment takings. (I say even Massachusetts because my empirical model predicts only a 19.1% chance of reform there).
But several news grabbing cases suggest many of these laws lack meaningful restraints. Missouri's state supreme court upheld the power of St. Louis to condemn a dentist's office to build a shopping center. The U.S. Supreme Court recently denied cert to Atlantic Yards petitioners. And it looks increasingly inevitable that Columbia University will be aided by eminent domain to expand into existing neighbors' properties. There are plenty of these stories from many states across the country. At least two cities have even taken action to quash protests against eminent domain abuse (Clarksville, TN and St. Louis, MO).
Point is, it's an open question how long is the tail of the Kelo backlash. I talk about some of these issues in a radio interview yesterday, available here. Eternal vigilance is the necessary companion of liberty. Or something like that. So quash this:
Letter on the DIY Economy
Ellen Goodman is frustrated with the "do-it-all-yourself world." My thoughts, sent to the Memphis Commercial-Appeal:
The self-service economy that frustrates Ellen Goodman ("Welcome to do-it-all-yourself world," July 20, 2008) is the partial by-product of labor market policies that have made it prohibitively expensive to employ many workers with few skills who could be gas station attendants, cashiers, dishwashers, etc. if they weren't legislated out of the labor market.
The minimum wage is a key culprit. On a recent trip to Massachusetts, I was surprised that at an ice cream parlor and at a coffee shop, signs advised to bus my own table. If I remember correctly, the minimum wage in Massachusetts is $8.00 per hour, which means that every hour of labor that cannot produce at least $8.00 worth of output will be unemployed. Someone in Massachusetts who is willing to bus tables for $7.99 an hour is denied the opportunity. As studies by economists David Neumark and William Wascher show, higher minimum wages give firms incentives to avoid hiring unskilled workers. Among other things, they substitute machines and computers for workers. To cite one example, the increasing prevalence of self-checkout lanes at supermarkets is one of the unintended consequences of the minimum wage.
Goodman mis-identifies the culprit as privatization when in fact the culprit is labor market intervention. If we make the labor market more flexible, we can provide more opportunities for those who genuinely need them and enjoy more, better services in the process.
What I've Been Reading Today*
Ernest Mandel, An Introduction to Marxist Economic Theory. I decided to read this to prep for my Classical & Marxian Political Economy course. Mandel offers a clear and lucid explanation of the Marxian theory of history and capitalism, but unless I missed it Mandel doesn't appear to offer a clear alternative. It's a short version of Mandel's much longer treatise, but a better title might have been An Introduction to the Marxist Theory of Capitalism. The book's last sentence summarizes what appears to be the essence of Marxian analysis:
This stage in turn could usher in the conquest of power by the workers and the establishment of a working-class government which could proceed to the construction of a socialist democracy free of exploitation and all its evils (p. 78).
I didn't see any details on how this "socialist democracy free of exploitation and all its evils" would actually work. We'll be considering the Misesian critique in detail: here are Economic Calculation in the Socialist Commonwealth, Socialism, and Theory and History, all at a price of $0.00 courtesy of the Mises Institute.
Lindsay Campbell: Mock the Vote
Lindsay Campbell at www.moblogic.tv makes the case for non-voting:
I'll elaborate on an important point that she makes. If you stand in line at the store for a couple of hours on the day after Thanksgiving, if you line up to get the new iPhone, or if you line up at midnight to see The Dark Knight (we didn't, but if there's a midnight showing of The Clone Wars in a few weeks, I'm there), you at least have something to show for it. If you stand in line for a few hours to vote, you exert exactly zero influence on the outcome and maybe you come away with an "I voted today" sticker. I still do it, though. My thoughts on voting in Presidential elections are here. Here's South Park's very intelligent but very less-than-wholesome take on voting. They use obscenity and vulgarity in the service of satire, but you've been warned.
Firms in the Marvel Universe
Re: my post about what I've been reading and watching lately (below), Josh sent me a link this morning to the Wikipedia page for Damage Control, which was the company that was apparently hired to clean up the mess after battles between superheroes and supervillains. On one hand, it's great to see that the market process works even in the Marvel Universe. On the other, a quick skim of the page suggests that the company has some trouble with executive opportunism. Under a well-functioning legal system, incurred liability from crime should reduce the value of the company. This should create a market opportunity for a superhero of a different kind--call him The Speculator--to create value through his signature maneuver, the Leveraged Buyout. I doubt a series of comic books based on the academic debate about capital market discipline would sell particularly well, though.
Olympic events c. 1908
The July 21, 1908 NYT reports on the London Olympics. One event which is no longer on the agenda was tug-of-war. This day's issue reports on a potential figurative casus bella:
The City of London policemen, who won the Olympic tug-of-war, as issued a challenge for a match with the American team, the members of both teams to be in their stocking feet or in any way the Americans prefer, and the match to be for love or any charity.
Tax on Cupid c. 1908
From the July 21, 1908 NYT:
The State Board of Education has put a tax on Cupid by demanding that the young women who are graduated from the new Normal School that is to open here [Montclair, N.J.] on Sept. 15 shall teach in the State schools for two years afterward or refund the cost of their education.
Certain candidates to political office suggest similar approaches to "making college affordable" without ever facing the question of the implicit tax they are imposing on those who "volunteer" for such funding options.
A microscopic bowl of ramen noodles, which brings us ever closer to allowing the tiniest organisms to eat like graduate students (or junior faculty members, though a quick glance at my food drawer suggests that my ramen stash is at home). Nothing about whether the noodles are chicken, beef, or shrimp flavored.
HT: Jorge Cham.
Mike Moffatt's Fitness Challenge
Lawrence Reed, the longtime president of the Mackinac Center, will be the new president of FEE. A great hire for a great organization.
HT: Jeff Tucker.
July 20, 2008
What I've Been Reading (and Watching) Lately*
1. Thomas Sowell, On Classical Economics. I'm teaching Classical and Marxian Political Economy in the Spring, and I'm thinking about assigning this. James C.W. Ahiakpor didn't care for it. It's very heavily footnoted--about 1/3 of the 300 or so pages are devoted to notes, index, and bibliography.
2. Ayn Rand, The Virtue of Selfishness. It's always good to read a little Rand during major policy debates; she isn't one to mince words. Many will find the title off-putting; Rand's use of "selfishness" is different from the way most of the rest of us use it. Every chapter stands alone because the book is a collection of essays by Rand and Nathaniel Branden. My favorite chapters were 12, 13, and 14 on "Man's Rights," "Collectivized 'Rights,'", and "The Nature of Government." Branden's chapter on "The Divine Right of Stagnation (chapter 16) is also worth reading.
3. Deirdre McCloskey, How to be Human (Though an Economist). I've read this a few times--I picked it up when I was on the job market in Boston in 2006. Every grad student should read it during their first year. My favorite essays (those on work and scholarship) appear on pp. 101-110 under "Rule 5. Work and Pray."
4. Robert Ekelund and Robert Tollison, Mercantilism as a Rent-Seeking Society. I've skimmed parts of it and it applies the now-standard theory of rent-seeking to European mercantilism. The content will provide interesting background for my Classical and Marxian course, and I'm especially interested in reading it in light of the literature that has developed since it was published in 1981.
5. The One-Year Bible (New Living Translation). This is one of the more innovative of the various Bible-reading plans I've come across. Every day has a selection from the Old Testament, a selection from the New Testament, and selections from Psalms and Proverbs. I first read it in 2001-2002; I've become a fan of the NLT because of its conversational tone.
A couple of notes on movies and something about insurance below the fold.
Read More »
1. Kung-Fu Panda. I was interested in this because I've been practicing martial arts for about two years. It's a very cute fish-out-of-water story with a predictable moral, but also with a twist. You'll want to go out for dim sum after seeing it. Unless you have a compelling reason to see it now, wait for the DVD.
2. The Dark Knight. Wow. This movie is absolutely fantastic. A little more back story on the Joker would've been nice, but I'll stop there for people who haven't seen it. Worth seeing in the theater. Worth the price of admission.
3. The Incredible Hulk. We figured we'd round out the comic book movie summer by seeing this one. It's what we expected: a pretty good popcorn flick with lots of explosions and cool special effects, which didn't really leave much time for character or plot development. Wait for the DVD.
4. Semi-Pro. We were going to rent Batman Begins to prepare for The Dark Knight but settled for this. A cute concept, but don't waste your time.
I left Hulk wondering about the efficiency of insurance markets in the Fictional Universe. There seems to be an awful lot of "(Gigantic/Evil/Extraterrestrial/Experimental) ___________(something)_________ (attacks/is released in/lands in) ___________(major city)___________ and destroys (several buildings/a lot of stuff/everything)" in this alternate reality, so I wonder how this affects housing and insurance markets. Is there a Fictional FEMA that redistributes the risk from residents of Gotham, Metropolis, and other hapless municipalities to taxpayers? To the best of my knowledge, neither DC or Marvel has created a series of comics about a heroic claims adjuster yet, but someone has to write the checks to clean up the damage. There's a Batman comic about Ludwig von Mises, so why not one about insurance?
« Close It
A face for radio...
This afternoon I will be Charles Heller's guest on LibertyWatchRadio from 3 to 4 pm Eastern. We will be discussing takings for economic development. This is a call in show. I'd love to hear from DOL readers, 520-790-2040 or 866-725-5467. Here are some related papers of mine:
1. "Kelo and its Discontents," The Independent Review, Winter 2007
2. That paper was written while many of the facts were still coming in about state legislative responses. A more recent paper contains all the most up-to-date information (although it goes in a very different methodological direction....): "Pass a Law, Any Law, Fast! State Legislative Responses to the Kelo Backlash."
3. A paper for Rus Sobel's book on policies in West Virginia "Make Property Rights More Secure: Limit Eminent Domain".
July 19, 2008
Shrinking Carbon Footprint?
Amid this torrent of doom and gloom, there is some good news that has largely been ignored by the media: the trend toward consumption of cleaner fuels that contain less carbon. This decrease in the carbon intensity of global energy use, known as decarbonization, has been ongoing for more than two centuries and appears to be gathering speed. Better still, decarbonization is continuing without government mandates or subsidies. The reason for this is clear: consumers are always seeking the cleanest, densest fuels that they can get.
Markets in Everything: Chipper Chardonnay and McCann Merlot Edition
This one somehow escaped my notice until a visit to Kroger earlier today:
...Longball Cellars has a wine for you.
HT to MR for the markets in everything concept.
Higgs on the "Credit Crunch"
In my opinion, Robert Higgs is one of the premier minds in the economics profession. In addition to asking interesting questions, he always comes up with great ways to answer them. Here, he points out that trends in interest rates are inconsistent with the popular claim that we're experiencing a "credit crunch."
If you're an academic (particularly if you're a grad student), you should read Jorge Cham's "Piled Higher and Deeper." It's like Dilbert for academia. The last several strips have been hilarious, particularly Cecilia's finding "that professors exist as probability density functions." I found this especially funny in light of the ongoing conversation between Tyler Cowen, Bryan Caplan, and Robin Hanson on assigning probabilities to beliefs. If I ever teach stats or econometrics, that comic is going on the syllabus.
Letter to the Editor: Marx in Economics
Why don't economists read Marx anymore? Here's my letter to The Chronicle Review:
Russel Jacoby raises several interesting and important points about the apparently conspicuous absence of Freud, Hegel, and Marx from their respective disciplines ("Gone, and Being Forgotten," July 25). I cannot speak to the marginalization of Freud in psychology and Hegel in philosophy, but I can speak to why economists no longer read Marx: for the most part, we don't read him because he contributed nothing of lasting value to the discipline. My undergraduate comparative economic systems professor referred to Marxian economics as having been "stillborn." Thomas Sowell correctly points out that "there is no major premise, doctrine, or tool of analysis in economics today that derived from the writings of Karl Marx" and quotes Paul Samuelson's assessment of Marx as "a minor post-Ricardian."
As I prepare to teach a course entitled "Classical and Marxian Political Economy" this Spring--for which I now plan to assign Jacoby's article, I might add--I would be the first to agree that one's education should include a broad historical overview of the ideas in a particular discipline. I further agree that Marx is an important figure in the history of ideas. He plays a minor role in economics, however, because he has been thoroughly refuted.
Letter to the Editor: Stimulus Package
The Democrats are drafting their own economic stimulus package. I sent this letter to the Washington Post:
In response to Paul Kane's Friday column about the proposed new stimulus package, it may very well be that Senate Democrats are correct and the government needs to act to "kick-start a faltering economy." However, I fear that what will ultimately emerge will not be a package of reforms that will increase economic growth but rather a package of handouts to special interests and favored constituencies. These may lead to a short-run uptick in economic indicators, but a wise person once said that "there is nothing so permanent as a temporary government program." We need to take this insight to heart.
These won't win many political points, but if Senate Democrats are serious about the long-run health of the country, they would do well to revise and eliminate the regulatory burden that chokes off entrepreneurship and experimentation, eliminate barriers on high-skilled immigration, and eliminate some of the well-intentioned but ultimately counterproductive labor market interventions (like the minimum wage) which eliminate opportunities for those who most desperately need them.
July 18, 2008
Movies for Econ
For years I've shown films in class, primarily John Stossel's fine work and the PBS series "The Commanding Heights." I've usually shown at least half of the films, typically the entire works.
My approach is changing, however, thanks to Dirk Mateer's Movies For Econ. Dirk has documented short portions of economics content in many popular films (e.g., Legally Blonde and Dumb and Dumber).
To my wife's chagrin--I now stop films to jot down notes or to replay a segment--I'm also watching movies differently. To wit, here are two examples from films I've watched over the past few weeks:
1. In Bruges: In a scene (right at the 50:00 mark), I woman who is a prostitute is asked if she's American. She replies no, that she's from Amsterdam. The man who asked if she's American [it isn't clear if he knows she's a hooker or not] replies with the observation that Amsterdam is awash in prostitutes. She says she knows and that she came to Bruges so that she could get a better price for her services. [Warning--preview this clip before using it in class--she uses an R-rated word for her "services."] The scene is a nice illustration of the effect of supply on prices, people responding to price incentives, and labor mobility.
2. Mad Money: A four minute segment (roughly 3:45-7:45) raises issues of unemployment, downsizing, discrimination against and the employability of older workers, and so-called discouraged workers. For example, a character played by Ted Danson is asked by his wife why he hasn't applied for any jobs. He replies that he's given up because he had been searching for a year without success. His wife (played by Diane Keaton), who is also searching for a job, encounters difficulty finding a job because of her lack of computer skills (she's asked what programs she's proficient with an replies Google; her college degree was in comparative lit). There are two other short segments (roughly 8:55-9:10 and 44:10-44:40) that talk about the role of the Fed and the effect of increasing the money supply. [The premise of the film--supposedly based on a true story though I found nothing in a quick google search--is three low-level employees of the Kansas City Fed conspire to steal thousands of dollars of used currency that has been returned to the Fed for shredding.]
BTW, I don't consider either movie very good artistically. I thought Katie Holmes, who plays one of the thieves, and Ted Danson were especially bad in "Mad Money."
Two other films, sans detailed notes. "The Counterfeiters" portrays Nazi Germany's attempt to counterfeit millions of pounds of British currency; it's a very good film but I didn't find any scenes to be particularly useful for class. "The Sierra Leone Refugee All Stars" is a documentary about a band formed by refugees from Sierra Leone's civil war earlier this decade. The film provides a nice example of Paul Collier's conflict trap.
See also Art's post on "The Third Man."
This Paper Looks Interesting
Lemons hypothesis reconsidered: An empirical analysis by Arif Sultan
This paper tests the hypothesis that there is no difference in the average maintenance expenditures required for cars acquired used and those acquired new. The results showed no evidence that cars acquired used required more maintenance expenditures than those of a similar age acquired new.
Link (sub req).
Beaulier and Mounts on Oil Speculation
Is Sports Attendance an Inferior Good?
Writing on the Freakonomics blog, Dan Hamermesh suggested that MLB attendance in an inferior good (attendance increases when the economy weakens) because unemployment reduces the opportunity cost of attending games.
This article in today's AJC suggests otherwise:
from two-for-the-price-of-one outfield seats to four-game packages that come with $25 gas gift cards. The Dream, the new WNBA team, cut the price of some weeknight seats to $4, a play on the price of a gallon of gas. The Falcons trimmed the season-ticket price of all upper-level seats, and Georgia Tech slashed some football season tickets by $100.
Of course, all else is not held constant. Is it the bad economy per se (e.g., a normal good instead of an inferior good) or is it gas prices (a complement for driving to games)? Or, at least in the case of the Braves, attendance could reflect the team's sub-.500 performance (winning and attendance are positively related):
Overall, the Braves say their average attendance through 48 home games is 31,621, down slightly — 1.6 percent — from the same point last season. The drop has been steeper since June 1 — 8.3 percent. [NB--The Braves struggled in June going 11-16.] That might be partly because of the economy and gas prices, although other variables, particularly the schedule, also are at play.
Like Ed, I cringe at the article's use of "price point" instead of price.
Top Ten Paper
I got a pleasant and interesting surprise in my email this morning: my review of Benjamin Powell's Making Poor Nations Rich was one of the SSRN's ten most downloaded papers in development economics between May 19 and July 18. Not bad for a book review; huge thanks to Steve Horwitz and Chris Coyne at the Review of Austrian Economics for letting me post the review on SSRN.
Letter to the Editor: Mike Munger in the NC Debates
I just sent the following to the Raleigh News & Observer. The letter's marginal contribution to the probability that Mike is included in the debates is probably small, but every little bit helps and the idea is now on record.
While I am not a North Carolinian, I have been watching the discussion over whether Libertarian candidate and Duke University political scientist Michael Munger should be invited to the gubernatorial debate with some interest. I only first met Dr. Munger at a professional meeting in March, but I have admired his scholarship and contributions to the public understanding of economics and political science for years. Dr. Munger and the Libertarians did all that was required of them to appear on the ballot, and they did it all in very timely fashion. For this reason alone, Dr. Munger should be invited to the gubernatorial debates. Beyond this, however, Dr. Munger holds a PhD in economics and chairs the political science department at one of the world's elite universities. Including him would elevate the level of the debate considerably. Excluding him from the debates would be unfair to Dr. Munger, but the real injustice is done to the voters of North Carolina. If Dr. Munger is excluded, the voters are denied the opportunity to have a debate featuring all the legitimate candidates.
Letter to the Editor: Oil
I was recently sent a copy of J. Kennon Ledbetter's July 8 Letter ("High gas prices result of government regulation") and wanted to take a minute to echo his sentiments. Current record high gas prices are not the result of devious "manipulation" by speculators or oil companies. They are the result of supply and demand, but it is supply and demand with a twist. Decades of punitive and restrictive regulation have compromised the market's ability to respond swiftly and completely to changing conditions. With greater flexibility in the market's ability to supply energy, changes in international energy demand would lead to much less pronounced price fluctuations for consumers. At a minimum, the federal government should immediately end subsidies to domestic ethanol producers, eliminate tariffs on imported sugar-based ethanol, and relax restrictions on alternative sources of energy such as nuclear power. Offshore oil exploration should be allowed, even encouraged. Better yet, the continental shelf and ANWR should be privatized--perhaps by issuing shares of stock to all US taxpayers--so that we can all reap the benefits of increased exploration.
Congressional hearings in which politicians excoriate oil company executives make for great political theater but bad public policy. Blaming executives diverts attention from some of the root causes of high fuel prices and diverts their attention from their core business, which is running the companies with which they have been entrusted. There are a lot of reasons why gas prices are higher than they have ever been. A sudden increase in oil company "greed" is not one of them.
July 17, 2008
Colbert Report Online
Armentano and Paul on Antitrust
Here's an interesting 1983 interview with Dominick Armentano and Ron Paul on antitrust hosted by the Mises Institute. This will be a supplement to future incarnations of my econ 101 unit on monopoly and my economic history unit on the Sherman Act and the Progressive Era.
How Should One Decide Who to Support?
Not by "voting against" the candidate you don't like or by picking "the lesser of two evils." My thoughts are here.
Still a ways off, yes. But the call for papers is now available, and sessions are soon to begin taking shape. So now's a good time to think ahead.
APEE 2009 will be held in Guatemala City and co-hosted by Francisco Marroquin University. The program runs April 5-7, 2009, at the Westin Camino Real Hotel. The conference kicks off with its traditional opening reception & dinner on Sunday night, and it continues with academic sessions Monday through Tuesday. There will be a guided excursion to Antigua, probably on Sunday morning (for an extra fee). UFM's slick conference brochure reads
APEE and UFM share many values and a vision about the relevance of private enterprise education. Indeed, UFM's mission is to teach and disseminate the ethical, legal, and economic principles of a society of free and responsible individuals. The country of Guatemala is one of the world's most famous tourist destinations because of its breathtaking scenery, ancient Maya ruins, and traditional indigenous communities. It has live volcanoes to climb, the most beautiful colonial city in the hemisphere to explore, spectacular lakes to swim in, and forests where you can watch the comings and goings of a wide range of exotic and migrating birds. A generous sampling of Guatemala's scenic and cultural riches has been included in the program, along with plenty of opportunity to shop for treasure from our rich handicraft tradition.
Here is Lawson's hiking report from Nov. 2006, when he and Ben Powell and I climbed two Acatenango and Fuego.
The photo here is of Chichicastenango, which explodes weekly into one of the world's largest bazaars.
Here is Lago Atitlán with one of its surrounding volcanoes.
Here is one view from Antigua.
Conference registration is $390 (includes opening reception & dinner plus breakfasts, lunches, and one additional dinner, plus APEE membership). Flight times are 2 hours from Miami, 3 hours from Atlanta/Dallas/Houston, and 5 hours from the coasts. Guatemala is also proud of making easily the world's best rum, Zacapa Centenario.
Community Bikes in Arkansas
The U of Arkansas is starting a community bike program. Some details:
“Razorbikes” will allow university students, alumni and faculty to borrow at no charge and use 48 numbered bicycles, returning them to racks scattered around campus.
A couple of observations. First, if students routinely abandon bikes at the end of semesters then it isn't obvious that there is a large unmet need for bicycles. Second, students need a code to unlock the bikes but, based on the article, it doesn't appear that checked out bikes will be associated with specific users. A user needs a code but apparently the code would be the same for all users; hence there does not seem to be a way to determine which person checked out a bike if the bike is damaged or not returned. My guess is that this program will fail like others that do not have a check out system that associates a specific person with a specific bike. Since the bikes are basically abandoned, except for the ones donated by the bank, a failed program won't produce a great loss.
Speaking of other programs, the same article mentions a couple of failed open access bike programs in Arkansas:
Bentonville began its program in 2005 using the Police Department’s growing collection of unclaimed stolen bikes. The city’s Parks Department painted the handlebars orange and stenciled them with “Bentonville” in black letters. Less than two weeks after workers placed 16 bikes on five designated racks, all but one were stolen.
The artilce also notes that Copenhagen's program, frequently hailed as a successful program, uses GPS chips to track bikes.
July 16, 2008
Building Brand Equity: Thoughts on Speculators
An article on voter bias and "greedy speculators" is here.
You're the Terrorist Watch List's 1,000,000th customer!
I wonder what you win for that sort of thing?
HT: Anthony Gregory.
Congrats to my good friend Rita Barnes who just completed the Badwater Ultramarathon (135 miles starting in Death Valley and finishing at the Mt. Whitney trailhead) with a time of 42:21:13.
Tough Questions for John McCain...
...from Radley Balko. Radley's next column will ask questions of Barack Obama. I wonder if there will be similar installments for Bob Barr, Chuck Baldwin, and Ralph Nader?
Posted by Art Carden at 02:47 PM
Read 'em and Weep
The comments following Will Wilkinson's NPR Commentary, that is. Wilkinson makes the important point that immigration restrictions for skilled workers are a nice bit of protectionism for the well-educated that increases our wages relative to what they would be in a truly free market (I need to start rent-seeking, pronto). It's a sound argument. But, after reading comment after comment that dodged Will's argument by calling him names and questioning his integrity, I couldn't help but agree that he's wrong. After all, people wouldn't heap that much invective on him if he was right, would they?
HT: Will Wilkinson.
Transfers vs. Exchanges: A Lesson for T. Boone Pickens
In this ad (at 24 seconds), T. Boone Pickens calls U.S. oil imports "the largest transfer of wealth in the history of mankind." Wrong--it's not a transfer a la welfare or the tax goodies that Pickens wants to fund his plan (more about this--including a bootleggers and Baptists angle--is below the fold), it's a mutually beneficial voluntary exchange. That is, we get something valuable--OIL!--in return for the $700 billion. It's true that we get much less consumer surplus from trades at $140 per barrel rather than, say, $60 per barrel; it's also true that at $140 per barrel we find some activities are no longer economically worthwhile (e.g., we're driving less and airlines are reducing their flight schedules). Am I oversimplifying or ignoring something important (e.g., we buy much oil from odious regimes or Mankiw's Pigou Club concerns)? Probably, but I doubt they'd change my point that imported oil is an exchange not a transfer. In return for the $700 billion (or, more precisely, the goods and services that can be bought with the $700 billion) we get a commodity that can be used for everything from making plastics to fueling family vacations.
I'll leave it to others to explain the concept of emergent order to Mr. "I have a Plan" Pickens.
NB--This WSJ op-ed also contains Pickens's bit about buying foreign oil being a wealth transfer and his call for wind power subsidies.
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From a USA Today article:
Washington, Pickens adds, can encourage the move to natural-gas-powered vehicles by providing modest economic incentives for fuel retailers to invest in CNG pumps at their stations, for automakers to build CNG-powered cars and for individuals to convert their existing vehicles to CNG use. And it should continue to provide tax incentives for another 10 years to encourage wind energy's rapid development as part of an overall plan to wean the nation from foreign oil, he says.
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Incentives Matter: Traffic Ticket Edition
Day after day in Warren, Mich., people wait in a long line to pay traffic fines. Many are there because police say they didn't come to a full stop at a stop sign. Often the policeman saying that is Officer David Kanapsky.
The public choice nature of Stossel's piece (as McChesney and Shughart once wrote, "Homo politicus and homo economicus are the same.") reminded me of the Makowsky and Stratmann paper on the political economy of traffic tickets. I've put the abstract below the fold.
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In this paper we study the political economy determinants of traffic fines. Speeding tickets are not only determined by the speed of the offender, but by incentives faced by police officers and their vote maximizing principals. Our model predicts that police officers issue higher fines when drivers have a higher opportunity cost of contesting a ticket, and when drivers do not reside in the community where they are stopped. The model also predicts that local officers are more likely to issue a ticket when legal limits prevent the local government from increasing revenues though other instruments such as property taxes. We find support for the hypotheses. The farther the residence of a driver from the municipality where the ticket could be contested, the higher is the likelihood of a fine and the larger its' amount. The probability of a fine issued by a local officer is higher in towns when constraints on increasing property taxes are binding, the property tax base is lower, and the town is less dependent on revenues from tourism. For state troopers, who are not employed by the local, but rather the state government, we do not find evidence that the likelihood of traffic fines varies with town characteristics. Finally, personal characteristics, such as gender and race, are among the determinants of traffic fines.
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Moral Sentiments: Billy Graham speaks at TED
July 15, 2008
Bunning brings the high heat to Bernanke
Senator Jim Bunning, R-KY, during a Senate Banking Committee Q&A with Ben Bernanke:
Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem.
Bunning (Hall of Fame MLB pitcher) not only knows baseball, but evidently knows a thing or two about our financial regulatory ballgame.
Free-conomics, or, You Say You Want an Education?
While teaching at the “Liberty and Society” seminar at Bryn Mawr sponsored by the Institute for Humane Studies a few weeks ago, we had a series of interesting conversations about the cornucopia of free* resources available on the internet. John Hasnas, one of my colleagues at the “Liberty and Society” seminar, pointed out that this bodes well for liberty. Henry Hazlitt once said that the problem with the intellectual foundation of the free society is that the good ideas have to be re-learned every generation. In the internet era, however, the cost of learning these ideas is much, much lower. Here is a short list of internet resources for an online education in freedom. The Mises Institute maintains an astounding archive of foundational resources in the Austrian/libertarian tradition as well as audio, video, and daily commentary. In addition to the resources hosted by the Mises Institute, other organizations maintain extensive archives of resources in the classical liberal tradition.
Point to ponder c. 1908
A letter to the editor of the NYT on July 15, 1908:
If the Democratic Party will run all of its States down hill, what will it do with the Nation if it gets it?
Building Brand Equity: Local Foods and the InBev/A-B Deal
Here are a couple of recent commentaries published today by the Mises Institute. The first asks whether we should buy only local produce. The second asks whether we should care about Anheuser-Busch being bought by a "foreign" firm.
And here are the best examples of anti-market, anti-foreign, pessimistic, and make-work bias ever:
President George W. Bailout
The Way Not to Convince Me to Take Global Warming Seriously ...
... is to have Al Sharpton and Pat Robertson collaborate on a global warming video. With pitchmen like these, I'll remain a skeptic (I'm not a denier--that would require more knowledge/confidence on the issue than I possess.) BTW, in addition to hurricanes, dying polar bears, and the like, global warming is now said to increase kidney stones.
July 14, 2008
Chad Vader on Customer Service
I don't ever remember being told any of this when I worked in retail. Maybe if I'd worked in a grocery store...
Best Sentence I've Read Today*
Sound advice from Bryan Caplan, on buying a house:
Don't buy a house you might not be able to afford by signing a contract you can't explain to your friends.
Jim Gwartney and I gave a talk to a large crowd at this year's FreedomFest. We got some press from HumanEvents.com (pasted below the fold):
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LAS VEGAS -- The United States is slipping in its economic freedom ranking in large part due to increased security to thwart terrorists, said Robert Lawson, a professor of economics at Auburn University, said Thursday at the FreedomFest conference here.
The erosion of economic freedom in the United States is occurring as a number of other countries are achieving big gains, Lawson explained. For that reason, even comparatively small dips in U.S. economic freedom are causing the country to slip faster in its ranking compared to a number of other nations in the world that are increasing their economic freedom.
In 2000, the United States ranked second in the world in economic freedom before falling to eighth and ending up on the verge of dropping out of the top ten altogether, Lawson said in follow-up comments after his presentation.
The United States has an economic freedom rating that has been falling slightly each year since 2000. Property rights issues are a major reason for the slippage, along with the cost of clearing customs, Lawson said. Both changes could be attributed to the government’s increased measures to protect against terrorism, he added.
“George Bush has been a disaster for economic freedom, if you want to blame it on him,” Lawson told attendees. However, Lawson explained after his formal presentation that anti-terrorism policies enacted during the Bush administration to boost security most likely contributed to the decline in U.S. economic freedom.
Countries that have been fueling a general global trend toward economic freedom include Ireland, a nation that has significantly scaled back government spending since 1980 to become an economic powerhouse in Europe, Lawson said. The Great Britain and New Zealand also have shown dramatic improvement in growth through increased economic freedom, he added.
In Latin America, Chile has gone from comparatively restricted economic freedom in 1975 to well above average, Lawson said. Economic growth in Chile has followed.
In Asia, China is expanding economic freedom substantially in certain regions, while limiting it in others, Lawson said. Overall, China has been notching increased growth as economic freedom rises.
India is another example of a country that has gained on the economic freedom scale and has enjoyed rapid growth. India has achieved greater economic freedom than China and, as a result, is the market that Lawson said he would target for investment rather than China.
Venezuela, under the regime of Hugo Chavez, has incurred sagging growth as its economic freedom has diminished, Lawson said.
The most countries that are the most free also have the longest life spans, Lawson said. In addition, data show that economically free countries have the best distribution of wealth, he added.
Overall, economic freedom worldwide has been rising slightly during the past two decades, said James Gwartney, a Florida State University economics professor who holds the Gus A. Stavros Eminent Scholar Chair. His analysis found that economic freedom is the key to growth and is spurred by gains from trade, entrepreneurship and investment.
Entrepreneurship is a driving force behind economic growth and a big reason why the standard of living has risen dramatically in the last 50 to 100 years, Gwartney said. Not only do free economies have higher rates of investment but they also attain greater productivity from investment, he added.
Among the regions of the world, Africa has the highest trade restraints, Gwartney said. Sub-Saharan Africa is made up of more than 40 countries, so any movement toward economic freedom in that region could make a meaningful impact.
Both direct and indirect benefits are derived from economic freedom, Gwartney said. The direct effect of economic freedom is to aid growth through gains in overall productivity. The indirect effect of economic freedom includes spurring growth from rising levels of investment, he added.
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I'm slowing coming back online after a few weeks of (1) being neck deep in revisions for the Economic Freedom of the World index (to be released on Sept 17) and (2) being way over my head with the details surrounding the family move to Auburn. We're here now and getting settled. War Eagle! (That was especially for you, Art!)
Anyway, the folks at AU have been nice enough to grant me tenure upon arrival. One of the AU traditions is to allow newly-tenured faculty to select a book for the library which will include a nice bookplate with the faculty member's name and other information.
So what book should I choose? Capitalism and Freedom? The Wealth of Nations? Atlas Shrugged? Other? Comments open (until the porno spammers find us).
How about you just fly your f*ing planes...
...and stop blaming the evil speculators?
From last week's inbox:
Hello Dr. Lawson,
Mrs. Carden and I saw Wall-E with my in-laws on Friday night. My take: very cute, visually spectacular, economically illiterate. Mike Hammock, who really liked it, offers a detailed discussion here. Writing for the Mises Institute, Gennady Stolyarov II is much less kind. The trailer for The Clone Wars was worth the price of admission.
A few questions and major, major spoilers are below the fold. Do not proceed unless you have already seen the movie or at least want to know how it ends.
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Let's run for just a second with Gennady Stolyarov's thesis that Wall-E is a critique of modernity. At the end of the movie, they show the captain demonstrating the wonders of farming (I warned you!!!). Laying aside for a second the fact that most of the people would be unable to walk if they have spent their entire lives in hovering chairs, I wonder whether there wouldn't be a massive return to the Axiom after it was discovered that farming is really, really hard. My thought during the closing credits was "90% of the population dies within a year," but they still have at their disposal a gigantic spaceship that apparently has the technology to provide them with whatever they want, whenever they want it. As the people are faced with a game of choose-your-own-dystopia, I wonder which one emerges: the anti-modern agrarian dystopia in which everybody dies, or the hyper-modern corporate dystopia in which people revert to their over-stimulated blobbery? Assuming that some go anti-modern and others go hyper-modern, will there be conflict between the two civilizations? Will these questions be answered in a sequel? The mind boggles.
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What I've Been Reading Lately*
1. Bill Hybels, Holy Discontent. We were in Birmingham over the weekend, and I picked this up yesterday at the bookstore at Gardendale's First Baptist Church. It was a very interesting book; my review (submitted to The Christian Century) is here.
2. My email, which included a notice that my paper "Sound and Fury: Rhetoric and Rebound After Katrina" has been accepted by the Journal of Business Valuation and Economic Loss Analysis.
No beer, no civilization
So says George Will. Another snip:
Beer is a health food. And you do not need to buy it from those wan, unhealthy-looking people who, peering disapprovingly at you through rimless Trotsky-style spectacles, seem to run all the health food stores.
McCain Touts Role in "Campaign Reform"
John McCain has begun running a 30 second version of this ad in Ohio and 10 other states, in which he touts his role in "campaign reform." This is, to my knowledge, his first televised ad to tout, even obliquely, his role in passing campaign finance reform during this presidential campaign. While "McCain-Feingold" did much to harvest good PR in the mainstream media for Senator McCain and helped put him on the national political map in the 1990s and early part of this decade, the failure of the bill to "clean up politics," the speech restrictions it put into place, and the organized opposition to excessive speech regulation that McCain-Feingold finally spurred, have made it much less popular today. There is little doubt that McCain's role in promoting and passing the failed McCain-Feingold bill, and defending its restrictions on political speech in court hurt him in his quest for the GOP nomination (Fred Thompson was also hurt by his role in passing the bill, which was sometimes referred to as "McCain-Feingold-Thompson" in those heady "reform" days of 2002). He overcame that hurdle on the basis of his many other strengths, and by downplaying the issue, to the point where it was scarcely mentioned in the primaries, except in response to questions, where his answer was usually some variation of the non-sequitur, "I don't know anybody who thinks there is too much money in politics."
It is interesting to see Senator McCain now pick up the issue again, even in this small way, as he prepares for the general election. Obviously his campaign staff still thinks there is mileage to be earned with independents and conservative Democrats from the issue, or at least from claiming the mantle of "reform." (The subject is listed among others - "military reform," "spending reform," - on which the ad claims for Senator McCain the mantle of "reform." Of course, the notion that fighting for McCain-Feingold was some daring risk was never quite true - the more principled and politically daring position for a would-be president would have been to oppose these restrictions on political speech. After all, no one is talking about Mitch McConnell or Phil Gramm for President - but that's another issue.) But it is also interesting that the ad does not refer to it "campaign finance reform," and makes no reference to "McCain-Feingold."
It is no small marker for freedom that "campaign finance reform" is something even John McCain no longer wants to campaign on, even as he strives to keep the mantle of "reformer" that the press gave him for his role in passing these restrictions.
Cross posted at the Center for Competitive Politics, www.campaignfreedom.org.
Posted by Brad Smith at 10:33 AM
All humans with a pulse plan beyond today and are, therefore, speculators.
That's Peter Gordon via Craig Newmark.
July 13, 2008
A Sports Economics* Lesson for Peter Gammons
Earlier this evening on ESPN's "Baseball Tonight" program, Peter Gammons was asked to comment on the possibility of the Braves trading first baseman Mark Teixeira. Gammons stated (this quote may not be exact; I'm typing from memory) "that the Braves have to decide if they can get back as much as they gave up for Teixeira last year" when they acquired him and pitcher Ron Mahay for five prospects.
This is decidedly not the problem the Braves face. The five prospects sent to Texas are a sunk cost since, unfortunately for Braves fans, there's no indication that the Rangers would reverse the trade and send the prospects back to the Braves.
Instead, the decision now is based on comparing the costs and benefits of keeping Teixeira vs. trading him. Some of the costs and benefits can be thought of in terms of financial gains or losses and while other come in the form of talent gains and losses (which, of course, have financial implications since they affect winning and fan attendance).
For example, if the Braves keep Teixeira the benefits include having him on the roster for the rest of the year thereby giving them larger (though still remote) odds of making the playoffs and larger attendance (both from winning more games with Teixeira's formidable bat in the lineup and from not appearing to concede the race to other teams). The benefits also include getting two compensatory draft picks for him when he leaves at the end of the year as a free agent.
By contrast, the costs of keeping Teixeira include his salary for the remainder of the season (perhaps $4-5m) and the cost of signing two high draft choices (approx. $1m each).
The Braves choice is to compare the net gain from keeping Teixeira to the value of the talent they can acquire for him. If trade rumors are to be believed, there are no teams offering substantial talent for Teixeira (this can, of course, change between now and the July 31 trade deadline). There would be two advantages to trading him for prospects rather than waiting for draft choices. One, as noted above, is that draft choices require signing bonuses. The other is acquiring prospects who have already played, say, 2-3 seasons of minor league baseball gives (for both the Braves and the trading team) a better read on whether they will turn out to be bona fide major league talent. That is, prospects with minor league experience are less risky than newly drafted players who have not yet begun the transition from high school or college to pro baseball.
BTW, my prediction is the Braves will keep Teixeira because, as noted above, there doesn't seem to be strong market for him. I think there's also a behavioral reason--the Braves management would take a lot of heat for trading Teixeira for much less than they traded away to get him.
Radio Ad: Listen, and Let Me Know!!!
This radio ad will play tomorrow, in Charlotte, Greensboro, and Raleigh. And it will
Charlotte: WBT 1110 AM
Posted by Michael Munger at 10:19 AM
July 12, 2008
Phil Gramm Is Right
So says Amity Shlaes. To the extent (I think small) that Gramm is wrong, the "Campaign Econ" peddled by the presidential candidates will only make matters worse. For all the difficulty associated with $4 gas and the mortgage mess, this is still an amazingly prosperous country and it will remain so if we can avoid the various schemes (e.g., Medicare and Social Security whose long term insolvency is a true problem) concocted by pols.
It appears that the Straight Talk Express is the bus that McCain throws loyal supporters (Gramm's biggest mistake) under for telling the truth.
A final point: A few weeks ago I was asked to sign an economists for McCain letter. I passed and l'affaire Gramm makes me even happier that I did so. In the unlikely event that I vote in November, it will be for Barr.
HT: Don Boudreaux
July 11, 2008
Getting church and economics right (concurrently)
Since my intern days at the Acton Institute, I've been on the lookout for people or groups who recognize the value of laissez-faire economics to religion. When the only contact pastors have to the world of economics is the conclusion that income is created by passing the collection plate, the economic apologist has much work to do.
The Catholic News Agency is hosting a new blog by Dr. William Luckey on economics and religion. A blurb from the announcement:
For clergy, pronouncements on subjects, while emphasizing the moral aspects, still need to take into account how the world actually works. Many clerics act as if, say, unemployment occurs because cheapskate companies just heartlessly refuse to give people jobs. People who lose jobs not only tend to share that sentiment, but their anger is fueled by the pronouncements of the clerics. For the citizen, we all need to make decisions regarding public policy questions, or what actions will actually help the poor, or really make healthcare more widespread. More often than most people want to admit, the solutions proposed are much more harmful than beneficial because those who propose them either are ignorant of the economics of the question, or choose to ignore it.
His first column is on (what else?) oil prices. Somewhat simplified but unobjectionable.
Here is Dr. Luckey's own blog, which includes an idea I tell my students the first day. Economics: it might sound boring, but we are all affected by it (Affected, Dr. Luckey, not Effected).
EPA Reduces the Value of a Statistical Life
Kerfuffle ensues. Details here; one portion caught my eye b/c I had a grad class from Viscusi and Taylor was a grad school classmate:
Just how the EPA came up with that figure is complicated and involves two dueling analyses.
I was at the Westerns in Hawaii last week. One of the days I was attending sessions (yes, I really attended--there are witnesses), my better half and Pee Wee went snorkeling at Hanauma Bay. To paraphrase the cliche, all I got was the photo below (note the different uphill and downhill prices for the shuttle).
En route to Hawaii, I spent a few days with my sister and her family in LA. We were in the audience for the taping of two episodes of "Deal or No Deal." The shows are part of a syndicated version set to air this fall. There's bad news for people who watch the show for the eye candy--the syndicated version uses only 2 models. (My sister--who's in the biz--agrees with my hunch that the reduction in models is attributable to models being expensive.)
As for the airlines policy of charging for second bags--as most economists would have predicted, the overhead bins on my flights seemed unusually full.
My post (below) about recent papers on the rape/porn link got me thinking about whether China's selective-sex single-child policy would have an impact on Chinese crime as a disproportionately male generation grew up. Apparently, there's an effect in the form of higher crime; the bloggers at Freakonomics point us to the story.
Here's a further testable implication as this generation of Chinese men emerges, and I wouldn't be surprised if Steve Levitt and his students are preparing to investigate this themselves (I'm going to swim in dangerous, possibly politically incorrect waters here): the Chinese "one child" policy could provide an experimental setting in which to test theses about the genetic origins of homosexuality. The idea that changes in costs and benefits at the margin plays a role in determining sexual behavior is not novel; here's a 2005 Freakonomics post which summarizes research on how costs and benefits affect sexual preference. We're probably a few years away from having the data, but I think the Chinese "one child" policy will admit the kind of research design that scholars need to make headway on this very contentious issue. From Andrew Francis's website, it looks like his study discussed on the Freakonomics blog is forthcoming in the Journal of Health Economics.
Markets in Everything: Gas for Baby Name Edition
Fox News just had an interview with a couple that is selling the naming rights to their unborn child for $100 in gas. (As an economist, I have to ask why not $100 cash that could be used for gas or anything else?) In a quick google search and a quick glance at foxnews.com I didn't find supporting links. I'll add a link later if I find one.
HT--MR for the Markets in Everything concept.
Truth v. Truthiness: Will Wilkinson Takes Down Barbara Ehrenreich
July 10, 2008
Regular unleaded gasoline is selling for $1.99 a gallon at the at Citgo on Jimmy Carter Boulevard and N. Norcross-Tucker Road in Norcross, part of a mid-morning insurance company promotion that had vehicles lined up for nearly a mile for the cheap fuel.I wonder how many gallons of gas people burned idling in line? Given July heat in GA, you can bet most folks kept their cars and AC running. If you add in the value of an hour or more waiting in line, queueing costs may have exceeded the savings for cheap gas. Maybe some folks are suffering a mental recession.
Paging Wesley Mouch: The War on "Speculation"
Apparently, the email I got from a colleague about the airlines' petition for Congress to stop speculation wasn't a joke. The hyperlink takes to you an analysis by Dick Langlois in which he proposes using the "Stop Oil Speculation Now" website to subvert the looters. I quoted his text and added the following to an email to my representatives:
This controversy will become an integral part of the "futures markets" section in my economics 101 course. I hope I can tell my students that their government made the decision consistent with sound economic analysis.
Capital Tax Incidence ...
Sorry for not uploading the cartoon as I have previously but we seem to have a technical glitch in MT b/c I've unsuccessfully tried uploads via 3 different computers.
The first YouTube ad of the campaign.
Major, major props to Rusty Sheridan. His company.
Building Brand Equity: Congratulations Mike, Caleb, Evelyn, and Alison!
Some of my economic history students had articles published in the Tennessee Encyclopedia of History and Culture. Here's the press release from Rhodes:
Student articles written in a Fall 2007 Economic History class taught by Professor Art Carden are now available in the Tennessee Encyclopedia of History and Culture.
Michael B. Hathorn ’08 and Caleb Standafer, III ’08 wrote an article about Memphis merchant Jacob Goldsmith who established one of Tennessee’s best-known department stores, Goldsmith’s.
Evelyn Plumb ’08 and Alison White ’10 wrote an article about Memphis cotton broker William Dunavant Jr. who shaped the Bluff City’s commerce and the world cotton futures market during the late twentieth century.
Sir John Templeton, 1912-2008
The New York Times carries an informative article for those, like me, who didn't know the man personally.
In a career that spanned seven decades, Sir John dazzled Wall Street, organized some of the most successful mutual funds of his time, led investors into foreign markets, established charities that now give away $70 million a year, wrote books on finance and spirituality and promoted a search for answers to what he called the “Big Questions” — realms of science, faith, God and the purpose of humanity.
July 09, 2008
"Nickel and Dimed"
I finally read Barbara Ehrenreich's Nickel and Dimed from cover to cover. The book is a staple of courses on poverty, inequality, and labor issues, but I don't think people are drawing the right inferences from the book. Ehrenreich draws attention to the dark side of modern life, but it would be a non sequitur to infer from the plight of the people in Ehrenreich's book that we could improve on their lot through more extensive government intervention.
Nickel and Dimed book is very well-written and I agree with Studs Terkel's back-cover endorsement: it's a hard book to put down. Ehrenreich's descriptions are colorful and vivid, and the picture of life among low-wage laborers is empathetic without being too dramatic. Anyone who has ever worked in the low-wage service sector will find much that is familiar in Ehrenreich's discussion.
Ehrenreich is openly critical of the market economy, and the book falls short first in its failure to articulate superior, plausible alternatives to the situations she describes and second in its lack of appreciation for the market as a process rather than an end unto itself. Wages in Ehrenreich's book are the product of grossly unequal bargaining strength. If she discusses the productivity theory of wage determination, I missed it (if this is an error, please kindly bring this to my attention). Ehrenreich openly advocates an increase in the minimum wage, contra years of theory and carefully collected evidence. She raises important points about industrial psychology and correctly points out that incomplete information impedes market functioning, but she does not adequately address the processes by which the market reduces these information costs.
I take several main points from Ehrenreich's book. First, and most obviously, it is very, very hard to be poor. Fortunately, the market processes that have been allowed to operate over the last several centuries have alleviated the crushing burden of poverty for many in the west. Second, Ehrenreich's experience in "unskilled" tasks is instructive. I've told my econ 101 students that I don't like the term "unskilled" because there are many "unskilled" tasks that in fact require skills. Finally, there is much headway to be made in the application of theory and careful data analysis to questions of living standards over the very long run a la Robert W. Fogel and Gregory Clark. While the cases discussed by Ehrenreich are fascinating and at times instructive, I don't think we can draw much in the way of policy implications from her study.
Via Cafe Hayek, here's an interesting dissection of proposals to mandate volunteering. I particularly like the discussion of intractable measurement problems: what is "service," what isn't, and who decides?
This exposes a glaring inconsistency in US labor policy. Working voluntarily for a wage of $5.00 per hour is unacceptable exploitation and is therefore illegal. Working involuntarily for a wage of $0.00 per hour, on the other hand, is ennobling service and may soon be required.
Best Sentence I've Read Today*
While looking at my sister's pictures of her recent trip to London, I came across this excellent caption:
When sunglasses like these go out of style, I'll wish I'd taken them off in more pictures.
What are the barriers to an efficient Coasean bargain if my sister's present-day choice of eyewear is imposing an intertemporal "internality" on her future self? Does this imply that we need a real-life "fashion police?"
Drew Carey on the Bacon Dog War
Here's a great idea for a party: foodstuffs that have been banned or heavily regulated in some places. Perhaps we'll have a fundraiser for the Elizabeth Palacios legal defense fund.
More Stuff Online
1. The paper "Profit and Production" that I mentioned a few days ago wasn't uploaded. Now it is, and it should be available after SSRN gets finished reviewing it.
2. I enjoy reading books on business, productivity, and performance in my spare time. One of my most recent reads is Josh Waitzkin's The Martial Art of Learning. Waitzkin, a chess prodigy turned martial arts champion, offers a very interesting perspective on high-level performance. I sent an unsolicited review to the Harvard Educational Review--I'll be interested in whether they like it or not--and posted the review on SSRN.
July 08, 2008
Building Brand Equity: Op-Ed on Globalization and Culture
The Independent Institute is distributing this op-ed on globalization and culture. The article is loosely based on my paper "Commerce and Culture in the Global Economy," forthcoming in the Journal of Interdisciplinary Studies. I've been told that the first place to pick it up has been the Sunnyside, WA Daily Sun News.
Poor Yorick: Rockin' the Late-90s Tuscaloosa Scene
My friend S. Taylor Williams has an online archive of songs by her defunct-but-not-forgotten band Poor Yorick. A steal at the price of $0.00.
"It's a pornography store. I was buying pornography."
I'm working on a short note about tradeoffs based on Todd Kendall's paper about sex crimes and internet pornography and Winai Wongsurawat's paper about the diffusion of pornographic magazines and sex crimes. I sent myself some notes on Wongsurawat's paper via Gmail last night entitled "notes on pornography" and noticed that there are (thankfully) no running advertisements accompanying the message in my Gmail account even though there are ads accompanying all my other messages. Perhaps this is because my Google settings are set on strict filtering. Perhaps also it's because if there are negative externalities associated with internet licentiousness, Google is assisting the Coasean bargain. Or maybe Google fears legislative reprisal. Comments are open if anyone has alternative theories.
July 07, 2008
Adult Web sites enjoy boost from stimulus checks
Seems Uncle Sam's economic stimulus checks are boosting an unlikely part of the economy.
I wonder if the checks have also stimulated watermelon sales.
Best Sentence I've Read Today*
From the summer issue of Rhodes magazine, here's physicist and fellow member of the college's Fall 2006 professorial cohort Deseree Meyer Brittingham on her summer reading:
Confession #1: I didn't always know I wanted to be a nuclear physicist, and I began my undergraduate years as an English major.
Also a possible contender for Best. Sentence. Ever.
*Meme: as always, Marginal Revolution.
Podcast on Transantiago
Hey, you podcastrians!
For which, I should add, I was paid my full market wage.
We talked about the Transantiago cluster fig. And talking to Russ is always fun.
Go East, Young Man
I just finished listening to Will Wilkinson's "Free Will" conversation with Who's Your City? author Richard Florida.
At Florida's website, one can find a lot of interesting information about urban areas. One that jumped out at me was the clear spatial distribution of single men and women. If people are voting with their feet based on available marriage partners, we should see men moving east and women moving west, ceteris paribus. I'll be interested in seeing what this map looks like in ten years.
What I've Been Reading Lately*
1. Richard Land, The Divided States of America? Land, who chairs the Southern Baptist Convention's Ethics and Religious Liberty Commission, preached at our church yesterday, and I picked up a copy of the book after his message. I've read the first few chapters and the last chapter, and it has been a pleasant surprise so far. Subtitled "What Liberals AND Conservatives are missing in the God-and-country shouting match!", it's a refreshing departure from the shrill squawking that characterizes most left- and right-wing polemics about the relationship between church and state; indeed, a common theme among the back-cover blurbs is that the book is unique in that it is very calm and very measured. I look forward to finishing it.
2. Robert William Fogel, The Fourth Great Awakening and the Future of Egalitarianism. I'm finally reading this one from cover to cover. Fogel argues that according to available measures, we are in the middle of a Fourth Great Awakening of religious fervor, and he draws on the historical experiences of the first three Great Awakenings to make predictions about how the Fourth Great Awakening will influence social policy. Fogel applies his economist's reverence for clear theory and explanation and his historian's reverence for facts and evidence to a very important question in the social sciences very generally.
3. Jim Powell, FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. This was one of the free books available to students at last week's IHS seminar, so I decided to take a look at it before I gave my lecture on the Great Depression and World War II. Powell offers a very useful intellectual history of the Great Depression, and I recommended that students read this book after reading Atlas Shrugged. The parallels between the New Dealers' rhetoric and the statements made by some of Rand's villains are instructive. For students: the Ayn Rand Institute is sponsoring an essay contest, and I'm pretty sure they'll send you a copy of Atlas Shrugged if you ask for it. Powell's book is an excellent introduction to the New Deal; for a deeper, more analytical treatment, I recommend Robert Higgs's Depression, War, and Cold War.
4. Paul Ehrlich, The Population Bomb. Since this is one of those books that is likely only "read" in title only, I wanted to at least skim it before giving my IHS lecture on the limits to economic growth. I was surprised to discover that it is an explicitly political tract. As much as I would like to say so, the book's proper place is not the dustbin of history. Instead, I hope that future courses in intellectual history assign Ehrlich's writings alongside Julian Simon's writings to show how and how not to think about social phenomena.
*-Meme: Marginal Revolution.
Building Brand Equity: Profit Paper
I just sent my paper "Profit and Production" to the Quarterly Journal of Austrian Economics. The abstract:
Profits and losses provide powerful incentives. This essay explores the roles of profits and entrepreneurs in a market economy. In a market with secure private property rights, profits are a reliable guide that directs productive activity. Profits reward entrepreneurs for successfully adjusting the structure of production to better suit the wants of consumers. This has implications for Michel de Montaigne's thesis that one's profit is another's loss: while this seems like an attractive (and intuitive) proposition, profits arise when an entrepreneur is able to satisfy consumer wants. This essay applies Ludwig von Mises' thesis that the source of human action is the desire to remove "felt uneasiness." For example, in a situation in which an entrepreneur alleviates discomfort, it is the opportunity to alleviate the discomfort that is the source of the profit and not the discomfort itself.
Lots of folks helped with the Money Grenade, and with getting word out about the difficulties I have been having even getting access to the normal assets of campaigning.
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I can't cite them all. So, for those I have missed: a blanket thank you, and a heartfelt one. In addition to the net postings I have missed, I want to thank Joy Elliott, Paul Elledge, Linda Ellis, Susan Hogarth, Barbara Howe, Tom Howe, Phillip Rhodes, Rob Rose, Rusty Sheridan, John Szamosi, and Richard Schilhavy. (Again, I'm sorry if I left you out, but it's 6:30 am, and I am at the beach celebrating my anniversary with my wife, and I have to get back to the room; there's marital work to do...)
As I noted, there were lots of internet mentions, and I appreciate them. But there are some I have to mention specifically.
Bill Anderson, on LR's site.
Art Carden, with a nice thought piece. Very nice.
Ed Cone helped out. Thanks, Ed!
Greg Dirasian has his little boxer shorts all twisted up in knots.
Last Free Voice posted the announement; thanks!
Scottille News came up big, too.
Third Party Watch posted the info on the Money Grenade. A BIG help; we 'pree-shayt it, man!
BUT: The main prize, the above and beyond, the hardest working man in the Blogosphere for the Munger campaign, has got to be.... Steve Newton! This post clearly brought in quite a few contributions, and I appreciate it!
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July 04, 2008
Celebrating Independence Day
We're spending the night in Bristol, VA on our way back to Memphis from Bryn Mawr. On our way down, we stopped at Bob's Shabu-Shabu in Rockville, MD for an excellent lunch with Tara Sinclair. There seems to be something appropriate about going to a restaurant with a multi-lingual, multi-cultural menu as part of our celebration of one of history's greatest experiments in liberty.
Celebre su independencia
A few of us DOLers are in Guatemala for the APEE board meeting. Since I can't shoot any roman candles this year, allow me to celebrate with you by pasting these timeless words, never perfunctory.
IN CONGRESS, July 4, 1776.
July 03, 2008
Penny Postcards Online
Interesting archive here.
Here is historical downtown Auburn (date unknown).
Exercising outside the box
The latest study, from researchers at Liverpool John Moores University, included six boys and five girls between the ages of 13 and 15. The children were fitted with a calorie-counting monitoring device while they played games on the Xbox 360 and the Wii. The kids burned up to 66 percent more calories playing the Wii than the Xbox, the researchers found. That translates to about 179 calories burned an hour playing Wii tennis compared to 107 calories on the Xbox. At rest, a child expends about 70 calories.
July 02, 2008
Limiting Access to the Political Order in North Carolina
My short piece on Mike's adventures in North Carolina politics (see below) was published on the Independent Institute's blog here.
Why my office smells of bourbon and diapers
After traveling for more than a week, I came back to the office for the first time this morning, and this is what welcomed me:
Good people here at Liberty Fund. Baby is due August 4th-ish.
Pope Benedict's shoes: Not knock-offs
The Devil may wear Prada — but the Pope does not, according to the Vatican.
Full story here.
More Resources on the Great Depression
I'm giving my talk on the Great Depression and World War II at the IHS "Liberty and Society" seminar in about two hours. In addition to the resources I discuss here, I would also add Murray Rothbard's America's Great Depression to the list (also available at a price of $0.00 from www.mises.org).
A Favor....Grenade Brigade!
As you know, I have been working to run for Governor of North Carolina, as a Libertarian, for the past two years. Well, we got the 105,000 signatures, and we got on the ballot.
But then things got…weird. I was invited to the final debate, in October, at Queens College in Charlotte. But then that debate got cancelled, and ANOTHER debate, only without the Libertarians in it, got scheduled instead.
The state of NC is really dragging its feet in getting out new forms, so Libertarians can register. The state Board of Elections will barely meet with us, and the county Boards of Elections won't accept checks for filing fees for our candidates. I put up more than $1,000 worth of yard signs, and the state took them all down, because (get this) there is "no election going on at this time"! Ouch. (MORE BELOW THE FOLD....)
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The only thing that can change this is participation at the grassroots.
And the only kind of participation that matters is….small contributions, from lots of folks!
That's why we are running a small money bomb tomorrow. It's so small, it's really just a money grenade.
1. Go to http://www.munger08.com
2. Click on "contribute"
3. Give $25, or less (the amount doesn't matter as much as the fact you show your support for democracy and free choice in politics!)
That's it. That's all I need. Well, that and GET THE WORD OUT TO OTHER PEOPLE!
Please help! Even if you have already given, PLEASE just give something. It isn't the money, as much as it is the message that lots of folks care.
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Posted by Michael Munger at 11:01 AM
I'm quoted in Steve Chapman's column by that title in yesterday's Chicago Tribune.
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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