Division of Labour: January 2009 Archives
January 30, 2009
When Having One Tax Cheat in Your Cabinet Isn't Enough ...
Tom Daschle, President Barack Obama's choice for secretary of Health and Human Services, paid about $140,000 in back taxes and interest after questions surfaced during the vetting of his nomination, according to documents being prepared by the Senate Finance Committee.
Some folks noticed
I was one of 200 economists to sign the Cato petition, which ran as a full-page ad in the New York Times and Washington Post, opposing the "stimulus" (pork) bill. Many bloggers took notice of the petition. Today the online Wall St. Journal ran a story featuring a photo of three Republican senators holding up a copy of the ad.
Atlas Shrugs in Florida: Falaschetti and Douglass on Political Risk
Dino Falaschetti was kind enough to send me this op-ed he and Christopher Douglass published in yesterday's Orlando Sentinel. State Farm has decided not to insure Florida property anymore because they can't get the regulators to go along with a proposed increase in rates. In addition to being a tidy summary of how insurance markets work, Falaschetti and Douglass cust straight to the heart of the issue:
Choosing a short-term solution can lead to long-term problems. We often hear that Florida's problems come from insurers not wanting to be in a risky place. But what kind of risks are they worried about? Risk of the next catastrophe or risk that politicians will change the rules after the next catastrophe?
Art's post reminds me of a conversation that I had with an Ed major some time ago. We were discussing the rationale for government schooling. As we went through the arguments, I realized that all arguments carried more force if applied to feeding infants. I said as much to the student, and I discovered that she was quite convinced--convinced that government direction of feeding infants was probably a good idea.
The Onion post missed this important point: Parents are not up to the important task of doing what it takes "to completely eliminate their curiosity, crush their spirit of amazement, and eradicate their childlike glee." For that, we need a Ministry of Wonder.
Convenient Ethics & Market Segmentation
From The Economist
“There is a real hostility in this country to the use of agents,” says Mitch Leventhal, vice-provost for international affairs at the University of Cincinnati. “Some universities think it is illegal—it’s not, what’s illegal is recruiting American students via agents. Some think it’s unethical—but it’s only unethical when done unethically.
Funny that American university officials would worry about the ethics of using agents. Shouldn't the concern be with the ethics of supporting laws that ban their use, thereby depriving students of information?
I Can't Tell if This is Funny...
...or if I should expect to see it in my lifetime. From The Onion's archives, here's "Child-Safety Experts Call For Restrictions on Childhood Imagination." Here are the last three paragraphs:
"Many of the suggestions are really quite simple, like breaking down cardboard boxes or sewing cushions to couches so they cannot be converted into forts or playhouses," McMillan said. "Blank pieces of paper, which can inspire non-reality-based drawings, should be discarded unless they are used in one of our recommended diagonal folding and unfolding activities. And all loose sticks left lying in the yard should be carefully labeled 'Not a Sword.'"
Unfortunately, removing everything from a child's field of view that could stimulate his active young mind is extremely time-consuming, and infeasible as a long-term solution, McMillan acknowledges. "To truly protect your children, you must go to great lengths to completely eliminate their curiosity, crush their spirit of amazement, and eradicate their childlike glee. Watch for the danger signs: faraway expressions, giggle fits, and a general air of carefree contentment."
Added McMillan: "Remember, if you see a single sparkle of excitement in their eyes, you haven't done enough."
Mises Quotes of the Day
Here are two great quotes from Ludwig von Mises's Bureaucracy, originally written in 1944:
"The outstanding fact of intellectual history of the last hundred years is the struggle against economics." p. 89
"He who is unfit to serve his fellow citizens wants to rule them." p. 100
January 29, 2009
Friday's WSJ contains a letter from Terence M. O'Sullivan, General President of the Laborers' International Union of North America. A snip (emphasis added):
The Beacon Hill Institute study cited in the Journal's Jan. 21 editorial "How to Save $40 Billion" is contradicted by voluminous research based on real-life projects showing that prevailing wage requirements do not raise overall construction costs. Higher wages, when coupled with training and a dedicated work force, are generally offset by greater productivity, cost-savings related to safer job sites and the local economic development resulting from family-supporting wages.
If it really is the case that prevailing wages are offset by higher productivity (doubtful given union work rules) then union workers and "poverty wage" workers should have the same total cost and the same effect on construction firms' bottom lines. Of course, if prevailing wage union workers were productive enough to offset their higher wages, then construction firms would gladly hire them and prevailing wage laws would be unnecessary.
Nice pic, Art, but...
...this is my kid, Keri, at age 3. I swear this wasn't staged. I came in the room and there she was with my copy of the book. She's 13 now and you can just imagine how much she loves this pic now. Ok, not.
An NFL bleg
Whereas the Super Bowl is the best sporting event in the known universe;
Whereas going to work on the Monday after the Super Bowl just sucks;
And Whereas "Super Bowl Saturday" has the same alliterative appeal as "Super Bowl Sunday";
Let It Hereby Be Resolved that the NFL will MOVE THE DAMNED GAME TO SATURDAY!
RE: Friday Night at the Carden House
Cool picture Art. Last summer, I read the first several chapters of the book to my son--he's now one well-informed second grader on how to make a pencil.
I have a (very positive) review of the book forthcoming in The Freeman and am using it in my principles course this semester.
Posted by E. Frank Stephenson at 10:21 AM
Friday Night at the Carden House
Jacob loves a good book. Picture below the Fold.
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Corruption & the Financial Crisis
Dani Kauffman, who has left the World Bank for Brookings, writes about corruption and the financial crisis:
First, the public sector is reshaping regulation; second, the government is becoming an owner of financial institutions; third, it is bailing out selected private concerns through a quick and massive infusion of funds; fourth, it is to provide almost a huge fiscal stimulus into infrastructure; and fifth, it intends to extend the social (and housing) safety net for millions of vulnerable citizens.
HT: Irene Mia
January 28, 2009
An ode to C.Q.D. c. 1909
On January 23, 1909 the SS Florida collided with the RMS Republic off the island of Nantucket (I missed the original story). There was considerable response by other ships in the area after the call "C.Q.D." went out over the wireless. This collision was the first time the call had been used after it was standardized in February 1904 (which sounds like a long time to me).
Here's a poem commemorating the "first responders" in this accident printed in the Jan. 28, 1909 NYT:
A Thought Experiment
I did a thought experiment with some of my students after class yesterday that, I think, illustrates the importance of the economic way of thinking. Imagine the following three pairs of people:
1. LBJ and FDR
Now identify which pair people would classify as heroes, which pair people would classify as saints, and which pair people would classify as villains. As one might expect, LBJ and FDR are perceived as heroes, Gates and Walton are perceived as villains, and Mother Teresa and Gandhi are perceived as saints.
I then asked them to rank the group in order of the degree to which they have alleviated genuine human suffering. The students anticipated where I was going with this: I think Gates and Walton are the runaway winners, followed by Mother Teresa and Gandhi. If Robert Higgs is correct, LBJ and FDR have actually created human suffering instead of alleviating it. On ranking the presidents, here's John Denson's edited volume Reassessing the Presidency, which includes a chapter by Richard Vedder and Lowell Galloway on ranking the presidents.
Live today on KMOX
My colleague Dave Rose and I will be chatting live in-studio with host Mark Reardon this afternoon from 2:10 to 3:00 pm Central time on KMOX 1120 AM ("the Voice of St. Louis"). We'll be discussing the state of the economy, the financial mess, the "stimulus" bill, and specifically our recent op-ed piece "We Can't Spend Our Way out of This Quagmire". Key point: we should let the recession do its job of correcting the bad investments made during the boom. Public policy should not be aimed at stopping the correction.
KMOX provides live streaming audio here. A podcast should be available subsequently.
UPDATE: I just got home from doing the show, and the podcast is already available, here!
Starbucks Eschews Marginal Reasoning
Another example for my principles of economics course: Starbucks announced today that they will no longer automatically brew decaf coffee after the noon hour. They say the process takes about four minutes. They claim that demand for decaf slows in the afternoon and this creates much waste in many of their stores. The new policy does not apply to espresso-based drinks, which are customized for each order.
Now, I am a simple guy, a straight black coffee man who has no taste for those complex, fluffed up, specialty coffee drinks. But I am still willing to wait in line watching each person take up to two minutes just to order their fifteen-step, specialty coffee drink (for which they pay almost as much as I pay for my lunch).
Given that Starbucks brews their drip coffee into very high quality thermo-urns that keep it piping hot for hours, I must ask myself: What is the marginal cost in each store making two or three "uneccesary" thermo-urns of decaf coffee each afternoon (assuming almost nobody orders decaf after noontime and they are ulitimately wasted)?
Further: What is the marginal benefit (in saving potentially lost revenues) of NOT ticking off those few good customers (like yours truly) who don't feel like they have any more available time to wait yet an additional five minutes beyond the normal waiting period, just to get a cup 'o decaf joe?
Marginal benefit versus marginal cost--maybe I need to offer my consulting services to Howard Shultz.
January 27, 2009
The Minimum Wage and Busboys
Today's WSJ has an article on restaurants cutting busboy jobs because of difficult economic times:
For two decades as a Bob Evans waitress, Ms. Baker relied on a busboy to clear syrup-plastered dishes and wipe biscuit crumbs from her tabletops. But with restaurants in a sharp downturn amid the recession, Bob Evans is among a growing number of full-service eateries that are eliminating busboys to cut costs. Instead, servers are primarily responsible for clearing their tables.
But check out this paragraph--it appears that recent minimum wage increases bear some of the blame for busboy job cuts:
In many states, it's cheaper to keep servers on the clock than bussers because of a loophole that allows restaurants to pay servers who earn tips less than the minimum wage -- as little as $2.13 an hour. Bussers must be paid at least $6.55 an hour.
Repeat After Munger ...
... "Golly, I wish Public Choice were not such a deadly accurate way of understanding the political world." Case in point, the abstract of Shawn Cole's paper (gated) in the initial issue of the American Economic Journal: Applied Economics:
This paper integrates theories of political budget cycles with theories of tactical electoral redistribution to test for political capture in a novel way. Studying banks in India, I find that government-owned bank lending tracks the electoral cycle, with agricultural credit increasing by 5-10 percentage points in an election year. There is significant cross-sectional targeting, with large increases in districts in which the election is particularly close. This targeting does not occur in nonelection years or in private bank lending. I show capture is costly: elections affect loan repayment, and election-year credit booms do not measurably affect agricultural output.
Co-blogger Ed points us to this report that Milan might pay 4.5 million pounds (or $6.3m) to obtain David Beckham from the LA Galaxy. In our paper (previous post here) on Beckham's effect on MLS attendance, Bob, Kate, and I made a back of the envelope guess that Beckham's marginal revenue product for the Galaxy in 2007 was $20m. Reports indicate that the Galaxy pay Beckham about $10m thereby implying a net gain of $10m (a figure that has probably declined a bit after the initial excitement over Beckham's arrival). So a $6.3m transfer fee looks like we might have been in the neighborhood.
But here's an interesting question--Beckham is also highly valuable to the other MLS teams. I wonder if the other teams might increase the amount the league pays toward the salary of star players, its Designated Player Rule, in order to entice the Galaxy to keep Beckham.
Once More on Krugman and Air Traffic Control
Many thanks to the reader who sends along this email:
Paul Krugman, Nobel Prize winner, appears ignorant of examples of privatized air traffic control, such as Nav Canada (a private sector, non-share capital corporation financed through publicly-traded debt), and the 50% public/private National Air Traffic Services of the UK.
Posted by E. Frank Stephenson at 07:33 PM
Plagiarism is the Sincerest Form of Flattery
Bet you didn't know that I had an alter ego named Ricardo Valenzeula. Neither did I, but two of my posts--the one on broken windows Krugman and the one on condoms as stimulus--are posted above his name on the Liberty Post blog (here for Krugman; here for condoms).
Posted by E. Frank Stephenson at 11:03 AM
Building Brand Equity: Journal of Wine Economics Book Review
The latest issue of the Journal of Wine Economics is now out. In the issue I have a book review of Wine and Philosophy: A Symposium on Thinking and Drinking, which can be found here.
The full table of contents of the issue is below the fold. Thanks to Karl Storchmann for the notice.
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Journal of Wine Economics
An Examination of Judge Reliability at a Major U.S. Wine Competition
Wine Quality, Wine Prices, and the Weather: Is Napa “Different”?
Book Review: Alice Feiring: The Battle for Wine and Love or
Book Review: Tyler Colman, Wine Politics: How Governments, Environmentalists, Mobsters and Critics Influence the Wines We Drink
Film Review: Randall Miller (director): Bottle Shock
Book Review: Tadashi Agi (writer) and Shu Okimoto (illustrator):
Book Review: Fritz Allhoff (ed.): Wine & Philosophy: A Symposium on Thinking and Drinking
Letters to the Editors
« Close It
Best David Hume Phrase I've Read Today
"...our modern expedient, which has become very general, is to mortgage the public revenues, and to trust that posterity will pay off the incumbrances contracted by their ancestors: And they, having before their eyes, so good an example of their wise fathers, have the same prudent reliance on their posterity; who, at last, from necessity more than choice, are obliged to place the same confidence in a new posterity." David Hume, "Of Public Credit," Essays, Moral, Political, and Literary II.IX.2
Best Blog Post Title That Should Be An Album Title That I've Read Today
Here's Don Boudreaux's latest in the Pittsburgh Tribune-Review. The Cafe Hayek post in which Don alerted his readers to the article was titled "Parliament of Pimps," a play on the 1992 P.J. O'Rourke Book Parliament of Whores and a great phrase for a musician looking for an album title.
Don argues that the pimp metaphor is more appropriate than the whore metaphor because while prostitutes (usually) trade their services voluntarily, the art of politics consists of "truck(ing) and barter(ing) with other people's property."
Nationalize the banks?
Yesterday I spoke by phone with Alan Bock of the Orange County Register, as reported in his editorial here.
What monetary arrangements for an independent Scotland?
If Scotland becomes an independent nation-state, should the government create a new national fiat currency? (We can assume that a commodity standard is off the table.) Or should it join the Eurozone? Or should it remain on sterling? Last year I wrote a brief (9 pp. single-spaced) monograph on this interesting set of questions at the invitation of a small but feisty Scottish think tank, The Policy Institute. Publication was held up while the Policy Institute merged with another like outfit, Reform Scotland. Somewhat to my surprise, I find that the piece has now appeared online.
January 26, 2009
New Issue of Econ Journal Watch
Among the goodies:
The Race between Education and Technology is the title of a new book by Claudia Goldin and Lawrence Katz. In a review essay, Arnold Kling and John Merrifield hail the book for its formulation of the problem and theoretical core, but find ideological distortions in the execution, diagnosis, and prescriptions.
Which Rents Should We Seek?
Naturally, the highest-value use of the stimulus money would be to pay more cops to patrol my streets (which will be freshly paved, thanks to stimulus dough) and to provide massive cash infusions for economists at local liberal arts colleges.
Two Good Questions
First Greg Mankiw (in a NYT forum on questions to pose at the Geithner confirmation hearing):
President Obama supports the estate tax. Why should a person who leaves his money to his children pay more in taxes than another person with the same lifetime income who spends all his money on himself?
Second, Mankiw posts an email from a prominent economist:
Best Parenthetical Sentence Fragment I've Read Today
"And the evidence against The Shock Doctrine is now approaching that of The Population Bomb."
Narrative and ideology
What does my exchange last month with Brad DeLong on Cato Unbound, and other such debates, have to tell us about the philosophy and psychology of economics? Russ Roberts offers some thoughts on his podcast.
Russ comments that offering a narrative account of a singular event is "not the best place to do science". True. It's the place to do history, which is not the same as doing science.
Quote of the week
CNN.com reports: "Two Minnesota lawmakers are asking the state's legislature to consider a proposal that would sell to private firms the Minneapolis-St. Paul International Airport, along with other state property and programs, in an effort to bring in roughly $6 billion or more."
It includes this bewildering remark (bewildering, considering its source):
They also say their proposal is a way to spark debate over whether government should be in control of certain entities in the first place.
"Government doesn't always have to do it," [Republican State Sen. Geoff] Michel says.
Well, count that as change I can believe in.
"The airport is a significant asset," Brod adds. "Why is the state running the airport, which provides restaurants and shops and the functions and the operations that a private business probably would do very well?
"So what we're looking at is just ... raising the real question of 'what should government be doing?'"
Building Brand Equity: Free-Riding on William Easterly
William Easterly has a new blog on foreign aid. Here's his last paragraph (HT: Arnold Kling):
If you are not accountable for promises, if you try to do everything and focus on nothing, and if you obsess about aid money raised rather than results achieved, haven’t you already told us that the money will not be “well spent”?
Arnold Kling applies these insights to the stimulus package. If we take the principle that people respond to incentives seriously, then we have to follow it wherever it leads. Economists with free-market sympathies are often accused of having naive faith in perfect markets, but the case for interventionism makes awfully heroic assumptions about what governments can and will do if we would only give them the power to do it.
I've been reading a lot of papers about corruption today while working on revisions of a couple of projects (1, 2), and I think we're making a lot of progress toward better understanding why government isn't a cure for all that ails us. While I'm shamelessly self-promoting, my paper combining some of Easterly's empirical findings with the theoretical framework of the New Institutional Economics will be published in the Journal of Private Enterprise soon.
Broken Windows Krugman at His Best
Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.
This is breathtakingly bad economics--does Krugman really believe the airlines would fly their airplanes, worth millions of dollars, without an effective air traffic control system? Of course they wouldn't. And they just might develop a system of their own that works much better than the FAA.
The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending.
I doubt anyone is saying a dollar of tax cuts is ALWAYS better than a dollar of spending. Instead, folks calling for tax cuts over spending as the best form of stimulus are thinking at the margin. That is, they are taking the current condition as the reference point and asking what the more useful change would be. If we were starting from a basis of no government spending or much lower government spending then maybe, but just maybe, a dollar of spending would be preferable.
ADDENDUM: The broken windows reference is explained here.
Condoms as Stimulus--What's Next Viagra?
I've heard of supply side economics and demand side economics, but apparently there is now bed side economics (transcript from ABC's "This Week" via Drudge:
STEPHANOPOULOS: Hundreds of millions of dollars to expand family planning services. How is that stimulus?
Posted by E. Frank Stephenson at 12:10 PM
How to Bailout the States (If We Must)
Here's the rough draft of an op-ed I'm working on:
Appearing recently on ABC’s “This Week,” Senate Minority Leader Mitch McConnell suggested that stimulus funds for the states take the form of loans rather than grants. "It will make them spend it more wisely," McConnell said. "The states that didn't need it at all wouldn't take any."
Note: The spending reduction for WV strikes me as implausibly large so I'm taking another look at the Census data.
Posted by E. Frank Stephenson at 08:32 AM
January 25, 2009
My turn ...
to be shocked, that is. Lobbyists won't be marginalized after all, according to this AP release.
President Barack Obama's ban on earmarks in the $825 billion economic stimulus bill doesn't mean interest groups, lobbyists and lawmakers won't be able to funnel money to pet projects.
January 24, 2009
Paul Krugman, stickler on the history of economic thought?
Is it too much to ask that someone criticizing Keynes actually, you know, read Keynes …?
It is, of course, a perfectly reasonable request. But it’s pretty funny for the request to come from the same person who declared:
Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics—at least in the English-speaking world—was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed.
Krugman’s declaration here shows that has not actually, you know, read the pre-1936 economics literature to which he refers. (He has, instead, read and repeated Keynes’ mis-characterization of it.) Never mind that the anti-free-market Institutionalists were not "completely dominated" or "suppressed". The two leading neoclassical economists of the English-speaking world c. 1910, Alfred Marshall and Irving Fisher, both explicitly rejected the doctrine of laissez faire.
I'm Shocked, Part Deux
Two Illinois congressmen urged the Treasury in October to avoid taking any regulatory action against a struggling bank in their state, illustrating the aggressive efforts some politicians are taking to help hometown lenders during the bank crisis.
Posted by E. Frank Stephenson at 12:00 AM
January 23, 2009
Posted by E. Frank Stephenson at 08:02 PM
Bryan Caplan on Parental Investment in Kids
Here's a very interesting article by Bryan Caplan on the amount of time we spend parenting (HT: Bryan Caplan). The main point I take from it is that our parenting effort features too much quantity and not enough quality. We can probably be happier, better parents (with happier, better kids) if we rest when we need to and don't do things we fundamentally don't want to do just because we feel like the kids need "face time." It's an interesting idea, to be sure, and I look forward to Bryan's forthcoming book giving us "Selfish Reasons to Have More Kids."
What I've Been Reading and Writing Lately (Updated)
Blogging has been light recently because of the beginning of the semester and a very enjoyable, fascinating (but very time-consuming) prep for Classical and Marxian Political Economy. This has made for a lot of really interesting reading:
Murray Rothbard, Economic Thought Before Adam Smith. I had resisted reading this for some time because it's part of Rothbard's unfinished history of economic thought. The first volume is nothing short of magisterial, and it lends a lot of credence to Deirdre McCloskey's developing thesis that rhetorical changes were part and parcel of what laid the groundwork for modern economic growth. Very specifically, it's likely difficult to have a capital market in a world where charging interest is considered by many to be a mortal sin. The main text for the course is Ekelund and Hebert's A History of Economic Theory and Method, 5th edition, but Rothbard has helped considerably as I've prepped lectures. Students will be reading the chapter on the Scottish Enlightenment on Thursday.
David Hume, Essays, Moral, Political, and Literary. Hume and Adam Smith were close personal friends; we're reading essays 1-9 in part II for class on Thursday.
Karl Marx, The Communist Manifesto. See here.
Paul Krugman, "Ricardo's Difficult Idea." For all our differences, economists at least agree on the fundamentals. And there are few things as fundamental as the law of comparative advantage. Here, Krugman offers a very useful contribution to the General Theory of the Theory Class and points out why, in his opinion, so many learned people either refuse or fail to understand the law of comparative advantage. On the subject of refusal to understand, here's Lou Dobbs offering a cogent criti--...er, calling economists, particularly Alex Tabarrok and Ben Powell, names.
I've also recently posted a couple of papers on SSRN.
"How to Be a Great Conference Participant." The tongue-in-cheek product of a multi-hour delay at the airport in New Orleans after the 2007 SEA meetings. The abstract:
Being an academic, particularly an academic economist, is a task that requires a great deal of preparation and effort. It also requires a great deal of travel. This essay provides helpful suggestions on how to be a Great Conference Participant.
Revenue and Regulation: Lessons for E.U. Leaders from the Roman Empire to the Modern Era (with Alex Tokarev). This is a draft of a book chapter that should appear in print sometime soon. The abstract:
Government structures are more bureaucratic (and their policies more redistributive) in the European Union than in the United States. The more 'statist' character of Europe is hardly a surprise given the leading role of France in the post-WWII integration of the continent. Economic freedom was never a priority for the French monarchs and republican parliaments. Admiration for the "invisible hand" of the market may have inspired brilliant thinkers such as Cantillon, Say, and Bastiat, but theirs were voices crying in the desert of interventionism. We explore European bureaucracy from the institutional changes of the late Roman Empire through the French Revolution.
January 22, 2009
I'm Shocked (a la Capt. Renault)
Troubled OneUnited Bank in Boston didn't look much like a candidate for aid from the Treasury Department's bank bailout fund last fall.
As Mike Munger recently said, "Golly, I wish Public Choice were not such a deadly accurate way of understanding the political world."
Posted by E. Frank Stephenson at 10:46 AM
Econotourism: India, part 2
Many arrangements in India’s cities are puzzling until you remember that land and capital are dear while labor is cheap. You don’t do your own shopping at a chemist’s shop (pharmacy): one of the half-dozen clerks behind the sidewalk counter jots down and fetches your order. (Btw, almost any medicine is available without a prescription.) Self-service supermarkets are rare and small, as in Manhattan, but unlike Manhattan's the one we visited in Bombay had a clerk stationed in every aisle. Nobody replaces broken appliances or electronics: guys in hole-in-the-wall booths, in grimy arcades bordering the corrugated-steel shantytowns, fix them cheaply. In one such arcade, where we took clothes for alterations, two booths down from the tailor, four men sat on the floor hand-sewing flowers together into garlands. In one home we visited, a tailor was making a house call to do alterations using the homeowner's sewing machine.
And this is the country where, fifty years ago, Nehru thought that capital-intensive heavy industry was the way to go?!
In homes, a shower or bath is typically warmed, somewhat, only by a small wall-mounted on-demand electric water heater (commonly known as a "geezer"). Supposing that there is a shower head, and not just a bucket for collecting warm bathing water, it is seldom within a stall, and often the bathing area is not separated from the rest of the bathroom even by a low wall, so water splashes all over the bathroom. The design assumes that a servant will come and mop up after each shower. But even pensioners of modest means do have servants.
ADDENDUM: Here's another example of capital-labor substitution. In the U.S., if you want a large outdoor tent for a reception, you typically rent one with an expensive, pre-fabricated, jointed metal frame that a small crew can quickly put up and take down. At the Delhi Golf Club, on January 2nd, I watched a large crew dissassembling a tent frame that had been custom-built entirely from long bamboo poles tied together with twine.
January 21, 2009
We can't spend our way out of this quagmire
My UMSL colleague David Rose and I have an op-ed piece in today's St. Louis Post-Dispatch. Topic: how bad fiscal and monetary policies contributed to the financial mess and how they threaten to perpetuate the problem. Here's a nugget on how Federal Reserve policy disabled the economy's interest-rate brake:
But if the Fed hadn't increased the money supply from 2002 to 2006, increased demand for credit resulting from deficit spending and the increased demand for real estate would have pushed up interest rates. This would have discouraged borrowing. Rising interest rates would have thwarted the process by which an increase in borrowing by the government and by the public artificially inflates asset prices, begetting even more borrowing.
Pith & Wisdom for Bailout Nation
The best two sentences I've read today:
Every man must bear the loss of a bad bargain legally and honestly made. If not, he could not enjoy in safety the fruits of a good one.
That's from a famous 1855 case on mistakes & fraud in contract, Harris v. Tyson (24 PA. 347). Full text of the opinion is fascinating and pasted beneath the fold.
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SUPREME COURT OF PENNSYLVANIA
24 Pa. 347; 1855 Pa. LEXIS 44
PRIOR HISTORY: [**1] Error to the Common Pleas of Chester county.
This was an action of ejectment brought by Jesse Harris against Isaac Tyson, Jr., and others, in which the plaintiff claimed to recover the exclusive possession of a tract, containing about 80 acres of land in East Nottingham township, Chester county. Isaac Tyson, Jr., was not summoned; the persons summoned were his agents, or workmen, and claimed the right to enter upon the land in question under him. The defendants were considered on the trial as nominal parties merely, Tyson being the real defendant.
It was not denied that Harris, the plaintiff, was the owner of the fee; but it was contended that the defendants were entitled to a limited possession under said Tyson, for the purpose of digging and removing chrome, under a deed by Harris to Tyson, dated 14th April, 1837. By the deed Harris, for the consideration of fifty dollars, conveyed the land to Tyson, "said conveyance being only for the purpose of digging or removing all minerals or mineral substances of value"--the latter to have free liberty to dig, and privilege of ingress and regress," "with the right to erect such buildings as are necessary for the mining operations."
The [**2] defendants then rested; and the plaintiff, alleging that the deed was procured by fraud and misrepresentation, attempted to sustain the allegation by the testimony of witnesses.
It was shown that Tyson, who resided in Baltimore, prior to the year 1832 was extensively engaged in preparing chromate of iron (usually called chrome) for market. This mineral was found to exist in its native state in several conditions: rock chrome, which was found in subterranean veins; surface chrome, which existed in lumps or masses above ground, and sand chrome, which lay in the beds or on the margins of small streams of water as they now run, or as they ran formerly, in the shape of coarse, heavy sand. The defendant's principal operations, prior to 1832, were at Soldier's Delight, in Baltimore county, Maryland. Having exhausted the supply of rock chrome at that place, he began, about that time, to take out sand chrome from the beds and margins of the watercourses. In 1834 he began to obtain chrome from Chester county, Pennsylvania.
In the south-western sections of Chester county are two districts of country called respectively "White Barrens" and "Pine Barrens," not far distant from each other. [**3] These districts present everywhere a very poor, barren soil, almost unfit for agricultural purposes, and of little value, except for the chrome they contain. The tract of land belonging to Harris, the plaintiff, is situate within the "White Barrens," having upon it a log building in which Harris and his family resided. At the date of the conveyance to Tyson, the building was in a dilapidated condition, and scarcely habitable. The plaintiff was poor.
The plaintiff having given evidence tending to prove that Tyson was aware of the existence of sand chrome in the White Barrens, proposed to ask a witness if the chrome found everywhere in the White Barrens, is the same mineral, and of the same kind as that found on the land of the plaintiff. This was objected to, and the offer rejected. The plaintiff excepted.
The second bill of exceptions was of the same import.
The third bill of exceptions related to the condition of the plaintiff's family, which was alleged to be sickly, infirm, and dependent: this the plaintiff proposed to show. The defendants objected. The proposition was overruled, and the plaintiff excepted.
The circumstances attending the execution of the deed [**4] were shown by two witnesses. One of them, Nevill, testified that in 1837 Tyson and Harris had a conversation about the sale of the land of Harris, for which Tyson offered from $ 300 to $ 400, and that they could not agree about the price, but in a week or two afterwards Tyson returned, and offered the price asked, and being refused, Tyson asked for a lease of the chrome right. The witness further stated that Tyson said that he did not know that it would benefit him a great deal, because there was so much barren rock among it. Tyson requested Harris to go to Squire Bye's, and they went away together.
Amos Bye testified that they came to his house, and Tyson said he had offered Harris $ 350 for his place, and inquired if he did not consider it a fair offer. He said he did not. Tyson said it made no difference--he must have the mineral right--that he was willing to give him $ 50 for the mineral right, and if he would not take that he would be under the necessity of bringing an action against him for damages. Tyson wrote a deed, and it was executed by Harris alone, with his mark.
The plaintiff's counsel then proposed to show by the same witness that in 1836 Isaac Tyson called [**5] on the witness, and asked him to prepare a draft of the different streams that made up through the "Barrens," and place the names of the people that inhabited the houses, as he often passed through the Barrens, and if he got lost, he could tell from the houses where he was--that witness made such a draft, and gave it to Tyson.
The proposed evidence was objected to and rejected, and plaintiff excepted.
The same witness testified that, in his judgment, the land of Harris, in 1837, was worth $ 5000; and that Harris could read, though he did not know that he could write.
Another witness testified that the land of Harris was worth, in 1837, $ 10,000. That without the chrome its value was not beyond $ 300 or $ 400.
The defendants proposed to file a paper disclaiming all right, title to, and interest in the premises described in the writ, except so far as concerned the mineral chrome. The plaintiff objected to the filing of such a paper; the objection was overruled, and plaintiff excepted.
The plaintiff then offered to prove that the defendant, concealing his knowledge of the nature and value of what is called sand chrome, purchased between the years 1836 and 1839 [**6] nearly all the tracts of land in the neighborhood of the plaintiff's farm, upon which was to be found sand chrome of the same character and quality as that found on the land of the plaintiff; that before the said purchases he took measures to conceal the value of the said sand chrome, and put in circulation a report that sand chrome was of no value; and thus impressed the public mind in the neighborhood with that idea, for the purpose of enabling him to purchase either the land or the ore lease at very small sums--much less than its real value; that with the view of producing this impression he publicly declared that the sand chrome found upon the Sherry property, adjoining the land of the plaintiff, was worthless, and that such was the fact also in reference to the sand chrome found on the land of the plaintiff; that declarations, coming from one supposed to be well acquainted with the subject, created a general opinion that sand chrome was worth nothing, and that, in consequence of this erroneous impression, he was enabled to buy most of the tracts in the neighborhood, and to procure the agreement with the plaintiff at a sacrifice.
The defendants objected; the offer was overruled, [**7] and plaintiff excepted.
The next four exceptions to the ruling of the Court, rejecting evidence offered by plaintiff, depended on the same principle as the last.
To show knowledge on the part of Tyson, the plaintiff's counsel offered to prove "that in the year 1838 the defendant sent an agent to the neighborhood of the land in suit, that he examined the plaintiff's land with other land, and that the defendant himself came there and was told by the agent that he could not take out all the sand chrome found in the neighborhood with a hundred hands in ten years."
The evidence was rejected, and plaintiff excepted.
The Court also rejected an offer by plaintiff to inquire whether the chrome appeared to be more abundant on the tract of the plaintiff than on the other tracts in the neighborhood; and to prove that prior to 1837 Tyson was seen on or near Harris's land, coming from the stream on Harris's land, and had conversation with the witness about the sand chrome there, or in the vicinity, and also to prove what that conversation was.
The plaintiff also offered to prove other conversations of Tyson about sand chrome in 1838, without stating what the conversation [**8] was. The offer was rejected, and the plaintiff again excepted.
The plaintiff proposed to ask a witness what he paid Sidwell for ore (chrome) leave in 1842 and 1846, and excepted to the opinion of the Court overruling the proposition.
The plaintiff then proposed to prove Tyson's declared intention to monopolize the chrome business, and excepted to the opinion of the Court overruling the evidence.
The plaintiff proved that after the purchase by Tyson no chrome of any value was extracted from the Harris tract till 1851, and gave evidence tending to show that Harris's business transactions had been extremely limited, that he had but little acquaintance with business, was ignorant, and that between 1837 and 1851 his house had been improved and repaired at Tyson's expense, so as to make it habitable.
On part of the defendant was given evidence to show that late in 1836, or in the beginning of 1837, Tyson opened a negotiation with Harris for the purchase of his land, for which he asked from $ 300 to $ 400. It appeared that, the parties not being able to agree upon a price, Tyson offered to the plaintiff $ 20 cash for the right to search his land one year for chrome, all [**9] loose ore to be his for expense of search, and $ 3 a ton besides for what he should take out, or to pay him $ 300 for the land. This evidence came from R. Sidwell, who had received a letter from Tyson making the offer, which he communicated from Tyson to Harris. In order to show what the offer was, Sidwell produced the letter, and it was proposed to read it to the jury. Objection was made and overruled, and plaintiff excepted.
In 1850, Harris agreed to sell the land in fee to Tyson, for $ 600. The money was tendered, and deed written, but not executed.
The defendant further proved that in the year 1851, Harris, by an instrument in writing, which was produced, sold to J. P. Grier all his right and interest in the chrome found in the tract for $ 3 a ton, for every ton of clean ore he should get out of it; also that Grier had given Harris a bond of indemnity against any claim of Tyson, and covenanting to conduct and defend all suits relating to the chrome, at his own expense. The bond was read in evidence, and a general power of attorney also from Harris to Grier.
Evidence was given by defendant that Tyson took out a few tubfulls of sand chrome in 1840; that subsequently [**10] when persons mining on an adjacent tract, trespassed upon the plaintiff's lands, and took out a quantity of chrome therefrom, Harris gave notice to Tyson's agent of the trespass, speaking of the mineral as the property of Tyson; and that Harris was always friendly with Tyson, and accustomed to speak of him gratefully for benefits conferred, till after his arrangement with Grier in 1851.
In order to show that Tyson possessed no knowledge of the extent of the sand chrome in any locality prior to 1839, evidence was given that the discovery was first made in that year that sand chrome was to be found beyond the channels and margins of the rivulets in which it had previously been known to exist, and sometimes extended to considerable distances into the fast land. This discovery was made by Tyson's workmen, in Chester county, and it led to their working again the ground at Soldiers' Delight, where the sand chrome was supposed to have been exhausted. The second working at that place produced more largely than the prior operations.
Proof was also given that magnetic sand was deemed worthless prior to 1839, and was still used in small quantities only in combination with a better quality [**11] of mineral, making, by the compound, a medium article for trade.
A number of points were submitted on part of plaintiff.
Haines, President Judge, in his charge, observed that, as from the pleadings it would appear as if the title to the land was in question, therefore a disclaimer of the title had been filed, and that it was proper. He charged that the right to erect buildings for mining operations, authorized the erection of temporary buildings for boarding and lodging of the hands.
He charged that actual fraud vitiates a purchase. But that when the deed in this case was procured, and till the year 1839, the existence of sand chrome in places outside the beds and banks of streams was unknown, and it was not until that year supposed that any considerable quantities of sand chrome existed in the fast land--that the poverty of the plaintiff had nothing to do with the case.
He further observed that Tyson, having exhausted the sand chrome in the bed of the stream at Soldiers' Delight, in 1837, directed his attention to Lancaster county. Being desirous of obtaining chrome, and Harris's land having been mined to a small extent on a lease to William Harris, he called on [**12] the plaintiff and made the proposition, "to give him $ 20 in hand for the exclusive right to search his land for one year, and give him $ 3 per ton for all he could get, or buy his land for $ 300--of which the $ 20 would then be in part pay, and if he did not buy, the $ 20 would be his. All loose ore to be his, for the expense of search."
This was about the middle of January, 1837, and is strong evidence of the ignorance of defendant as to the existence of chrome on the land of the plaintiff, immediately before the execution of the deed. What the answer to this proposition was, we do not know, the letter from Sidwell to Tyson being lost; but either then, or at a subsequent period, the contract for the sale of the whole property seems to have been concluded by Harris agreeing to accept the offer of the $ 300. When, however, the deed was prepared for execution, and the money in the hands of the agent of Tyson to be paid over, Harris objected to signing the instrument, inasmuch as his wife was unwilling to leave the property. In this state of affairs Tyson executed an instrument of writing, which was subsequently handed over to Harris, whereby he agreed to permit the wife to remain [**13] on the property during her life.
This instrument is still in the hands of the plaintiff. Harris continuing to refuse to execute the deed for the conveyance of the whole tract, the parties went together to Amos Bye's, as a friend, that they might be put right, and there, in the presence of that witness, they executed the deed upon which the defendant claims the right to possess a part of the land of the plaintiff for mining purposes.
He further observed:--"But the plaintiff alleges that the defendant committed a fraud, by the intentional concealment or suppression of material facts, and by misrepresentation. To this I answer, 1. There is no evidence in the cause which shows that Isaac Tyson had a knowledge, at the execution of the deed, that there was sand chrome on the fast land of Harris; while there is testimony that he was ignorant of the fact until 1839. Where there was no knowledge, there could be no concealment.
"2. A purchaser of real estate is not bound, in law or equity, to disclose to the seller his knowledge of the existence on his land of a mine, of which the seller is ignorant; and this is emphatically true, where the opportunities of information are equally [**14] open to the inquiries of both of the contracting parties.
"3. There is not in the recollection of the Court a tittle of evidence of misrepresentation by the defendant to the plaintiff.
"4. In order to render a contract void upon the ground of fraudulent misrepresentation, it must be of some material fact relating to the thing contracted for, and must relate to something, in regard to which the vendor acts upon the misrepresentation of the vendee.
"As to the points submitted on part of plaintiff:--The first related to misrepresentation by defendant, as to which the Court said they saw no evidence. 2. Concealment implies knowledge, but there was no evidence that the plaintiff had superior knowledge as to the existence of chrome at the making of the contract. 3 and 4. That there was no evidence that the defendant produced a false impression on the mind of the plaintiff as to the existence of chrome on his land, or as to the value of it, and that he had no recollection of expressions or acts of Tyson tending to mislead the plaintiff. 6. That duress to avoid a contract must be of the person. 7. That actual fraud would avoid the deed. 8. That houses for boarding and lodging [**15] hands might be erected upon the land, without forfeiting the land so occupied. The 9th related to the disclaimer which was before answered in the charge."
February 11, 1853, verdict for defendants.
There were thirty-nine assignments of error, twenty-two of which were to the rejection and admission of evidence, and seventeen to the charge of the Court, including the answers to the several points submitted on part of plaintiff. The several specifications were however classed in the argument, and considered under the appropriate heads. Also see the opinion of Black, J.
PROCEDURAL POSTURE: Plaintiff fee owner sought review of the judgment of the Court of Common Pleas of Chester County (Pennsylvania) entered on a jury verdict in favor of defendant mineral owner, in the fee owner's action of ejectment to recover the exclusive possession of a tract of land.
OVERVIEW: The fee owner conveyed all of the mineral and mining rights to the mineral owner. The fee owner learned that the mineral rights were significantly more valuable than the mineral owner had stated to others in the area. The fee owner filed an action of ejectment against the mineral owner to recover the exclusive possession of the land. The trial court entered judgment on a jury verdict in favor of the mineral owner. On appeal, the court affirmed. The court held that the mineral owner was not bound to make the fee owner as wise as he himself was. The ignorance of the fee owner was not of itself fraud on the part of the mineral owner. The court further held that there was no evidence that the mineral owner willfully made any misstatement concerning the material fact that misled the fee owner and induced him to sell at a lower price. Rather, the statements made by the mineral owner were to others in the neighborhood, not directly to the fee owner. Finally, mere inadequacy of price was not sufficient to set aside a deed.
OUTCOME: The court affirmed the judgment of the trial court entered on a jury verdict in favor of the mineral owner, in the fee owner's action of ejectment to recover exclusive possession of a tract of land.
LexisNexis® Headnotes Hide Headnotes
A person who knows that there is a mine on the land of another, of which the latter is ignorant, may nevertheless buy it. The ignorance of the vendor does not of itself render the transaction fraudulent on the part of the purchaser.
The mere fact, therefore, that the vendee of a right to dig up all minerals and mineral substances of value, and remove the same from the land of the vendor, was aware, at the time of the purchase, of the existence of a valuable deposit of sand chrome on the land, of the value of which the vendor was ignorant, though he knew of the deposit, is no ground [**16] for impugning the validity of the conveyance.
If the vendee, during the negotiation for the purchase, had wilfully made any misstatement of a material fact, and thus misled the vendor, and induced him to sell at a lower price than he otherwise would, the contract would have been a cheat, and the conveyance void.
Mere inadequacy of price is not sufficient to set aside a deed. It is sometimes regarded as a suspicious circumstance when coupled with other strong evidence of fraud.
Duress to invalidate a deed must be of the person. A threat to sue the grantor for a good cause of action will not invalidate it.
An offer on the part of the plaintiff, in an action of ejectment, in the nature of a bill in equity for the rescission of a conveyance, to prove that the defendant, having knowledge of the nature and value of sand chrome, of which a large body existed on the plaintiff's land, concealed that knowledge, and actively put in circulation a report that sand chrome was of no value, and thus impressed the public mind in the neighborhood of the plaintiff with that idea, for the purpose of enabling him to make extensive purchases of lands containing sand chrome; and that [**17] in consequence of an erroneous impression thus created, the defendant was enabled to buy most of the chrome lands in the neighborhood, including the plaintiff's tract, was properly rejected; no offer being made to show that the declarations of the defendant proposed to be proved were made to the plaintiff, or in his presence, or were communicated to him.
Evidence that the plaintiff was a poor man was properly excluded.
The defendants had a right to file of record, during the trial, a disclaimer of all right to the land described in the writ, except as to the privilege of taking out chrome.
The rejection of offers to prove conversations of defendant, without stating what the conversations were or that they were relevant, is not error.
A declaration by defendant that it was his intention "to monopolize the chrome business," is not evidence in an action brought to set aside a conveyance of a chrome right in the land of the plaintiff.
A witness having testified that he had received a letter from defendant, the contents of which he communicated verbally to the plaintiff, it was not error to permit the letter to be read to the jury--it being evidence of the defendant's [**18] fair dealing in relation to the contract sought to be set aside, and relevant to the point in controversy.
The tract in dispute owes its value to the presence of sand chrome. Irrespective of this it is nearly worthless; but as a depository of that mineral it is worth a large sum of money. Leave to dig and carry it away is therefore a highly valuable privilege. Of this the plaintiff was ignorant, though he had some knowledge of the worth of rock chrome. But Tyson was aware of it before he procured a cession of the right to mine on the plaintiff's land. Yet this, during the negotiation, he concealed from the plaintiff. Under the circumstances in which the parties stood, is not this such an instance of suppressio veri as will affect the contract?
Constructive fraud is where a party knows the truth and conceals it: Pearson v. Morgan, 2 Bro. Ch. 390. As a general rule, each party is bound in every case to communicate to the other his [**19] knowledge of material facts, provided he knows the other to be ignorant of them, and they be not open and naked or equally within the reach of his observation: 2 Kent's Com. 4th ed. 482 & n. This is consonant with the principle of the civil law, though subject to some qualification in our Courts, where the rule seems to be that to constitute undue concealment there must be a suppression of facts, which one party is bound in conscience and duty to disclose to the other: 1 Story's Eq., §§ 207, 208. This occurs wherever the circumstances are such as to attract the confidence of the ignorant party: 1 Madd. Ch. 265-6. There are various instances of this kind in reported cases: State v. Holloway, 8 Blackf. 45-7; Draper v. Bolare, 2 Vern. 370; Ibbottson v. Rhodes, 2 Vern. 584; 2 Hov. on Frauds, 197; Hundson v. Chancey, 2 Vern. 370. The principle has been asserted even in law: 1 Stark. R. 352, Gray v. Hall; also in Morgan v. Morgan, 1 Brod. & Bing. R. 289, a very strong case.
This doctrine was considered in Kentzing v. McElrath, 5 Barr 467, where it was held under the authority of Ludlow v. Organ, 2 Wheat. 178, that the obligation of a purchaser to communicate extrinsic facts which might [**20] influence the price was applicable only to cases where the means of intelligence were not equally accessible to both parties: Cornelius v. Malloy, 7 Barr 293. Where the slightest confidence is reposed and betrayed, equity will protect the injured party. Such confidence is always presumed where one of the bargainors is possessed of information which the other cannot attain to without scientific or laborious investigation. Such was the position of the plaintiff.
Fox v. Mackreth, 2 Brown's Ch. R. 420, was the case of a concealed mine known only to the vendor. But there, there was nothing to invite confidence, nor was any reposed. The parties dealt at arms' length. So says Lord Eldon in Turner v. Harvey, Jacobs's R. 178. The present is a very different case: 1 Story's Eq. 147, 148; Penny v. Martin, 4 John. Ch. 566.
The defect of proof as to Tyson's statements is attributable to the exclusion of the plaintiff's evidence. An inspection of the record will show that the defendant's counsel objected to any evidence of statements not made directly to Harris, or communicated to him afterwards, and of facts in relation to any other chrome than that found on the plaintiff's land, and [**21] that the court excluded all such evidence, as well as that which related to Tyson's design secretly to create a monopoly, and the steps he took for that purpose. It is a well settled rule that where the question is of fraud the utmost liberality is exercised in the admission of evidence: Stevenson v. Stewart, 1 Jones 307; Smull v. Jones, 1 Watts & Serg. 138; Reeme v. Parthemore, 8 Barr 461; Bredin v. Bredin, 3 Barr 81. In Hunt v. Moore, 2 Barr 107, it is said a Court of equity will lay hold of slight circumstances to relieve where an advantage has been gained by silence. The evidence offered was all pertinent, and ought to have been admitted.
Whether falsehood was circulated, and, if so, how it influenced the plaintiff, were questions for the jury. Equity always relieves where there has been misrepresentation: Evans v. Bicknell, 6 Ves. 173, 182; 1 Story's Eq. 191; Pidlock v. Bishop, 3 B. & C. 605; Smith v. Bank of Scotland, 1 Dow. P. R. 272; 1 Story's Eq. 192; 2 Kent's Com. 452, 484, 490; Fisher v. Worrall, 5 Watts & Serg. 478; Smith v. Richards, 13 Peters' S. C. R. 36; Ludlow v. Organ, 2 Wheat. 195; Sug. on Vend. 7th ed. 6; 1 Story's Eq. § 200. Nor is it important whether the party [**22] knew his assertions to be false; Arnslee v. Medlycott, 9 Ves. 21; Groves v. White, Frem. R. 57.
And even though a party misrepresents a fact through mistake; for it operates as a surprise or imposition on the opposite party: Pearson v. Morgan, 2 Bro. C. R. 389; Burrows v. Locke, 10 Ves. 475; De Mandeville v. Compton, 1 V. & B. 355; 1 Story's Eq. § 193; 1 Madd. Ch. 208; 1 Bro. Ch. C. 546.
So, if consent be obtained by imposition, circumvention, surprise, or undue influence: Fonb. Eq. B. 1, cap. 2, § 3, note (r) (a); Ib. § 8; 1 Story's Eq. §§ 221, 222.
Courts of Equity especially protect persons disabled by weakness, age, or other incapacity: Gartside v. Isherwood, 1 Bro. C. C. 358; 360, 361. The misrepresentation, however, must be a matter of substance, and the other party must be misled by it: Frower v. Newcome, 3 Mer. R. 704; 2 Kent's Com. 484; 1 Story's Eq. 191.
A transaction avoided by fraud cannot be subsequently confirmed, without a new consideration: Duncan v. McCullough, 4 Serge. & Rawle 483; Chamberlain v. McClurg, 3 Watts & Serg. 36; Jackson v. Somerville, 1 Harris 370.
Courts of equity will grant relief on the ground of fraud established by presumptive [**23] evidence, where Courts of law would not deem the proof sufficient to justify a verdict: Fullager v. Clark, 18 Ves. 483; 1 Story's Eq. 190.
Was the evidence offered relevant and proper? With respect to Tyson's declarations, it will not be denied they would have been receivable if made to Harris himself. The question is then reduced to this: Was it allowable to give evidence that might satisfy the jury of Tyson's intention to induce a general delusion of which he might take advantage, and which probably extended to the plaintiff, although there was no direct evidence of it. The Court thought not. If correctly, stupendous frauds may be committed with impunity. Courts of equity may deduce fraud from circumstances affording presumptions alone.
2. The inadequacy of price paid for the privilege granted is so gross as to shock the conscience, and afford conclusive evidence of a fraud practised.
Here "ore leave" worth $ 5000 was purchased for $ 50. Mere inadequacy, as a general rule, is not enough; but where the inadequacy is so great as to satisfy the conscience of the Court that there must have been imposition or oppression, relief will be afforded: 1 Madd. Ch. 268; Booth v. [**24] Vernon, 9 Mod. 147. The consideration of a deed may be of itself sufficient evidence of fraud: 1 Madd. Ch. 267. A bargain may be hard, yet valid, unless it shocks the conscience: Coles v. Trecothick, 9 Ves. 246. A legacy of 1000l., purchased for 310l., was set aside by Lord Thurlow, as a rank fraud, on account of the price: Crow v. Ballard, 1 Ves. 215. The inadequacy must be so great as to afford strong presumption of fraud: Butler v. Haskell, 4 Dessaus. 651; Udall v. Kenney, 3 Cowan 598. There are various decisions which serve as precedents: Lakey v. O'Donnell, 2 Sch. & Lef. 471; Maskeen v. Cole, cited 1 Madd. Ch. 269; Clarkson v. Hanway, 2 P. Wms. 203. Where the inadequacy is great, though of itself insufficient, the Court will lay hold of slight attendant circumstances to rescind the contract: Harden v. Crawford, 1 Atk. 390; Heathcock v. Paignon, 2 Bro. C. C. 167; Stephens v. Bateman, 1 lb. 22, 26, cited in a note to Moth v. Atwood, 5 Ves. 485; Osgood v. Franklin, 2 John. Ch. 23; Hough v. Head, 2 Ham. 502; Gest v. Frazier, 2 Litt. 118; Hardeman v. Barge, 10 Yer. 202; Tripp v. Tripp, 1 Rice, Eq. 84; Williams v. Powell, 1 Ire. Eq. 466; George v. Richardson, Gil. 230; McKinney v. Pinkhard, [**25] 2 Leigh. 149; Thornhill v. Evans, 2 Atk. 330; Pickett v. Laggon, 14 Ves. 215. In How v. Weldon, the only attendant circumstance was the known improvidence of sailors: 2 Ves. Sr. 516.
The disclaimer ought not to have been received at that stage of the cause. The letter produced by Sidwell had not been read to plaintiff or seen by him, and ought not to have been read to the jury, especially as the witness could not remember what he said to Harris.
Hickman and Lewis, for defendants in error.--In order to sustain the three points on which the plaintiff mainly relied, his effort on the trial in the Court below was, not to prove declarations made by Isaac Tyson and communicated to Jesse Harris, nor circumstances relating to the transactions between the contracting parties, but to give in evidence the declarations and acts of Tyson, which could in no wise have effected the contract on any reasonable ground of presumption or belief. It would by no means follow that if Tyson's declarations respecting the chrome had been carried to Harris, he would have given them a serious thought in making the subsequent contract. Their effect on his mind might possibly in such case have been properly [**26] left to the jury, as a subject of presumption. But it will not do to presume first, that Harris was informed of those declarations, and then, on the basis of that presumption, raise another, that he was influenced to his injury by those declarations. No presumption is allowable which rests only on another presumption: 2 Stark. Ev. 685. The evidence therefore offered and objected to was properly rejected, and there is nothing in the testimony actually given, which exhibits even an impropriety in word or act on the part of Tyson.
Even that Tyson had knowledge, in 1837, of the extent of the sand chrome deposits in the White Barrens is effectually disproved by the defendant's testimony. Their extent and value were not known or suspected by anybody till two years afterwards.
But if Tyson had possessed all the knowledge ascribed to him in the argument of the plaintiff, he was not bound to disclose that knowledge to the vendor: 2 Kent's Com. 484, 491; Story's Com. on Eq. § 197, n. 2; Fox v. Mackreth, 2 Brown's Ch. R. 420; Laidlaw v. Organ, 2 Wheat. 178, recognised in Kentzing v. McElrath, 5 Barr 467.
It is indeed said by the learned judge who delivered the opinion of the Court [**27] in Cornelius v. Molloy, 7 Barr 300: "There are cases where a party is under a legal, or at least an equitable obligation to communicate what is not known to the other party." "This is always so where, from the nature of the subject, there is created a trust or confidence between them which authorizes the ignorant party to act upon the presumption that there is no concealment." But no case is cited in which a trust or confidence was decided to exist where information was not applied for; much less where nothing more appeared than superior intelligence on the part of a vendee of property on which the vendor himself resided. The illustration which the judge gives of the rule, is of one selling an estate knowing he had no title to it, or knowing there were encumbrances on it, of which the vendee was ignorant, and therefore by no means applicable to the case in hand. And yet this very illustration is erroneous, or else the rule caveat emptor would be without virtue. A deed cannot be annulled in Pennsylvania merely because of failure or defect of title known to the grantor, and the consideration ordered to be repaid, no actual fraud appearing: 1 Serge. & Rawle 42; 7 Barr 486.
The question [**28] as to the inadequacy of the price is not presented by the evidence. The value at the time of the contract was unknown, and is unknown yet; for it depends even now, (since the extent of the chrome deposit, after seventeen years' experience, may be better guessed,) on the value of chrome in the market. The land is of no value if the chrome cannot be sold for more than the cost of mining. But it will not do to raise a standard of value in 1851, by which to estimate land in 1837, after certain resources heretofore unknown have been developed. No contract could stand an operation of that kind, if inadequacy of consideration were to become a question. Here the whole fee simple value in 1837 was estimated by Harris himself at $ 300 or $ 400. In reference to such a price for the whole title, $ 50 for the "ore leave" was no such inadequacy as to shock the conscience.
Besides, inadequacy is but a ground of presumption. This is the reasonable and well recognised doctrine: Griffith v. Spratley, 1 Cox 391; 1 Story. Eq. § 245; Eyre v. Potter, 15 Howard 60; Copis v. Middleton, 2 Madd. R. 409; Day v. Newman, 2 Cox 77; Wood v. Fenwick, Prec. in Chan. 206; Willis v. Jernegan, 2 Atk. 251; Nichols [**29] v. Gold, 2 Vesey 422; City of London v. Richmond, 2 Vernon 423; Moth v. Atwood, 5 Vesey 845; Gregor v. Duncan, 2 Dessaus. 639; Seymour v. Delaney, 3 Cowen 453; 1 Story's Eq. § 248-9; Osgood v. Franklin, 2 John. Chan. 23; Fonb. Eq. by Laussat, 3d Amer. ed. page 127 and note; 1 Story's Eq. § 331; and Davidson v. Little, 10 Harris 245. Here there was nothing to aid a presumption, if one existed, but much to repel it. It is but too apparent that the only object of the plaintiff is to get rid of what he considers a bad bargain, in order to avail himself of the terms of a better, since made with Grier.
Duress of goods will not avoid a contract--but only an arrest of the person: Story on Contracts, § 87; Chitty on Contracts 206; Shep. Touch. 61; Sumner v. Ferryman, 11 Mod. 201; Maissonaire v. Keating, 2 Gal. 337; Eddy v. Herron, 5 Shep. 338; Stauffer v. Latshaw, 2 Watts 165.
As to the propriety of reading the letter produced by Sidwell, the counsel cited Heart v. Hummel, 3 Barr 415; Farmers' and Mechanics' Bank v. Boraeff, 1 Rawle 152; Messenger v. Hogenbuch, 1 Whart. 410; 1 Greenl. Ev. 437; Borough v. Martin, 2 Camp. 112; Merill v. Ithaca & O. R. R. Co., 16 Wend. 586.
JUDGES: Black, [**30] J.
OPINION BY: BLACK
[*359] The opinion of the Court was delivered, May 21, 1855, by
Black, J.--This action depends on the defendant's right to dig and take away chrome from the land of the plaintiff. The defendant claims that right under the plaintiff's deed, giving and granting it in due form. But the plaintiff asserts that the deed is fraudulent and void because, 1. The defendant suppressed the truth; 2. He suggested a falsehood; 3. He paid a totally inadequate consideration; and 4. He got the deed by means of threats which amounted to duress.
1. HN1Go to this Headnote in the case.A person who knows that there is a mine on the land of another may nevertheless buy it. The ignorance of the vendor is not of itself fraud on the part of the purchaser. A purchaser is [*360] not bound by our laws to make the man he buys from as wise as himself. The mere fact, therefore, that Tyson knew there was sand chrome on Harris's land, and that Harris himself was ignorant of it, even if that were exclusively established, would not be ground for impugning the validity of the deed. But it is not by any means clear that one party had much advantage over the other in this respect. They both knew very well that chrome could be [**31] got there, which one wanted and the other had no use for. But the whole extent of it in quantity was probably not known to either of them for some time after the deed. When it was discovered that sand chrome was as valuable as the same mineral found in the rock, and that large quantities of the former could be got in certain parts of the fast land as well as by the streams, it was natural enough that the plaintiff should repent and the defendant rejoice over the contract: but this did not touch its validity. Every man must bear the loss of a bad bargain legally and honestly made. If not, he could not enjoy in safety the fruits of a good one. Besides, we do not feel sure that the contract has made the plaintiff any poorer, for it is not improbable that he would never have discovered the value of the mineral deposit on his land if he had not granted to the defendant the privilege of digging.
2. HN2Go to this Headnote in the case.If the defendant, during the negotiation for the purchase, wilfully made any misstatement concerning a material fact, and then misled the plaintiff and induced him to sell it at a lower price than he otherwise would, then the contract was a cheat and the deed is void utterly. But in all cases [**32] where the evidence brings the parties face to face, the language and conduct of the defendant seem to have been unexceptionable. An offer was made and rejected to prove that Tyson had made certain statements in the neighborhood which were calculated to produce the impression that all the chrome in that region was not very valuable. It was even proposed to be shown that he had spoken in depreciating terms of sand chrome on a tract adjoining Harris's. It would at least have been useless, and it might have had a pernicious influence on the minds of the jury, to have admitted such evidence. To invalidate a solemn deed by showing that misrepresentations were used to obtain it, there must be very clear proof that the falsehood was told directly or indirectly to the grantor. It is not to be supposed that he was influenced by a statement neither made to himself nor communicated to him. If the vendee's conduct in all his transactions with the vendor was honest and fair, he is not answerable in this action for what he may have said elsewhere to other persons.
3. HN3Go to this Headnote in the case.Mere inadequacy of price is not sufficient to set aside a deed. It is sometimes regarded as a suspicious circumstance when coupled [**33] with other strong evidence of fraud. Here it would hardly be entitled to that much consideration. The sale of this privilege at [*361] a low price is explained by so many reasons, that it is not necessary to account for it by supposing there was any foul play. But it is enough to say that the plaintiff had a right to sell at what price he pleased or keep his property. Having chosen to do the former, he cannot undo it by changing his own mind.
4. The allegation of duress is founded on these facts: Before the date of the deed now in question, Harris made a written contract with Tyson to sell him his land out and out; but he refused to make the conveyance, and Tyson declared that he would bring an action on the covenant. The difficulty was then settled by the cancellation of the agreement, and the execution of the deed granting the mineral right. The Court received this evidence, and most properly instructed the jury that duress to invalidate the deed must be of the person. For the plaintiff it was insisted that the deed might be avoided merely by proving a threat to sue the grantor for a good cause of action. There is not only no judicial decision in favor of this opinion, but [**34] I think it is new even as an argument at the bar.
This is the whole body of the case. There is nothing else of leading importance in it. Yet the judgment is brought here on no less than thirty-nine exceptions.
The 1st, 2d, 4th, 5th, 7th, 8th, 9th, 10th, 12th, 13th, 14th, 15th, 16th, and 39th disclose a succession of struggles to get in evidence of Tyson's declarations concerning sand chrome on other lands in the same neighborhood. These declarations may have had a tendency to impress the minds of those who heard them, and who knew nothing on the subject from other sources, with the opinion that sand chrome was worthless, but they had no connection with and no relevancy to the purchase from Harris, except that his land had the same kind of mineral in it. No attempt or offer was made to show that Harris ever heard these statements from Tyson, or heard of them from anybody else.
The 3d is the rejection of evidence that the plaintiff was a poor man. It is impossible to see what this had to do with the merits of the case. It could not strengthen any more than it could weaken his title to the property in dispute.
The 6th points us to an exception, by which we find that the defendant filed [**35] of record a disclaimer of all right to the land except the privilege of taking out chrome. It is not denied that this put the dispute on its true ground. The defendant had a right, and perhaps it was his duty to file it. Certainly it did the plaintiff no harm. The bill of exceptions does not say that the paper was read to the jury.
The 17th and 18th were offers to prove conversations of Tyson, but what the conversations were was not stated, nor so much as hinted at. It is impossible for us to make anything out of exceptions like these.
[*362] The subject of the 19th was a proposal to prove a transaction between two other parties, who were altogether strangers to this business. It was about chrome, to be sure; but it could have thrown no light on the subject under investigation. It was not only a bargain between other parties, but it was five to nine years later in time than the contract between Harris and Tyson, and the bill of exceptions does not even show what its terms were. We take it for granted that this offer was not made for the purpose of showing the disparity between the value of Harris's ore and the price he got for it, because the Court gave the plaintiff leave to [**36] prove all he could on that subject, and the very witness of whom the question was asked testified fully and directly to the point.
In the 20th we see an offer to prove that it was Tyson's declared intention to monopolize the chrome business. This is somewhat indefinite. If Tyson really thought he could get a monopoly in the proper sense of the word, that is, a law forbidding all persons but himself from engaging in such an enterprise, he is not the shrewd man he is represented to be, and his fancy was a very harmless one. If he intended merely to carry on the manufacture of chrome so largely and sell it so cheaply that no one would think it worth while to compete with him, then he is a meritorious citizen. He has a right to all he can win by his science, labor, and capital honestly employed. Either way, the evidence offered could serve no purpose except to waken prejudices which had better be allowed to sleep.
The letter mentioned in the 21st specification was properly admitted. Its contents were communicated to Harris pending the negotiation, and show how it was conducted. After all that was said about foul play in getting the bargain, to withhold from the jury this clear and direct [**37] evidence of Tyson's fair dealing would have been gross injustice to him.
The remaining specifications refer to the charge. Those numbered from 22 to 37 inclusive are intended to particularize the several mistakes which the judge fell into, and the 38th makes the sweeping assertion that the whole scope and tenor of the charge is erroneous. Of all the specific errors assigned we do not find one which we would feel justified in calling an error, and the charge as a whole is impartial and sound. It contains so convincing a refutation of the views which the plaintiff's counsel took of the case, that we wonder they were not perfectly satisfied with it.
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Economic Freedom Correlates with Peace
Hedge Fund of Last Resort
The Wall St. Journal today channels the message of James Hamilton's blog and of the second half of my paper for the November Cato monetary conference: the Fed has radically expanded its balance sheet while transforming itself into a highly leveraged holder of risky assets. Losses will fall on American taxpayers.
HT: Ivan Pongracic, Jr.
January 20, 2009
Ugh. I'll let CNN.com speak for itself:
Stimulus: Spend or cut taxes?--Most economists agree that both are needed. The debate comes when they ask how split it.
Most economists support the emphasis on spending [rather than tax cuts], saying government expenditure does more to boost gross domestic product, a key indicator of fiscal health.
In other words, spending delivers more bang for the buck because each dollar paid to a worker building a wind turbine, for example, is then re-spent on groceries or clothing, causing a fiscal ripple-effect. Conversely, a worker might save a third of the money he is given in a tax cut, with some of the spending going toward imports, which would also reduce the stimulus to GDP.
According to a Jan. 6 study by Mark Zandi, chief economist at Moody's Economy.com, GDP grows by $1.59 for every dollar spent on infrastructure, while the increase from a corporate tax cut is only $0.30.
Haven't we been over this? Of course, the story never discusses the logical conclusions of such arguments: why not double the government budgets and build millions of wind turbines? Why not triple it? A multiplier greater than one seems tantamount to a perpetual motion machine; if they actually existed they'd be pretty cool. I can't believe people are still convinced of the "paradox of thrift" argument either.
Even though we're worrying here at our University about our jobs since the state budget is bad, stories like this always remind me that the problem of economic ignorance is likely to never be solved so I will always have a certain amount of job security.
How Can He Say This @#$! With a Straight Face?
I felt left out when I didn't make the list of ethics free Republican hacks like Ed and some other folks I know. So try, try again.
In his inauguaral address, President Obama called for a "new era of responsibility." This from the president who wants an $800B "stimulus package" (The Real Voodoo Economics) and plans for deficit spending in excess of $1 trillion.
There was also some blather about ""our collective failure to make hard choices." This is offensive. For example, my wife and I have bought two houses, making a large downpayment on both. We've been aggressively saving for retirement (only to see our savings nearly halved by the Fed and the pols). The fact that many other citizens and our spendthrift pols have not similarly lived within their means does not make me complicit in their failure. Alas, genuinely responsible
Re Running--Berry Half Marathon
On March 7, Berry's 26,000 acre campus is the host for the 2nd annual Berry Half Marathon--there are also 5k and 10k races (rumor has it, a marathon will be added in coming years). Other events include a kite day, and a kids fun run. I'm not running, but I'll be on my mountain bike as a sweeper.
Carden - Lawson Running Throwdown
Co-blogger Art has begun running and plans to run the Mike Cody 4 Mile Classic at Rhodes College in a couple weeks. As a new runner, he's smartly starting with a run/walk strategy to make the distance.
I've run only one 4 mile race, the Ohio-Michigan 4 Mile Run in July 2006, and ran it in 24:22.
So here's the bet: If Art runs his 4 miler in less than twice the time (48:44) I ran mine, then I owe him a beer at the APEE meeting in April. Otherwise he owes me the beer.
Econotourism: India, part 1
I've just returned from three weeks in India, mostly in Bombay and Delhi. Here's the first installment of some observations.
The sweeping Marine Drive in Bombay (aka Mumbai) hugs the shoreline of the Arabian Sea. Near the Drive's southern end is the 5-star Oberoi Hilton hotel. A block or two to the hotel's north begins a long row of Art Deco apartment buildings facing the Sea to the west. The area could be the Miami Beach of India -- if not for the sad and startling fact that about half of the apartment buildings are shabby and stained. They look like they haven’t been painted in 10 years. Why would such a high-rent district be left in such disrepair? Ah, but it isn't a high-rent district: it happens that Bombay has had severe rent controls for decades. What a shame, what a waste.
Streets and other public places in Bombay are often dirty or in disrepair. On the other hand, in the seaside Juhu neighborhood north of downtown one can walk or jog in a beautifully landscaped and maintained park. What gives? It turns out that the park is private, owned by the surrounding apartment co-ops. Admission is Rs. 5 (about US$0.11). Maintenance is provided by the HSBC bank, which has a few discrete signs posted about the park.
January 19, 2009
Dead Letter Office
I have a decent batting average on letters to the editor in the WSJ, but my last two were misses. Here's one (I thought this one had a decent chance of running):
To the editor:
The second (not too bummed over this one being rejected):
To the editor:
Posted by E. Frank Stephenson at 09:50 PM
For Your Viewing Enjoyment
Two highly recommended videos:
1. A PBS (!) clip on the corrupt Congressional earmarking process.
2. A Cato event on the relationship between education spending and economic growth. My friend George Leef is the first speaker.
Posted by E. Frank Stephenson at 09:35 PM
Quote of the Day: Charles Koch
The role of business is to produce goods and services that make people's lives better. And if you have to get a subsidy -- if you have to force other people to support your profit -- you're not doing that. You're not making them better off; you're making them worse off.
Building Brand Equity: Short Selling
Together with Scott Beaulier, my student Nick Abraham and I have an op-ed on short-selling in Saturday's Macon Telegraph.
Building Brand Equity: Wal-Mart Review
P.S. Good luck to the new editor Richard Cebula.
Quote of the Day: Zimbabwe Edition
Baltazar shot me a look, and said, “The occupation of land was very popular after the liberation, because the whites owned it and they were rich, and so the people, and many war vets, thought that if we took over the farms then we will automatically be well-to-do, like the whites whom we removed. We didn’t realize that it took them decades to make those farms productive. Most of us now realize that farming is not a simple process.”*:
Jon Lee Anderson, "The Destroyer," New Yorker, 27 October 2008.
On presidential salaries c. 1909
An interesting, if not very "Progressive," take on the salary of the President of the United States is offered in a letter to the editor in the Jan. 19, 1909 NYT:
I think were our people to realize that the President of Haiti received all told $35,000 a year, but $15,000 less than the President of these United States, and the President of the French Republic something like $200,000 or more, who is merely a figurehead, a feeling of National pride would compel our lawmakers to take action to grant proper compensation to those who occupy positions of such great responsibility.I suspect such an argument used to justify CEO compensation would run into considerable static both yesterday and today.
On government financing c. 1909
An interesting parallel to current local and state tax revenue problems is the subject of a letter to the editor in the Jan. 19, 1909 NYT:
A house in this city which was sold ten years ago (not in foreclosure) for $21,000 was at the time assessed at $11,000. This year it would hardly bring $25,000, and yet it is assessed at $22,000. Only seven years ago the city could borrow on this same property but $1,100; now it can borrow and actually borrowed $2,200. By the former mode of tax valuation this property would be assessed for not more than $14,000, and the 10 per cent. debt limit would be only $1,400. By the trick of full valuation the debt was extended by $800, and this without legislative sanction. One can see that the underlying security for the city's present debt is relatively much smaller than it was seven years ago. A provident government would reserve at least a fifty-million-dollar margin for the possibility of a decline in values, but our city government has apparently adopted for its motto, "After us the deluge."States and local governments are begging for bailout money as property values, and subsequent tax revenues, fall. However, consistent with this letter writer's intuition, if property values are held a little lower than current prices, then if a market correction occurs, the taxing authority might not be in such a pickle.
Unfortunately, too much to hope for.
January 16, 2009
This, on the inauguration of The One who will, inter alia, reverse the trend toward global warming:
The carbon footprint of Barack Obama's inauguration could exceed 575 million pounds of CO2. According to the Institute for Liberty, it would take the average U.S. household nearly 60,000 years of naughty ecological behavior to produce a carbon footprint equal to the largest self-congratulatory event in the history of humankind.
On Lying Bank Presidents c. 1909
From the Jan. 16, 1909 NYT:
T.S. Anderson, former President of the defunct Davies County Bank and Trust Company, was found guilty of swearing falsely to a statement of the bank's condition and was sentenced to three years in the penitentiary.Perhaps we could use a little more of this these days?
Only 4 Days Left ... Things to Do ...
George W. Bailout is at it again ...
... the government cemented a deal at midnight Thursday to supply Bank of America with a fresh $20 billion capital injection and absorb as much as $98.2 billion in losses on toxic assets, according to people involved in the transaction.
UPDATE: Oops here he goes again--more dough for Chrysler's financing division.
Posted by E. Frank Stephenson at 11:54 AM
On bigness c. 1909
For some, there is an innate aversion to "bigness," at least in the context of private business. Those who distrust "bigness" in the private sector often (but not always) seem to have little problem with "bigness" in the public sector. There is another segment of the population (perhaps smaller) that feels the reverse: distrust in big government and little concern about big business.
Those who rail against Microsoft and champion Apple would likely reverse themselves if the market share of Apple was in the 94% range, even if Apple was doing everything they are doing "right" today. This aversion to "bigness" for "bigness" sake is one of the underlying roots (and problems) with US antitrust laws, especially the Sherman Antitrust Act.
The argument against "bigness" might be most famously rendered by Judge Louis Brandeis and was the focus of an editorial in the Jan. 16, 1909 NYT concerning the limitations placed on New York Insurance companies:
According to Mr. Kingsley's statement, the New York Life Company has been prevented from taking enough new business to make good its losses. It lost 69,000 members, and would have been able to replace them but for the operation of the law which limited its new business to 63,000 members. It would have been criminal to do enough business merely to make good its losses, and the company reduced its outstanding business by $68,000,000.The setup is in place: Big company is bad and therefore must be limited by government fiat. There is an implicit lack of faith in either the market or the firm to limit firm size. The former would limit firm size through competition and product differentiation, the latter through the profit motive (the profit maximizing size of the insurance company is determined by demand, technology, and factor prices; as the insurance market does not seem conducive to natural monopoly, the size of the individual insurance company is therefore less than the overall market for insurance). The next paragraph begins to outline the "Progressive" reasons behind the law:
The law was enacted for reasons rather obscure. It seemed to have been thought that mere bigness was a menace, and the competition for bigness resulted in excessive cost of business. It was contended that it was necessary both to protect the companies against themselves and the community against the companies. Therefore the cost of getting business was restricted, and the law was made favorable - as was thought - to the smaller companies.This reads like a scene out of Atlas Shrugged. Using the political process to hamstring your business competition is not new, and language such as "competition for bigness resulted in excessive cost of business" sounds good to the layman, but ultimately is clap-trap. Why would the government care at all about private business incurring extra cost? Rather, the spin is that firms are caught in a prisoner's dilemma and chase the grail of "size" to their collective detriment, as if "size" was the objective of firm management rather than profitability. Perhaps, but it seems unlikely. This reads more like the "Equalization of Opportunity Act" in Rand's opus.
The next paragraph lays out the almost immediate and, perhaps, unintended consequences of the law change:
The operation of the law has been otherwise. The smaller companies have not prospered by the overflow of business which it was forbidden the large companies to do. One has failed, one has reinsured, two have made good deficiencies of capital. The business which they lost and which the large companies were forbidden to take went outside the State. The deterioration in character of risks is even more serious than the limitation of volume. The companies thus lost the new blood which keeps any company vigorous.Assuming the editorial is telling the truth, the smaller companies were not small because of first-mover advantage or because they were otherwise limited by the "big firms." Rather, they were small because that was their natural market size, either because of their clientel, the products they offered, their location, or for some other reason not nefariously concocted by the bigger firms. Moreover, those who were able to "vote with their feet" and buy insurance, say, in New Jersey, increased the relative riskiness of those insured by New York companies. This would be expected to raise the price of insurance (simultaneously reducing the consumer surplus of those who still purchased insurance and pricing others out of the market for insurance), it would also put the remaining firms in a less profitable situation for a given price of insurance. As with most, if not all, attempts by government to mandate human choice, government doesn't have sufficient information to write the mandate but that clever, and pesky, humans can outwit the bureaucrat's intentions. In this case, the New York legislature evidently forgot about the fact that the New York border wasn't protected by nature or law.
The paragraph continues with language that reminds me of the "how do you expect me to survive" analysis Hank Reardon offers when introduced to the "Steel Unification Plan" in Atlas Shrugged:
For four years Mr. Kingsley's company had done $300,000,000 of new business, and had an unimpaired plant and organization for doing so indefinitely. Now it is suddenly limited by law to $150,000,000. Meanwhile the companies of other states have gained $245,000,000 of new business, or $54,000,000 (sic?) more than the law allows the New York companies to do. The need of insurance is proportioned to population, and the business is being done, but not by New York companies.
The editorial goes on to question why big is bad:
As Mr. Kingsley says, it is queer logic which cures evils by limiting size. A big man or business may be sick, certainly, but not because of bigness. Neither need the big man or business therefore be bad. The Federal antitrust law punishes trusts merely because they are alive. It will not allow them to do good acts because the capacity to do anything implies the capacity to do bad things.
The paragraph is correct at the time of writing. The "rule of reason" applied to antitrust law is still a couple of years away when the Supreme Court rules on the the Standard Oil case (which incidentally wrapped up on Jan. 15, 1909) in 1911.
Similarly, the New York statute - passed under a similar exaltation of sentiment - punishes mere bigness, irrespective of how the bigness employs itself. There is a sort of life insurance which ought to be pressed by law, equally, whether it is written by small or large companies. But the argument that a good company should be restricted merely because of its size is difficult to maintain now that we are calmer, and have otherwise cured the faults against which this singular law was leveled.
Thus, the bad policy was passed after the financial panic in
Recent posts by Pete Leeson and Pete Boettke at The Austrian Economists have inspired me to share my course syllabi. I think we all benefit from thiis kind of collaboration, so I'll make problem sets and assignments available, as well. If you're in the Memphis area, we're hosting Randall Holcombe, the DeVoe Moore Professor of Economics at Florida State University, on Tuesday evening at 7:00 in Barret 051. Professor Holcombe will discuss his book Entrepreneurship and Economic Progress, and one of the papers on which his book is based is available at www.mises.org in their archives for the Quarterly Journal of Austrian Economics. Here are my syllabi for Econ 101, Classical & Marxian Political Economy, and Economic History. I last taught Economic History in Fall 2007 and plan to teach it again in Fall 2009; if you have any suggestions, I would be grateful.
On Sunday Baseball c. 1909
Having lived in Arlington, Texas, for 11 years before moving to Charlotte, NC, I enjoyed a boost in my quality of life by living about ten minutes drive time from the Ballpark in Arlington (now Rangers Ballpark in Arlington). Unfortunately, while I was in Texas, the Rangers appeared in the playoffs three times and were waxed each time by the Yankees (the rangers were a combined 1-9 against the Bombers). Usually sometime in the summer, when the temperature became obnoxious and the team's quality became ever more apparent, attendance would fade off.
Frustrated and very warm Rangers fans might agree with a proposed legislation in Texas reported in the Jan. 16, 1909 NYT:
The bill introduced in the Texas House of Representatives yesterday by Mr. Bowles to prohibit the playing of baseball on Sunday has caused much uneasiness among the owners of the clubs of the Texas League and many friends of the sport. They declare if th e bill becomes a law it will kill professional baseball in Texas.I could see that, in 1909, weekend games were much better attended than weekday games as there were no lights on stadiums at that time. Essentially taking one half of the most profitable games away would have been a blow to the industry, no doubt.
January 15, 2009
Best Sentence I've Read Today: Nicholas Kristof On Alleviating Poverty with Sweatshops
"In the hierarchy of jobs in poor countries, sweltering at a sewing machine isn’t the bottom." Hat Tip: Gregory Mankiw.
My classes started today; I'll be wearing my "I buy goods from poorer countries" wristband that the Adam Smith Institute sent me at least through our discussions of comparative advantage.
Building Brand Equity: Mises Podcast
Jeff Tucker over at the Mises Institute and I did this podcast today...talking about the financial crisis and lawn jarts.
"Don't leave me, come back"
Newsflash from Hammond, Indiana. This just in.
Boy's Tongue Stuck on Pole NBCChicago.com January 15, 2009
Ahem. I believe it was a triple dog dare that got Flick. BTW, you can buy leg lamps here. The fishnet nylons are genuine, and the leg lights up. They're "indescribably beautiful" and "remind of the Fourth of July."
January 14, 2009
Today's Reading: Macroeconomic Populism
Last week I revised and shortened this paper for the Journal of Lutheran Ethics. Assuming the paper is published, the longer version will remain on the web. I've also been collecting notes for a wholesale revision of the larger project about institutional change that Bob, Josh, and I are working on. To this end, I've been reading Rudiger Dornbusch and Sebastian Edwards (eds)., The Macroeconomics of Populism in Latin America. The first chapter contains an excellent organizing framework for understanding Latin American economic crises in the late 20th century (which, not surprisingly, weren't the product of a Friedmanite conspiracy) and the rest of the book consists of specific case studies. There is much here about institutional dynamics and, I hope, lessons that we can learn in the face of a populist surge in the United States.
Laundry Worker Full Employment Act c. 1909
The Jan. 14, 1909 NYT reports on potentially misguided legislation proposed in Nebraska:
Traveling men in this State [Nebraska] will be handsomely treated at country hotels so far as the bedding is concerned if a bill introduced in the State Legislature to-day becomes law.I wonder if the legislator proposing the bill had any relatives in the cotton industry? Perhaps someone with friends in the legislature was "stuck" with hundreds or thousands of nine foot sheets for which there was no market. Perhaps the proposed law was intended to legislate a market into existence? On the other hand, it might have been much more Progressive in spirit. Perhaps the law was intended to ensure a legislated demand for quilt airers and ironers.
Will we get a flurry of similar legislative interventions in the coming months, all carrying the word "stimulus," "fairness," "security" or "stabilization"?
What is THE Multiplier?
Arnold Kling channels his inner Walter Block (HT: Cafe Hayek) and asks whether the government spending multiplier is 1.57 universally, or just over some restricted range. Two gut reactions:
1. My first thought is that discussions of the spending multiplier are probably like "economic impact" studies for stadiums and Super Bowls, though my prior is that the people doing the calculating in this case are more competent. Still, Kling asks the right question: if the multiplier is 1.57 over the entire range of government spending levels, then why are we stopping at a trillion dollars? If government spending is the wellspring of prosperity, why stop? People probably start to anticipate spending increases in the same way they start to anticipate inflation and, therefore, any short-run gains from government spending have to be gains from unanticipated spending. A bleg: cites on this?
2. The Keynesian story is that government spending is needed to solve a collective action problem that would otherwise produce insufficient aggregate demand. For a useful explanation of this, here's one of my grad school mentors Steve Fazzari on EconTalk.
January 13, 2009
Stimulus: The Real Voodoo Economics
Today's offering from Mike Lester of the Rome News-Tribune:
On the paparazzi c. 1909
We like to think that the paparazzi today is something new but it is really more of an evolution over time. For instance, the Jan. 13, 1909 NYT reports on the marriage of one John J. Evers. That name probably doesn't evoke a lot of interest from the average person. Perhaps the name is more recognizable after a hint from the baseball refrain "Tinkers to Evers to Chance"?
John Evers, the famous Cubs second basemen got married on January 12, 1909 and merited a total of 17 lines of text in the NYT. Here is the entirety of the story:
John J. Evers, the second baseman of the Chicago Cubs, this afternoon was married to Miss Helen Fitzgibbons, one of Troy's most popular young women. The ceremony was performed at St. Joseph's church by the Rev. Father Leo O'Haire, in the presence of relatives. The pride was attended by Miss Ellen C. Evers, a sister of the groom. Edward Wansbro of Albany, a cousin of the groom, was the best man. The second baseman's gift to his bride was a pair of diamond earrings. He gave the bridesmaid a diamond brooch and the best man a diamond stickpin.Granted, this is a lot more information than was ever printed about my wedding, but I am not nor ever will be a famous second baseman.
An interesting question is why we have so much more paparazzi today than we did a century ago. Clearly there are influences on both the supply and the demand side. On the supply side there are two distinct influences: first the technology to distribute information about Britney and Paris is much more developed today than a century ago. Thus the costs of providing information about the rich and famous has declined. Ceteris paribus, we would expect a lower cost of production to lead to more coverage.
However, this is not guaranteed if those who are the subject of paparazzi focus truly wanted the paparazzi to go away. The rich and famous could lobby for legislation that would restrict the paparazzi snooping around their private lives, or they could continually sue individual paparazzi or their sponsors to drive up the cost of providing coverage of private lives. The fact that there are so few law suits in this area (regardless of the true legal standing of the claim), suggests to me that a) those who are the focus of paparazzi are resigned to their fate or b) are not that torn up about it. It seems, on the surface at least, that those subjected to paparazzi treatment often seek out the "coverage" in an attempt to improve their marketability, improve their image, or simply to "have a gas" at being in the magazines in the grocery store.
There are enough counter-factuals that suggest that famous people can keep a low(er) profile if they wish - I don't hear much about the daily goings-on of Clint Eastwood. Admittedly there seem to be times when famous people wish to keep a low profile and this desire is seemingly ignored, such as the case of Princess Diana. However, cases such as Princess Diana seem to be relatively rare. On the contrary, it seems the paparazzi provide a middle-man service to those members of the rich and famous who want to have some portions of their private lives exposed to their "fans." In return, the rich and famous pay for this service by suffering the "snooping." Perhaps the endogenously determined "price" between the paparazzi and the rich and famous leads to a natural limit for how far the paparazzi can go. If true, this would partially explain why the Diana-type scenario seems relatively rare.
On the demand side, there are a lot more people in this country who seem to have an insatiable appetite for other people's business. This is clearly not unique to the modern era, but the number of people and their willingness and ability to pay for information about where [insert name here] had a latte seems different than a century ago. Perhaps this is a function of affluence and increased leisure time which is filled with liviing vicariously through Tom Cruise rather than through Cousin Melba.
Another thought experiment is whether there is feedback between all-star salaries of athletes and actors and the interest people have in their daily lives. The feedback would arise if some/enough individuals feel a sense of "ownership" of their favorite athlete or actor, perhaps because they directly contribute to the athlete's/actor's high salary by attending games or movies. As interest in the private actions of the actor/athlete increases, this could cause an increase peoples' interest in the public/professional actions (such as games or movies) thereby increasing the salary of the athlete/actor.
While some condemn the paparazzi for invading the privacy of individuals, in many cases it is less clear whether paparazzi coverage is truly an "invasion." Both supply and demand-side effects seem to encourage more revelations of what might have been considered private or uninteresting behavior in the past.
January 12, 2009
Technology and Household Bargains
If I remember the literature correctly a standard argument in the literature on the economics of the family is that people "save" by investing in their children as a response to capital market imperfections, and norms like bequests, dowries, bridewealth, etc. evolved in response to the fact that in their absence the intergenerational bargain is unenforceable: if we invest heavily in our son, there's nothing really to prevent him from shirking during his peak earning years unless we can forge a pair of golden handcuffs.
Fatherhood and rapid technological advances have led me to wonder about whether the efficiency of parent-child bargains will change. My parents' stories about the trials and travails of caring for me as a young child are backed up by a few pictures, but mostly I have to take their word for it. In this day and age of digital cameras and practically unlimited electronic storage space, the trials and travails of raising our son will be much more extensively documented. I see a couple of implications here:
1. Since the costs we're bearing are much easier to document, our son's future uncertainty about how much we really love him falls. The efficiency of the household bargain increases.
2. But well-documented sacrifice is a substitute for future sincerity. Instead of investing in familial social capital I can point to the pictures and go on my merry way. The efficiency of the household bargain is unchanged.
3. "I can't believe you took a picture of that!" Our son spends his teenage years and early adulthood in therapy grappling with his alienation from camera-happy Mom & Dad. The efficiency of the household bargain falls.
And yes, I've been watching my son this afternoon.
Acemoglu almost discovers Public Choice?
Daron Acemoglu writes about the financial crisis basically blaming it on greedy people and a blind ideology based on "Ayn Rand novels". As if greed were new and as if the Bush/Clinton/Bush years had turned America into Galt's Gulch. Spare me.
But there is this little nugget of wisdom in his article:
...even within firms, monitoring must be done by individuals: the chief executives, the managers, the accountants. And in the same way as we should not have blindly trusted the incentives of stockbrokers willing to take astronomical risks for which they were not the residual claimants, we should not have put our faith in individuals mon- itoring others simply because they were part of larger organizations.
Nothing wrong with that in my book.
He goes on to write that we need to save regulated, free-market capitalism (oxmoron alert!) from an anti-market backlash. How to do this, you ask?
A comprehensive stimulus plan, even with all of its imperfections, is probably the best way of fighting off these dangers, and on balance, there are sufficient reasons for academic economists as well as concerned citizens to support current efforts as insurance against the worst outcomes we may face. Nevertheless, the details of the stimulus plan should be designed so as to cause minimal disruption to the process of reallocation and innovation. (Emphasis added)
Um? Hello! Designed by whom? Oh yes, we should blindly trust the incentives of politicians, government bureaucrats, and MIT academics to design a comprehensive plan because they're nothing at all like those greedy stockbrokers working for large organizations.
January 11, 2009
Best Sentence I've Read This Afternoon
"The numbers involved are larger, but conceptually the policy talk is as if the past forty years did not happen."
Mario Rizzo at http://thinkmarkets.wordpress.com on the policy debate about how the economy should be stimulated.
On All-stars and Churches c. 1909
An interesting example of an "all star" type salary is reported in the Jan 11, 1909 NYT:
Mrs. Corinne Rider Kelsey has accepted an offer of $5,000 a year for several years to become the soprano soloist in the First Church of Christ, Scientist, in this city. The contract will begin immediately. This is said to be the highest fee ever paid to a singer in the history of church music in America. Clementine De Vere, well known here some years ago, received for her services while with the West Presbyterian Church in West Forty-second Street $3,500 and this remained the record until the engagement of Mrs. Kelsey by the First Church of Christ, where Mrs. Kelsey will sing every Sunday morning when not on her concert tours.
In 1909 the per-capita nominal income was about $350. Thus, it might have seemed a bit over the top to pay more than 14 times the per-capita income for someone to sing during Church services. However, similar to professional athletes and Hollywood actors, it is possible to recast the salary in terms of impressions.
Assume Mrs. Kelsey was going to sing for 50 Sundays each year. The $5,000 annual salary could be reduced to $100 per Sunday (give or take). If there were 1,000 people in attendance (I have no idea what the size of the First Church of Christ was at the time), the per-capita expenditure to secure Mrs. Kelsey was about ten cents.
Now, it might seem a bit out of touch to pay so much for a single person to sing during Church, however if the ten cents per person guaranteed "pretty" singing rather than off-key singing, then the cost might have actually been viewed as a real bargain. Moreover, as the First Church of Christ was in competition with other churches in the area, securing a headline singer might have provided a non-spiritual edge that might have increased membership or at least dissuaded members from leaving.
It Depends on Your Perspective...
SCENE: The office/sewing room/guest room at the Carden house. It's Sunday afternoon and the Cardens are cleaning out the filing cabinet, closet, desk, etc. ART has been feeding several years' worth of useless documents (old phone bills, etc) into the shredder.
ART (economist): Wow. There's so much shredded paper in here that it looks like the Nixon White House.
SHANNON (CPA): Or Enron.
I'm clearing out some stuff on the desk and came across an interesting headline. From the October 13, 2005 Harris Poll:
"Three-Quarters of U.S. Adults Agree Environmental Standards Cannot Be Too High and Continuing Improvements Must Be Made Regardless of Cost"
January 10, 2009
On business cycles c. 1909
From the Jan. 10, 1909 NYT:
Few years in the history of American finance and business have opened under conditions so unpromising as those which surrounded the birth of 1908, and it is equally safe to say that in no previous twelve-month have such serious handicaps been so far overcome and the country as a whole set so far forward upon the return road to prosperity....In the money market at the opening of January, 1908, the legacies of the  panic were still undisposed of, for the premium on currency had barely disappeared, call money ruled at 20 per cent, the Clearing House banks were working under a deficit of $20,170,000 and had still some $50,000,000 of Clearing House certificates outstanding, while the Bank of England, the world's money barometer, had just reduced its discount rate from 7 to 6 per cent. On the Stock Exchange the movements of securities were feverish and uncertain, reflecting the unsettlement of sentiment everywhere, and the average price of sixty active railroad stocks stood at 79.66. The position of the railroads was disclosed both int eh great declines in earnings reported from week to week and in the official statement of the American Car Association that standing idle on the tracks were 341,000 freight cars. The sinister side of this situation was well brought out by the appointment on Jan. 8 of receivers for the Chicago Great Western Railway. Trade conditions were bad, consumption of merchandise had dropped sharply to 35 per cent. of normal, factories were going on part time or closing down, and leading to the return to Europe of thousands of foreign workmen. In the iron and steel trades curtailment had gone so far that December pig iron production figures, which were published in January, disclosed an output of only 1,234,000 tons as against 2,336,972 tons in October.This was the never heard of "great recession" of 1908!! Consumption of merchandise, which I read to mean non-food, non-housing expenditures, fell to 35% of the norm!! If that were to happen today we would be truly in meltdown - instead we are on the precipice when consumption is down 6-10%.
There is very little discussion in the story about government intervention in markets. The author actually points out that the courts shut down a number of hastily passed laws against railroads and public utilities that mandated maximum prices - the story hints that many of the laws were passed in the panic that followed the currency crisis of 1907 but would have proved more damaging than helpful.
It is interesting to see how similar our current situation is to what happened in 1907-1908 and yet it seems that our situation might not be even as bad as that which occured in 1908!! Of course, yesterday's recession (or 100 years ago) doesn't mean much to the guy who lost his job this week. However, the fact that no one has ever heard of the recession of 1908 should provide a glimmer of hope - that the business cycle is just that - a cycle.
Will history books talk about the great recession of 2007-2008? Perhaps. But likely in the context of the presidential election and how the recession influenced the election's outcome rather than as an historical sea-change on the par of the 1929-1941 depression.
The Musing Philosopher c. 1909
From the Jan 10, 1909 NYT:
Progressive economics c. 1909
From the January 10, 1909 NYT:
"Now children," commanded the austere instructor in advanced arithmetic, "you will recite in unison the table of values."Alas, too many people still think this way.
On Mere Man c. 1909
From the January 10, 1909 NYT:
January 09, 2009
Black-Market Kidney Sales
Economics + The Empire Strikes Back = Teaching Example Comedy Gold.
On president-elect propriety c. 1909
The Jan 9, 1909 NYT reports on a very different approach to announcing the incoming cabinet than the current "Office of the President-elect":
The Taft-Knox Cabinet conference is over and the Pennsylvania Senator is to-night on his way back to Washington. Neither the President-elect nor his adviser will discuss the result, and it is strongly hinted by Mr. Taft to-night that his Cabinet will be made known for the first time when he sends the names of the men who are to compose it to the Senate for confirmation after March 4.
There is more to the story, primarily discussing the Taft will attend a barbecue in South Carolina and that Governor-elect Joe Brown of Georgia had visited with Taft.
Perhaps it is better to release the names of the proposed cabinet members earlier than later so that the public and those with axes to grind in Congress can have time to amass their arguments against any proposed cabinet member. Moreover, there might be Richardson-like outcomes of a nomination that any president-elect would rather have occur before the actual nomination hearings or votes occur.
Nevertheless, given the extended announcements and bromide-filled press conferences held by the new species "Office of the President-elect" over the past two months, Taft's approach might have been preferred.
Valuable New York insights c. 1909
The Jan. 9, 1909 NYT reports:
DALLAS, Texas - A corps of auditors from new York have for some time been checking up the accounts of all the State Departments at Austin. today they astonished Gov. Campbell and other State officials with the statement that the Texas Capitol building was in danger of being blown to pieces at any moment. They then called attention to the fact that all of the Texas National Guard ammunition under charge of the State's Adjutant General was stored in the basement of the Capitol.
On Congressional license c. 1909
The January 9, 1909 NYT reports:
The Post Office Department is now engaged in an effort to collect $16 from Senator Tillman in postage on a typewriter, which he franked from his home in South Carolina to Washington recently.
Who's The Top Two?
I car pool with William Keech, the political economist who used to be Head of the Decision Sciences Dept at Carnegie Mellon, and is now a Research Prof. at Duke.
In the car, we got to discussing a question he had raised in class this week: Who were (are) the TWO most important economists of the 20th century?
Where...."important" means influential, having the biggest impact on the way people think and the way government acts.
Read More »
Without revealing individual viewpoints, let me say that we agreed that Maynard K has to be one of them. Right or wrong, he had a huge impact, and continues to.
But....who is second?
We came up with the following list of possibilities, listed in alpha order here.
If the criterion is practical influence, then I think the answer has to be Friedman.
But in terms of influencing my OWN thinking, and that of some others, most DEEPLY, it's Hayek.
And if it's being a Soviet-loving caricature of Smith's "Man of System," then the answer is clearly Samuelson.
(I'm going to allow comments for a bit)--Discuss
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EconTalk: Best PodCast? It's Up to YOU!
Hey, Econtalk got nominated again.
The competition is tough.
But you can vote once per day per IP address.
Vote early AND OFTEN, please!
Economic Viagra for the Porn Industry?
In an announcement that launched a thousand unprintable puns, adult-entertainment moguls Larry Flynt and Joe Francis said Wednesday that they are asking Washington for a $5 billion federal bailout, claiming that the porn business is suffering from the soft economy.
Article. Would this be any more obscene than Washington's recent spending orgy?
January 08, 2009
On progress c. 1909
The January 8, 1909 NYT has the following poem:
A CENTURY OF PROGRESS
It would seem that a new stanza should be added. Suggestions taken.
January 07, 2009
Morningstar CEO of the Year
CNBC is reporting that Warren Buffet is the winner of Morningstar's CEO of the Year award. Runner up is John Allison of BB&T Corp. From Morningstar's press release at the nomination stage.
It may seem odd to nominate a bank CEO after all the trouble that imprudent lending has caused to our financial system, but John Allison, BB&T's retiring CEO, is a worthy candidate. During his tenure, he has used the combination of conservative underwriting with timely expansion to create a Southeast banking giant. With an intense focus on culture, Allison's personality and ethics are ingrained throughout the organization.
January 06, 2009
On the costs of TB c. 1909
The Jan. 6, 1909 NYT reports on a report issued by the New York State Board of Charities concerning the economic cost of tuberculosis:
Considered from an economic standpoint, the annual cost of tuberculosis in this State is estimated by the State Board of Charities, in a statement given out to-day, to approximate $63,000,000, which includes the value of workers prematurely lost to the State.In 2007 dollars, the total is approximately $1.5 billion, but this figure grossly understates the true social cost of the disease. One would want to account for non-monetary costs of premature deaths suffered by loved ones and the monetary costs people incurred in trying to avoid the disease (even if those efforts were ineffective).
According to this World Health Organization report on tuberculosis, 13,000 cases of TB were diagnosed in the US in 2006 with 1,300 cases proving fatal. According to this entry in the "Classic Encyclopedia," in the month of October 1917 there were 1,089 TB deaths in the state of New York alone.
I just finished listening to Gregg Easterbrook's interview on Russ Robert's Econ Talk concerning Easterbrook's 2007 book "The Progress Paradox" in which it is outlined how things in our modern world are substantially better than they were 100 years ago (and less) yet people seem to not appreciate the improvements. It would seem that TB, or rather the substantially reduced threat it poses in the United States, is another example of what Easterbrook describes.
Property Rights and the Right of Retrieval
Property rights are sometimes described as bundles of sticks. This NPR story about Virginia's right for hunters to go on other people's land to retrieve their dogs provides a nice illustration. Although the current issue seems to be primarily an attempt by animal rights folks to decrease deer hunting, it shows that the current bundle of property rights in VA does not include the right to exclude hunters seeking to retrieve their dogs.
Politics Without the Romance
I've almost finished reading Amity Shlaes's magnificent book The Forgotten Man. Last night I came across this quote (on p. 338) from Keynes: "It is a mistake to think businessmen are more immoral than policiticians." Keynes and public choice--who knew?
January 05, 2009
On Bashing the Rich c. 1909
From the Jan 5, 1909 NYT:
ASHEVILLE, N.C. - County school teachers here have not received their pay because the Biltmore estate failed to pay its $24,000 county taxes as expected. The county authorities have cabled Mr. Vanderbilt direct at Paris.I do not know what the operating budget of Buncombe County was in 1909, but I would wager it was considerably more than $24,000 per year. To blame the failure to pay teachers on a single tax payer is pathetic but, I suppose, rather Progressive.
Selgin on Argentina's Currency Shortage
Suppose you want to ride the bus or feed a parking meter without exact change. Or suppose you just want to drop a few cents in a street musician's hat. Nothing easier, right? Not if you live in Argentina. Try doing any of these things there, and you could be in for a major hassle.
January 02, 2009
The Division of Labour team will be pretty busy at the ASSA meetings. Craig Depken is presenting in a session on real estate tomorrow morning at 10:15. Bob Lawson and I are in a concurrent session, Josh Hall is presenting in the economic education poster session, and Ed Lopez is hosting the IHS reception tomorrow evening. I expect that a good time will be had by all. Good luck to any and all job candidates who are reading this, and remember to have a good time. Most of the people you will meet here will be genuinely interested in you and your work. Remember that there's a demand curve in this market, too.
I'll be extending my West Coast stay by a couple of days. On Tuesday, I'm presenting the torture and economic liberalization paper at the Naval Postgraduate School (thanks, David Henderson) and then speaking on the Great Depression and World War II to a group in Monterey (thanks again, David Henderson).
I'll also plug Deirdre McCloskey's talk tonight at 6:30. Her topic: "Smith's Proposal: An Ethically Serious Capitalism." It should be especially interesting since I'm having my Classical & Marxian students read parts of "The Bourgeois Virtues." My flight gets in a little before 5:00, so I hope to make it in in time.
January 01, 2009
Is the Productivity Bubble Popping?
Among the hats I picked up in 2008 was a semi-regular gig writing for Lifehack.org, a popular personal productivity website. I started reading it and other related sites a few months before I finished my dissertation in 2006, and it seems like during my years in the productivity business (first as an observer, now as a writer), pretty much everything useful about list-making, goal-setting, etc. was said and a bubble of sorts developed. I wonder if that bubble is popping. Here's Lifehack.org editor Dustin Wax starting a multi-part series entitled "Toward a New Vision of Productivity" in which he points out that many of the leaders of the web worker productivity movement have moved on and will be focused on actually getting things done instead of discussing meta-issues about productivity. It's worth a look, and as a social scientist I wonder if there are models in our toolkit than can explain it.
For 2009: McCloskey on the Bourgeois Virtues, Once More with Feeling
I'm prepping discussion questions on McCloskey's apology for capitalism for the first day of Classical & Marxian Political Economy. Here are a couple of passages I mentioned a while back that we should dwell on as we move into 2009.
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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