Division of Labour: August 2008 Archives
August 30, 2008
Demand Curves Slope Down, Even for P. Diddy
More Economics Haiku
I'm inspired by the Freakonomics contest (see below--I didn't win). More economics Haiku are below the fold.
Read More »
Always look for the
When the price rises
When the price rises
Specialize and trade--
« Close It
Economics Haiku: Transaction Costs
Can I define "porn?"
August 29, 2008
Boettke on Gustav and the Mercatus Katrina Project
I have been blogging very lightly of late, partly because I'm still on vacation in Buffalo/Niagara and partly because I'm focusing a lot on little Lorenzo. But I should point out that Pete Boettke has an important post today--a timely and concise summary of "what we have learned" since hurricane Katrina. How do we avoid a repeat of the madness of Katrina? This has as much to do with popular attitudes and beliefs about the locus of responsibility in a free society as it does with incompetent bureaucrats or cost-minimizing/vote-maximizing politicians. Pete rightly casts this as a heretofore unmet challenge to public choice.
Compete With Me: Another Freakonomics Contest
Stephen Dubner points out that they get more comments when they offer schwag. Their latest contest: pick the score of tomorrow's LSU-App State game. My guess: LSU 45, ASU 3. My guess is just barely non-random. All I'm really sure about is that LSU won't let themselves get caught overlooking ASU. I'll be keeping up with the LSU-ASU score--and the Alabama-Clemson score--from the stands at Vaught-Hemingway Stadium, where I'll be taking in the Ole Miss-Memphis game with a couple of friends.
Rationing function of prices
As we here in Louisiana brace for the possible landfall of Hurricane Gustav, with Hurricane Katrina a recent memory, preparations are being made for evacuations and shelters.
On top of all this, a local church has decided to "offer some relief to citizens in the community from high gas prices due to recent shifts in our economy." "Bishop Larry L. Brandon and Praise Temple Full Gospel Baptist Cathedral will be giving away $10,000 in free gas to the community at four Murphy USA gas stations near local Wal-Mart stores in the Shreveport-Bossier City area starting at 4 p.m. today."
It appears that members from the church will spend a half hour at each station, giving away $25 of gas to each person.
It should be an interesting experiment to see how efficiently gasoline is rationed when it is both free and likely to be in short supply should the Hurricane hit our state.
First Female Republican V.P. Nomination in History
It looks like John McCain has selected the newbie Alaskan Governor, Sarah Palin, to be his running mate. This makes for an interesting contrast to the Democratic ticket:
On the one ticket... Obama, the supposed “agent of change” for American politics, picks Joe Biden, an “inside the beltway” master of maintaining the well-oiled political machine.
And on the other ticket... McCain, the oldest candidate in history to run for the office of President, selects someone with less than two years of experience as governor of one of the least populated states in the union.
We are indeed living in “interesting times"...
Posted by Mike Stroup at 12:09 PM
To Serve and Protect, cont'd.
Here are a few thoughts on the economics of apparent police brutality and media portrayals thereof:
1. Judiciously edited video can be deceptive. However, I'd be interested in learning the conditions under which a woman being cross-checked by a cop who looks to be about a head taller than her and probably 50-100 pounds heavier--I'm not very good at eyeballing these kinds of things--is warranted. Perhaps it's a credible commitment to take no prisoners as a means of defusing an explosive situation, but I'm skeptical. The fact that the cops "disappeared" her (even if only temporarily) while she was giving an interview was a little bit alarming.
2. As stories like these develop, I predict that they will be cast as struggles between the state and individual rights as recognized under the first amendment. This interpretation has some merit, but the key problem rests fundamentally on questions of poorly-defined property rights. In the second video, this is stated explicitly: the news team was "on public property." Of course, when "the public" owns something, nobody does--which means that the right to exclude others from use is poorly defined. Common property is a source of conflict. It is clear that I don't have the right to enter your living room and say what I want under the guise of free speech or to observe what you're reading or watching on TV and report on it under the guise of a free press. When resources are unowned, our claims come into unavoidable conflict. Conflict is a necessary consequence of poorly defined ownership.
3. Monopolists behave like monopolists. Competition is a civilizing force: if I don't like the service your company provides, I can take my business elsewhere. This is only true in a limited sense in the case of defense and police protection. The case for government provision of police services rests on a standard story about externalities. If I subscribe to police services, my neighbors enjoy a benefit for which they do not have to pay because criminals will presumably be less likely to go about their business in our neighborhood. At the same time, though, government provision changes the incentives: insulation from competition means that income is not tied to ability to create value. The creative competitive pressures of the marketplace are replaced by the noisier (and in some cases, destructive) competitive pressures of the political sphere. The structure of incentives lends itself to corruption and inefficiency.
Criticisms of the incentives inherent in government provision of services are sometimes unfortunately interpreted as personal attacks against the people providing the services. Nothing above is not to denigrate people who put on a police uniforms because of the actions of a few bad apples. My own experience with the police has been largely positive: many cops are outstanding human beings who are dedicated to their jobs. One of my friends from high school is the quintessential “good cop,“ the officers who took the police report after our house was robbed did a commendable job, and the campus safety officers here at Rhodes are outstanding. However, provision of police services often relies on people to do what is right for its own sake irrespective of the incentives created by the system. In a fallen world, relying on individual virtue rather than the clearly-defined incentives that emerge in a market economy is a recipe for waste, abuse, and inefficiency.
Cross-posted at The Beacon, where comments are open.
August 28, 2008
To Serve and Protect
Fortunately, people who aren't satisfied with the protection services being provided below can just take their business to a competing private security fi-- oh, wait. No they can't--not without moving, anyway. (warning: salty language and disturbing imagery)
This is the lake resort where I'm teaching this week. No Russian tanks in sight!
2nd Quarter GDP
... grew at a pretty decent rate of 3.3% (this is the "preliminary" estimate up from a 1.9% "advance" estimate). Wonder who'll be the first to apologize to Phil Gramm? Inflation was less pretty--a 4.2% clip.
A Longer NFL Season
Sentiment among NFL leaders to reduce the preseason to two or three games per team and lengthen the regular season to 17 or 18 games, up from the current 16, is growing, and it seems generally accepted that such an adjustment likely will be made within the next few years.
It's Hard to Run Wearing Baggy Pants
Atlanta police shot and wounded a man who allegedly pointed a gun at officers after a foot chase outside the Fulton County Courthouse, according to police and witnesses.
August 27, 2008
Compete With Me: Economics Haiku
Is this child labor?
Best Thing I Heard on the Radio This Morning ...
... was Will Wilkinson's commentary on locovorism. A snip:
How far your food travels matters a lot less than what kind of food it is, or how it was produced. According to a recent study out of Carnegie Mellon University, the distance traveled by the average American's dinner rose about 25 percent from 1997 to 2004, due to increasing global trade. But carbon emissions from food transport only saw a 5 percent bump, thanks to the efficiencies of vast cargo container ships.
Cross Price Elasticity of Demand: Electric Bike Edition
Yet another margin for behavioral changes in response to high gas prices:
The surging cost of gasoline and a desire for a greener commute are turning more people to electric bikes as an unconventional form of transportation. They function like a typical two-wheeler but with a battery-powered assist, and bike dealers, riders and experts say they are flying off the racks.
August 26, 2008
Hey, Bill, It's Called a Point Estimate
On August 12, CNN's Anderson Cooper program had a brief report on the Garthwaite and Moore paper on Oprah's support for Obama. The transcript:
JASON CARROLL, CNN CORRESPONDENT (voice-over): She endorses a book, it becomes a best seller. She mentions one of her favorite products, stores soon sell out. Oprah, it seems, has the Midas touch. But does it apply to voters? After Oprah endorsed Sen. Barack Obama, two grad students decided to find out.
What's really absurd is that Scheider has a Ph.D. from Harvard but he doesn't seem to know that the 1,015,559 is a point estimate and that the authors aren't claiming that to be the precise effect Oprah had on the election. In fact, the cutting room floor probably has a snip of one of the authors telling CNN something like "based on our estimates there's a 95% chance that the true effect of Oprah lies between 750,000 and 1,300,000 million additional votes for Obama."
1. My former student Dan Alban calls my attention to two good pieces in Slate: French bureaucracy is impeding the French wine industry and an economics experiment increases farm worker productivity. [Sorry I forgot the link earlier.]
2. Jon Sanders asks a good question: If computer models have difficulty predicting hurricane tracks then what does that say about models of global warming?
3. Reason number 982 to hate politics: Democrats whack John McCain for being married to a multimillionairess but in 2004 their nominee was married to a billionairess (wikipedia says Heinz Kerry owns 5 houses). In any case, I'll be voting for Barr if I vote at all so I was pleased to see Brad's post containing Barr's polling numbers.
August 25, 2008
My family visited this weekend; here's a Saturday picture of Jacob (courtesy of my sister Jenny). This one is now my desktop wallpaper at school. Jacob's carseat is covered with warning labels. For that matter, so is just about every other baby-related doodad we own. Here's Steve Levitt on carseats.
August 24, 2008
1. Sentence of the day, from Russell Roberts: "[China's] mobilization of resources to win medals in gymnastics and diving is a scandal for such a poor country, not a triumph."
2. On a somewhat related note, I've observed another data point that makes me more skeptical of claims that trade deficits are bad. According to the admissions office at Rhodes, this year's incoming class includes a good number of students from outside the US. This explanation remains untested as far as I know, but I'm inclined to believe that it's the law of comparative advantage in action. An increased flow of foreign undergraduates is consistent with the hypothesis that our trading partners are using their earnings from exporting goods to the United States in order to come here and buy higher education. International trade is closing doors in American textile manufacturing but opening doors in American higher education. Again, I don't know the particulars on this but if anyone can point me to evidence, I would be grateful.
A few thoughts on campaign dynamics. I just saw that an organization is offering free campaign schwag supporting a candidate for whom I do not plan to vote. I see a couple of possibilities:
1. I take the schwag, stick it in a drawer, and thereby impose costs on an organization that supports policies with which I disagree.
2. I take the schwag and wear it ironically, thereby using this organization's political ammunition against them.
3. I take the schwag and try 1) or 2), but the organization is able to get political mileage out of the fact that people want their stuff. My attempted subterfuge backfires.
4. There is an implicit agreement whereby I agree not to take someone else's campaign schwag unless either I collect it or I use it to support the organization. Incentives in the system imply that the agreement always breaks down, which could be one of the reasons why clean campaign rhetoric doesn't match dirty campaign reality. That could be an interesting political history paper, though I'd be surprised if someone hasn't written it already.
5. I blog about it, ignore it because accepting the offer will get me on every political mailing list in the solar system, and go on with my life.
Comments are open if anyone has thoughts.
Presidential Campaign Miscellania
OK, OK, presidential campaigns are no place to try to find economic wisdom, but this year's campaign seems more devoid of economic knowledge, and full of economic idiocy, than any I can remember in my lifetime -- a lifetime that remembers campaigns by Richard (wage & price controls) Nixon and Gerald ("Whip Inflation Now" buttons) Ford, not to mention a campaign by Walter Mondale.
Here we have Barack Obama, whose proposed solution to rising energy prices is to take steps to a) decrease supply (with new taxes and regulation of "big oil") and b) increase demand (by using the tax revenue so raised from suppliers to fund cash payments to consumers), up against John McCain, to whom "economics" is sort of like "the vision thing" was to the senior George Bush - it's something he knows is important, but he just can't quite get a handle on it, and often it appears that he's not even quite sure why it's important.
Now Senator Obama has decided to supplement his economic illiteracy by selecting Senator Joe Biden as a running mate. Biden is known for many things, but economic policy is not one of them.
Meanwhile, if Senator McCain picks a Senator as a vice presidential candidate, he'll complete an unprecedented sweep - all four members of the major party tickets will be sitting U.S. Senators. I'm pretty sure this is a sign of the apocalypse, but hold on while I check my references.
Yes, it is.
Meanwhile, poor old Bob Barr continues to make his pitch for voters to vote capital "L" Libertarian. Is he having success? John Zogby's latest interactive polls continue to include Barr, who makes some surprisingly strong showings. To wit:
This is remarkable, really. Note that in none of these polls does Ralph Nader (also included by Zogby) top 3%. Of course, "interactive" polling remains highly controversial among pollsters. Even assuming these numbers are accurate, the norm is for third party support to fall off sharply close to election day, especially if the race between major party candidates is close. Nevertheless, these are surprisingly strong showings, especially given that Barr's fund-raising has been so-so and, like any third party candidate, he struggles to find any media oxygen (though he certainly is outdoing any previous Libertarian candidate). Could Barr really poll double digits, even in relatively libertarian Nevada or New Hampshire? And remember that Zogby's polling in early July showed Barr at 8% in Georgia (which he represented in Congress for four terms), six and seven percent in neighboring South Carolina and Tennessee, respectively, six percent in giant Texas, seven percent in McCain's home state of Arizona, and 5% in Obama's home state of Illinois, among other showings.
Common wisdom is that Barr's support comes primarily from Republicans, but it may be wrong to assume that Barr's candidacy helps Obama. It strikes me that at least as likely is that Barr gives libertarian leaning Republicans upset by the GOP's spending binge, corruption, and conservative positions on "social issues" a place to park their support short of pulling the Obama lever (or, for you conspiracy theorists, pushing the Obama button on their Diebold-rigged machine that will record their votes for McCain anyway). If that's the case, then Barr's candidacy helps McCain.
If I can find a bit of time, I hope to look at the Barr campaign's pronouncements on the economy to see if they actually do make more sense than the nonsense coming from the Obama camp and the bewilderment released by Senator McCain. I'll share the results here.
August 23, 2008
Robert Frank @ Google
I'm having my principles students do Frank's "economic naturalist" assignment this fall and in preparation I came across this nice Robert Frank talk.
George Carlin on Voting
Now to figure out how I can use this in my public economics class...
[For those who care, the colorfullness of the language is what you would expect so heads-up]
On Gordon Tullock
1. I first met Professor Tullock at a Public Choice Outreach conference at George Mason in 2000, where I learned what a Vickrey auction is and won a signed copy of his The Economics of Non-Human Societies. I bid the cover price, figuring that the worst I could do would be to have to pick it up at the bookstore, but that would require everyone else bid higher-than-cover prices (I enjoyed a couple of dollars in consumer surplus).
2. I've heard it said that your career as an economist is incomplete until you have been insulted by Gordon Tullock. Here's Alex Tabarrok's story. Here's Bob Lawson's. I'm happy to say I checked this one off my list during dinner at the Public Choice Society meetings in 2007. Professor Tullock charged Peter Calcagno and me with finding the answer to a question about the way the New World was divided by the pope, plus its subsequent development and proceeded to say that he would have to doubt my intelligence if I couldn't provide a satisfactory answer. I have yet to provide one, but I did haul home all ten volumes the Liberty Fund's Selected Works of Gordon Tullock after the conference. My honors advisee, having heard this story, considered trying to elicit an insult from Professor Tullock at the 2008 Public Choice meetings.
3. Tullock is routinely mentioned as a candidate for the Nobel Prize (about 4400 Google hits for "Gordon Tullock" "Nobel Prize" a few seconds ago). I quote here William Niskanen on why Tullock is worthy of the Prize (from Niskanen's review of the first volume of Tullock's selected works):
In addition to his coauthorship of The Calculus of Consent (with James Buchanan), the major individual contributions for which Tullock still deserves the Nobel Prize are his proofs that democracy usually works rather better than suggested by the theories of Kenneth Arrow and Duncan Black and that the social costs of inefficient policies are substantially larger than suggested by Arnold Harberger.
August 22, 2008
But What About the Blogging Economists Who Like College Football And Barbecue Demographic?
Of course, all this should be capitalized into prediction market prices.
If Only "Drivetones" Weren't Necessary...
E. Frank Stephenson’s note (below) about the evolving market for life-saving “drivetones” resulting from more and more quiet electric powered cars being driven on the roads today was thought provoking. It made me think about how voters are so often swayed by illogical arguments to justify wasteful legislation, such as requiring auto makers to sell more "zero emissions” cars. (Of course, the phrase “zero emissions” car is about as honest and credible as the phrase “perpetual motion machine,” but I digress…)
For example, how many times have we heard politicians justify their pet policy with the statement, “If this new legislation saves just one life, it will be worth it”? One could just as easily use this illogical abuse of the concept of opportunity cost to justify banning ALL zero emissions cars from the roadways. After all, it is very likely that the relative silence of an electric car would certainly be the demise of at least one additional pedestrian or bicyclist who would otherwise have heeded the noisy exhaust warning note of a gasoline swilling car engine belching carbon monoxide and sulfur dioxide into our precious atmosphere.
As educators seeking to enlighten the citizen voters of our country, we economists have much work ahead of us…
Leadfoot Fed Shreds Cred: Recession Ahead?
All of my recent reading about Milton Friedman and F.A. Hayek has gotten me thinking about the role of expectations in monetary policy. Gerald O'Driscoll's column in today's Wall Street Journal was particularly interesting in this regard. I can't find Tyler Cowen's post on this at the moment, but I wonder if I should root for higher inflation since Shannon and I are barely a year into a fixed-rate mortgage. Hmmm...
A Thought on CEO Pay
I saw the chart below in Business Week. A CEO who earns $10 per $10,000 of company revenue is earning 0.1% of the company's revenue. The median pay of liberal arts college presidents is about $250k; if the median liberal arts college has annual revenue of $100m (I think that's on the high side) then presidential pay would be 0.25% of revenue. This isn't to say that presidents are overpaid (their compensation may be a compensating differential for dealing with campus crazies) or that CEOs are underpaid. We do, however, hear much more about supposedly lavish corporate compensation.
Usual disclaimers apply--yes there are other metrics .... And, regardless of metric, both types of institutions have boards that agree to the pay...
On National Anthems c. 1908
As of 1908, the United States didn't have a national anthem? This seems to be the case, given the discussion in the NYT during the Summer of 1908. Throughout that summer there were a number of candidates offered, but the odds favorite seemed to be the Battle Hymn of the Republic.
The August 22, 1908 NYT has this opinion:
All recognized critics agree, I believe, in calling the "Battle Hymn" one of the few great poetical productions of America. The lyrical structure of the piece is simple, yet superb. It is a truly passionate appeal. I fear, however, that the unpleasant memories it brings up in the South will prove too strong an objection to overcome.It is somewhat ironic that, 100 years later, many universities in the South play the Battle Hymn during football games. Indeed, my two-time alma mater, and pre-season #1 ranked, University of Georgia's primary fight song is the
Opportunity Costs Really Are Everywhere… Even in San Francisco
It appears that even the socialist politicians in San Francisco have to (at least occasionally) recognize the economic law of “the omnipresence of opportunity costs.”
The Wall Street Journal reports that a life-long lefty activist, Rob Anderson from San Francisco, has grown weary of arrogant bicyclists speeding through pedestrian walkways. Anderson claims these aggressive and bullying cyclists are full of self-righteousness indignation, acquired while wearing the mantel of “I’m one of the few who are truly committed to green living—get outta my way.”
So he is fighting back.
Anderson has forced the local government to undergo environmental impact studies on how their programs of expanding bike access lanes and decreasing automobile lanes in downtown San Francisco will ultimately increase traffic congestion and raise the levels of automobile pollution and greenhouse gasses. Local government authorities have temporarily placed the bike lane expansion project on hold as they try to make the case that the increase in bike ridership will prevent a net increase in smog and carbon dioxide. They recognize that this will be a difficult challenge, considering that the most optimistic projection of the increase in bike ridership will likely fail to reduce automobile traffic to avoid the increase in pollution.
More “reality economics” fodder for my principles class…
Markets in Everything: Drivetones Edition
The advent of ultra-quiet electric cars could create a business for auto tones. Project Better Place, a Palo Alto (Calif.) electric-vehicle startup founded by Shai Agassi ... has just copyrighted the Drivetones brand, according to Germany’s Auto Motor und Sport magazine. Electric vehicles make almost no noise. So to avoid running over bicyclists and pedestrians accustomed to hearing an approaching car, they’ll need some artificial vroom, Agassi says.
As usual, a HT to MR for the Markets in Everything concept.
Yet laissez-faire capitalism hasn’t delivered nearly what its proponents promised. It has created big budget deficits ...
Laissez-faire capitalism may or may not live up its proponents hopes (I think it does--or would if we actually tried it since what we see in the world around us isn't truly laissez-faire capitalism), but it certainly does not create big budget deficits. The responsibility for deficits lies with pols about whose abysmal performance there can be no doubt. Leonhardt's assertion has to rank as one of the stupidest things ever written.
HT: James Pethokoukis
August 21, 2008
Music Review: Eve's Burden
A California band called Eve's Burden was kind enough to send me a digital press kit (I'm not sure why; perhaps somehow they saw some of my music posts). I felt obliged to honor their troubles and give a listen to the tracks that were available their website (www.evesburden.com). After a first listen, the songs are a little nondescript and the production quality seems a tad iffy on some tracks. "The Black Letter" has a good melody but I'm not really taken with the chorus. Their song "Love Keeps Me Hangin On" turns me off by rhyming "standing in the rain" with "tears of pain" immediately. One of my artistic pet peeves has been over-use of the cliched rain/pain coupling, but this is hardly unique to Eve's Burden--many bands I like do it a lot. It seems like space filler when the lyricist can't think of anything else to say. "Like A Wildcat" is rap-heavy, but Rage Against the Machine does it better. "The dogs are licking my face/I eat the leftover food from behind the pizza place" (followed by a second use of "face" as a rhyme) in "Peace to a Fool" doesn't really do much for me in a song that takes itself seriously. I'm pretty easy to please and a total skinflint, so the questions I would ask are as follows: is it worth a listen? Sure. Would I pay for it? No. But don't take my word for it. You can check them out at www.evesburden.com.
"I walk these streets, a loaded six string on my back
It's not nearly as good a question as the ones Steve Horwitz posted on The Austrian Economists a few days ago, but Josh et al. might find your answers useful for the "Abba to Zeppelin, Led" music site.
August 20, 2008
The t-shirt of gold standards
Celebrate "the original currency of kings". (A riff on the Original Kings of Comedy?) Available here.
HT: Peter Klein
I haven't been able to update this for a while because of baby-related responsibilities, but I've been on a bit of a book bender recently in part inspired by my reading of The Shock Doctrine. Here are a few interesting recent reads:
1. F.A. Hayek, The Sensory Order. This was for a project on Hayek and Buchanan co-authored with Anamaria Berea and Jeremy Horpedahl from George Mason. It is very, very dense, but you can see how Hayek's social theory and classical liberalism follow from his cognitive theory. Peter Klein and commenters on his blog say a couple of things about the relationship between Austrian economics and the public choice approach here.
2. F.A. Hayek, The Road to Serfdom. I re-read this while prepping material for Bob's and my paper about The Shock Doctrine. It remains as timeless and as classic as ever. My version was a gift from a friend in 1999, but there is now a Definitive Edition edited by Hayek scholar Bruce Caldwell.
3. Milton and Rose Friedman, Two Lucky People. The Friedmans' memoirs. I read this as part of the Shock Doctrine project, and the Friedmans go to great lengths to set the record straight about his involvement (or lack thereof) in Chile. They include an appendix of Chile documents, including Friedman's letter to Pinochet.
4. Lanny Ebenstein, Milton Friedman: A Biography. Excellent brief treatment of the man's life and work; an essential companion for Friedman scholarship. The definitive biography of Friedman has yet to be written, and I can't see a full treatment of Friedman coming in at less than a thousand pages. History of Thought students looking for a dissertation topic should seriously consider this.
5. Stephen T. Ziliak and Deirdre N. McCloskey, The Cult of Statistical Significance. This I the crowning piece in a 25+ year research agenda on the rhetoric of empirical analysis. Wide-ranging in coverage, this criticizes scientist’s morbid obsession with statistical significance, noting that it is quite literally morbid: the subtitle is “How the Standard Error Costs Us Jobs, Justice, and Lives.” I’m reviewing it for Economic Affairs; the full review should be available before too long.
6. Tom Peters, Thriving on Chaos: Handbook for a Management Revolution. One of my guilty pleasures is reading management and personal development books. I forget how this one ended up on my bookshelf, but it was interesting to skim parts of it 20 years after it was written. One thing I found interesting about the parts I did read was how much the song remains the same: trade deficit, low saving, competition from East Asia, lack of innovation, blind American business methods, etc. are leading us down the wrong path. As we all know, fears of Japanese economic dominance were unfounded, and besides, I remain puzzled by economic nationalism. I understand its superficial emotional appeal, but I have a hard time thinking in terms of "our" steel industry, "our" automobile industry, "our" semiconductor industry, or "our" potato chip factory. Many economists have pointed out that the principle that trade creates wealth does not end when you cross a national border, and I agree with Steven Landsburg that it is morally distasteful to prefer trade with one stranger to trade with another based on anything other than the content of that stranger's character (or the price and quality of his or her product).
7. Alvaro Vargas Llosa, The Che Guevara Myth and the Future of Liberty. An excellent and short (67 pp.) treatment of Che mythology and Latin American liberalism. I expected a more detailed treatment of Che, but he only gets the first chapter. I'll be giving our student workers my ID card, a Liberty Fund tote bag, and a list of call numbers for every Che book our library has soon.
Other books on the shelf that I probably should have read by now but haven't: Michael Heller's The Gridlock Economy (reviewing for The Freeman), Brian Doherty's Radicals for Capitalism, David M. Primo's Rules and Restraint (reviewing for Public Choice), Deirdre N. McCloskey's Knowledge and Persuasion in Economics, and many more. Coming from Amazon.com: Bruce Caldwell's Hayek's Challenge: An Intellectual Biography of F.A. Hayek and Lanny Ebenstein's Friedrich Hayek: A Biography.
Meme: Marginal Revolution.
Steve Horowitz asks for nominations of economic fallacies of fact and of theory. My choices:
Fallacy of Fact: That consumption can take place before production.
Fallacy of Theory: That jobs are goods.
Don't get sick!
Just got back from a doctor's office visit (darned high cholesterol!), and we had an interesting chat about the upcoming election. He told me that if the vote results in a particular candidate being elected, leading to a single-payer system, then the practice (of which he is part owner along with a few of the other docs) will end up laying off a huge number of staff. He bases this conclusion on the comparison with Medicare patients, who are a financial loss for the business.
If his thinking is correct, this could really harm our area, since there is a large presence of health care businesses here. Of course, would the voting public draw the connection between unemployed medical staff and universal health care? Would they recognize that the large wait times due to both less staff and increased quantity demand from patients is the inevitable result of their wishes for medical care at a zero price? Would they understand that the substandard medical care they are receiving is due to the neglect of prices and incentives? Do I really want the remaining overworked and underpaid staff to be sticking me with needles?
The only bright spot in our discussion was my doc's thought that, should this all happen, he would open a new practice with a visibly posted fee schedule, so patients knew what they were paying. Reminded me of John Stossel's Sick in America.
Grand steps in medicine c. 1908
From the August 20, 1908 NYT:
WASHINGTON - News of one of the most remarkable operations ever performed in this city or, possibly, in the United States, which took place at the Emergency Hospital here, when one of the surgeons of that institution succeeded in bringing back to life a 12-year old [African American] boy of Hyattsville, MD., who had died suddenly while undergoing an operation, has just been made public...
Interesting items from this story? The physician remains nameless, and thus non-famous. There is no threat of a law suit against the surgeon who initiated the heart massage without FDA approval. There is no castigation from the ADA for "cowboy medicine." There is no animal rights group threatening eco-terrorism or other forms of boycott for the pending dog tests.
I have no specific knowledge about heart surgery, but if this was the beginning of a new field that would ultimately yield the pace maker, bypass surgery, and heart transplants, then the spark of innovation on the part of the nameless surgeon would seem to have borne tremendous benefit.
August 19, 2008
Is a government bailout of Fannie and Freddie inevitable?
“Some investors,” according to a New York Times headline today, say it is. But of course it isn’t. A bailout – whether in the form of government capital infusions or explicit guarantees of Fannie and Freddie debts – is a policy decision. A different decision could be made.
A reasonable alternative would be for the feds to adopt the “structured early intervention and resolution” approach that the FDIC is supposed to apply to any bank whose capital becomes too low. If Fannie and Freddie have implicit taxpayer guarantees – if the Treasury is not prepared to see their bondholders take losses even should the firms become insolvent – then SEIR seems as appropriate for them as for FDIC-guaranteed commercial banks. SEIR requires any insured institution whose capital falls below a specified threshold (say 6%) to replenish its capital. Fannie and Freddie appear to be already below any reasonable threshold for a taxpayer-guaranteed institution. At some lower threshold (say 4%), oust senior management and restrict dividend payments. If capital continues to fall, close the institution before its net worth reaches zero so that its debt-holders and the taxpayers are protected. The time to begin applying this approach, if it is to be applied, is now.
Alternatively, if the Treasury is prepared to see Fannie and Freddie bondholders take haircuts, the feds should declare either institution bankrupt when its measured net worth, based on marking its assets to market, reaches the point where its portfolio could be liquidated for just enough to repay its debtholders. Some say that Freddie’s net worth is already below that point.
The market appears to believe that Fannie and Freddie do have implicit taxpayer guarantees. The NY Times reports:
Government officials note that both companies continue to buy mortgages and that they are borrowing at rates far below what other banks and companies pay.
The lower borrowing rates can only be the result of lenders counting on a bailout should Fannie or Freddie be unable to repay fully otherwise. The lower borrowing rates are, of course, what have allowed the two firms to grow so much larger than any other financial intermediaries. The implicit guarantees themselves have led to "too big to fail" institutions that supposedly make a bailout upholding the implicit guarantees "inevitable". A self-justifying intervention into the market!
What would be the spillover effects of liquidating Fannie or Freddie? We can't completely know. But recall that liquidating a bankrupt airline does not make its airplanes or pilots disappear. The planes and pilots are instead reallocated to airlines that can use them to fly passengers more efficiently. Liquidating Fannie or Freddie would likewise reallocate its assets and personnel to other institutions that can intermediate efficiently – without taxpayer guarantees.
The more talk I hear about a bailout being inevitable, the more I am convinced that liquidating Fannie and Freddie and starting afresh with explicitly unguaranteed institutions is the only credible way to reach the goal of an undistorted financial market populated by institutions that do not threaten to unload their losses on taxpayers. How best to liquidate Freddie or Fannie if they become near-insolvent should be the topic now under discussion -- not how best to bail them out.
Steve Horwitz asks a great question at www.austrianeconomists.typepad.com (still no hyperlinks with the Mac):
"What is the fallacy of fact and fallacy of theory that the reasonably well-informed layperson believes about economics that are most in need of correction? That is, which ones do the most damage?"
He nominates the idea that average American living standards are falling for the most destructive fallacy of fact and the idea that consumption causes economic growth for the most destructive fallacy of theory.
My nominees, posted in the comments on Steve's post:
Fallacy of Fact: All human action is zero-sum.
Fallacy of Theory: greed causes prices.
The first leads to the conclusion that someone "loses" in trade and therefore sets the stage for policies based on the misguided view that commerce is combat.
The second leads to price controls and other destructive interventions, but I think the real danger comes from how it causes us to view one another. The idea that greed causes prices usually leads to the conclusion that production and allocation decisions should be made by a virtuous surrogate. In other words, this is part of a worldview holding that there is an actionable moral inequality whereby the good, non-greedy people get to use the bad, greedy people as a means to their ends--namely, their version of utopia.
The Milton Friedman Institute
I figured that Marshall Sahlins's article in the Chronicle of Higher Education would get a lot of attention. I read the article while taking a break while compiling my notes from the Friedmans' memoirs (essential reading for any economist) and drafted a short response based on those notes, which I'll submit somewhere after I give it another look. It's part of a larger project on Naomi Klein's The Shock Doctrine that Bob and I are working on. In any event, Brad DeLong and his commenters offer a pretty good discussion of the proposed Milton Friedman Institute. And here's Alex Tabarrok. Lanny Ebeinstein's biography of Friedman arrived in the mail today; I look forward to reading it and will have more to say soon.
Hey! What gives you the right
To put up a fence to keep me out and to keep Mother Nature in?
Ok that's from "Signs" by Five Man Electrical Band and not Metallica, but now we have this story.
James Hetfield, co-founder of the legendary heavy metal band Metallica, has erected a barbed-wire fence on his property near San Rafael, cutting off a fire trail that has been open to public use for decades.
Now I'm as big a property rights defender as anyone, but if this is true, I would think the hikers/bikers/riders would have a reasonable claim that an easement by prescription had formed on the property.
Link via Matt Ryan.
It's Still Just a Mental Recession
The abstract of Edward Leamer's new paper on recessions:
Monthly US data on payroll employment, civilian employment, industrial production and the unemployment rate are used to define a recession-dating algorithm that nearly perfectly reproduces the NBER official peak and trough dates. The only substantial point of disagreement is with respect to the NBER November 1973 peak. The algorithm prefers September 1974. In addition, this algorithm indicates that the data through June 2008 do not yet exceed the recession threshold, and will do so only if things get much worse.
August 18, 2008
Markets in Everything: Breast Enhancing Gum
If you must increase your bust, but gas prices have tapped your plastic surgery fund, there may still be hope. This time you don’t have to go under the knife. Just pop a few pieces of gum in your mouth everyday. Zoft Breast Enhancement Gum, which can be purchased without a prescription, contains Fenugreek Seed Extract, Fennel Seed, and 11 other herbs that the company says will deliver “larger, fuller, firmer breasts.”
Consider me skeptical, but users wanting to convince me are welcome to send before and after photos. :-)
Adam Smith on "Folly and Presumption"
Quoted at the beginning of Hayek's "The Road to Serfdom," chapter 5:
"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 to no council and 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."
UPDATE: Bob points out that this is also the quote on the right of the page, right below where you're advised to buy DOL merchandise. I had forgotten that t had changed. It's still a great quote, though, and worth reviewing every so often.
Econ Academics Blog
Christian Zimmerman, of IDEAS fame, has started a aggregator blog called Econ Academics. The idea is to encourage the discussion of economic research on blogs.
Rather than highlighting certain blogs, I would think a better approach would be to encourage the submission and reprinting of posts of an academic nature. For example, this excellent post by Kevin Grier.
Unilateral free trade
Writing from Hong Kong, L. Gordon Crovitz writes in today's WSJ Online:
Hong Kong is essentially irrelevant to trade talks because it practices unilateral free trade, with virtually no tariffs or other barriers. People here understand that imports, exports and the rigors of comparative advantage create individual opportunity and wealth. Enough, in Hong Kong's case, for it to have evolved under almost pure free trade from a rocky harbor into one of the wealthiest places on earth.
Interesting read, including some facts on wine being one of the last products to be lifted of tariffs. But the real action is how innovation can bring unilateral free trade through the back door.
The hound that doesn't bark is the selective unilateral free trade that occurs when countries choose not to impose barriers in preferred industries. While global trade has grown rapidly since World War II -- partly because of the success of earlier multilateral trade agreements -- not enough attention has been paid to the role played by tariffs and other barriers that were never put in place for industries that have led growth in world trade. Unilateral free trade by the U.S. has especially helped software, hardware, the Web and other technologies.
Incentives Matter: Cash for Physics Edition
Several British universities apparently are offering cash incentives to students to induce them to enroll in unpopular degree programs, according to an investigation by London’s Sunday Times in which undercover reporters posed as students seeking spots.
Of course, this is equivalent to charging higher tuition for more popular programs. The only difference is how it is framed.
August 17, 2008
Chez Schumpeter: Creative Destruction in the Kitchen
In the last couple of years I have developed an interest in food as a metaphor for economic and social progress. I don't have much to add to what Tyler Cowen and others have already written on the subject, but I can offer some personal case studies. Over the next few weeks, I'll be experimenting with leftovers and some of the provisions I bought during a Sam's Club buying spree a few months ago. I claim no expertise, particularly since I don't have any culinary training, but if these ideas can be improved on by abler hands I would be happy to hear about it. Experiment #1, which involves leftover noodle soup from Pho Saigon and barbecue from Germantown Commissary, is discussed below the fold (cross-posted at www.blog.mises.org/blog).
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Pho Saigon is a Vietnamese restaurant near our house that offers one of the best quality-per-dollar ratios we've come across. A large bowl of noodle soup is $6.49. The first time we ate there, we each got two meals each just from the leftovers. Some friends visited from Saint Louis yesterday, so a couple of us went to Pho Saigon to get take-out. Yesterday afternoon, some friends from our Sunday School class dropped off barbecue from Germantown Commissary for our dinner.*
This afternoon I decided to see how the barbecue would go with the leftover soup. Pork is, after all, one of the soup options at Pho Saigon, so I thought that perhaps the flavor of the soup and the flavor of the smoked pork would complement one another. I mixed together broth, noodles, and pulled pork and microwaved the concoction on high for a few minutes. I found that they went extremely well together, and I will probably try similar experiments with Ramen noodles after our leftovers run out. As I expected, adding barbecue sauce to part of the mixture decreased rather than increased the quality. Given that hoisin sauce, peanut sauce, and chili sauce improve a noodle bowl in my humble opinion, I'm not sure exactly what it is about spicy barbecue sauce that makes it unsuitable for inclusion in a noodle bowl.
Contrast the experimental nature of the market process to the centralized nature of economic (or cultural) planning, licensing, and regulation. Planners could argue for eons about whether pho noodles and pulled pork are really two great tastes that taste great together, but we can't know for certain unless someone has the freedom to try it. In her book "The Future and Its Enemies," Virginia Postrel writes about how Vidal Sassoon defied hairstyling conventions and was hounded by regulators and bureaucrats because of certification problems. This raises a question: if we had a government boards of culinary standards the way we have boards of cosmetology, would we get innovations like barbecue nachos with the speed that we do? I'm inclined to think not.
*People from our Sunday School class have brought us a few meals to help smooth out our baby-induced lifestyle inversion. It's been great: the food has been very good and very plentiful. I'll have more to say on social capital and risk-sharing later.
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August 16, 2008
I Wonder How Long This Will Last
Some friends and I were looking at the Obama and McCain websites. You can personalize both; this text on BarackObama.com jumped out at us:
"Get Local! Create your MyBO Account (or login)"
Nothing yet on whether Old Spice has been contributing the Obama campaign.
Drip: Iced Coffee
How does one get his or her morning coffee fix without overheating in a city so hot and humid as Memphis (NB: it's actually cool here this morning thanks to recent rains)? I've been experimenting a bit with iced coffee, and I've been pleased with the results. I never really liked iced black coffee the times I'd ordered it at coffee places, but with a little milk and cocoa mix it's pretty good.
The very idea is a drip in what Don Boudreaux calls "the Prosperity Pool." It also illustrates an important point made by Tyler Cowen in several places about the cultural search process. Centuries of international trade and global integration are responsible for the coffees we have today, and I doubt there exists a culturally authentic, completely unique coffee product anywhere in the world. Every part of the process is probably borrowed from somewhere, and this is not a bad thing: somebody somewhere got the idea of eating coffee beans. Someone else probably got the idea of boiling them. Roasting the beans was probably someone else's idea. Apparently no one put milk in their coffee before 1800. And so on. Coffee is also not native to some of the world's premier coffee-producing regions. According to the website below the fold, coffee beans were first brought to Costa Rica from Cuba in the late 1700s.
Iced coffee a small innovation, one of life's simple pleasures. It is trivial when considered by itself but it illustrates how the market process systematically makes us better off. In the years before I was exposed to mass-marketed specialty coffee products (Starbucks, in other words), I never would have thought to put coffee over ice.
HT: Don Boudreaux for the "Prosperity Pool" meme. A couple of interesting nuggets about coffee history are below the fold.
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Google turned up some interesting coffee history on the website of one Bob Gragson of Madison, WI (http://www.gragson.com/coffee/coffeehistory.htm, no hyperlink because I'm blogging from a Mac). Here are a couple of interesting tidbits. I can't vouch for their truth, but remember that they wouldn't put it on the internet if it weren't true:
"Wine and lemonade merchants in Italy in the 1600s called coffee 'Satan's drink' due to its threat to their markets. These merchants asked the Pope to issue an edict condemning coffee. However, their plan backfired when Pope Clement VII tasted coffee, liked it, and baptized it to make it a Christian drink."
"Ludwig Roselius, a German coffee importer, discovered decaffeinated coffee by accident in 1903. He tested a sea-water damaged shipment and noted most of the caffeine was gone from the beans. This prompted him to invent a method of extracting caffeine from coffee beans, and he named his new product Sanka derived from the French sans caffeine meaning 'without caffeine.'"
"The original iced coffee was a French invention called mazagran made from cold coffee and seltzer water."
"Johann Sebastian Bach released his 'Coffee Cantata' in 1734 to empathize with neglected women whose husbands spent considerable time in coffeehouses and in response to Frederick the Great's attempt to ban coffee in Germany."
"In the early days of coffeehouses, it was a penny to gain entrance and get a cup of coffee. Coffeehouses were the places where there was much discussion of the ideas of the times, and as a result of the penny charge, many coffeehouses became known as 'penny universities.'"
"Two decades ago nearly 90% of Americans drunk coffee made from percolators. Percolators are one of the worst ways to make coffee because they continually boil coffee already made. It was only with the introduction of the cone-shaped drip units about this time that the quality of a cup of coffee began to change."
"The coffee plant was first cultivated over 1,300 years ago in Yemen, and the Arabs are thought to be the first who actually "brewed" coffee. The word coffee seems to most likely have derived from the Arabic word gahwa which can mean 'wine' or 'excitement.'"
My iced coffee recipe:
Combine hot coffee, a little milk, and some hot cocoa mix in a mug. Put it in the freezer until it's cool, and put the rest of the pot in the fridge. Serve over ice in a plastic cup from a local barbecue restaurant and enjoy.
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August 15, 2008
Building Brand Equity: Paper on Hayek and Buchanan
Anamaria Berea, Jeremy Horpedahl, and I will have a paper at next month's FEE conference "From Vienna to Virginia," which explores the links between the Austrian school and Virginia Political Economy. The current version is available on SSRN. One thing I found interesting in doing the reading for this paper was that Hayek and Buchanan effectively lay out an epistemological case for classical liberalism. As I read them, forsaking the market means forsaking the mechanism that would reveal the information necessary for rational government intervention. Comments and suggestions are welcome. Here's the abstract:
Cost and Choice and The Sensory Order represent tangents from the basic research programs of their respective authors, James M. Buchanan and F.A. Hayek. These seeming diversions into methodology by two political-economic philosophers help to shed light on their underlying assumptions about cost and rationality. We argue that Buchanan and Hayek, and consequently Public Choice and Austrian Economics, have very similar underlying assumptions about the nature of cost. This can help to explain other similarities between the two schools, especially regarding the role of the state. These contributions are synthesized and applied to debates over the “new paternalism” and military conscription.
August 14, 2008
1. I wonder if PETA or Lou Dobbs is more bothered by this (HT Shawn):
Sensor-equipped elephant seals are helping scientists survey the ice-covered oceans surrounding Antarctica—and in some ways the animals do a better—and cheaper—job than traditional methods.
2. I guess 47% of the public doesn't know the meaning of "Congress shall make no law ... abridging the freedom of speech, or of the press ...":
Nearly half of Americans (47%) believe the government should require all radio and television stations to offer equal amounts of conservative and liberal political commentary ..."
3. News reports earlier this week huffed and puffed that two-thirds of corporations don't pay income taxes. Well they're wrong--no corporations pay taxes. People--that is owners, input suppliers (including labor), or customers--pay taxes not corporations. Companies merely write the check to Uncle Sam. (Read Mankiw for more explanation.)
Resume regular programming.
Infant Nutrition Bleg
We took Jacob to the doctor this morning for his two-week checkup, and we're glad to report that he's still perfectly healthy. One thing we've noticed in our recent foray into parenthood is that there is a lot of zeal for breastfeeding. I found Jan Riordan's book on breastfeeding via Google books and skimmed parts of it, but apart from a few figures about how many billions of dollars we're losing because Americans don't breastfeed enough, I haven't been able to find non-gated estimates of the treatment effect of breastfeeding on different health outcomes. Comments are open if anyone can direct me to good studies of the following:
1. What is the treatment effect of breastfeeding on health outcomes? How is it calculated?
2. What is the marginal effect of an additional unit of breastmilk on health outcomes? How is it calculated?
3. Breastfeeding has been promoted in developing countries. On page 8, Riordan reproduces a tragic "UNICEF photograph of thriving breast-fed twin and his dying bottle-fed sister (Courtesy of Children's Hospital, Islamabad, Pakistan)." Is the efficacy of breastfeeding in developing countries due to breastfeeding as such, or is it because breastmilk is a substitute for a contaminated water supply?
Sign-and-significance studies without clear, comparative discussions of magnitude need not apply. Thanks in advance to anyone who can help.
On surcharges c. 1908
From the August 14, 1908 NYT:
Spring water is now served to waiting passengers at 1 cent a glass both at this [Ocean Grove, NJ] station and Asbury park. A plumber to-day removed the fixtures of the free drinking fountains which have supplied the station crowds. Ice water is still free on the trains.
Building Brand Equity and Blegging Shamelessly: Saving Gas
A local publication called the Main Street Journal published my article on saving gas by slowing down, inspired by blog posts by Bryan Caplan and James Hamilton. The article and a Mac bleg are reproduced below the fold.
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Shameless Blegging: I'm making the switch to Mac, and I've noticed that Moveable Type doesn't allow me to format or link text in Safari or Firefox (I'm writing this with IE using my old laptop). Any suggestions?
Here's the aforementioned article:
How to Save Money at the Pump
Life gets harder when gas is over $4.00 per gallon, but there is a silver lining in the dark cloud of higher gas prices. The law of demand tells us that as the price of something goes up, people do less of it. That’s only part of the story, though. People also look for substitutes. This means that people get creative. People are coming up with all sorts of ways to conserve energy, and people are switching from gas-guzzling SUVs to smaller, more fuel efficient cars. When it gets more expensive to drive, it’s easy just to say “drive less,” and it is also easy to call for government policy to fix the problem. There’s another prescription recently offered by several economists: slow down.
In a number-crunching exercise posted on his weblog, James Hamilton of the University of California-San Diego has calculated that if you drive a Chevy pickup truck for 500 miles at a slower speed (65 rather than 75 miles per hour), you would spend an extra hour behind the wheel but save $18.70 in fuel costs. That’s a tax-free “implicit wage” of almost $20 per hour. In other words, under the conditions discussed by Hamilton, slowing down from 75 to 65 for 500 miles would be the economic equivalent of working an hour at a job that paid $18.70 an hour, tax free.
There are limits to the possible savings: automobile engines are configured so that they maximize fuel efficiency at higher speeds, but Hamilton notes that as you get above sixty miles per hour, wind resistance starts to dominate and fuel economy drops. Nonetheless, easing off the gas is one way to reduce your fuel bill and shrink your carbon footprint.
Other solutions include reducing city driving and rearranging your schedule so that you can commute, shop, worship, and recreate during off-peak hours. Rearranging your schedule to do what you need to do when traffic is light again means improved traffic flow and better gas mileage. You might not be in a position to rearrange your own schedule, but you benefit indirectly from others who can. Fewer people on the road during rush hour (again) improves traffic flow and therefore improves your gas mileage.
As people drive less and slow down, there will presumably be better fewer accidents and, therefore, improved traffic flow. Less starting, stopping, slowing down, and speeding up will also improve gas mileage.
People find ways to adapt to higher gas prices. The city of Southaven, Mississippi, has approved a four-day, ten hour per day workday for city employees to help them save on gas. Other employers will likely follow suit, particularly as their workers begin to ask for more flexible work arrangements.
Not only do people find ways to adapt, they find ways to improve. In a book entitled The Ultimate Resource, economist Julian Simon pointed out that when resources get more expensive, people come up with newer, better ways to do things and newer, better ways to conserve resources. Necessity is indeed the mother of invention, and the inventions wrought as a response to necessity often leave us with even better ways to do things.
In response to higher gas prices, people experiment with substitutions and improvements along all sorts of different margins. Some of these experiments will work and some will not, but over time the most successful ways to conserve energy and substitute more efficient technologies will reveal themselves, and if the market is left to its own devices, they will emerge without the government’s help.
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August 13, 2008
A Great Question About Markets and State
I'm listening to Thomas J. DiLorenzo's most recent "Monopoly and Competition" lecture from Mises U 2008 while making final edits on a forthcoming paper. In his discussion of "the nirvana fallacy," he asks a very interesting question about how we analyze government and the market. Superficial analysis of the market proceeds by identifying imperfections in the market and prescribing corrective intervention accordingly. The presumption seems to be that the burden of proof is on the market to show that it is competitive. DiLorenzo asks what would happen if we put the burden of proof on the government for any proposed intervention: show that the government can intervene perfectly, or you get no intervention. I would predict that we would have a lot less intervention.
Will Wal-Mart Destroy Potsdam, New York?
Steve Horwitz offers an interesting post on a new Wal-Mart that just opened in Potsdam, New York. Steve is the author of a very interesting Mercatus Center piece on Wal-Mart's response to Hurricane Katrina.
Now I'll exploit this bit of serendipity to promote some of my own work. Anyone who fears that the new Potsdam Wal-Mart will destroy the community can rest easy. "Does Wal-Mart reduce social capital?", a paper I wrote with fellow Wash U alums Charles Courtemanche (now at UNC-Greensboro) and Jeremy Meiners (now at AGREM LLC) was published online yesterday and will appear in the print version of Public Choice soon. An ungated earlier version (very different, but with the same basic conclusions) is available on SSRN. The abstract:
Social capital has attracted increasing attention in recent years. We use county-level and individual survey data to study how Wal-Mart affects social capital. Estimates using several proxies for social capital—such as club membership, religious activity, time with friends, and other measures—do not support the thesis that “Wal-Mart destroys communities” by reducing social capital. We measure exposure to Wal-Mart two ways: Wal-Marts per 10,000 residents and Wal-Marts per 10,000 residents aggregated over the years since 1979 to capture a more cumulative “Wal-Mart Effect.” We find that the coefficients on Wal-Mart’s presence are statistically insignificant in most specifications.
In my reading of the Wal-Mart literature, the only strikes against Wal-Mart are their procurement of subsidies and this study by Stephan Goetz and Hema Swaminathan in which they argue that Wal-Mart increases county-level poverty rates, all other things equal. We plan to take another look at this hypothesis in the near future. Other criticisms have failed to withstand scrutiny.
With peacekeepers like these...
...who needs invaders?
Hundreds of South Ossetian rebels with some Russian army personnel went house-to-house in villages near Gori. They set houses ablaze and looted buildings, witnesses said.
Baseball Fan Loyalty & The Worst Contract in Baseball History
But they're no Texas Rangers fans who flock to the Arlington ballpark through last place finishes and playoff runs alike. The Ranger faithful don't care if the team trades away its best players or spends $252 million to sign an MVP-caliber batter like Alex Rodriguez. No team's attendance is less tied to its on the field performance than the Rangers', and nowhere else in the country do fans peel off at a slower rate when the club has thin years.
Two things going on here. First, the primary focus of the article is measuring fan sensitivity to winning and proclaiming the franchise whose attendance is least sensitive to winning to have the most loyal fans. (BTW, the Tigers and the Angels are rated as having the least loyal fans.) Neat idea, though one might raise questions about methodology. (The authors give some but not complete detail.) For example, I wonder if the sample period of 1991 to present isn't problematic b/c some franchises have been good throughout (Atlanta) and others have been crummy throughout (KC). That is, there may not be sufficient variation in team winning percentages over time to get a strong estimate of the relationship between winning and attendance.
Second is the aside about the ARod contract. The authors might be on ok ground if they mean that it was a bad contract because with very loyal fans the Rangers didn't need to sign more talent in order to win more games to draw more fans. On the other hand, the authors are off base if they are merely commenting on the size of the contract or trying to say something about ARod's performance. Yes, ARod got a large contract but he has also performed at a very high level over the past decade. Comparing pay and performance, his contract nowhere near as bad as those signed by, say, Carl Pavano, Mike Hampton, or (it appears) Barry Zito. I'll leave comments open for a day or so if readers want to offer other candidates for the worst contract in baseball history.
August 12, 2008
Another POV on Georgia
A Russian friend of mine, Pavel Yakovlev, is quoted over at Perfect Substitute about the Georgian situation. He has a decidedly Russian pov.
Let me offer up a different pov. I have been to Georgia twice in the past, have many close Georgian friends, and in fact am supposed to be flying there on Thursday of next week(!) so I have some, albeit imperfect, understanding of the situation. I cannot say this is a Georgian pov, but it's probably close.
The area of South Ossetia is historically part of Georgia--the land between the Greater Caucasus and Lesser Caucasus Mountains. The Ossetians began to migrate from the north across the Greater Caucasus Mountains in the 17th and 18th Centuries. Allied with the Russians, the Ossetians supported the gradual annexation of all of Georgia by Tsarist Russia over the course of the late 17th and 18th Centuries and then, after a brief period of independence, again by the Communists in 1921.
Today, most people (about two-thirds) in South Ossetia are Ossetians; they are concentrated in just a few towns, including the regional capital. But importantly most of the villages in South Ossetia are populated by Georgians. That is, the population of South Ossetia is mostly Ossetian, but the geography of South Ossetia is mostly in the hands of Georgians.
The animosity and fear of Georgians regarding Russia is understandable. The country has been literally occupied and terrorized by Russia for over 200 years. The Ossetians have historically been, and continue to be, Russian-supported and Russia supporters. After independence in 1991, the Ossetians and Abkhazians (similar story to the Ossetians) objected violently (with Russian support) to Georgian rule, and eventually Russian "peacekeepers" stepped in to stop the civil wars. For the last several years an uneasy and imperfect truce has been maintained by the Russians in these autonomous regions. No country recognizes South Ossetia (or Abkhazia) however.
The Russians have repeatedly rejected offers to use international peacekeepers and it is laughable, as the current episode illustrates, to claim that they are impartial in this dispute. A long term diplomatic solution is not likely whilst Russia maintains its occupation of these regions.
Georgia's current president is a nationalist who badly underestimated Russia's resolve to support the Ossetians, and very badly overestimated America's support. (Duh! Can you say South Vietnam?) Claims of genocide commited by Georgia against the Ossetians have yet to be verified, and considering the source (Russia) are likely exaggerated if not plainly false. Clearly such claims need to be investigated by international authorities.
But Russia is clearly playing a bigger game. This whole thing has more to do with NATO (keeping Georgia and Ukraine out), oil (the pipeline to the black sea runs through Georgia), and fanning Russian nationalism than anything else.
Posted by Robert Lawson at 03:53 PM
The Beijing Olympics Discovers Specialization and Division of Labor
The unquestioned star of the Opening Ceremony was a little girl who performed "Hymn to the Motherland" in front of the entire world. I remember watching her and thinking how adorable and talented she was, the "poster child for all of China." Well, it turns out that she wasn't as talented as we all thought. It was in fact, a seven year old singing to the whole world on a pre-recorded tape, not the cute, pig-tailed Lin Miaoke, whom we all came to know and love according to a report from The Telegraph."This was a last-minute question, a choice we had to make," the ceremony's musical designer, Chen Qigang, said. "Our rehearsals had already been vetted several times - they were all very strict. When we had the dress rehearsals, there were spectators from various divisions, including above all a member of the politburo who gave us his verdict: we had to make the swap."
Cross Price Elasticity of Demand: Pit Stop Edition
Yet another margin on which people seem to be adjusting their behavior in response to high gas prices (a central planner definitely wouldn't have thought of this one):
Police say there's been an alarming rise in urine-filled plastic containers found along a three-mile stretch of Interstate 84 in eastern Oregon.
Transfers and Exchanges: Gov. Moonbeam is Also Confused
Our massive purchases of foreign oil represent perhaps the greatest transfer of wealth from one people to another in all human history. And, paradoxically, this wealth transfer is from a far more technologically advanced nation to poorer countries -- some unstable and hostile -- whose only claim is the oil that lies under their ground. Wake up America! We must stop the hemorrhaging of our national treasure, and we need to do it now.
Read more about the difference between transfers and exchanges in my article "Pickens's Slim Economics."
Tyranny Tarted Up as Art
This year's August upheaval coincides, probably not coincidentally, with the world's preoccupation with that charade of international comity, the Olympics. For only the third time in 72 years (Berlin 1936, Moscow 1980), the games are being hosted by a tyrannical regime, the mind of which was displayed in the opening ceremony featuring thousands of drummers, each face contorted with the same grotesquely frozen grin. It was a tableau of the miniaturization of the individual and the subordination of individuality to the collective. Not since the Nazi's 1934 Nuremberg rally, which Leni Riefenstahl turned into the film "Triumph of the Will," has tyranny been so brazenly tarted up as art.
August 11, 2008
Entering the Fray
Yours truly in Tuesday's WSJ:
Thomas Frank ("Captives of the Meatpacking Archipelago," Tilting Yard, Aug. 6) says that Labor Secretary Elaine Chao "has held the line against card-check unionization" thereby "meet[ing] the strictest conservative standards" and resulting in illegal immigrants having no leverage to avoid working in "hellish conditions."
Dear John (Edwards)
Thank you for your heartfelt admission of guilt of cheating on your marriage vows and lying about it for the last two years. As these sorts of celebrity/politician apologies go, yours was as genuine as I can remember.
I was particularly struck by this part of your statement, "I started to believe that I was special and became increasingly egocentric and narcissistic." Who can blame you? You spent the last several years being wined and dined by the most powerful people in the world. You had scores of people telling you how great you and your ideas were. You could have become president! Heck I bet haven't driven yourself to work or gone to a grocery store in years!
Who wouldn't let this go to his head?
I fear this typically happens even to good people when they are elevated to political office. And this is precisely why it is so dangerous to give you politicians the kind of unlimited power over our lives that we have given you. Your political career is over perhaps, but we citizens still have to live under the rule of your "egocentric and narcissistic" colleagues who remain in office.
Dave Barry visits Beijing
Five amusing reports here.
Cross Price Elasticity of Demand: Guano Edition
From Ibsen Martinez (the first paragraph gives the cross price elasticity example but the others give interesting history):
Probably the most striking Latin American phenomenon associated with both global oil and food price hikes is going on in Peru, where surging prices for synthetic fertilizers have turned guano into a commodity almost as promising as it was for Peruvians in the mid-19th century.
UPDATE: Here's more on guanonomics from a Salon article:
For Peru, the golden age of guano -- from 1840-1880 -- was a tremendous boon, allowing the state to pay off crippling foreign debt. During that 40 year period the country exported 20 million tons of guano, earning around $2 billion in profit. Unfortunately, as W. Mathew wrote in "Peru and the British Guano Market" (Economic History Review, 1970), Peru immediately began again to borrow recklessly on international markets, and successively hiked up the price of guano to pay for the new loans.
August 10, 2008
It's a boy!
I would like to introduce you to Lorenzo Hayward Lopez, born Sunday August 10 at 11:08 am weighing 7 pounds 13.3 ounces and measuring 20.75 inches. Everything's great.
Seems Backwards to Me
Bryan Caplan has an interesting post on the XM-Sirius merger; a snip:
Despite vocal opposition from lobbyists for terrestrial radio, it looks like satellite radio providers XM and Sirius will finally get to merge. It only took 17 months, plus some absurd concessions:The deal reportedly will also include a three-year price freeze and two-dozen channels dedicated to noncommercial programming.
It's not clear from Bryan's post or from the article he links, but I wonder if the price freeze was included in the deal as a goodie for terrestrial radio. Obviously this might not be the case--it might instead be intended as a protection for consumers. But if the price freeze was included to protect traditional radio, I think the FCC's reasoning is backwards. Price hikes, assuming constant product quality, be the merged XM-Sirius would send consumers looking for substitutes such as traditional radio; by contrast, frozen prices for XM-Sirius would attract customers away from traditional radio. [ADDENDUM: The mere fact that competing producers--terrestrial radio--protests suggests the merger will be good for consumers. Terrestrial radio has nothing to fear if the merged company would be expected to produce a high price, low quality product.] Maybe I'm missing something here ...
August 09, 2008
A Question for Martin Feldstein
I just got around to reading Martin Feldstein's op ed in Wednesday's WSJ. An excerpt is below. There's much to like about Feldstein's piece, but the parts in bold struck me as rather odd. If earlier studies indicated that one-time tax rebates are not cost-effective stimuli, then why would Prof. Feldstein support the rebate program? Was there something about this rebate program that gave him reason to think it would succeed where previous rebate plans had failed?
Congress enacted the tax rebate program earlier this year because ...
George Orwell, blogger
George Orwell's diaries begin on August 9, 1938 -- so The Orwell Trust had the idea to post the entries online, one day at a time, exactly 70 years after they were written. You can read the first entry (and all subsequent ones, for that matter) here.
August 08, 2008
Quite a bad day at the Munger campaign, and for journalistic consistency.
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1. First, the Charlotte Observer runs this story. Notice the total ABSENCE of any mention that I even exist.
Now....I have a PhD in Econ. I have worked as an analyst at the Federal Trade Commission, I have taught energy economics at Dartmouth College. I have published extensively on energy, including work on low level radioactive waste disposal siting and technology.
Oh, and I almost forgot: I'M A CANDIDATE FOR GOVERNOR! As a candidate for Governor, just like the two who WERE mentioned in the story in the Big O, I issued a press release, and wrote up my position on drilling on my campaign blog. If you Google "munger drilling", you get my position in the fourth line. If you Google "munger libertarian drilling", you get it in the FIRST line, and three of the first four entries. Even a reporter, I think, should be able to use advanced research techniques like this. If he WANTED to, that is.
Shame on you, Mark Johnson. If you want to email him, here you go.
2. Then, the News and Observer actually goes out of it's way to deliver the coup de grace. (Ryan, I though we were tight, man....sad, really). Here's Ryan's story.
Mr. Beckwith goes through all the permutations of Bev Basnight's different names, her travels through the many lands of marriage and names she doesn't even use any more. He also talks, at length, about whether Pat McCrory goes by Pat or Patrick.
Ryan...sweetie...what every HAPPENED to us? Nothing about "Mike" or "Michael"? Not one word about the other candidate in the race?
You could at least have said this:
"The other candidate, Mike Munger, Libertarian, uses "Mike" rather than "Michael" because it is shorter. He knows that improves the chances of getting included in the last sentence of stories." Only 25 words. How hard would that be?
I want my nickname included with the others! Then, I'd feel like a REAL boy, just like Pinocchio. (He went by "Woodie," as you might know.)
A final lagniappe: Bev Perdue's nickname in the Senate was, and is, "Dumpling." Yet, Mr. Beckwith, in a clear show of journalistic timidity, left this out of the story.
Sad day for journalism in NC. A sad day.
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Posted by Michael Munger at 07:01 PM
Working Long Hours
Something to keep in mind next time a pol speaks of working families:
In 1983, the lowest-paid workers were more likely to work long hours, according to the National Bureau of Economic Research. But by 2002, the most highly paid workers were twice as likely to work long hours as the lowest paid.
An obvious, though not necessarily correct, explanation is the reduction in marginal tax rates.
Thursday's WSJ had a write up on paperbackswap.com and some other book swapping sites. Paperbackswap.com was founded by a former colleague, a former student, and an older Berry alum; more about them here. I'm a member; the site is both useful and user friendly.
August 07, 2008
The Revolution Will be Printed on a T-Shirt That Retails for $17.99
While browsing for some stuff about Che Guevara for a project about human rights violations and economic freedom (coming soon!), I came across www.che-lives.com. Three things about the site immediately jumped out at me. First, the hammer-and-sickle icons on the left sidebar, the second of which is next to "advertising" (by Google--the link will take you to cheguevaraproducts.com). The second is the fact that the right sidebar is all links to the Che-Lives Store. Then, right below the middle of the page are "Links" (actually "Ads by Google" again) with one offering "Che Guevara Shirts" and the other linking to "10 Rules of Flat Stomach" (can't I just cover unsightly flab with a Che shirt?). From the main site, it would be easier to navigate to "10 Rules of Flat Stomach" than it would be to actually find anything Che said or wrote.
Here is Alvaro Vargas Llosa on Che. And here's the shirt I won from Bureaucrash at the IHS "Liberty and Society" Summer Seminar. It's actually cheaper than the shirts I saw at the Che-Lives Store, but I could save on Che shirts if I bought them wholesale. Finally, here's a related thought from the vault on how anti-capitalism is made possible by the social division of labor.
Beautiful irony, thy name is Che Guevara.
Obamanomics--We Have a Taker
I wondered if any legit economist could defend Obama's energy combo of taxing oil companies and sending $1,000 stimulus checks to consumers. Obama advisor Austan Goolsbee dutifully rides to the rescue; see this video. Goolsbee points out that oil companies have received gobs of subsidies. Well, ok, cut the subsidies (even if doing so puts upward pressure on gas prices), but ditch the tax/consumer rebate scheme.
BTW, here's Josh Barro on windfall profits taxes.
ADDENDUM: A reader sends the following question.
Anyhow, I got to thinking, and if his argument is that oil has received subsidies and tax breaks for the past 30 years and they need to pay those back, well, what about the other industries that have received the same, should they not pay back as well? [snip] Big farm has made plenty of money with all of their subsidies.
A fine question. Not only does Obama appear to single out just one industry, oil, for taxation to recover previous subsides, he (if memory serves--I'm not looking it up at the moment) supports subsidies for ethanol.
Here's another question--is there any reason to think that Obama's proposed tax on oil companies is commensurate with the subsidies they received? Stated differently, one might assume that the actual amount of subsidies varied across oil companies; does Obama's tax plan hit firms accordingly? I doubt it but I haven't dug that deeply in the details of the proposal (if they're even available).
FWIW, Goolsbee is smart enough to realize all of the above. I'm wondering if flacking for Obama's tax/stimulus scheme is his punishment for the NAFTA kerfuffle.
I also owe a HT to the the first place--I think it was Mankiw--I saw the Goolsbee video and Barro link.
Walter Block on Point-Shaving
Bob raises an interesting question about what Walter Block might say about point-shaving. So I sent him an email and asked. He graciously agreed to let me post his response:
In my humble opinion, point shaving is like payola: a disc jockey playing records he is paid to play by record companies. Rothbard deals with this correctly in my view: this is a tort against the radio station, not listeners. But there could be severe penalties against either payola or point shaving.
A couple of further thoughts:
1. As I understand it, gambling fuels a lot of interest in sports. It's the fact that people can bet on them that makes them interested in MAC basketball games. I'm not picking on the MAC: growing up in Ohio I always felt like MAC schools were unfairly overlooked, especially in football.
2. Point-shaving scandals and other gambling-related scandals are probably a direct consequence of the fact that betting on sports is illegal in most places and, therefore, has to be done underground. This produces the results you would expect: heavy involvement from organized crime, violence, dishonesty, and so on. If gambling were universally legal, I would guess that professional sports leagues and now-legitimate gambling operations would work out some time of arrangement whereby gambling operations would be entitled to relief if the league's games were fixed and where the league would be entitled to relief if it were discoverd that the gambling operations were meddling with the outcomes. I don't know exactly what kinds of institutions would evolve, but I'm enough of a Hayekian to trust that order would emerge. This theory is weakened by the fact that the leagues do not currently have any arrangements with Las Vegas sports books, and I think that the specter of gambling is one of the reasons why the major sports leagues have avoided Las Vegas.
3. I don't know why more people don't bet against their favorite teams as a form of insurance, especially since so many of us will let the outcome of a sporting event ruin an entire weekend (or week, or year). One would think that people would want to insure against such precipitous utility losses, especially since winning a few bucks would make it easier for a dejected fan to self-medicate after a crushing loss. I have three back-of-the-envelope theories. The first is social: for a lot of people, betting against Our Team is a form of treason. If I had to explain to friends and family that I'm not that disappointed in Our Team's recent loss because I won $100, I would probably end up spending my winnings replacing slashed tires. The second is psychological: people enjoy the emotional roller-coaster that comes with being a sports fan. In other words, the variance of the expected utility stream is important, not just the mean. The third is that sports fans are playing a maximax strategy and don't want to dampen the euphoria that comes with the best-case scenario. Losing money would probably make it harder to belt out "We Are the Champions," and I doubt I would have enjoyed the Cardinals' Game 7 victory over the Mets in the 2006 NLCS as much if I'd lost money on it. Any alternatives? Comments are open.
A former University of Toledo basketball player has been charged with fixing games in the latest development in a nearly two-year federal gambling probe.
I don't know what's more surprising, that his occurred or that anyone cares enough to bet on MAC basketball games.
Question for thought: Should point shaving be a crime?
You could argue that the player violated the contract he has with the NCAA not to engage in such activities, but we don't usually criminalize simple contract violations. How is a point shaver different than a player who simply dogs it? As far as the betters are concerned, if the line setters have done their job right, half the betters should be on one side of the line and the other half on the other side of the line. An effective point shaver would change which half won, but I can't see any reason why I should care about one side over the other side. The whole thing was a coin toss anyway.
Would Walter Block defend this undefendable?
August 06, 2008
The word of the day is "execrable"
Frank's adjective describing Hannity and Colmes made me swivel my chair to the bench where sits my Websters New Universal Unabridged Dictionary.
execrable, adj. 1. utterly detestable; abominable; abhorrent. 2. very bad: an execrable stage performance. [1350-1400 for earlier sense "expressing a curse"; 1480-90 for def. 1; ME < L ex(s)ecrabilis accursed, detestable. See EXECRATE, -ABLE] --execrableness, n. --execrably, adv.
Fed's batting average under Bernanke dips
As you know, yesterday the Fed left the target federal funds rate unchanged. In the 30 months since Ben Bernanke became Fed Chairman, now just 10 of 21 FOMC meetings have resulted in either a rate hike or a rate cut, a dip from a .500 to .476 "batting average." NB: in the 30 months prior to Bernanke's term, the Fed had 14 "hits," increasing the FFR 14 times for a total of 350 basis points. Data here.
Transfers vs. Exchanges: A Lesson John McCain Also Needs to Learn
In an earlier post, I pointed out that T. Boone Pickens is wrong to call imported oil a $700 billion transfer instead of a mutually beneficial exchange. As this video (about 30 seconds into the clip) of a recent appearance on the Hannity and Colmes program (one of the most execrable hours of tv imho) indicates, John McCain also seems oblivious to the difference between transfers and exchanges.
Drill Now, For the Children
My suggestion on how to get Dems to allow more offshore drilling is below the fold.
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In 1995, Robert M. Goldberg penned a Wall Street Journal article called “When in trouble, unleash the urchins.” In the article, Goldberg explains how “War on Poverty holdovers are now using children to shield every social program from any spending controls” and he calls the rhetorical exploitation of children a “cause for genuine embarrassment.”
More than a decade later, children play a prominent role in this year’s presidential campaign rhetoric. Sen. Obama calls for having “our children … inherit a planet that’s a little cleaner and safer” and bemoans “crumbling schools that are stealing the future of black children and white children and Asian children and Hispanic children and Native American children." Talk about no child left behind.
Sen. Clinton urges us to “lift the threat of global warming from our children’s future,” advocates making “college affordable again for the young people,” and indicates that she ran for president in order to “leave all children brighter tomorrows.” Of course, Sen. Clinton’s fondness for urchin rhetoric is hardly a surprise since the Clinton Administration’s Vaccines for Children program (yes, its real name) motivated Goldberg’s article.
Not to be outdone, Sen. McCain makes children a bipartisan cause. He asks, in the wake of a Baghdad bombing, “what are they [terrorists] willing to do to our children?” Indeed, he raises the ante with some grandchildren straight talk: “We and the other nations of the world must get serious about substantially reducing greenhouse gas emissions in the coming years or we will hand off a much-diminished world to our grandchildren.”
Of course, it’s true that education, national security, and the environment are all issues that will affect our children, my young son included. It’s just as true that our children’s quality of life will be affected by the availability of energy at affordable prices. And this issue, specifically motivating Congressional Democrats to join President Bush in lifting the moratorium on offshore oil exploration, is ripe for some “for the children” advocacy.
Liberals in Congress oppose drilling. Typical is California Sen. Dianne Feinstein, ''Even if new offshore drilling were allowed … along the outer continental shelf, which I wholly and resolutely oppose, it won't produce oil in time to solve the gas price emergency American consumers are facing right now.''
Maybe Sen. Feinstein is right that drilling would have little immediate effect on prices; after all, oil exploration is an expensive and time consuming process. Then again, futures markets—exchanges inhabited by scapegoats called speculators—react not only to current conditions but also to expectations about the future.
Regardless of any effect increased drilling may have on current prices, it is still worthwhile policy. Even if it takes five or ten years for new drilling to expand the flow of available oil, the increased supply of oil will make future prices lower than they would otherwise be. (We’d now be observing the price lowering effects of drilling but for Pres. Clinton’s 1996 veto of legislation opening ANWR.) How much lower is, of course, impossible to forecast with any reasonable degree of certainty. But a reduction of, say, 50 cents per gallon of gasoline below the price that would otherwise prevail would translate into savings of $250 per year for a consumer who logs 15,000 miles per year in a car getting 30 mpg.
Moreover, there would also be reductions—again difficult to quantify but certainly nontrivial--in the cost of producing and transporting goods. Everything from airfares to supermarket produce to plastics would be a bit cheaper than if we continue with the moratorium on drilling offshore and in ANWR. (A bit of perspective: The ANWR drilling footprint would be less than 10% of the size of my college’s campus.) These savings would not move someone from poverty to opulence, but they are substantial nonetheless.
Advocating drilling is not claiming we can “drill our way out” of higher energy market prices; future generations may still face higher prices arising from increased demand for oil in China, India, and other developing countries. Nor does advocating drilling mean that future generations would not adopt more fuel efficient lifestyles. Higher gas prices lead people—almost as if they are guided by an invisible hand--to drive less, to buy more fuel efficient vehicles, and to make a myriad of other changes. Even if drilling is permitted, the strong possibility of higher future prices is likely to provide an incentive for continued fuel conservation and for the development of new technologies.
It’s also worth noting that drilling, to the extent it replaces imported oil, would offset carbon emissions from tankers and may well produce less spillage than tankers. Hence, it’s far from a forgone conclusion that increased drilling would leave future generations a dirtier environment.
Besides advocating policies for the children, another favorite Democrat nostrum is “targeted tax cuts.” By promising to lower the future price of products derived from oil, lifting the ban on drilling amounts to a targeted tax cut for future generations, aka children. Congressional Democrats should drill now, for the children.
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August 05, 2008
Deficits: The Movie
For those of you keeping track: federal spending in 2000 was $1.8 trillion and has increased by more than $1 trillion dollars since. W's final proposed budget was $3.1 trillion. The current budget deficit is about $350 billion and rising fast. And total federal debt is about $9.6 trillion, with about $450 billion in interest payments. Here are all the CBO historical numbers. And here is Munger in Public Choice, puzzling over whether and how any of these data matter.
Sound like an interesting movie pitch? The Concord Coalition thinks so:
The movie, an official selection of the 2008 Sundance Film Festival, features Concord Coalition Executive Director Robert Bixby and Fiscal Wake-Up Tour keynote speaker, former Comptroller General of the U.S., David Walker. It contains interviews with Concord Coalition President Peter G. Peterson and Concord Board members Robert Rubin and Paul Volcker. [...] Using candid interviews, archival footage and economic data, "I.O.U.S.A." presents a vivid, alarming profile of America's current financial status. The "I.O.U.S.A." documentary will open in theaters in 10 cities on Aug. 22nd. Those cities are expected to be: New York, Los Angeles, Atlanta, Chicago, Dallas, Miami, Philadelphia, Kansas City, San Francisco, Washington, D.C.
The interesting thing about [the Concord Coalition] is they hold the viewpoint that we need to eliminate the debt. That means a fiscally responsible vote is not only voting no against spending bills, but also voting no against lowering taxes.... They have as the movie suggests supporters on both the right and the left. They have a record of congressional votes and produce score cards so you can see what they consider a fiscally responsible vote. It is not about reducing the overall scope of the government just the debt.
A Lot Has Happened Since Thursday
1. US Per-Capita GDP is now lower.
2. The percentage of our family income and the percentage of US GDP devoted to health care is now higher.
3. My estimate of the probability that major diseases like cancer and AIDS will be cured in my lifetime is now higher.
Jacob Henry Carden was born at 11:47 PM on Thursday, July 31. He was 21 inches long and weighed just under eight pounds. I would describe him as healthy, happy, and hungry. A family photo and an economics question are below the fold.
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Our First Family Photo, Baptist Hospital, 8/1/08.
An economics question: does claim #3 depend on any particular assumptions about Jacob's career path? Why or why not? Answers?
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August 02, 2008
Obamanomics: Any Takers?
Barack Obama proposes to deal with rising gasoline prices by giving a $1,000 "emergency rebate" to consumers - a rebate to be paid for by taxing the so-called "windfall profits" of oil producers.
That's exceptionally good, even by Don's high standards. But my interest in copying it here (I assume most DOL readers also read Cafe Hayek) is the following. Earlier this year, much was rightfully made of McCain's call for a gas tax moratorium and how no economists thought it was a sound idea. For example, here's Mankiw: "I don't know any prominent economist who favors this McCain-Clinton proposal."
What I'm wondering now is if there are any prominent economists who support Obama's tax/rebate scheme? Any takers? Anyone? [Best read with Ben Stein's "Ferris Bueller" voice.]
August 01, 2008
Weirdest Sentence I Read This Week
Even Larry Lindsey, the former Reagan economist, concludes that a larger bailout is nearly inevitable -- though his fanciful solution is to recruit 100,000 immigrants who would agree to buy $10 million worth of housing each.
That's from Holman Jenkins WSJ column. I wonder what makes Lindsey think there are 100,000 such people who want to come here, have net worth above $10m, and want to tie up $10m in houses that Americans don't want to purchase at their current prices. Maybe he has good reasons for offering his solution, but it strikes me as a bit squirrelly.
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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