We report, you decide:

Cafe Risque was a little more true to its name than residents of a small northeast Georgia town could take.

The town of Lavonia shelled out nearly $1 million Tuesday to buy and shut down the strip club along I-85. Then, the city quickly burned the interstate signs advertising the club, which was popular with truckers.

Cafe Risque was opened in 2001 .... The city went to court several times to close it but was never successful.

Story here.

From the RNT:

The American economy is in a recession, SunTrust Banks’ chief economist told the Rotary Club of Rome today.

“I know it’s up for debate, but they’re wrong,” Gregory Miller said. He said the recession started late last year and will last until April or May 2009.

“Right now, we have the worst of both worlds, weak economic growth and strong inflation,” Miller said. Going back to the 1960s finds that combination in the economy less than 10 percent of the time, he said.

The widely accepted measure of a recession by economists is two consecutive quarters of negative growth in the economy.

Miller said there was 1.9 percent growth in the Gross Domestic Product index in the second quarter of 2008, but half of that came from tax rebate checks, a one-time event, and the other half was increased product exports due to the weak dollar. Take away those factors, and the GDP for the second quarter would be negative, he said.

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.

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.

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.

ATSRTWT.

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.

More questions:
Have paintings become larger over time as the price of canvas has fallen?
Does this lessen the relative value of "Patch of Grass"? Did Van Gogh hate the painting underneath sufficiently that he just wanted to cover it up? Or did he love the Patch of Grass so much it was worth covering up even the mysterious face?
Does an artist's economy of necessity lend itself to artistic innovation?
Does creative destruction describe artistic innovation? A recent favorite example of mine is Tom Nozkowski, as recently featured in W magazine.

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.”

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 ...
In 2007 alone [...] Louisiana saw more than 1,600 workers lose their jobs.
Nationwide, the trade deficit is blamed for the loss of at least 2.3 million jobs.

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.

So, Louisiana has lost nearly 16,000 jobs since China entered the World Trade Organization in 2001 ...
In 2007 alone [...] Louisiana saw more than 1,600 workers lose their jobs.

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,
Nationwide, the trade deficit is blamed for the loss of at least 2.3 million jobs.

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.

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?

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.

Consider an important example today. Airlines have enormous demand for fuel. Those that can do so often hedge against a rise in the price of oil. The price of oil may or may not rise. The risk exists in any event. The question is: Who is going to bear the risk?

The airline doesn't want to bear the risk of higher oil prices. That's not their business. But at the right price, the speculator will take that risk. So the speculator contracts with the airline to deliver an amount of oil (or jet fuel) at a certain place and time and for a fixed price. The speculator, of course, does not have the oil. Rather, at the appointed time, the speculator buys the oil on the spot market for delivery. If the spot price is then below the price contracted with the airline, the speculator makes money. If not, the speculator loses. Either way, the airline's price is locked in.

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.
[...]
[Referring to earlier studies, Summers] noted that the male-female ratio in the top 5% of Grade 12 math students appeared to be about two to one, suggesting that the variance in male test scores was probably about 20% higher than that of female ones. On average, in other words, women tend to be more average.

And that's exactly what Ms. Hyde's team found: The test data for boys were spread out more in every state, and in every single grade, by between 11% and 21%. [...] Which is to say, the Science study has produced a recognizable echo of what Mr. Summers pointed out, to such indignation, in 2005.

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.

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.

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".

HT: Steve Horwitz

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.

By The New Republic's Jonathan Chait. A few choice quotes from the review are below the fold.

Read More »

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).

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...
Ambassador Creel's Government [of Mexico] is anxious to have the cooperation of this Government in establishing a chain of forts or army posts along the border between the United States and Mexico. The plan is for both countries to divide the expense of maintaining this chain of forts.

Oh, the irony.

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.

7/30 Update: A commenter on the Mises Blog picked up on it. There's no entry for The Message on the "Abba to Zeppelin, Led" site, though.

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.'"

ATSRTWT.

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!

HT: The Lone Libertarian

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.

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.

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.

Read More »

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.

Via Radley Balko, here is Rush playing "Tom Sawyer" on Rock Band.

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.

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.

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.

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.

Obama’s nomination will be celebrated as a first for African-Americans. But the racial symbolism may obscure the importance of his presidential run to the tens of thousands of government-funded community groups that stand to benefit from an Obama agenda that’s right out of the 1960s. His presidential platform touts programs that would refuel the nonprofit sector, ranging from a commitment to boost money for federal relics like the ineffective and wasteful Community Development Block Grant program . . . to a plan for providing “a full network of services, including early childhood education, youth violence prevention efforts and after-school activities . . . from birth to college” to a series of “Promise Neighborhoods.”

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:

"The first objection to the guarantee is that it ignores the fundamental defect of our currency system, its rigidity. There is an actual need for money to handle the business of this country in the Fall of the year than in the other seasons, and the guarantee plan does not meet that demand.

"The second objection to the guarantee of deposits is that it eliminates character as a necessary factor in the banking business."

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.

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.

and

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.

The gun is noiseless, and is fired without powder. And this is not all. Mr. Patten asserts that the gun can discharge bullets faster than they can be loaded into its magazine, and that the loading speed is therefore practically the only limit to the number of shots that can be fired. He maintains that 50,000 shots a minute can be discharged from this new weapon, and adds that he'll demonstrate this when he gets a full-sized one in commission.

The gun is fired by centrifugal force. All there is to it is a big wheel with a crank for revolving it. In the ten-inch model this can be turned by hand. A motor of fifty horse power would be required to turn the six foot model Mr. Patten hopes to built.

Stimulus checks for dead people.

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.

[...]

In private, and public, Democrats are telling companies they're frustrated with what they view as too slow a shift in the political makeup of lobby shops. New Jersey Sen. Bob Menendez recently quipped that if companies didn't start sending friendlier faces, they might find it "a little difficult at the end of the day for them to achieve the success they want." North Dakota's Byron Dorgan (who apparently has read the ethics law) clarified: "It's not about how many Democrats are hired. It's about how they weigh in on issues."

Mr. Reid stepped up the pressure with last week's pow-wow. Democrats invited only presidents and CEOs of the most powerful trade groups, hoping to circumvent GOP lobbyists and take their message straight to the top. That message? According to one participant, the meeting was cordial, but the theme clear: "We have a narrow margin right now, and it is tough for us to get anything done. But there will be more of us next year, you'd better get used to it, and you better find a way to work with us."

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.

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.

"We don't do nothing," she said. The director "holds us in a room for hours."

Although she was owed several hundred dollars, Samantha was paid a nickel Friday and was finally paid in full yesterday.

Pay problems are just one of the administrative issues in the D.C. summer youth jobs program, as was apparent at a news conference yesterday at the academy.

In interviews, many students echoed Samantha's complaint, saying they were spending their days sitting silently in classrooms.

Students are supposed to be doing arts programs, such as jewelry-making, painting and singing in a choir, [summer academy director Dianna] Robinson said, as well as learning such "life skills" as job readiness.

Robinson said she was excited about the remaining 4 1/2 weeks, now that everyone has been registered. But she did not think the first month had been a waste.

"Some of these 14-year-olds are the only ones earning a salary in a three-generation household," Robinson said. "If that means sitting in a hot auditorium, then I'm okay with that."

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.

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.

The first 100 fans through the gates for the team's August 4th game against the Savannah Sand Gnats will receive a pair of flip flops.

But that's not all. The GreenJackets plan on retiring Favre's jersey number (4), only to reinstate it the next day. Luckily, the team doesn't currently have a player wearing that number.

The idea for the night is still in development, but other events planned include seat upgrades to anyone wearing a Favre jersey. Fans wearing a "cheesehead" will also receive a free brat at the concession stand. The team will also be hosting contests including the "Lambeau Leap" and the "Strahan Sack." Though we're not exactly sure how the latter would work. Who could do the best fake?

Story here; HT to Skip Sauer.

The abstract of a new NBER paper:

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.

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.

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 …

“If (the cost of business) gets too high, you have to cut back,” he said. “We want to keep everybody we’ve got. But it will affect retailers and how many employees they can afford to keep.”

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.

Cutting out one day of school has been the key to preserving educational programs and staff in parts of Kentucky, New Mexico and Minnesota, outweighing some parents' concerns about finding day-care for the day off.

"For rural school districts where buses may travel 100 miles round-trip each day, there certainly are transportation savings worth considering," said Marc Egan, the director of federal affairs at the National School Boards Association.

Egan said about 100 schools in as many as 16 states have already moved to a four-day school week, many to save money on transportation, heating and cooling.

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).

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...

The feature of the past year, he went on, had been the tremendous number of arrivals and departures after a very short stay, a practice which was not nearly so remunerative as when the visitors used to stay longer. The prevailing fashion of using motorcars was doubtless one of the reasons for these short visits.

Another cause of the falling off in profits was the continued decrease in the consumption of wines. Compared with ten years ago, the company's receipts from sales of wines had fallen 50 per cent., the greater part of this decrease having occurred in the last two or three years.

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.

Will Wilkinson, on an LA Times article about how Americans are losing their faith in the free market:

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.

"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:
1. You're the second ranking executive office holder in the free world. Very cool if you're maximizing status and Secret Service details.
2. There's a chance you'll become president if your boss leaves office. In the last 100 years Calvin Coolidge, Harry Truman and especially Gerald Ford seem to be the big winners here. But a presidential historian could fill in some detail.
3. You get to break ties in the Senate. From Coolidge to now, there have been just 55 such tie-breakers, and five Veeps got zero (Quayle, Rockefeller, Ford, LBJ and Coolidge).
4. After 8 years you are a presumptive frontrunner for your party's presidential nomination. The upside here is you have years to build your organization and no real responsibilities or vote record to defend. The downside, you're identified by your predecessor and carry some of his baggage. Aside from Nixon and Bush 1, only John Adams, Jefferson, and Van Buren have made this work.

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.

Gated version; ungated version.

...but where have you gone, Ellis Wyatt? My thoughts on oil executives (courtesy of the Mises Institute) are here.

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?

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:

1. Yes.
2. Having a PhD in economics helps, but in retrospect I learned pretty much everything I need to know about efficient markets and "hot stock tips" by losing $1500 or so in the stock market in high school.
3. Very.

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.

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.

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:

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.

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.

*Meme: MR.

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.

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.

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.

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.

The tuition at the school will be free, but the State wants to derive some results from the benefits it bestows gratuitously. The rule applies to the male students, too, but its provisions are especially intended to offset the desertions from the teachers' ranks because of matrimonial alliances.

Upon entering the school the pupils must sign a declaration to the effect that they will adhere to the rule.

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.

It looks like Mike Moffatt will not be contributing $100 to the "Munger for Governor" campaign.

HT: MR.

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.

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.

*-Meme: Guess.

Read More »

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".

Carbon intensity trends:

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.

[...]

The decarbonization of the world’s energy mix has been ongoing for centuries. From prehistory through the 1700s and early 1800s, wood was the world’s most common fuel. Wood has a carbon-to-hydrogen ratio (C:H) of 10 to 1. That is, it has about 10 carbon atoms for every hydrogen atom. But as the Western world industrialized, wood lost its dominance to coal. Coal was a dramatic improvement over wood with a C:H ratio of about 2 to 1. But coal was destined to lose out to oil, particularly for transportation, thanks to oil’s greater energy density and a C:H ratio of 1 to 2. Over the coming decades, natural gas will be the big winner, a result of its 1 to 4 C:H ratio. Thus, when compared to wood, natural gas has 40 times as many hydrogen atoms as carbon atoms. And that transition toward hydrogen has many advantages, particularly when it comes to issues like air quality and carbon dioxide emissions.

[...]

Changing that infrastructure—nearly all of which has been built to harness carbon-based fossil fuels—to a system dominated by renewable and alternative energy sources will take many decades. Nevertheless, a beneficial and largely unambiguous trend is clear. Wood dominated the global energy scene through the 18th century. Coal dominated the 19th century. Oil dominated the 20th century. Natural gas will be the dominant fuel of the 21st century. And that’s good news. Just don’t expect to read about it in the newspaper.

This one somehow escaped my notice until a visit to Kroger earlier today:

...Longball Cellars has a wine for you.

For $13 a bottle, you can wash down your peanuts, popcorn and Cracker Jacks with Cabernet Glavingnon, Chipper Chardonnay and McCann Merlot.

Braves pitcher Tom Glavine, third baseman Chipper Jones and catcher Brian McCann have lent their names and images to a line of wines made by California's Clos LaChance Winery & Estate Vineyard. The project is a part of a larger charity effort that involves more than 30 professional athletes, including Boston Red Sox slugger Manny Ramirez (Manny Being Merlot), Chicago Cubs legend Ernie Banks (Ernie Banks 512 Chardonnay) and former Miami Dolphins quarterback Dan Marino (Marino Estates, Vintage 13). Go to www.charitywines.com to see more players.

Proceeds from the wine sales go to local charities and the Major League Baseball Players Trust.

Profits from Cabernet Glavingnon will go to Cure Children's Cancer, Chipper Chardonnay supports the Miracle League and McCann Merlot helps the Rally Foundation for Childhood Cancer Research.

Hey it beats NASCAR romance novels or MLB coffins.

HT to MR for the markets in everything concept.

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.

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.

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.

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."

Lemons hypothesis reconsidered: An empirical analysis by Arif Sultan

Abstract:

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).

Former colleague and co-author Scott Beaulier (with Skip Mounts) has a nice op-ed on oil speculation in the Atlanta Journal Constitution.

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.

Although the price-cutting hasn't reached the prime seats, the summer sale signals a recognition among teams that they must react to the weak economy.

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.