Atlas gets a deal that can't be refused, reports today's Charlotte Observer.
The government announced the [tarp] program two weeks ago, requiring nine mega-banks – including Charlotte's Bank of America Corp. and Wells Fargo & Co., which is buying Wachovia Corp. – to sign up for it. Wednesday, the U.S. Treasury said it had followed through with its pledge to purchase shares of those banks, which means federal money is now starting to work its way through a wounded banking industry.
The Treasury is allowing other banks to announce their participation in the $250 billion program on their own timing. In the past week, at least a dozen regional banks said they had signed up, including Winston-Salem's BB&T Corp.
Most of the banks say they want the capital so they can make more loans, though some could also have an eye on buying up other firms. BB&T's CEO, John Allison, hinted at that possibility on Monday, when BB&T announced its $3.1 billion infusion.
“For us, the additional capital will not only extend and strengthen our lending capacity, but provide other strategic options as well,” said Allison, who is famous in the banking world for his opposition to government intervention.
I sent this email replying to an email I received earlier today.
I care a lot more about losing our liberties than I do about our bulging waistlines. Americans should be free to eat 8000 calorie burgers and ogle all the naughty nurses they wish, and busybodies like you have no right to tell them otherwise.
Please do not solicit me again with such nonsense.
I've just been told that a restaurant called the Heart Attack Grill is going to be opening near campus. Their slogan is "Taste Worth Dying For!"
Anyone who finishes the Triple Bypass Burger gets pushed out to their car in a wheelchair by the Naughty Nurse waitresses.
I read an article saying that the Quadruple Bypass Burger has 8,000 calories. Isn't America fat enough already?? Hopefully someone on the faculty can help keep this idiocy away from our campus.
Much has been made of the respective ages of the two candidates for U.S. President in 2008. One is thought by many to be too young and one is thought by many to be too old. Is it possible to be a vigorous President at 72? Is it possible to be a wise leader at 47? We will find out the answer to one of these questions next week, but the Oct. 29, 1908 NYT reports on the ages of the prevailing "world leaders" at the time:
Theodore Roosevelt, President, United States, 50 years old.
Francis Joseph, Emperor, Austria-Hungary, 79 years old.
Porfirio Diaz, President, Mexico, 79 years old.
Leopold II, King, Belgium, 74 years old.
Armand Fallieres, President, French Republic, 67 years old.
Edward VII, King, England, 67 years old.
Frederick VIII, King, Denmark, 65 years old.
Abdul Hamid II, Sultan, Ottoman Empire, 57 years old.
The Oct. 29, 1908 NYT has two stories which deal with questionable medical conclusions:
Dr. L.E. Landrone...commended the modern corset. In an address before the members of the Women's Literary Club he declared that the stays were good for the reason that the torso muscles have been weakened for centuries through the generous support of the corset until now the average female form could not stand without its help...
The speaker said that the body was composed of chemical fluids at the mercy of emotions. Anger, hatred, sorrow poison the fluids of the body while love, cheerfulness, and happiness serve as eliminators of the motive fatigue poisons.
"Anger and hatred will poison forty-two fluids of the woman's body," said Dr. Landrone. "Pleasure stimulates, and that is why, when tired, especially when young, an evening of dancing and music will remove all signs of fatigue."
Exactly 42 fluids?
Another story is even more shocking:
ADVISES SMOKING FOR WOMEN
Dr. Rachel Skidelsky, one of the best known women physicians of Philadelphia, started a brisk discussion last night when, at a meeting of the Women's Club, she supported the right of women to smoke. She said that smoking would undoubtedly be beneficial to the fair sex if it were properly indulged in. To bear out her statements she produced scientific data.
In the course of her arguments Dr. Skidelsky stated that men found relief from worry by smoking. "If a woman would sit down for five minutes before beginning her day and give the time to a cigarette," said Dr. Skidelsky, "she would be able to plan better her day's work. And the five minutes used, three times daily, would be, I think, of much benefit to her.
Many physicians held similar views, said Dr. Skidelsky, but hesitated to advise their women patients to smoke because of a fear that what was offered as medicine might become a habitual indulgence.
The Oct. 29, 1908 NYT reports more wagering on the upcoming 1908 elections:
A number of small wagers were made in the financial district yesterday at even money on Hughes and Chanler. Bets on Taft were few and far between, but a few were placed with odds on Taft, ranging from 4 1/2 to 3 to 1.
The largest bet heard of was one made early in the day by a Hughes man, who placed $5,000 on Hughes against $4,500 on Chanler. Later several bets of $1,000 were made on the State contest.
The largest bet on the Presidential outcome was reported from the Cotton Exchange, where it was said that $3,000 Taft money had been placed against $1,000 on Bryan. One Broadway Stock Exchange house placed $1,000 on Taft against $300 of Bryan money.
Those who have followed betting in Wall Street are agreed that there has never been a Presidential contest for a generation in which the wagering has been so light. Taft money seems to be plentiful, but the odds demanded by those with cash to bet on Bryan are considered prohibitive.
Please pardon the following commercial interruption, but the advertisement won't appear in the JOE until December because of California budget vagaries. So I am getting the word out.
The Department of Economics at San Jose State University invites applications for a tenure-track position at the level of Assistant Professor in Applied Economics. Qualifications include demonstrated teaching expertise and research potential. Preferred teaching fields are Industrial Organization, Labor Economics, Financial Economics, or Cost Benefit Analysis.
See below the fold for complete details. And please distribute freely.
The Department of Economics at San Jose State University invites applications
for a tenure-track position at the level of Assistant Professor in Applied
Qualifications: The Department is seeking candidates with demonstrated teaching
expertise and research potential in Applied Economics. Preference
is given to candidates with strong research and teaching interests in
Industrial Organization, Labor Economics, Financial Economics, or Cost
Benefit analysis. These key fields should be supplemented with
other courses listed below. Candidates should indicate which courses
they are prepared to teach at the graduate and undergraduate level:
Economic Decision Making
(Cost Benefit Analysis)
Teaching: A commitment
to outstanding teaching is required. The successful candidate
should demonstrate experience, understanding, and/or potential for excellence
in teaching. Integration of teaching and research is expected.
Candidates should infuse all courses with an international perspective.
Research: The successful
candidate should have publications and/or strong potential for publications.
The Department engages in applied
economic research with local and statewide impact. Please review
the Department website for
an indication of the level and quantity of publications currently accomplished
by tenure-track faculty.
Successful candidates are expected
to have completed the Ph.D. in economics or a closely related field
by August 20, 2009. Teaching excellence, publication in refereed journals,
and active university and community service are required for tenure
Applicants should demonstrate
a commitment to promoting global education, utilizing appropriate technologies,
and interacting effectively with Silicon Valley communities.
Applicants should have awareness of and sensitivity to the educational
goals of a multicultural population as might have been gained in cross-cultural
study, training, teaching and other comparable experience.
Teaching assignment is
12 hours of classroom instruction per semester (3 courses per semester
is possible and typical with supplementary independent courses or other
assigned time activities).
Teaching and developing
curriculum in their field and in introductory courses.
and advising of graduates and undergraduates.
work at the department, college, and university level
to the community through, for example, media interviews.
must address the needs of a student population of great diversity –
in age, cultural background, ethnicity, primary language and academic
preparation — through course materials, teaching strategies and advisement.
Commensurate with qualifications and experience.
Starting Date: August
Employment is contingent upon proof of eligibility to work in the United
full consideration send a letter of application, curriculum vitae, statement
of teaching interests/philosophy and research plans, and at least three
original letters of reference with contact information by December 10,
Department of Economics, San José State University,
One Washington Square,
San José, CA 95192-0114
Please include Job
Opening ID (JOID) on all correspondence.
The Department Search
Committee will be conducting informational interviews at the American
Economic Association in San Francisco.
San José State
University is California’s oldest institution of public higher learning.
The campus is located on the southern end of San Francisco Bay in downtown
San José (Pop. 945,000), hub of the world-famous Silicon Valley high-technology
research and development center. Many of California’s most popular
national, recreational, and cultural attractions are conveniently close.
A member of the 23-campus CSU system, San José State University enrolls
approximately 30,000 students, a significant percentage of whom are
members of minority groups. The University is committed to increasing
the diversity of its faculty so our disciplines, students and the community
can benefit from multiple ethnic and gender perspectives.
A common argument in favor of voting is that it allows the voter to let his or her voice be heard in the political process, but others have argued that silence can be deafening. Take a position: should I vote or not? In 500 words or less, persuade me to do one or the other.
Entries are limited to 500 words and must be submitted by email to email@example.com by 6:00 AM Central Time on Tuesday, November 4. Depending on the number of entries, I reserve the right to read only the entries I have time to read. Happy writing.
Update, 3:18 PM: the entries are rolling in, and they're pretty good so far. Keep 'em coming!
NB: it's also a useful exercise in the importance of social networks and social entrepreneurship. I got the link via a Facebook link from a student at the IHS "Liberty and Society" Seminar I taught at over the summer.
Why fear Socialism when you have Republicans? c. 1908
A somewhat lengthy letter to the editor published in the October 28, 1908 NYT suggests, once again, that there are not many new problems in the world just our problems. The letter might well be submitted today with only a few name changes:
They [Socialists] decry competition and call for more, and ever more, co-operation -- co-operation on a scale municipal, State, and National. They tell the propertyless that, in the nature of things, by the historical development of industry, it isn't possible for each man to be economically independent, for clearly each spinner cannot own a cotton factory and each engineer a locomotive, in the way each farmer started by owning his farm. So, they say, if you want a voice in managing your business, you spinners and engineers, you must get the factories and railways owned by the community, so that you can cast a vote in selecting the managers and fixing the wages and rules of your work.
While it might not be economically practical for each individual spinner to own his own cotton factory, what with economies of scale and all, it is possible for spinners to own parts of cotton factories if the cotton company is publicly owned via shares. Of course, many firms in 1908 were private just as they are today, but it is not necessarily the case that the individual spinner can't own a portion of the factory (to the extent that the worker wishes to bear the risk inherent in owning the means of production). Ownership by the public (i.e.,. shareholders) and ownership by the community (i.e., state ownership) are two very different animals. Ownership by the community does two things: it forces risk on those who would otherwise choose not to bear it and it politicizes firm decisions in a way that ownership by shareholders does not. State ownership changes the objective function of the firm - usually away from profit maximization.
The letter goes on:
That doesn't seem to me very alarming, unless one is afraid of democracy, for this programme of public ownership will inevitably be submitted piecemeal to the voters for judgment, and if it's found impracticable, wasteful, or immoral it won't be adopted. In a Nation as big as ours the danger is never that changes will come too fast. The Socialists will find that it is a terribly slow business to overcome the inertia of 80,000,000 of people.
It is indeed a slow process. It might take, say, one hundred years to overcome the inertia. However, I wonder how easy it is to "repeal" state ownership if it is found to be wasteful or immoral? Examples from other countries suggest that it isn't as easy as the letter writer assumes.
The letter writer then fires a broadside against the "free marketers" of the day:
The principle of competition which the Socialists flog has already been discarded; they are whipping a dead horse. No trust promoter believes in free competition. Moreover, most of the Rooseveltian policies - the arid land reclamation schemes, the National forests, the leasing of coal and mineral rights, the renting of grazing lands, the construction of the Panama Canal by direct employment, the development of water powers under public ownership and control - are in strict harmony with Socialist principles....The faith of our forefathers in the sacred principle of competition as the self-acting force which yielded ideal justice and rendered to every man according to his deserts, has departed as surely as the belief in witchcraft. So why be alarmed because Socialism is inculcating with some success a political philosophy that means the conscious adoption of the method we are already, empirically, trying? There is no advantage in preaching one principle and practicing another, as do some good Republicans and Democrats.
Wow - what an amazing paragraph and one that could be printed today with very little modification.
The letter writer goes on to castigate the wealth redistribution schemes of the day:
"But," reply the nervous ones, "the Socialists want to abolish rent, interest, and profits; and when they succeed where will you be?" Probably in my grave. I'm not worrying. They can't threaten me worse than Theodore Roosevelt does with his inheritance and income tax schemes and the social workers of New York with their ever-increasing demands on the city budget. "There's a good time coming, boys," has been the song of radicals in all ages, and always the heaven of their hopes has receded as they advanced - though they won a little brighter earth. If capitalists were really shrewd they'd really encourage the Socialists to talk about their heaven, the blissful time when the capitalist lion will lie down inside the proletarian lamb and the earth will bask in the peace of universal brotherhood, for the Socialists are formidable only when they make concrete proposals for immediate adoption. And when they do their schemes will have to stand sifting and criticism exactly the same as the schemes of other parties.
The letter writer's point that action is more important than rhetoric might provide some insight as to what is happening in this year's election.
The October 28, 1908 NYT reports on one industrialist's prediction of what would happen if William Jennings Bryan won the 1908 Presidential election:
President E.P. Ripley of the Atchison, Topeka and Sante Fe stated to-day that if Bryan was elected the Santa Fe system would abandon extensions and improvements, principally in the Southwest, aggregating $3,000,000, not that it was Bryan or for partisan reasons, as he explained, but because a change in the National Government at this time would prove nothing less than an industrial calamity.
"The country is slowly recovering from the financial fright a year ago," said Mr. Ripley, "in which the laboring people and workingmen suffered. A change in the Government's policy just now must surely mean a reorganization of the country's industrial world, and this means two or more years of unsettled conditions which America is not prepared for. The extension of the connection of the Pecos lines with the Gulf lines is a very important project, but this, with other improvements, must be abandoned if the present Administration is not continued."
So history doesn't repeat itself? I wonder if there are similar thoughts running through today's industrialists even if they seem silent about them.
The October 28, 1908 NYT reports on an interesting investment opportunity:
Speyer & Co. and the National City Bank, having charge in this country of the subscription lists for the new thirty-five year 4 1/2 per cent. sinking fund gold bonds of the Institution for Encouragement of Irrigation Works and Development of Agriculture in Mexico, announced yesterday that these lists would be closed to-day. They report a large number of subscriptions having been received from all parts of the country.
I wonder how the Institute "encouraged" irrigation in Mexico and whether the Institute actually paid off on their bonds - after all, a lot is going to happen in the next 35 years.
The October 28, 1908 NYT reports a surprising fact concerning President Roosevelt's eldest son:
The announcement from Hartford, Conn. that Theodore Roosevelt, Jr., has been promoted to the worsted room of the Hartford Carpet Company, but that his promotion carries no increase of wages, is supplemented by the statement of a close personal friend here that the weekly pay envelope of the President's eldest son contains exactly $4.50 [$104.60 in CPI adjusted 2007 dollars].
From the same source it is learned that Theodore, Jr., is likely to be advanced to $5 per week during the coming month.
The story is based on an unnamed source, which today would be (somewhat) frowned upon. However, if the story is true, the President's eldest son earned approximately $235 per year? EH.net suggests that nominal per-capita income in 1908 was about $340, which would mean that the President's namesake was paid less than the average citizen?
I am not sure I am buying this unless a) Theo, Jr. was simply a terrible worker, b) Theo, Jr. was intentionally taking a lower salary in order to "learn how the other half lives," or c) Both (a) and (b). On the other hand, perhaps Theo, Jr., was being paid considerably more than the average worker and this story is simply a viral means of deflecting from the state of privilege enjoyed by the children of politicos - especially "populist Republican" politicos as opposed to "populist Democrats" of today - about a week away from a Presidential election.
The highest minimum wage is in the state of Washington - $8.07 an hour. The lowest is in Kansas where some companies pay as little as $2.65 an hour.
Old Andy might benefit from a chat about the difference between binding and non-binding price floors. Kansas may have a minimum wage law of $2.65 per hour, but I bet few companies can get workers willing to work for that wage unless the job comes with tips or unusually generous non-cash compensation. By Rooney's logic that companies can get by with paying the legal minimum wage, New York's minimum wage must be whatever it is that he's being paid by CBS.
Any Kansans working for $2.65 an hour are welcome to send me an email and I'll append a correction.
One or the other has conspired to produce an interesting amalgam of ideas this evening. I just attended a discussion of democracy featuring two Marxists and returned home for an evening of quiet reading and non-alienation from my family. This evening's selections included among other things "The Letters of Ayn Rand" and CS Lewis's "God in the Dock: Essays on Theology and Ethics." After reading a few of Rand's letters this quote from Lewis's essay "The Laws of Nature" really struck me because it deals with Mises's explanation of human action and Rand's theories of reason and the creative mind as they relate to objective reality:
"Add six pennies to six and the result will certainly be a shilling. But arithmetic by itself won't put one farthing into your pocket." (p. 77)
6 + 6 = 12 is an objective fact about reality, but the creation of value and the putting of farthings into pockets requires the application of intelligence. We are always and everywhere constrained by the fact that 6 + 6 = 12, but this mere fact alone moves produces nothing. Production requires action.
Blogging has been light lately in part because I've been on the road a lot (MVEA meetings in St. Louis this past weekend, Liberty Fund in Indianapolis Thursday and Friday of this week) and in part because of hyperlinking problems with Firefox and Safari. According to www.al.com, teen pregnancy increased in Alabama in 2007 (http://blog.al.com/spotnews/2008/10/teen_pregnancies_up_in_alabama.html). This suggests a testable hypothesis. Minimum wages cause unemployment, and state-level variation in minimum wages would allow one to isolate the effect of a minimum wage on teen pregnancy. Here's a back-of-the-envelope theory explaining why higher teen pregnancy might be an unintended consequence of a higher minimum wage:
Idle hands are the devil's tools, and minimum-wage induced reductions in employment opportunities for teenagers will reduce the opportunity cost of casual sex. In addition, lower incomes means that demand for contraceptives will fall if they are normal goods. More sex coupled with greater risk tolerance should lead to more teen pregnancy. I stress that I haven't tested this theory, nor do I know whether anyone has. If anyone knows whether such a study has been done, I would be interested in seeing the results.
The Institute for Humane Studies is currently soliciting applications for the 2009-10 Humane Studies Fellowships. IHS hopes to exceed last year's award totals of $600,000 to more than 150 graduate and advanced undergraduate students from around the world. The awards support research into the principles, practices, and institutions that support a free, prosperous and responsible society. Select applicants are invited to the annual Humane Studies Research Colloquium and other advanced colloquia throughout the year. Fellows also join a growing network of over 10,000 IHS academics who are committed to the ideas of liberty and intellectual freedom. For more information, visit www.TheIHS.org/HSF. The deadline to apply is December 31, 2008
A simple computer program discards the lowest quarter and highest quarter of the estimates, and calculates the average of the remainder. The result is that day’s Libor. The calculation is repeated for each of ten currencies and 15 loan durations (from overnight to 12 months), so 150 Libors are published daily: overnight sterling Libor, one-week euro Libor, one-month yen Libor, three-month US dollar Libor and so on.
It’s the back-up arrangements that tell you something about how much the calculation matters. The co-ordinators have dedicated phone lines laid into their homes so they can still work if a terrorist attack or other incident stops them reaching the office. A similarly equipped building, near the office, is kept in constant readiness, and there’s a permanently staffed back-up site in a small town around 150 miles from London (I won’t be any more precise than that). Its employees periodically work in the London office, so that they’re ready to take over if need be.
The precautions are necessary because if Libor suddenly became unavailable, large parts of the global financial system would be paralysed.
The very possibility of a large-scale swaps market depends on the availability of a measure of interest rates that is unequivocal and credible enough to form the basis for contracts denominated in billions of dollars. Libor has provided that measure.
To economize on transaction costs, banks trade via brokers in London. The essay conveys some very intresting institutional details, including how informal codes of conduct regulate much of the money trades that depend on and inform LIBOR. Read the whole thing to discover how traders compete on good eyesight and "broker's ear".
As one broker put it to me: ‘When you’re on the desk you’re expected to hear everyone else’s conversations as well, because they’re all relevant to you, and if you’re on the phone speaking to someone about what’s going on in the market there could be a hot piece of information coming in with one of your colleagues that you would want to tell your clients, so you’ve got to be able to hear it coming in as you’re speaking to the person.’ ... It’s an embodied skill that affects the way Libor is calculated.
Now with stocks plunging and a steady drumbeat of layoffs, bankruptcies and foreclosures, sales efforts such as variable pricing, pay-as-you-go plans, package deals and even mandated cheap seats are growing. They're likely to only get more popular.
"We read the papers and know there are jobs disappearing and people being laid off," said Greg Schenkel, the Pacers' vice president of corporate and public relations. "We were not oblivious to the real world out there.
That's from today's AJC; the article also has some good stuff about teams' price discrimination strategies. Previous posts here and here.
The bailout is now the hottest lobbying game in town.
Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.
The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.
These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.
The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.
Lobbying efforts are intensifying.
The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans.
Source. Yet another example of why Gordon Tullock should have gotten the Nobel instead of Paul "Broken Windows" Krugman.
Imagine this: Barack Obama proposes a Social Security payroll tax cut for low earners. Workers earning up to $8,000 per year would receive back the full 6.2% employee share of the 12.4% total payroll tax, up to $500 per year. Workers earning over $8,000 would receive $500 each, with this credit phasing out for individuals earning between $75,000 and $85,000.
Hold on a minute--I thought the 1993 Clinton EITC expansion already offset the payroll taxes for low income workers. Indeed, this snip from The American Prospect (a lefty mag) confirms my memory:
The EITC dates to 1975. The original idea was to offset the bite of payroll taxes on low-wage workers in low-income families. Since then, the credit has been expanded considerably. There are now three different schedules: a small credit for single-person households and childless couples, a much larger credit for families with one child, and a still larger credit for families with two or more kids. And since eligibility is keyed to family income, the subsidy is quite finely targeted (rich kids with after-school jobs need not apply). As family income rises, EITC benefits initially grow, then level off, and then begin to phase out. A working parent with two children gets 40 cents in tax credit for each dollar earned up to an income level of $9,720. (These figures are for the year 2000.) The maximum annual benefit is thus $3,888. Then, starting at $12,690 in annual income for this type of family, the tax credit declines by 21 cents for each dollar earned, phasing out altogether at an annual income of $31,152. For a family with one child, the peak benefit is $2,353, and for a single person, it's $353.
Drop the payroll tax pretense--the EITC is already more than double the payroll tax (including the employer part) that low income workers pay--and call Obama's scheme the confiscation that it is.
Can be found here. The comment is in response to other commentors, not to the blog author, the always excellent Seth Gitter. In response to those who want to ban padyday lending, commentor Dan responds:
As a pimp and sometime loan-shark, I'm voting YES on issue 5! Since I make my living off of prostitution -- something that's banned by law but has shockingly not gone away -- it's clear that the more we can push things out of transparent, regulated markets where participants in a contract have access to legal remedies if things go wrong, the more money I can make.
My brother the pot dealer agrees with me 100%.
Once small loan places are closed down, I look forward to servicing their customers, who will have no less of a need for short term loans. Of course, I'll charge even higher interest rates than the legal shops, and if they don't pay up, we have ways of getting our money back. They involve crowbars and car batteries. I anticipate a high level of success in my collections.
I'm also thinking about opening up a used car lot. Because as we've seen in other states that pass similar bans, when people need a short-term loan and can't get it through legal means and don't want to go to what some might call the "underworld of organized crime and street thugs," they're likely to sell their cars at fire sale prices.
So in short, as a criminal who preys on the weak, I look forward to the additional business that the well-intended but economically-illiterate backers of this ban will give me.
I recently made a casual prediction to co-blogger Bob that an Obama presidency (combined with a Congress to the left Mao) would trim at least 0.5 points and 10 ranks off the United States economic freedom rating (currently 8.04 and tied for 8th). (Reflection makes me think dropping 10 spots in the ranking is too pessimistic because other countries are also likely to be curbing economic freedom.) BTW, going back to the 2002 EFW Report reveals that the U.S. has fallen 3 places (3rd to 8th) during the George W. Bailout (I'm thinking of updating to George Herbert Hoover Bush) years and had its economic freedom rating fall from 8.5 to 8.04. And to think he's some sort of radical Friedmanite!
But a President Obama would also enjoy large Democratic majorities in Congress. His party might even win a 60-seat, filibuster-proof majority in the Senate, giving him more power than any president has had in decades to push a liberal agenda. And given the opportunity, Mr. Obama will likely radically increase government interference in the economy.
Until now, this election has been fought on the margins, over marginal issues. But it is important to understand how much a presidential candidate wants to move the needle on taxes, trade and other issues. Usually there isn't a chance for wholesale change. Now, however, it appears that this election will make more than a marginal difference. It might fundamentally change America.
I've opened comments for a few days if anyone else wants to venture a prediction. If I actually make it through 4 years of Obamanomics without too big a financial hit I might even send some DOL swag to someone who makes a particularly good prediction.
Is the Financial Crisis Harder on Public Colleges?
Yours truly in Thursday's WSJ:
Your article "Crisis Shakes the Foundations of the Ivory Tower" (Currents, Oct. 17) reports that American Council on Education President Molly Corbett Broad thinks that public colleges "face the greatest challenge in a slumping economy because they get as much as three-quarters of their revenue from state taxpayers."
Please pardon private colleges if they don't share Ms. Broad's lament for government colleges. Instead of being heavily supported via compulsory taxation, private colleges must attract revenue by appealing to donors and by competing for students. Thanks to the financial crisis largely attributable to Fannie, Freddie and other governmental bungling, potential donors to private colleges are now considerably poorer than they were just a few months ago. Likewise, the financial turmoil has decimated the college savings of many families, thereby making it increasingly likely the affected students will choose a taxpayer-subsidized government school instead of a private college. Government largesse tilts the playing field in favor of government colleges, and the governmentally-induced financial crisis exacerbates the challenges facing private colleges.
E. Frank Stephenson
Department of Economics
Mount Berry, Ga.
The Oct. 22, 1908 NYT reports on a firebrand speech given by Eugene W. Chafin, who was the Prohibition candidate for president in 1908. He was giving his first speech at the Cooper Union. Some choice nuggets were reported:
"The Democratic platform is so long that it takes two newspapers to print it. It is like an old fashioned Mother Hubbard - is (sic) covers everything and touches nothing. The only difference between that and the Republican platform is that the latter looks like it was made for a child of four."
And he had this bold prediction:
This is a peculiar campaign. The people haven't yet made up their minds. Such a thing hasn't happened in forty years...Why haven't they made up their minds? they are thinking. They are not satisfied. This is the last battle of the Republican and Democratic Parties, anyway. In fact, there is no Democratic or Republican Party. It is either a Bryan or a Roosevelt party, each doing the master's bidding.
Now, I'm not going to bother with a Lexis search, but hasn't the press had fears of a recession for at least two years by now?
According to the BLS, we had negative GDP growth the last quarter of 2007, surrounded by two quarters of positive growth. The previous negative growth quarter was back in 2001Q3, and it too was a one-quarter only drop. The most recent two-consecutive-quarter negative growth period was way back when I was a freshman in high school, 1990Q4 and 1991Q1. I didn't know we were in a recession back then, but maybe that explains my lack of dates.
Try as they might, the media can't seem to convince the economy to go into a recession. Like a similar Onion-esque story I had on my office door entitled "Congress forbids economy to fix itself until Congress passes a bid to fix the economy." I know, I know, who wants to watch a newscast where the anchor says "things are going along just fine"?
In preparation for the possibility of starting a vintage base ball club in Auburn, I'm doing some historical research on local base ball history and was pleased to discover very early evidence of base ball in Auburn.
Thomas Porter Whitby, a veteran (1862-1865) of the 37th Alabama Regiment of Volunteers , organized a base ball club in Auburn in 1866 while attending the East Alabama Male College (which ultimately became Auburn University).
The Auburn University archives has Whitby's original paper listing the "Members who paid for Base Ball". It is dated March 12(?), 1866.
The note also indicates that he "Paid for Ball - 1.00" which is $13.47 in today's terms (using the CPI). For comparison, an official MLB ball is on sale today for $11.41. A high school ball goes for about $5.
"One time in the House of Representatives [a colleague] told me a story about a proposition that a teacher put to a boy. He said, ‘Johnny, a cat fell in a well 100 feet deep. Suppose that cat climbed up 1 foot and then fell back 2 feet. How long would it take the cat to get out of the well?'
"Johnny worked assiduously with his slate and slate pencil for quite a while, and then when the teacher came down and said, ‘How are you getting along?' Johnny said, ‘Teacher, if you give me another slate and a couple of slate pencils, I am pretty sure that in the next 30 minutes I can land that cat in hell.'
"If some people get any cheer out of a $328 billion debt ceiling, I do not find much to cheer about concerning it." [Congressional Record, June 16, 1965, p. 13884].
Two weeks ago I attended the Atlantic Economic Society meetings, where Franklin Allen's presidential address grimly said the most likely scenario to unfold is the nationalization of the banking industry. We've already seen early, incremental signs of course (over the weekend the Dutch injected $10 billion into ING with many strings attached). Today, Financial analyst/journalist Christopher Whalen explains why he is bearish on big banks and bullish on more intervention. After describing the Treasury Department's "voluntary" capital plan and its high hopes:
We regret to say that the Q3 2008 earnings reports from US banks will do little to dissuade markets that more crisis remains ahead. In front of us still are several quarters of old fashioned realized losses in the form of possibly record levels of bank loan charge-offs, so don't hold your breath waiting for US commercial banks to start growing lending exposure anytime soon.
The $125 billion allocated to bank capital infusions by Treasury Secretary Hank Paulson so far is the appetizer and soup course of the meal, in our opinion. Next year comes the main course, when we could see Citigroup (NYSE:C) and JPMorgan (NYSE:JPM) end up under government control if aggregate loan loss rates peak well-above 1990s levels. Click here to see the non-accrual loans of the largest US banks by assets.
Remember, Paulson's tune has changed over the course of the past year from one of "nothing to see here" to "the sky is falling and the Treasury needs to prop it up." He has also famously made false promises (e.g. "bazooka"). How reasonable is it to expect that all is well now? That we won't be asked to hand over just this little bit more power?
An overlooked problem: once Paulson et al. say "everything is going to be okay, we're confident that we got it right this time," now they are accountable for future downturns, at which time they'll say "okay, now we really mean it, just a little more power and we'll get it right this time."
We've seen this before, of course. In fact, it's the broadest cause for the housing bubble to begin with. Once politicians started to take credit for increasing home ownership rates, the political incentive structure was set in place to ruin the housing market. Again Whalen:
The precursors of the Great Subprime Bust of 2008 start in Washington, with members of both political parties feeding at the affordable housing trough and "spreading the wealth" to use the well worn phrase. Indeed so much wealth was spread, like jam scraped over too much bread, that the result is a partially nationalized US banking system and trillions of dollars in realized losses to investors. And this all in the name of "affordable housing."
Thus we wonder if the next evolution of the public debate regarding the banking industry bailout should be to consider not whether more capital must be injected into the largest banks - rising loan loss rates should make this obvious to all by now - but what is to be done with the biggest banks that the Treasury may very well control by the end of 2009. Building bigger, dumber mega banks, we submit, is a bad choice, while redistributing the deposits and assets of the big banks into more numerous, stronger hands makes enormous sense.
Pedro H. Albuquerque at the blog Incentives Matter, in a sympathetic commentary on Anna Schwartz's anti-bailout perspective, adds this brilliant extension:
the problem of asymmetric information in financial intermediation [is] probably the most important component of this financial crisis.
... the Treasury's bailout plan [makes] the information problem worse by keeping unhealthy banks afloat. The government is artificially creating a lemon market when it does not allow discrimination between healthy and unhealthy banks to occur via bank failures. Besides the redistributive problems that the bailout plan creates, it endangers the entire economy through planned obfuscation. An exemplary case of government failure.
In reading Mary O'Grady's fine column on the presidential debate exchange over the U.S.-Columbia Free Trade Agreement, this passage caught my attention:
But when Mr. McCain pointed out that opposing the U.S.-Colombia Free Trade Agreement doesn't make sense -- because the U.S. is already open to imports from Colombia and because the agreement will open new markets for U.S. exporters during rough economic times -- Mr. Obama was caught flat-footed.
If Ms. O'Grady is correct that the deal is essentially a reduction in Columbian trade barriers, then why doesn't Columbia simply drop its barriers and avoid dealing with the do-no-good U.S. Congress? I must be missing something here.
There's no free lunch in the Treasury borrowing and relending
CNNMoney.com reports the following statements today during Ben Bernanke’s testimony before the House Budget Committee:
In addition, Congress should weigh whether to make credit more available to consumers, homeowners, businesses and other borrowers, Bernanke said. He said that loan guarantees and direct lending by government are among the ways lawmakers can get credit flowing again. […]
Lawmakers also questioned Bernanke about the need to help state and local governments avoid budget cuts. The federal government could loan states money at significantly lower rates than available in the financial markets, he said.
Yes, the federal government (after borrowing yet more money at the Treasury's borrowing rate) can lend -- to consumers, business, states, whoever -- at rates however far below the market they choose. But it isn’t a free lunch. It would dump yet a further burden on innocent taxpayers. There is a reason why a competitive financial market charges various borrowers various premiums (over the Treasury’s borrowing rate). The reason is default risk. If the Treasury lends at below-market rates, it would be charging too little to cover expected default losses, and would therefore putting federal taxpayers on the hook .
I leave it as an exercise to the reader to enumerate the many other problems with creeping financial socialism. (Hint: think socialist calculation problem, Hayek's “Road to Serfdom”, Mises and Tullock on bureaucracy, and public choice.)
ADDENDUM: Jeff Miron does a great job here of explaining why "government ownership of banks has frightening long-term implications." Having the federal government expand its operations in competition with banks -- lending funds to consumers, businesses, etc. -- has the same implications.
Regarding the chief cause of our current financial mess:
"If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset. ... The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest rates that induced ordinary people to say, well, it's so cheap to acquire whatever is the object of desire in an asset boom, and go ahead and acquire that object. And then of course if monetary policy tightens, the boom collapses."
Regarding current policy for addressing the mess:
"The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."
"They should not be recapitalizing firms that should be shut own."
Regarding the proper policy:
Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich."
Here is an excellent video of my former colleague and frequent co-author George Selgin giving a recent talk at West Virginia U, with some very helpful charts thrown in for good measure. Selgin's talk begins at about 4:00 minutes in -- you can skip the introductions by paging forward to slide #2 -- and ends at about 25:00.
recent problems in mortgage markets illustrate that an underlying assumption of the CRA -- that more lending equals better outcomes for local communities may not always hold.
Such a warning is scalable: it applies to credit markets generally, and to the national economy as a whole. More lending does not equal better outcomes for the economy when the lending comes from artificial credit expansion. If only Alan Greenspan had recognized that, he might not have pumped up total credit so vigorously in 2001-06. If only Ben Bernanke will keep the generalized warning in mind henceforth. In a fiat money regime the central bank's task is to keep the nominal money flow (MV) on a steady (preferably flat) path, not to expand credit to fuel more lending than can be sustained.
Here’s a recent debate from the pages of Numismatic News that students of money and banking will find informative. (For you instructors, that’s a hint!) Should we rely on a government monopoly to manufacture our coins?
Because the federal government has already committed itself to bailing out Wall Street, it will soon find itself obligated to bail out many of the ancillary enterprises that depend upon Wall Street for survival. One of these is sports franchises. The government will be forced to lease the skyboxes at stadiums that were previously occupied by brokerage houses, commercial banks and investment banking firms. This is not an eventuality that either Henry Paulson or Ben Bernanke had envisioned when they first floated the subject of a bailout. These guys just can't keep their eye on the ball.
One can readily imagine the hue and cry that will greet the announcement that the Treasury Department has taken over a dozen skyboxes at Arrowhead Stadium and another dozen at Coors Field. Yet the alternative is unacceptable. Without the cash generated by luxury boxes, numerous sports franchises will go under. This would further undermine the public's mood, particularly in smaller cities, where watching ice hockey is literally the only way to have fun on a cold Friday night in February.
We’ve got an antique regulatory structure. Need to put back early 20th Century laws!
Got to do something about home values. We have to make sure that markets prices don’t adjust. Government should buy tons of houses …
[Will the economy get worse before it gets better?] Not if we give people free houses!
I’m gonna reform health care, which won’t cost anything.
When we’re this wealthy, the idea that sick people should have to not spend other people’s money is an outrage. Mandate won’t hurt that much. It’s for your own good. McCain doesn’t give a crap for kids because giving a crap for anything means voting to give them things.
Online records, improve efficiencies. Obama is all like “government this government that.” Obama will fine you if you don’t get insurance. I’ll give you tax credit you can take anywhere.
Energy and the environment
People other than us benefit from higher oil prices, which is outrageous. … Let’s think harder about how we use energy. Holy god there is nothing more important than not trading with foreigners for energy.
We can centrally plan green economy into prosperity.
If only we had nuclear power Indians would not weep. The French do it! America’s the best! We can do anything!
If people make more than you, its not fair for you to have to tighten your belt.
I will cut taxes for everyone other than the despicable wealthy.
Freeze spending, except defense, VA, entitlements, and buying every house in America.
Basically, I have no principle. I leave it at the discretion of my evolved moral intuition.
Iran can’t get nukes. But let’s talk about it.
America is greatest force for good in history of universe forever. We shed our blood everywhere. The question of when to kill people needs to be left [to] soldiers like me. Our wars are awesome because we’re a nation of good.
We should do whatever we can to help whenever we can. I have no principle for intervention either.
The Department of Economics and Management at Beloit College invites applications for a full time tenure track position at the rank of Assistant Professor, beginning fall semester 2009. Evidence of a strong commitment to excellence in teaching and scholarship is a must. Teaching responsibilities will include introductory economics, international economics, international trade and finance. Teaching and/or research interests in some of the following areas would be a plus but are not essential for consideration; international business, economic history/new institutional economics, law and economics, entrepreneurship, statistics, experimental economics and area studies such as Latin America, East Asia, Africa. The successful candidate will also contribute to all-college programs (e.g., first-year seminars, writing program, interdisciplinary studies and international education). Candidates must have completed a PhD in economics, or expect to complete their degree by September 2009. The teaching load is a 3/2. Average class size is 20 students.
Beloit College is a highly selective, small residential liberal arts college located in southern Wisconsin. Beloit College is committed to the educational benefits of diversity and urges all interested individuals to apply. AA/EEO Employer
Submit Instructions: Send vitae, a writing sample, a brief essay on your approach to teaching economics, a proposed syllabus for an international economics course with a principles prerequisite, three letters of reference. No electronic submissions but links to additional supporting materials are welcome. Complete applications must be received by December 1, 2008 to be considered for an interview at the ASSA meeting.
CONTACT: Jeffrey L. Adams, Chair, Department of Economics and Management, Beloit College, 700 College St. Beloit WI 53511. Additional information available at: http://www.beloit.edu/economics/
I'm guessing Joe the Plumber will be getting an IRS audit next year if we have an Obama victory. On a related note, Joe the Plumber is featured in Mike Lester's cartoon in today's RNT.
Folks who doubt gridlock is good might want to check out this article (scroll down to the box) in today's WSJ. The Repubs ability to filibuster the Senate has stopped much mischief. Here's hoping the GOP, for all its flaws, can keep at least 43 Senate seats.
Markets in Everything: Eau de Franklin Street Edition
UNC-Chapel Hill now has an official smell. A new collegiate perfume boasts that it captures the essence of the school.
The $60 bottle is among a handful of fragrances targeting universities with big, loyal alumni bases. Each perfume is based largely on the university's color scheme.
What does Carolina blue smell like? Champagne, lemon, jasmine and lavender, apparently. To contrast: the University of Alabama's color is crimson: a scent heavy in reds such as apple and pomegranate, said Katie Masich, a chemical engineer and president of the perfume company, Masik Collegiate Fragrances.
Source. Thanks Jane Shaw for the pointer. HT to MR for the MIE concept.
“Today thousands of bloggers will unite to discuss a single issue—poverty. We aim to raise awareness, initiate action and to shake the web!”
I’ve been telling people for weeks that economists are the wet blankets of the world, so keeping this in mind I thought I would offer a few ideas about what we can do to reduce poverty around the world.
1. Free Trade and Open Borders. Let’s open the borders to trade with anyone and everyone without strings attached. Economist Lant Pritchett argues that open immigration is one of the most effective ways we can improve the plight of the world’s poor. One of the principles of economics is that there are gains from exchange, and these gains from exchange do not stop at international borders. Stopping trade at gunpoint enriches special interests, but it oppresses the poor.
2. Competition in Education.Competition encourages innovation and leads to better educational outcomes. Affluent suburban schools and private schools have to compete with one another because the students they serve are mobile, but the geographic immobility of urban students gives large urban schools a lot of monopoly power. For example, a relatively affluent family in the Memphis area could choose where they live based on school quality and thus can choose between schools in Germantown, Bartlett, Southaven, Marion, Cordova, or any of the region’s private schools. A poor family in the Memphis city limits can choose from…Memphis City Schools. And that’s about it.
3. If you’re criticizing a “sweatshop,” make sure you have a good reason for it—i.e., criticize a sweatshop if it is actually enslaving people, committing fraud, or something like that and not because it pays “low wages” or offers lousy working conditions. Most of us in the developed world would recoil in horror at the idea of working in a “sweatshop” for pitifully low wages and in relatively unsafe working conditions. That is because we have better options. Many people around the world, however, are not so fortunate, and their working conditions have roused the indignation and anger of many around the world. These sweatshops are better than poor workers’ next-best options, which is always a job that offers either lower wages or worse working conditions. In the case of some laid-off child workers in Bangladesh, the next best alternative was prostitution or starvation. Economists Benjamin Powell and David Skarbek have studied sweatshop wages and conditions around the world and have found that sweatshops usually offer higher wages and better working conditions than average for the countries in which they operate. The road out of poverty can be long and arduous, and closing off opportunities for the very poor only makes that road more difficult to travel.
4. If you’re criticizing Wal-Mart, criticize them for the right reasons (like their aggressive pursuit of local government subsidies).I’ve studied Wal-Martat some length, and I think the company gets a bum rap. In their book The Wal-Mart Revolution, Richard Vedder and Wendell Cox report an admittedly back-of-the-envelope calculation that the social saving from Wal-Mart is roughly 5% of US GDP—in percentage terms, that’s roughly the same impact as railroads in the nineteenth century. Even if their estimate is twice as large as the real effect, 2.5% of GDP is roughly a year’s worth of economic growth. Economists Jerry Hausman and Ephraim Leibtag have argued that the benefits of Wal-Mart’s policy of “Every Day Low Prices” have accrued disproportionately to poor households. If you want to alleviate poverty, protesting Wal-Mart isn’t the way to do it.
5. Protest less, produce more. Economics Nobel Laureate Robert Lucas has argued that no society ever got rich by redistributing resources. Production alleviates poverty. Carrying a sign, shouting slogans, and chucking a brick through the window of a Starbucks might feel great, but at the end of the day it either accomplishes little or hurts exactly the people the protestors are trying to help. Informed dissent is critical to the health of a free society; uninformed dissent, however, can be grotesquely destructive. I stress that it is very important and certainly noble to fight for those whose voices are silenced by oppression and coercion, but we have to be very careful about what we fight for and what we fight against. Voluntary exchange is not a human rights violation, and treating it as such has led to horrific consequences.
7. Look for private rather than political solutions. While I harbor no rose-tinted illusions about the unfettered marketplace producing utopia, I’m very skeptical of trying to use government to control it. Evil will always be with us, but I agree with George Washington: government is not eloquence, beauty, or poetry. Government is force, and it will tend to be co-opted by the special interests, for the special interests, and of the special interests. Experimenting with voluntary solutions like cruelty-free, fair-trade, and “green” certifications might be far more effective than agitating for more government policy.
A small tidbit of interest from the Oct. 15, 1908 NYT:
Baseball writers connected with the leading daily papers of every major league city, excepting Brooklyn, met here [Detroit] to-day, prior to the closing game of the world series, and formed an organization to be known as the Baseball Writers' Association of America. Its objects are to promote uniformity in scoring methods, to act in conjunction with the leagues in rules revision suggestions, and to gain control of baseball press boxes, the conduct of which is a sore spot with working newspaper men all over the country.
The Oct. 15, 1908 reports on the final game of the 1908 World Series, which the Chicaco Cubs won over the Detroit Tigers 2-0:
The series, however, created less interest in the two cities most affected than that of last year, if the attendance may be taken as a guide. The paid admissions were only 62,232 for the five games and the receipts totalled $94,976 [$2.3m in 2007 dollars], as compared with $101,000 last year. The attendance at teh final game this afternoon was only 6,210, with gross receipts of $9,577.50.
Of the money taken in the players of Chicago, the winning team, get $27,669 and the Detroit players $18,446. The club owners get $19,681 each and the National Commission $9,497.
Information is important to decision making and in this case I wonder if attendance to the last game would have been a bit higher if it had been advertised that the Cubs wouldn't win another World Series for 100+ years? The 1908 World Series per-cap revenue was $1.54 or approximately $37 in 2007 dollars. This year, depending on the stadium in which the Series takes place, the face value of upstairs tickets will be in the $150-$200 range.
I'm not normally one to whine about how Americans take so little interest in the affairs of other nations. But I couldn't help noticing this morning that my daily paper, the Columbus Dispatch, did not include any mention of yesterday's parliamentary elections in Canada.
This is one of the 30 or so largest daily papers in the U.S., in the capital city of a state which shares an extensive (albeit lake) border with Canada, the United States' largest trading partner. Trade between Ohio and Canada amounts to about $30 billion annually, about six times the trade between Ohio and any other foreign nation. It has been estimated that over 200,000 Ohio jobs are dependent on trade with Canada.
I found not a word about the Canadian elections in either the print or on-line editions of the Dispatch.
By the way, for those interested, the ruling party, the free-trading Conservatives, returned an increased plurality, but still fell short of a majority. They are expected to form another minority government. At the same time, the anti-NAFTA, anti-trade New Democratic Party and Green Party both gained seats in parliament.
Wondering about the widespread allegations of ACORN shenanigans, I emailed several acquintances earlier today about the possibility of a RICO prosecution for ACORN. My question was timely as one friend pointed me to a civil RICO suit filed in Ohio:
The Buckeye Institute, a Columbus-based think tank, today filed a state RICO action against the Association of Community Organizations for Reform Now (ACORN) on behalf of two Warren County voters. The action filed in Warren County Court of Common Pleas alleges ACORN has engaged in a pattern of corrupt activity that amounts to organized crime. It seeks ACORN’s dissolution as a legal entity, the revocation of any licenses in Ohio, and an injunction against fraudulent voter registration and other illegal activities.
Greg Randolph - fellow WVU graduate and current Southern New Hampshire economics professor - came in 3rd place in the faculty category of the 2008 Sir John Templeton Essay Contest sponsored by the Independent Institute. Not only is Greg an excellent teacher but he is also a fine scholar. Well done, Greg!
She uses the Nicolas Sarkozy quote (in the title above) to play up the irony of a French political leader having to correct our misguided media criticisms and naive popular opinions of the very institution that created so much prosperity for the U.S. and the rest of the world.
Her thoughtful editorial is a concise list of many of the institutional characteristics necessary for free markets to promote prosperity within democratic society. It is also a clear illustration of how over the years our country's economic structure has fallen well short of honestly earning the honorable title of "capitalism."
More on the Income Elasticity of Demand for Sports
The NBA is eliminating about 80 jobs in the United States, the first major American sports league to announce layoffs because of the worldwide economic turmoil.
Commissioner David Stern told The Associated Press last month the league would cut staff in anticipation of the downturn. He said Sunday the figure would be about 9 percent of the American work force, and the league confirmed the number of jobs the next day.
“My guess is that by the time we tip off in a week or so, we will be down modestly in season tickets. … We think we’ll be up in revenue, but I just can’t say for sure whether we’ll be up or down in attendance because it’s just so touch-and-go, because sports tickets are very much disposable income,” he said. “So, we’re not going to see a huge impact, but I dare say we will see some impact.”
Prior to the announcement of the 2006 prize I said:
Bhagwati, Dixit, and Krugman - for international trade theory
I would have liked to see Krugman win solo for his excellent economic geography work, but I don't see that happening since I think the committee would prefer to have him share the award.
While I certainly appreciate where commentators like Russ Roberts and Pete Boettke are coming from, on the awarding of this year's prize to Krugman I am in agreement with the thoughts and conclusions of Tyler Cowen and Kevin Grier. Like Ed Glaeser did with urban economics (and may he one day win a Nobel too), Paul Krugman saved economic geography. (Note that this sentiment is not incompatible with the excellent comment of Barkley Rosser on the neglected precursors to Krugman's work).
While I think the Nobel is deserved, my preferences for the current Nobel are close to what they were back in 2006 when I wrote:
Tullock and Krueger - for rent-seeking
Baumol and Kirzner - for entrepreneurship
Hanushek and ? - for economics of education
Richard Muth, Edwin Mills, and Jan Brueckner - for development and extension of the monocentric city model of urban location.
Today, I would only make one change. Today, I would certainly add Alchian and Demsetz for property rights economics to the list, just below Tullock and Krueger and above Baumol and Kirzner.
I'm surprised, because I didn't think of Krugman's professional work as highly influential (which is more subtle than just counting citations) on the professional literature. Perhaps I was just wrong about that.
Here is thoughtful commentary from Pete Boettke on the award's implications.
Here is Dan Klein with coauthor on Krugman the NY Times columnist.
At his request, here is Daniel Klein proposing drug approval denationalization as a simple step toward a better world. I like the argument: basically, he argues that we should allow the international marketplace for drugs to be more competitive by getting the government to quit stopping drugs at the border. If something is approved for use in Canada, for example, there is no reason why Americans shouldn't be allowed to use it. That said, here's Dan:
Waterbury, Conn. - Dennis Burns of Bridgeport and his wife made themselves objectionable on a trolley car running from Bridgeport to Waterbury last night. Because the man insisted on hugging and kissing the woman dramatically to the disgust of the passengers he was stopped at Naugatuck and arrested under an old blue law which says a man may not kiss even his wife in such a public and ostentatious manner.
Judge Hungerford did not care to entertain the charge of wife kissing on Sunday, and Burns has fined for disorderly conduct enough to make a total with costs of nearly $20.
Burns justified his conduct by the statement, "I love my wife dearly and have a right to kiss her, law or no law."
The October 13, 1908 NYT reports on the pending new world order (I suppose we are still waiting):
The Rev. Wilbur F. Crafts, D.D. of the International Reform Bureau, who spoke at the Warren Avenue Baptist Church last night, declared in his address that within a few years Theodore Roosevelet would be "President of the World."
Dr. Crafts said that his bureau's work would result in an international government at The Hague with legislative and executive departments. At the head would be Mr. Roosevelt bearing the title above mentioned.
I just got around to reading the Sept. AER. Not much to my taste, but there is a nifty article on India's liberalization from Aghion et al. The NBER WP version is here; the abstract:
We study the effects of the progressive elimination of the system of industrial regulations on entry and production, known as the "license raj," on registered manufacturing output, employment, entry and investment across Indian states with different labor market regulations. The effects are found to be unequal depending on the institutional environment in which industries are embedded. In particular, following delicensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments.
In response to my post on John McCain and small business taxation, a friend sent me the following email (lightly edited):
Just read your post at DoL. This is a subject close to my heart, as a stockholder in a small subchapter S business.
I didn't see the "debate" but doubt that McCain explained this clearly. Many smaller firms are set up as subchapter S corporations, with the business income flowing through to the tax returns of the stockholders. That can make you look "rich" when in fact you are not even close. Last year my AGI was something like $430,000, and Obama would no doubt call me one of those rich people who can easily afford to be more, uh, patriotic and "help" the country by paying higher taxes. What I actually earned and lived on was around 80K. The rest was imputed income. The company sent me checks to cover the tax liability, not $350,000.
If income taxes go up, the company will (I HOPE) raise the dividend payout to cover the increased liability, but that means less cash in the business for investment.
Someone ought to point out that what Obama accomplishes is to take funds that could have gone into expanding a business and/or running it more "green" and put them at the disposal of Washington politicians who will use them in whatever way best suits them. Who -- except the politicians -- thinks that a good trade-off?
Germany is cracking down on its growing black-market economy as workers duck some of the highest taxes in Europe. With companies trying to cut costs as the global credit crisis pushes Europe's largest economy near recession, more people may be forced underground. And Chancellor Angela Merkel plans to extend the minimum wage, a move economists say may send more work under the table and cost as many as 600,000 jobs.
Germany's lower house of parliament, the Bundestag, is due to discuss the proposals as early as next month, just as the global credit crisis begins to bite into growth. The European Commission last month cut its forecast for the economy of the 15 euro nations this year and forecast Germany would slip into a recession.
``We already have the problem of a flourishing black market, and with a minimum wage, labor would become even more expensive,'' said Ruediger Parsche, an economist at the Ifo economic institute in Munich.
In 2007, Germany's black-market economy -- derived from what's left over after legitimate spending is accounted for -- made up about 15 percent of gross domestic product, according to Friedrich Schneider, a professor at the University of Linz in Austria who studies illegal labor. That compares with 7 percent in the U.S.
Germans' income tax and social security contributions amounted to about 42 percent of earnings in 2007, compared with around 24 percent in the U.S., according to the Organization for Economic Cooperation and Development.
To sidestep some of that tax, a driving instructor in the German state of Hesse said he declares only two-thirds of his earnings.
The 43-year-old father of one said he works 14 hours a day, six days a week, and earns about 2,000 euros a month under the table. He said he wouldn't take home enough money to maintain a decent standard of living if he declared that income. Given how widespread the practice is, he said, he would be foolish to do otherwise.
The Oct. 10, 1908 NYT reports that it was October 10, 1898 when the reduced its price from three cents per copy to one cent per copy and that the price hadn't changed over the ensuing eleven years.
Of course, while the nominal price hadn't changed the real price had been declining over that time. Using the GDP deflator from EH.net, I threw the data provided into Stata and estimated a naive log-log demand curve.
Here's a scatter of the data with real price in pennies on the vertical axis and average daily circulation on the horizontal:
Here are the results from estimating a simple demand curve:
. reg lnqty lnrprice
Source | SS df MS Number of obs = 11
-------------+------------------------------ F( 1, 9) = 15.94
Model | 1.63760352 1 1.63760352 Prob > F = 0.0031
Residual | .924435716 9 .10271508 R-squared = 0.6392
-------------+------------------------------ Adj R-squared = 0.5991
Total | 2.56203924 10 .256203924 Root MSE = .32049
The Oct. 9, 1908 NYT reports on the response in Serbia of the Austrian annexation of Bosnia-Herzegovina:
Belgrade, Servia: Great crowds surrounded the palace to-night shouting for war and calling for the King to appear. Finally King Peter, accompanied by the Crown Prince, came to the balcony, and implored the people not to cause disturbances. He said:
"Trust me and my government: both will do their duty."
The crowd cheered the King but continued to shout "war with Austria."
For the Government to take stakes in our leading banks in order to re-capitalise them is not quite the sovietisation of Britain, but it is a pretty good start.
...the socialist experiment rarely ends up with people feeling happier, richer and more free until it has ended.
Anyone over the age of 40 will recall the abiding result of the days when we had a socialist economy in this country: poverty. We had better prepare for some more of that. The state does not have its own money to engage in stock market speculations, such as buying shares in clearing banks. It undertakes this gamble with our money.
That means either public spending cuts or a rise in taxation, or even both. As with any other shareholding, the value of the investment can go down. The liability and risk to the taxpayer is terrifying. The political cost to Labour if all this fails will be as nothing compared with the cost to the British public.
This is what socialist economics brings. The intervention, or rather interference, of the state in financial and economic matters can only lead to sclerosis, the suppression of enterprise, the raising of taxes, starvation of investment, lack of innovation, technological retardation and the rise of the power of organised labour.
The maxim of the American writer and philosopher Ayn Rand came close to fulfilment before the denouement of Old Labour on May 3 1979: that the difference between a welfare state and a totalitarian state is a matter of time.
We condemn America as the nation that used capitalism as a weapon against so-called "ordinary people", but think back and compare America in the 1970s to Britain at the same time: no American had to wait three months for a telephone to be put in, or had only three television channels to choose from, or had to watch rubbish piling up in the streets, the dead going unburied or factories open just three days a week because of industrial action and the failure of the command economy.
If you haven't been over to ABBA to Zeppelin, Led (a web resource for economic educators who use music in the classroom) in a while, there are some new additions courtesy of Simon Medcalfe of Brenau University. Thanks Simon!
Writers of editorials and op-ed pieces keep declaring that financial institutions (such as investment banks, hedge funds, and credit-default insurers) have been "unregulated" too long, and must now become regulated.
They should consider that financial institutions have never been unregulated. They have been regulated by profit and loss. The failure of Lehman Brothers and the near-failure of Merrill Lynch, by raising the interest rate the market charges to highly leveraged investment banks, forced Goldman Sachs and Morgan Stanley to change their business models drastically. If that isn't effective regulation, what is?
Protecting firms from failure (Bear Stearns, AIG, Fannie Mae, Freddie Mac) and sheltering them from losses (the $700 billion cash-for-trash bailout plan) renders this most appropriate form of regulation much less effective.
Yesterday, NPR's "Morning Edition" did some "fact checking" on Tuesday's presidential debate. Alas, NPR's fact checking requires some checking of its own. To wit, consider this part of the program (quoted from Lex/Nex):
[NPR Host Steve] INSKEEP: Let's move on now to another subject that was debated. Taxes. There was a lot of back and forth including this claim by Senator McCain.
Senator MCCAIN: Senator Obama's secret that you don't know is that his tax increases will increase taxes on 50 percent of small business revenue. Small businesses across America will have to cut jobs and will have their taxes increase and won't be able to hire because of Senator Obama's tax policies.
INSKEEP: David Wetzel of the Wall Street Journal, a regular on this program, was listening in and David is Obama planning to raise taxes on 50 percent of small businesses?
DAVID WETZEL: Well, it depends what your definition of small is. Senator Obama is planning to raise taxes on the top income tax brackets and it is true that many small businesses pay taxes at ordinary income tax rates. But the majority of small businesses simply don't make enough money to be covered by Senator Obama's proposed tax increases.
INSKEEP: So most won't be affected?
INSKEEP: That's David Wetzel of the Wall Street Journal.
Actually it's David Wessel of the WSJ, the transcript has his name wrong. But here's what McCain actually said during the debate (transcript here):
The only bright spot is that over 300,000 jobs have been created by small businesses. Sen. Obama's secret that you don't know is that his tax increases will increase taxes on 50 percent of small business revenue.
McCain was not talking about the number of small firms but about firms taking in half of small business revenue. These measures may sound to some like the same thing but they are not. McCain's statement may or may not be true, but NPR did not check the accuracy of what McCain really said. It's like deciding that a piece of fruit is not an apple by saying that it's not a pear.
Here are two statements--both of which I suspect are not true--that I wish NPR had examined. The quotes come from the debate transcript linked above.
First one from McCain: "Meg Whitman was CEO of a company that started with 12 people and is now 1.3 million people in America make their living off eBay." I guess this one all depends on how one defines "make their living" but I'm skeptical.
Now one from Obama: "So we're going to have to make some investments, but we've also got to make spending cuts. And what I've proposed, you'll hear Sen. McCain say, well, he's proposing a whole bunch of new spending, but actually I'm cutting more than I'm spending so that it will be a net spending cut." This is complete bunk--there's not a snowball's chance in you-know-where that spending will go down in an Obama (or a McCain) presidency. I'm confident in predicting (I should be--it's like predicting the Globetrotters will defeat the Washington Generals) that there won't even be a single year in which spending is lower than the previous year.
"The current $800 billion bailout (sorry, rescue) package is nothing more than a looting of the responsible and productive by the reckless and profligate. Call it reverse Darwinism, the survival of the least fit."
This quote caught my attention more than it might have normally because it echoes a chat I had with my wife last night. She usually has little interest in politics and policy but, as someone who has made significant down payments on the homes she's bought and has maintained a good credit history, she is annoyed that the bailout puts her on the hook for others' misbehavior.
The WSJ explains what McCain cannot--the advantages of his health plan and the reason that it ought to appeal to Obama. Here are a few paragraphs but read the whole thing:
Perhaps Mr. Obama is so agitated because Mr. McCain's proposal is highly progressive. The Republican wants to readjust the subsidies that Congress channels into health coverage for business so that lower- and middle-wage workers aren't shortchanged, as they are now. Currently, people who get insurance through their employers pay no income or payroll taxes on the value of the benefit. This is revenue the government forgoes to encourage certain behavior. If those losses were direct spending, the tax exemption would have cost more than $246 billion in 2007.
But all that money props up only employer-provided insurance. For reasons of historical accident and lobbying clout, individuals who buy policies get no tax benefits and pay with after-tax dollars. Mr. McCain is proposing to make the tax benefits available to everyone, regardless of how they purchase their insurance.
He would offer a refundable tax credit of $5,000 for families, $2,500 for individuals, and the benefit isn't dependent on where people work or what they earn. Some would stick with their current job-based coverage. Given the option, others -- especially the uninsured, armed with new health dollars -- would decide to buy coverage on their own. That in turn would stimulate a market for more affordable insurance.
On a related note, Sen. Obama said in tonight's debate that he believes health care is a right. This doesn't come as a surprise really, but it is fundamentally illiberal. One person's right to health care--a positive right, not a negative right--imposes a duty on other's to provide that health care. Alas, McCain's platform--including his health policy and his new scheme to buy down mortgages--isn't much (any?) better. And McCain's rambling on about a $700 billion transfer was downright painful.
Nevada authorities have raided the Las Vegas office of the community-organizing group ACORN seeking evidence of voter fraud.
Investigators seized records and computers from ACORN, the Association of Community Organizations for Reform Now. The office was unstaffed at the time.
Secretary of State Ross Miller said fraudulent registrations included forms for the starting lineup of the Dallas Cowboys.
"Tony Romo is not registered to vote in the state of Nevada, and anybody trying to pose as Terrell Owens won't be able to cast a ballot on Nov. 4," Miller said, according to the Associated Press. He said others used false names or information, or had duplicated information on multiple forms.
Bernanke said the Fed will "need to consider" whether its current stance of holding rates steady "remains appropriate" given the fallout from the worst financial crisis in decades.
Inflation numbers are "very ugly right now," Bernanke acknowledged.
The financial and credit crises, which took a turn for the worst in September and continue to stubbornly persist, are likely to "increase the restraint on economic activity in the period ahead," Bernanke said.
To that end, the Fed on Tuesday announced a radical plan to buy massive amounts of this short-term debt in an effort to break through a credit clog that is imperiling the economy.
Invoking Depression-era emergency powers, the Fed will begin buying commercial paper — short-term funding that many companies rely on to pay their workers and buy supplies.
Stagflation--it's official. Source of the above snips.
Think the "battleground state" is a new development? The October 6, 1908 NYT reports:
New York, New Jersey, Ohio, Indiana - these are the determining States. In both National committees this is fully recognized. From now until election day these are the States in which both the Republican and Democratic managers will centre their efforts. Into these states will go both Mr. Taft and Mr. Bryan. Bryan will reserve New York for the last.
The story goes on to show that candidates have ceded states to their opponents for quite some time:
Norman E. Mack, Chairman of the Democratic National Committee, came here to-day and told the newspaper men that he left for the Republican in the East only Pennsylvania and two or three of the New England States, but some of his colleagues at the headquarters, when they learned that he had not put Pennsylvania into the debatable column, protested that he was altogether conservative.
Yesterday was the first day for the collection of taxes, but the crowd at the tax office was comparatively small and the amount received only about one-sixth of the usual sum received on the first day in other years. The reason for the change was the new rule abolishing the 6 per cent. rebate allowed in other years to those who paid their taxes early.
As a result there were practically no representatives of corporations in line yesterday. There was much confusion, owing to the fact that many of the taxpayers did not understand that they were to get no rebate, and came prepared to pay only the rebated tax. It is probable that one result of the new law will be to cause a tremendous rush at the end of the month as the 7 per cent. penalty goes into effect on Nov. 1. In anticipation of this Col. David E. Austen is having an extra corps of clerks trained for emergency duty.
The amount received on the first day of tax collection in other years has averaged about $12,000,000. Yesterday's receipts were about $2,000,000.
A boy baby, six months old, will be raffled off at an Alton theatre Saturday evening. Commencing with this evening's performance a ticket will be issued to those in the audience, allowing one chance for the baby. No tickets will be issued to [African Americans] and bachelors.
The managers insist that their offer is genuine and is countenance by the authorities. The object of the raffle, say the promoters, is to obtain a good home for the baby. The winner of the child must be able to exhibit credentials as to his or her ability to care for it before the prize is awarded.
This sounds like a hoax - how can a random lottery, albeit among a population that self-selects into seeing an event at the theatre, assure a "good home" for a child?
This sounds like a form of viral advertising to get people to attend the theater, as I find it difficult to believe that such a raffle would be allowed to happen, even in 1908 United States.
Contrary to Joe Biden's claim that FDR took to the tele in 1929 to calm the nation after the stock market crash, the first televised White House address by a president was Harry Truman's address 61 years ago today.
Tom Smith, a finance professor at Emory University’s Goizueta Business School, said legislators should tighten gouging rules and draft firm plans to take to the airwaves to soothe panicky residents and encourage them to telecommute amid the crisis.
“It’s times like these where you have to give people incentives to behave in ways that are counterintuitive,” said Tom Smith, a finance professor at Emory University’s Goizueta Business School. “You have to convince them to buy less gas.”
Here's the response I dispatched to the paper's editor:
The recent article on gasoline outages ("State debates reaction to gas crisis" Oct. 5) quotes Emory finance professor Tom Smith as saying that "people [need] incentives to behave in ways that are counterintuitive" in order "to convince them to buy less gas." Prof. Smith's diagnosis is correct, but his prescription--tightening price gouging rules--is misguided. Although it may well seem counterintuitive to Prof. Smith and others, price gouging laws restrain price increases thereby dampening people's incentive to conserve fuel in the wake of hurricanes or other market disruptions. The consequence, as noted in your article, is panicked drivers topping off their tanks and exhausting stations' fuel inventories. Thinking otherwise is akin to thinking stores hold sales by marking up prices.
The Oct. 4, 1908 NYT reports on what seems to be a guilded age in dining:
The opening of the game season has revealed the fact that the hotels have been forced to increase the price of partridges, canvasback duck, venison, quail and the other game meats approved by bon vivants. The wholesale prices have been advanced, and the hotel menus reflect the increase. It is said that the increased demand for game has caused the advance, and not any unusual shortage of game in the market. The present scale of prices of hotel menus is: Partridge, $4 [$92.96]; grouse, $3.50 [$81.34]; reed birds, $1.50 [$34.86]; mallard duck, $3 [$69.72]; canvasback, $4.50 [$104.58]; teal duck, $1.50 [$34.86]; venison, $1 [$23.23] a pound. [prices in 2007 CPI adjusted dollars added]
The Oct. 4, 1908 reports on a debate concerning artificial aids in sports, and an unexpected PED:
Dr. Leonard Hill, F.R.S., whose experiments with oxygen in athletics first drew attention to this subject, which aroused considerable discussion on both sides of the Atlantic, has this week stated the case strongly but temperately...
Montague Holbein...denounced the use of oxygen...as unsportsmanlike. Dr. Hill's rejoinder is this:
"Oxygen is not a stimulant. To the perfectly trained runner or race horse oxygen will do nothing if given before a sprint. The trained man or horse has got enough in him for a spring, and an excess has no effect. It is to the tired or untrained man or the man fatigued by prolonged effort that oxygen does so much...
"Almost the whole of modern sport is conducted with artificial aids. The record feats of to-day are too often not sport, but deadly, earnest business. Either, I say, limit sport to reasonable feats of endurance or else add oxygen to the other artificial aids now employed in breaking records, and so diminish the harm done the athlete's body."
Not everybody is convinced by Dr. Hill's contentions. For instance, Lord Lonsdale declares that the use of oxygen is unsportsmanlike and un-English...
The Oct. 4, 1908 NYT reports on one man's proposals in the area of public health policy:
Sir John Broadbent, formerly President of the Royal College of Physicians, in the course of an address this week said that he looked forward to a Utopian era when such diseases as influenza, pneumonia, measles, and scarlet fever would become more or less extinct as the result of the proper ventilation of offices, shops, public buildings, and private houses, and other sanitary measures such as the avoidance of overcrowding, the abolition of children's parties, and the habit of indiscriminate kissing.
Matthew Thornhill, while an assistant prosecutor in 2006, was negotiating a plea bargain with the attorney for one Mary Hart, who was charged with felony forgery. Hart's attorney, reports the St. Louis Post-Dispatch, "told Thornhill that Hart's godfather was former Pittsburgh Steelers quarterback Terry Bradshaw." Thornhill, who is a collector of autographed baseballs, asked the attorney "to have her get an autographed baseball from Bradshaw," in exchange for which he would reduce the charges against her. She duly produced a signed baseball, after which the charges against her were indeed reduced. They were later dropped.
Thornhill has now been reprimanded by the Missouri Supreme Court.
Oh, and the signed baseball that Mary Hart the accused forger produced? It turned out -- surprise, surprise -- to be a forgery.
A year ago we had no taxicabs. Now it seems as if we had always had them, so easily have they fitted into the traffic of the town, and so generally have they been used. Generally, that is to say, in proportion to their number.
Though the supply has been trebled or quadrupled in the year, there are still not nearly enough to meet the demand. We need more taxicabs. The swift-running, comparatively inexpensive motorcar has transformed the cab business of New York, and nearly suppressed the nuisance of the guerrilla cab. It has taught people not to submit to extortion.
There are guerrilla taxicabs nowadays, to be sure, and their meters work mysteriously. But if you order your cab from a central station, or pick one up at a hotel stand, you can always get an excess of fare returned....But, considering the difficulties of going about in the New York streets, the inevitable delays in thoroughfares having surface-car tracks, there have been surprisingly few complaints of the taxi-cabs. In time they will supplant the horse-drawn cab altogether, and the fares will be cheaper than they are now.
Billiards are dying out - in France, at least. According to statistics of taxes, while there were 94,123 billiard tables in France in 1892. In 1906 there were only 89,939. It is probably to the success of outdoor sports and of motoring that is due this loss of affection for a game which has had famous votaries.
The irony discovered reading the paper from 100 years ago is sometimes too much, even for me. The October 2, 1908 NYT reports on the banking industry's take on a "bail out" plan, of sorts, proffered by William Jennings Bryan (and others):
The American Bankers' Association to-day adopted the following resolutions opposing the policy of guaranteeing bank deposits now being advocated by Mr. Bryan:
Resolved. That the American Bankers' Association is unalterably opposed to any arbitrary plan looking at the mutual guarantee of deposits, either by a State or the Nation, for the following reasons:
1. It is a function outside of State or National Government.
2. Is is unsound in principle.
3. Is is impracticable and misleading.
4. It is revolutionary in character.
5. Is is subversive to sound economics.
6. It will lower the standard of our present banking system.
7. Productive of and encourages bad banking.
8. It unjustly weakens the strong and unfairly strengthens the weak banks.
9. It discredits honesty, ability, and conservatism.
10. A loss suffered by one bank jeopardizes all banks.
11. The public must eventually pay the tax.
12. It will cause and not avert panics.
Later in the story we hear from Nathan Straus, "Chairman of the Business Men's Committee of the Democratic National Committee:"
He pointed yesterday to the recent failure of two small east side banks and the plight of the depositors as an object lesson of what evil is being wrought by lack of a guarantee for such deposits.
"The weeping women and children on the east side," said Mr. Straus, "present to my mind the strongest possible argument in favor of the guarantee of deposits as advocated by Mr. Bryan. If he had been President the failure of these banks would have been impossible."
The attention of Mr. Straus was called to the fact that Federal legislation couldn't possibly be passed to affect such institutions as the little private east side banks which closed their doors.
"How, then, could Mr. Bryan prevent their failure?" Mr. Straus was asked.
"Well, Mr. Bryan would have found a way to prevent it somehow," Mr. Straus replied. "When the appeal is to the heart, legal technicalities should not be permitted to become obstacles. It's all very well to talk about the inability of the law to reach these evils, but if you go down into those streets, the cries of these women and children will wring your heart, and if there is any humanity left in you, you will start out to brush aside these obstacles and get through a law that will be effective."
"Of course, all the big bankers who don't want to give the guarantee will be against such a bill. The rich always have the best of it. They have their lawyers and can fight; the poor can't help themselves. Every time there is a fight on I am for the under dog. If I had all the money people say I have I'd go down there and pay them off."
"But you don't charge these failures to the Roosevelt Administration, do you?"
"I don't say that these failures are chargeable to the Roosevelt Administration, but I do say that if Mr. Bryan is elected this won't happen. The poor people get the worst of it every time."
"If Mr. Bryan is elected will all the unemployed be put to work?" Mr. Straus was asked.
"Only God can do that," the merchant replied, "but I think that Mr. Bryan will do his best."
The Oct. 2, 1908 NYT reports on Arthur Brides's re-instatement to the Yale football team:
A boom for yale Varsity stock was evident this afternoon when the Faculty of the Yale Medical School declared Arthur Brides, guard and half back for two years, eligible for the eleven. Brides has finally removed every scholarship technicality, adn this afternoon reported for practice.
Only a few days ago the word was Mr. Brides would have a hard time overcoming his academic issues.
A bunch of other stuff is in the pipeline and should be available soon, including a long-ish review essay of Naomi Klein's The Shock Doctrine, a handful of articles for Mises.org, further revisions of our Wal-Mart papers, revisions of the paper about corruption that I'm presenting at Auburn next week, and total re-writes of my papers about lynching and Southern economic development. As always, comments are welcome.
All you Ph.D. candidates should be aware of www.econjobrumors.com. Things are slow there right now, but in the past it has contained some very good advice from those on the demand side of the market. Thanks to the mysterious "Tatonnement" for setting it up.
And here's the caption accompanying a photo embedded in the article: "Sen. Dodd has a law degree but no other formal background in economics." Since when does a law degree count as a "formal background in economics?"
Greg Mankiw points to a Tax Policy Center study which finds that the McCain and Obama tax plans have essentially the same average marginal effective tax rate for 2009 (24.1% under the Obama plan vs 22.6% under McCain's plan; currrent law would yield an AMETR of 24.2%).
Digging a little deeper in the study--specifically Table 7--reveals that Obama's plan creates higher AMETR for every income class between 10k and 500k than McCain's plan. In some cases--the income brackets between 20k and 50k and the folks over 200k--the Obama plan also yields higher AMETRs than exist under current law. In other words, middle class taxpayers face higher marginal tax rates under the Obama plan than the McCain plan; many of these folks face higher MTR under the Obama plan than under current law.
How can this be the case if the Obama plan's overall AMETR is essentially the same as current law? Obama's assorted refundable tax credits (welfare disguised as tax cuts) leads to a big drop in AMETR for folks earning less than $10k; that drop in AMETR effectively camouflages the higher marginal tax rates faced by folks earning over $20k. Of course, it is the phase out of those refundable tax credits that creates the increased marginal tax rates.
I've told people before that my Plan for World Domination is to someday hire a group of fourth graders to follow me around singing "I Believe the Children Are Our Future," in which case I would be able to get whatever I want. If this video is legit, it looks like some of Barack Obama's supporters have beaten me to the punch:
Apparently John--I don't do earmarks--McCain intends to vote for the bill. To be fair, the wooden arrow provision isn't technically an earmark; it's a narrowly defined tax exemption not a specifically targeted federal expenditure. But that baby sure walks like a duck and quacks like a duck.
Picking up on Frank's "snarky-ness," my brother (a federal bureaucrat working for the FCC, which sort of makes him the black sheep of the family) sent me a perfect example of why we shouldn't allow the same folks who start fires in the first place be responsible for extinguishing them.
If you were to look at the last version of the huge federal bail-out known as the Emergency Economic Stabilization Act, and if you were to go to the bottom of page 300, you would find this sweet little example of pork-barrel politics at its best (worst):
SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.
(a) IN GENERAL.—Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) as sub301 paragraph (C) and by inserting after subparagraph (A) the following new subparagraph:
(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.—Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly—
(i) measures 5⁄16 of an inch or less in diameter, and
(ii) is not suitable for use with a bow described in paragraph (1)(A).
EFFECTIVE DATE.—The amendments made by this section shall apply to shafts first sold after the date of enactment of this Act.
Wow... certainly this must fall under our Constitution's "general welfare" clause?!
Don Boudreaux rightly says that "no one is or ever can be 'ready' or 'qualified' to exercise power of the sort that is concentrated today in Washington."
Let's explore this point a bit by comparing the concentration of financial power in the hands of the 535 members of the United States Congress with the concentration of financial power of the 535 richest people in the United States.
According to Forbes, the 400 richest people had a combined net worth of $1.57 trillion. Let's simply assume the next 135 richest people had the same net worth, though they surely didn't, as the 400th person--$1.3 billion each. That brings our estimate of the combined net wealth of the richest 535 Americans to $1.75 trillion.
But wait, this is net worth, which is a stock, not income, which is a flow. So let's figure the annual income flow from the ownership of $1.75 trillion to be 10% of that amount. (I don't know if this number is high or low. On the one hand really rich folks probably are good at making high rates of return. On the other hand much of that $1.75 in net worth is likely to be speculative, consumptive, and/or illiquid assets like real estate, yachts, artwork, etc where the return is difficult to determine without selling the item. It turns out, you could double or triple this estimated return and still make the point I'm going to make.) Our estimate therefore is that the richest 535 Americans have about $175 billion (10% of $1.75 trillion) to spend on an annual basis.
Ok, let's compare this group with the 535 members of the US Congress. According to the latest Economic Report of the President, the annual outlays of the federal government amounted to $2.73 trillion in fiscal year 2007.
So I estimate that the 535 members of the US Congress enjoy over 15 times the financial power of the 535 richest Americans.
But do note how charitable I am being here. Unlike the 535 richest Americans, the US Congress also reserves the right to regulate the hell out of practically ever aspect of our lives. Furthermore, unlilke the 535 richest Americans, who hardly know each other and who certainly never hold meetings to coordinate their decisions, the US Congress does in fact meet regularly to decide exactly how this vast financial power is to be spent. Furthermore, I have failed to say anything about the various state legislatures in the land who annually spend an additional $1.9 trillion.
Why do we worry so much about the supposed concentration of economic power in the hands of "the rich", a group of strangers who don't coordinate their actions in any way, but care so little about the vastly greater concentration of economic power in the hands of Congress?
... is to take a dubious proposition--the $700B bailout package--and make it worse:
Senate leaders scheduled a Wednesday vote on a $700 billion financial bailout package after accepting tax breaks and a higher limit for insured bank deposits in a bid to win House approval and send legislation to President Bush by the end of the week.
Top lawmakers said the Senate proposal, worked out after a day of behind the scenes maneuvering, would include tax breaks for businesses and alternative energy and higher government insurance for bank deposits.
President George W. Bush on Tuesday signed into law a mammoth spending bill to keep the government running until early March 2009 that includes a $25 billion loan package for troubled automakers.
The $25 billion loan package, the biggest federal subsidy for the auto industry since the 1980 bailout of Chrysler, cleared Congress last weekend when the focus was on the debate over the $700 billion financial rescue package.
[I]t is true that it is harder this week than it was last week to persuasively argue pure free-market principles if one has endorsed the $700 billion bailout and partial nationalization of the credit industry (and I do emphatically endorse the bailout as the only available and preferable alternative to the calamitous economic status quo).
So, in the months and years to come, it falls to those of us who advocate for free markets to persist in making our case.
In other words, “I pledge in the future to reaffirm the free-market principles that I am currently abandoning.” Gee, thanks.
Anyone who opposes the bailout on free-market principles has to be disappointed by the number of relatively steadfast free-market economists -- some of high stature -- who have blinked and endorsed the bailout or something like it. I am sure that they have not done so lightly, though I question their judgment in this matter that more government intervention is needed to offset – and will offset rather than compound – the previous interventions that have landed us in this soup. They have made it harder to "persuasively argue pure free-market principles" not only for themselves, but for those who have opposed the bailout. Advocates of free markets can expect to hear in the future: “But even an arch free-market economist like [insert name] endorses greater government intervention in the financial market!”
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