Division of Labour: April 2009 Archives
April 30, 2009
A Minimum Wage for Uganda?
Want a minimum wage? Try in 2050, says [Ugandan] gov’t
Posted by E. Frank Stephenson at 10:42 PM
Paper Idea: "Choose Life" License Plates and Abortion
I'm fascinated by the perpetual push-and-pull among interest groups trying to use the state to further their causes, and I'm especially interested in claims about causal relationships with dubious empirical support (see this post about the alleged effects of premarital cohabitation, for example). Debates about "Choose Life" license plates are a case in point. Some opponents of abortion argue that it is a question of religious freedom. Opponents of the license plate suggest that they represent government endorsement of specific policies. Reason has more, and anyone who has ever seen a PSA sponsored by the Ad Council won't be shocked that the government chooses sides all the time.
That leads us to a testable empirical hypothesis: exploit cross-state variation in adoption of "Choose Life" license plates to see whether they have had a measurable impact on the number of abortions. Data on abortions should be obtainable from the Guttmacher Institute; a minute or two of playing with Google wouldn't give up the years in which the states adopted the license plates, but that shouldn't be too hard to find out.
If it matters, measure it!
The Fraser Institute is launching a new contest to identify economic and public policy issues which still require proper measurement in order to facilitate meaningful analysis and public discourse.
The Essay Contest for Excellence in the Pursuit of Measurement is an opportunity for the public to comment on an economic or public policy issue that they feel is important and deserves to be properly measured. Sponsored by the R.J. Addington Center for the Study of Measurement.
A top prize of $1,000 and other cash prizes can be won by identifying a vital issue that is either not being measured, or is being measured inappropriately. Acceptable entry formats include a short 500-600 word essay, or a short one-minute video essay.
Complete details and a promotional flyer are available at: http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm.
Entry deadline is Friday, May 15th, 2009.
Enquiries may be directed to:
April 29, 2009
A proposal to outlaw banking as we know it
Larry Kotlikoff and Ed Leamer, writing at Forbes.com on Friday, propose to make the financial system safer by outlawing all intermediation funded by debt, i.e. outlaw ordinary banks, thrifts, finance companies, and insurance companies. The only intermediaries allowed would be mutual funds, where all customers are shareholders. If you think I'm exaggerating, read it yourself. And yes, to all apperarances this is a completely serious rather than a Swiftian proposal.
I'm happy to see that the financial crisis has widened the scope of debate over monetary and banking reform. But this particular proposal would throw the baby out with the bathwater.
They defend the proposal thusly:
If such mutual funds sound revolutionary, they're not. Funds of this kind have been around for centuries.
In truth, no one doubts the viability of mutual funds. The real issue is the desirability of a financial system consisting only of mutual funds because it bans debt-based intermediation. Is debt-based intermediation never mutually beneficial? Are there never any good reasons for people to want to hold debt claims on intermediaries? For example, is it never prudent from someone approaching retirement to shift some of their pension funds into TIAA traditional or certificates of deposit with a pre-determined nominal return? Is it never convenient to have a checking account where this morning's account balance is knowable without going online? More generally, shouldn't we presume that there are efficiency reasons why debt-based intermediation has evolved and survived over the centuries even where government guarantees have been absent?
One can readily agree with Kotlikoff and Leamer's suggestion that deposit insurance has over-amplified the share of debt-based intermediation, without concluding that the best remedy is to reduce its share to zero by outlawing it. First let's try taking away the subsidies: no taxpayer-backed guarantees, no intervention to shift losses from holders of debt claims to taxpayers.
The Right Question
Our Administrative Assistant, Tiffany Harts, on the Manhattan/Air Force One Fiasco:
"Couldn't they have just photoshopped it?"
Here's WSJ video:
Quote of the Day, Part II: Economics and Anti-Slavery
As part of my work on the slavery and the roots of anti-slavery, I came across this very encouraging quote:
"With the growing popularity of Scottish and Manchesterian political economy, notably Adam Smith's The Wealth of Nations (1776), an increasing segment of public opinion saw slavery as a fetter on economic and social progress." p. 71
Fox-Genovese, Elizabeth and Eugene D. Genovese. 2005. The Mind of the Master Class: History and Faith in the Southern Slaveholders' Worldview. new York: Cambridge University Press.
Have you ever wondered why economics is called "the dismal science?" David Levy and Sandra Peart explain why. A future Econ 323 research paper assignment might be "pick an 18th or 19th century economist and analyze everything he ever said about slavery."
Selgin on free banking in the Richmond Fed's magazine
An excellent interview with George Selgin by Steven Slivinski appears in the current Federal Reserve Bank of Richmond's Region Focus magazine. (So much for the view that the Fed has a status quo bias?) It covers free banking, the gold standard, the fractional reserve question, and George's recent book on private token coinage. The print version, with a photo, is here. The unabridged version is here.
Quote of the Day: Louis Brandeis on Vigilance and Liberty
The epigram to chapter 17 of Hayek's The Constitution of Liberty comes from Justice Brandeis:
"Experience should teach us to be most on our guard to protect liberty when teh Government's purposes are beneficent. men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well meaning but without understanding."
Symbolism vs. Substance
I haven't done the confirmatory math but the visual lesson in this video is informative. I especially like the cluttered college dorm/apartment.
Econ-pwned by Don Boudreaux
From one of our profession's greatest voices of reason and sanity:
April 28, 2009
In a nutshell
Why is it that mainstream macroeconomists find Austrian business cycle theory so difficult to comprehend? Roger Garrision explains, analyzing a Brad DeLong lecture as a case in point. In a nutshell:
In mainstream macro, where business cycles were discussed, capital is assumed to be fixed. In mainstream growth theory, where cyclical movements are assumed away, capital is allowed to grow or to shrink, but it enters the theory as a holistically conceived capital stock.
Price as a signal of quality? c. 1909
The April 28, 1909 NYT reports on an automobile festival on Long Island in which cars were able to race on a two-mile or one-mile track. For some races, cars were flighted by price range; for others it was a "free-for-all."
Overall, there are 52 reported outcomes with the following manufacturers competing:
I took the times reported and converted them into miles per hour. I then gathered the reported horsepower of each car and identified those vehicles that were in the cheapest class of cars ("gasoline cars selling under $1250"). I also noted whether the car competed on a one mile or two mile track. Here's an interesting tidbit for an econometrics class:
. reg mph hp cheap onemile,r
For every horsepower, the average car ran .25 mph faster. However, holding horsepower and the length of the track constant, cheaper cars ran considerably slower. Perhaps this is a function of the drivers who participated in those heats. On the other hand, much like today, cheaper vehicles may not have been capable of going very fast very safely, notwithstanding their horsepower.
The most expensive, and the fastest, car in the group was a Benz, which came in at 120 horsepower and topped 102 mph.
April 27, 2009
2. Advice for Wannabe Economics Teachers (.pdf)
Shleifer on Stiglitz
From Andrei Shleifer's new article on "The Age of Milton Friedman" in the JEL:
One way to give the readers of this review an overall sense of this book is with an example. On p. 70, Stiglitz et al. chastise conservatives for objecting to fiscal deficits by making “arguments based on the hard-to-verify notion of confidence.” “Despite how frequently conservatives invoke the confidence argument, there’s remarkably little empirical research on the matter (including little research by the IMF which seems to rely on the confidence argument heavily).” Then, on p. 148, Stiglitz et al. attack George Bush’s budget deficits, equally severely. “What will happen, not just to the United States, but to the stability of the global financial system if foreigners lose confidence (emphasis added) in the strength of the dollar, if they worry that it will depreciate in value in coming years?” A reader might lose confidence in the rest of the book.
Posted by Robert Lawson at 12:49 PM
Alex Tabarrok on 21st Century Economic Optimism
Here's Alex Tabarrok making a solid case for optimism at TED.
When Stimulus Meets Eminent Domain
And bureacratic expedience is the basis for the takings power...
The city of Eugene [Oregon] is ready to flex its eminent domain muscles to start work this summer on a $6.2 million bicycle and pedestrian bridge over Delta Highway.
April 26, 2009
I found this in the church library today: "The Value of Law Observance: A Factual Monograph." It's a 1930 publication of the Bureau of Prohibition, and though the data don't show what it purports to show, it closes with this brilliant exercise in statecraft:
"In last analysis, critics of prohibition laws and their enforcement are criticizing and indicting the communities, officials, and citizens to whom they refer. It is no just criticism of the laws against homicide to point out that America produces more homicides than any civilized country. It is equally unfair to lay at the doors of the prohibition laws the lawlessness and unbridled selfishness of a too large portion of our citizens who should show strength of character enough not to commit themselves to the theory that they are above the law and will choose only such laws to observe as suit their own convenience and taste."
Translation: when our laws have demonstrable negative unintended consequences, it is the fault of the unworthies who won't play along. Here are two relevant quotes from Steven Landsburg's excellent "Fair Play:"
On Authority and Drug Use:
(pause to finish off this cup of coffee, my drug of choice)
On the State and the Law
Word of the Day: Environmysticism
After doing a bit of reading about green initiatives and the mystical fringes of the environmental movement, I propose a new word to describe ecocentric environmentalism: "environmysticism." A Google search turned up a couple of previous hits, but there's no definition. Environmysticism holds that environmental problems transcend human conflicts over property and the use of resources. The claim that the natural world is valuable as such and that we can violate the rights of nature is an environmystical claim. One has to wonder how the environmystic comes to this conclusion. Does the Holy Spirit tell us? Do we learn it by communicating with Gaia the Earth Mother through transcendental meditation? How is the right to use force to override over others' value judgments allocated?
As I have said before, I consider myself an anthropocentric environmentalist. I care about environmental problems because I'm an economist and because human happiness is important to me. There is a lot of low-hanging fruit out there: a lot of "green" policies are actually bad for the environment, and a lot of policies that would make housing cheaper will also reduce pollution. I see no reason to grant the premise that water, soil, and air have enforceable rights.
In the last chapter of "The Armchair Economist," Steven Landburg contrasts "the science of economics" with "the religion of ecology." It's worth reading often: http://www.shrubwalkers.com/prose/list/not.html.
Finally, here's the definition of environmysticism I sent to the Urban Dictionary:
1. A body of propositions claiming that nature has enforceable rights independent of human wants and needs.
2. The view that the natural world is valuable for its own sake.
3. The view that one can make definitive, specific, and actionable claims about the costs and benefits of environmental changes independent of the price system.
The essay was an exercise in environmysticism: the author claimed that no matter the costs, recycling is always right.
Really finally, here's the only English site I can find that uses the word: http://alchemistpq.livejournal.com/909.html.
April 25, 2009
I'm working on a paper while keeping one eye on the ESPN.com Gamecast of the Cardinals-Cubs game. It has an interesting feature in that it gives a predicted winner and estimates the probability of victory in real time. For example, it's the top of the 6th with two out, no one on, and the Cardinals winning 3-1 in St. Louis. The probabilty of a Cardinals victory is 84%. But Reed Johnson just singled, knocking the probability down to 83%. My first thought when I saw that was that someone somewhere is losing the opportunity to make gobs of money taking real-time bets on these games. Regulation prohibits it, and whether nationwide real-time wagering on sporting events would increase or decrease corruption in the sports world. On one hand, the influx of money involved might increase opportunities for corruption, but on the other hand the increased transparency might also reduce corruption. Some might argue that the recent controversies over steroids suggest that self-regulation monitoring broke down as players refused to monitor one another, but I'm not sure if it should be counted as a success or a failure. How does the rate of baseball players busted for steroids compare to the rate of government officials busted for corruption? I would guess that they compare favorably.
This illustrates how corruption in private enterprise is not a prima facie case for state power. I came across a great quote from C.S. Lewis yesterday that summarizes my views on the modern state: "Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters." I would rephrase this as follows: "Many people say that some people are so irresponsible or evil that they require the state's regulation, oversight, and direction, but I reject statism because I see no men (or women) fit to be their masters."
My rejection of statism is based on what we know about incentives and information. First, coercion distorts incentives, and when we give people the power to do things we like we also give them the power to do things we don't like. Hence, for example, we have people wringing their hands about the Obama administration using powers granted to the Bush administration in ways they don't like. Second, any proposal for intervention has to overcome the knowledge problem. Hayek showed that even under the best of circumstances, the absence of profits, losses, and prices means that no government official can know whether they are creating value or wasting resources. Therefore, to borrow from James Buchanan, our emphasis in designing policy should be on "the institutions of exchange, broadly considered" because it is only under these circumstances that the information needed for socially rational decision-making will emerge.
Not From the Onion
I didn't have to look far. A couple of headlines down, I saw this: "Vicksburg military park to get $2 million in stimulus money." That would be a good place to start. Also, you could cut everything here. And if someone could press ctrl+A DEL on all of this, it would be another step in the right direction.
Waiting, or Paying, to Exhale
Here's George Reisman. Of course, I'm not sure whether there are Coasean bargains that ensure optimal breathing. Now that carbon dioxide is a pollutant, perhaps more efficient ways to tax breathing would include taxes and restrictions on exercise and exercise equipment?
At what point do people say "this is silly?"
April 24, 2009
Markets in Everything: Temporary Resident Edition
OCEANSIDE, Calif. -- The fragrance of sage-scented candles and sounds of jazz fill the air of a 2,600-square-foot house a block from the beach. Tiger-striped chairs flank tables crafted from exotic woods. Photos of a chubby baby hang on the walls. Whoever occupies 211 Windward Way, they seem to live the good life.
Source. HT to MR for the markets in everything concept.
Have the Editors of the Onion Read My Paper?!?!
Economists on Ethics: Caplan v. Hanson on Liberty and Efficiency
Here are George Mason University economists Bryan Caplan and Robin Hanson debating one another on normative criteria. Caplan argues for liberty, Hanson argues for efficiency.
I'm processing my notes on Fitzhugh Brundage's very interesting The Southern Past: A Clash of Race and Memory. It points out that in Europe, states erected a lot of monuments while in the US (particularly in the South) monuments were erected by voluntary associations. Why did European states erect so many monuments while Americans relied on voluntary associations to do basically the same thing? Do you know?
Can They All Take a Long Nap?
Larry Summers's nap at a White House meeting yesterday has been circulated around ye olde internet. Here's hoping he's started a trend of nice long siestas among Washington officials at both ends of Penn. Ave. It's hard to imagine we'd be much worse off. The Congressional Effect Fund seems to bear out my thinking.
While I'm being snarky about politics ...
... here's a brickbat for Dick Morris. The title of his recent column is "Obama’s leap to socialism." Excuse me--that's no leap--it's Obama's true character as was abundantly clear during last year's campaign.
... and here's a swipe at Obama's Cuba policy. From a news report: "Obama administration lifted restrictions Monday on Cuban-Americans who want to travel and send money to their island homeland." Fantastic, but what if I--not a Cuban American--want to travel to Cuba? And isn't it unconstitutional to enact policies based on nationality and the like? Surely one couldn't pass a law saying that Cuban American must pay higher income tax rates just for being Cuban American. In fact, isn't there a cottage industry of lawyers who bring suit over policies that don't explicitly single out some group or another but supposedly have "disparate impact"? Maybe I should find one and file suit against Obama's policy on grounds that it has disparate impact on non-Cuban Americans. (Snark aside, I suspect the weasel wording that avoids the legal problems is a reference to relatives living in Cuba not to being Cuban American per se.)
Guerrilla Economics: Student Housing at Rhodes
Mike Hammock posts a column by our student and regular lunch companion Brent Butgereit on increasing the efficiency of the on-campus housing allocation at Rhodes. Give it a read--it's an excellent article.
April 23, 2009
Frustration c. 1909
The April 23, 1909 NYT published the following letter:
A man with a moderate fixed salary finds it impossible now to support his family decently with the high price of food, clothing, and rent. Those in this class, and it comprises the bulk of the country's population, read of the wild extravagance of Congress, but don't seem to realize that they are taxed for it; that if it was not for this wicked extravagance the cost of their living would be greatly reduced; that there would be no deficit in the Treasury, and that food, beef, mutton, poultry, butter, eggs, etc. would be brought into the country free of duty.No new problems, only our problems.
The 41,250% return c. 1909
The April 23, 1909 NYT reports:
As a joke, Frederick Adams, a youth of this town [Burlington], bid 40 cents for an old trunk put up at auction at a public sale...Adams examined his purchase, and found in the false bottom of the trunk a secret drawer stuffed with banknotes and gold coins, amounting to $165.Similar stories involve those who lived through the Great Depression as individuals hoarded cash in all sorts of weird places. A personal experience included spools of yarn up for sale at $0.25 each. One person purchased the lot but, in a fit of consciousness, brought them back after discovering $100 notes hidden within them - the total was around $1500.
If you hide your money in weird places, please leave a note to your heirs so that they don't have to rely upon the "goodness" of others.
I know, the title is a bit misleading because I didn't calculate the risk-adjusted return.
On politician salaries c. 1909
An editorial from the April 23, 1909 NYT:
State Senator Timothy Sullivan is not wholly unreasonable in his contention that $1,500 per year is poor pay for Assemblymen and Senators, though he oversteps the bounds of reason when he declares that amount of wages would hardly pay a street cleaner...Some of the competent and earnest men in both houses are worth more. But on the whole the State pays a pretty high price for its annual lawmaking, considering the result. The Legislature as a body is worth no more than it is paid. Doubtless it is not worth as much as it gets. Whether or not better service could be obtained for larger salaries, under present political conditions, is an open question.Amen.
Auctioning President Obama?
This story out of South Bend, Indiana, describes a relatively rare situation: faculty members tripping over themselves to attend commencement. The reason? President Obama is giving the commencement speech and demand among the faculty has exceeded the seating capacity allotted to the faculty.
An economist might suggest that the efficient solution is to auction off the tickets. This would put the tickets in the hands of those faculty who value the President's words the most. At the same time, the funds raised could be used to shore up scholarship funds or to purchase a renewal to a few journal subscriptions at the library.
Rather, the plan is to use a lottery to allocate the tickets. This, in turn, will create a healthy secondary market for the tickets where faculty make transactions behind the closed doors of their offices or late at night in the parking garage.
Thus, some faculty stand to receive a "windfall" profit generated by the President. Will there be calls by the White House to discourage such reallocation of tickets, much as the Congress called to discourage the secondary market for inaugural tickets?
While the total potential market for faculty commencement tickets seems fairly small, upward to 400 tickets, I wonder if that is enough for the tickets to show up on eBay or StubHub. Will keep tabs on it when I find the time, but if a reader discovers any tickets for sale I would appreciate the information.
Douglass C. North at Rhodes Tonight
Douglass C. North is speaking at Rhodes this evening at 5:30 in the Orgill Room. Here's a lecture he gave at the National University of Singapore about a year ago.
Can't We Pass a Law or Something?
My rating: PG-13.
Thanks to Karol Boudreaux ...
... for visiting Berry earlier this week and giving a bang up talk on "paths to property." Karol's visit was a fantastic way to wrap up our Making Poor Nations Rich lecture series that had earlier featured Bob Lawson and Scott Beaulier.
Students and nearby alums (it was good to see at least one in the audience for Karol's talk) should keep their eyes open for our fall speakers.
Posted by E. Frank Stephenson at 09:39 AM
April 22, 2009
Mother Nature is one ungrateful whore.
I gotta get me one of those portable air conditioners on a hand truck set ups!
A Chicken (and cell phone) in every pot!
SafeLink Wireless is a government supported program that provides a free cell phone and airtime each month for income-eligible customers.
File under: Anything will happen that can.
High school kid pitches 4 no hitters in a row.
Speaking of "anything will happen that can" and baseball:
April 21, 2009
Supply, Demand, and Earth Day
I have a problem whenever I try to post a Peter Huber article like this one. I don't know where to stop. He puts so much into a sentence that abridging is difficult. Likewise, almost every paragraph seems to require notice.
Like medieval priests, today’s carbon brokers will sell you an indulgence that forgives your carbon sins. [. . .] If making carbon this personal seems rude, then think globally instead. During the presidential race, Barack Obama was heard to remark that he would bankrupt the coal industry. No one can doubt Washington’s power to bankrupt almost anything—in the United States. But China is adding 100 gigawatts of coal-fired electrical capacity a year. That’s another whole United States’ worth of coal consumption added every three years, with no stopping point in sight. Much of the rest of the developing world is on a similar path.
The article contains a delicious piece of historical irony. In the 70s, nuclear proponents used computer models to show how unlikely a catastrophic nuclear event is. Environmentals dismissed the use of computer models to make predictions about anything as complex as a nuclear generating plant.
Not as good a read, but worth ingesting between now and Earth Day is Green and mean: The downside of clean energy in the New Scientist.
A suggested slogan for Earth Day: Celebrate Squandering Billions, Starving Millions and Lenin's Birthday, Too!
Posted by Wilson Mixon at 06:55 PM
On taxation c. 1909
The April 21, 2009 NYT reports on tax policy as seen through the eyes of President Taft:
President Taft agrees with Senator Aldrich that no new form of taxation will be necessary or advisable in case the Tariff Bill, as finally enacted, will raise sufficient revenue to meet the expenses of the Government. In case additional revenue is necessary, the President is in favor of trying first an inheritance tax, and next an excise tax on corporations.How refreshing that the President didn't want to tax for taxation's sake.
An income tax is the kind of additional revenue measure least of all favored by Mr. Taft. In fact, he is of the opinion that such an income tax is undesirable, because, in the first place, it would fly directly in the face of the Supreme Court, and, in the next place, it would be a direct incentive to perjury. Certain men would be sure to evade it by perjury, while others paid it honestly, and it would be an unequal tax.The President does not mention, or at least it wasn't reported, the incentive to avoid, rather than the more distasteful (from the government's point of view) evade, an income tax. One wonders if Taft is taking a merely pragmatic view that the perjury would reduce the ability to collect the tax or if he is making a moral pronouncement.
In that event [that there is insufficient revenue raised by the Tariff bill] his effort would be to secure the adoption of the inheritance tax. He believes that an inheritance tax is the most certain of collection and the easiest of all forms of additional taxation suggested.It is true that dead men tell no lies, thus the perjury concern is probably off the table in the case of an inheritance tax. However, there is still an incentive to avoid the inheritance tax or at least the incentive to reduce the impact of the tax on one's estate. Again, no mention of avoidance.
If the Federal inheritance tax is not to be tried, then the President is in favor of an excise tax on the profits of corporations. He is convinced that it would entirely constitutional, and that no great difficulty would be experienced in its collection.As if corporations are black boxes rather than being managed by the same households about which the the President expresses perjury concerns? Excise taxes on corporate profits are simply profits on the individuals who hold the residual claims on the firm. Supposedly the corporate profits tax is a path of less resistance but a corporate profit tax is still distortionary and creates incentives to avoid the tax.
Taft then hits a theme that sounds rather similar to today:
Mr. Taft agrees with Senator Aldrich in the effort to reduce expenses and has told his callers that he would back the Senator to the limit in everything aimed at that end. He thinks that there could be great savings in the War and Navy Departments. He has been informed by navy officers that consolidation of the bureau work in the navy yards will save at least $5,000,000 a year. The President means to go at this question of reducing expenditures with the greatest possible vigor.Perhaps there was a culture of "small g" government in the early 1900s which would give Taft's words credibility. On the other hand, generally speaking vigorously trying to reduce the expenditures of the government in one area seems to be offset by vigorous increasing expenditures in other areas.
Alas, no new problems, only our problems.
Failure in the law of one price c. 1909
The following letter was published in the April 21, 1909 NYT:
In your edition of Sunday you say that the London bakers have been compelled to raise the price of bread to 6 1/2 d. (13 cents) for a four-pound loaf. The price here for a loaf of bread weighing thirteen ounces is 6 cents. Would some one explain why we should pay more than double the price here, when the wheat has to be bought here and shipped to England?
The price in England was 0.2 cents/oz whereas in New York the price of bread was .46 cents/oz. If we grant the letter writer a greater cost of wheat in England than in the U.S. and assume that the other labor and capital costs of producing bread were essentially the same, there are two other explanations for the distortion in price. First is the exchange rate. The second is if the demand for bread was that much greater in New York than in London.
This particular letter writer likely doesn't care about our answers but are there any other explanations I am missing?
What I've Been Writing Lately: Property, Prices, and the Environment
Forbes.com ran this article today. It's based on the paper I linked to yesterday on Economic Calculation in the Environmentalist Commonwealth. Due to space constraints, I wasn't able to include the reading list, but here are some links to additional reading and podcasts:
Daniel Benjamin, “Eight Myths of Recycling”
Michael Munger and Russell Roberts, “Munger on Recycling”
Michael Munger, “Think Globally, Act Irrationally: Recycling”
Bruce Yandle and Russell Roberts, “Yandle on The Tragedy of the Commons and the Implications for Environmental Regulation”
Garrett Hardin, “Tragedy of the Commons”
Bryan Caplan, “Externalities”
100 Million Dollars
Posted by E. Frank Stephenson at 12:26 PM
Moneyball, the Movie
Columbia Pictures and director Steven Soderbergh have set Demetri Martin to star alongside Brad Pitt in "Moneyball," the adaptation of the Michael Lewis book about ballplayer-turned-Oakland Athletics g.m. Billy Beane and his attempt to field a competitive team on a slim payroll.
Source. It'd be cool if my director sister got a gig on this film.
A Timid Advocate of Freedom
That's the overly generous title of Mitt Romney's NR piece on President Obama. Given what I've seen of Obama palling around with Hugo Chavez and of Obama's domestic policies, a timid advocate of freedom would be an improvement.
Posted by E. Frank Stephenson at 11:54 AM
Notes on the State
My notes for today's discussion in Classical & Marxian Political Economy are below the fold. We're discussing chapters three and four of Douglass C. North's Structure and Change in Economic History in anticipation of his visit on Thursday evening. On Thursday, we're discussing the working paper on which his new book with John Wallis and Barry Weingast is based.
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“…an organization with a comparative advantage in violence, extending over a geographic area whose boundaries are determined by its power to tax constituents. The essence of property rights is the right to exclude, and an organization which has a comparative advantage in violence is in the position to specify and enforce property rights” (p. 21).
A Contrived Example:
Thus, at any price per unit of violence between $0.50 and $2, the state and the Citizenry will trade. For the state, any price above $0.50 means that they get more by specializing in violence than they get from trade. For the Citizenry, any price below $2 means that they can get more from specializing in trade and then trading for violence. This is a contrived example of how the state and the citizen trade property rights for tax revenue.
What are the leading theories of the state?
As I see it, the key problem of the state is reconciling the contractual and predatory goals of the state: how do we specify incentives that maximize elite rents while, at the same time, being good for economic growth?
North writes that “(t)he existence of a state is essential for economic growth” (p. 20). How is the existence of a state essential for economic growth?
Obvious: secure private property rights give rise to the price mechanism.
When there are economies of scale in violence, it benefits society to have specialization.
North continues: “the state, however, is the source of man-made economic decline” (p. 20). How do states create economic decline?
Also obvious: arbitrariness alters time preference.
What are the key problems facing economic historians?
“For the economic historian, the key problems are to explain the kinds of property rights that come to be specified and enforced by the state and to explain the effectiveness of enforcement; the most interesting challenge is to account for changes in the structure and enforcement of property rights over time” (p. 21).
The importance of this question grows the more I read Mises and Hayek.
Modeling the State (p. 23)
“…the property rights structure that will maximize rents to the ruler (or ruling class) is in conflict with that that would produce economic growth” (p. 28). Explain.
“In short, the process of growth is inherently destabilizing to a state.” (p. 29). Why? Why is “no growth” also destabilizing?
The Analysis of Organizations in Economic History
In a limited-access order, the right to form organizations is personal and limited. In an open-access order, the right to form organizations is impersonal and unlimited.
1968: no essay on the market in the International Encyclopedia of the Social Sciences, or in the "great ideas" volumes of the Great Books of the Western World. Today, there are essays on the market in a variety of scholarly compendia.
Why are transaction costs important, and how does North choose to deal with them?
How do we pick organizational forms?
Hayek, Friedrich A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press.
Hoppe, Hans-Hermann. 1998. The Private Production of Defense. Journal of Libertarian Studies 14(1):27-52. Online.
Mises, Ludwig von. 1957 . Theory and History: An Interpretation of Social and Economic Evolution. Auburn, AL: Ludwig von Mises Institute. Online.
Mises, Ludwig von. 1990 . The Idea of Liberty is Western, in Richard Ebeling, ed., Money, Method, and the Market Process: Essays by Ludwig von Mises. Boston: Kluwer Academic Publishers. Mises.org Daily Article, June 23, 2006. Online.
Nye, John VC. 1997. Thinking About the State: Property Rights, Trade, and Changing Contractual Arrangements in a World with Coercion, in John Drobak and John VC Nye, eds. The Frontiers of the New Institutional Economics. San Diego: Academic Press, pp. 121-142.
Weingast, Barry. 1997. The Political Foundations of Limited Government: Parliament and Sovereign Debt in 17th- and 18th-Century England, in John Drobak and John VC Nye, eds. The Frontiers of the New Institutional Economics. San Diego: Academic Press, pp. 213-246.
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April 20, 2009
Will Wilkinson makes a forceful argument for de-stigmatizing casual marijuana use, and tops it off with "My name is Will Wilkinson. I smoke marijuana, and I like it."
International Free Banking
On Thursday I'll be giving a talk on "Fundamentals of Liberal Monetary Reform: A Case for International Free Banking" at the Friedrich-Naumann-Stiftung für die Freiheit / Institut Liberale colloquium on "Free Currency - The Future of Money" in Potsdam, Germany. Here are the opening paragraphs.
Let me begin by quoting a recent statement, made less than one month ago, that emphasizes the need for international monetary reform and proposes a set of principles for reform. See if you can guess the author:
The outbreak of the current crisis and its spillover in the world have confronted us with a long-existing but still unanswered question, i.e., what kind of international reserve currency do we need to secure global financial stability and facilitate world economic growth …? The above question, … as the ongoing financial crisis demonstrates, is far from being solved, and has become even more severe due to the inherent weaknesses of the current international monetary system.
The author is not any well-known classical liberal economist, but Zhou Xiaochuan, head of China’s central bank, in a statement entitled “Reform the International Monetary System”. Evidently support for fundamental reform of the international monetary regime is growing. Of course, a key question is: reform in what direction?
Classical liberals can applaud Zhou’s three stated desiderata for a global reserve money: (1) its value should be anchored, (2) its quantity should automatically respond to market demand, and (3) its quantity should not be subject to variation by any national government. Without intending to, Zhou has described three main virtues of the classical gold standard.
In the rest of his statement Zhou unfortunately proposes concrete measures that will never achieve the stated ends. He proposes that a more powerful International Monetary Fund could issue a desirable reserve currency denominated in a revised version of its SDR unit. Such a proposal overlooks some simple basic facts.
Unlike gold, the SDR is not anchored to anything but a basket of unanchored national fiat monies (what Zhou calls “credit-based national currencies,” oddly given that their issue is based on fiat and not on credit in any standard sense). If the SDR were its own fiat unit it would remain unanchored.
Unlike monetary gold, the SDR in either form is governed by no market forces making its quantity automatically respond to demand.
Unlike competitive firms in gold mining, minting, and gold-based banking, whatever the IMF does is inherently determined by politics. The quantity of IMF-issued SDRs will be decided in the political realm, where long-run stability has never been more than an empty promise.
Anti Anti-Trust 1909 - 2000
Joel Klein, the third-rate lawyer/political hack who is in charge of the government's Microsoft persecution, recently tried to rationalize the lawsuit by saying that it was in keeping with the long history of consumer protection regulation, beginning with the Sherman Antitrust Act of 1890. In reality, the history of antitrust has been a history of politically-inspired witch hunts launched against America's most innovative and entrepreneurial businesses.
Posted by Wilson Mixon at 04:22 PM
What I've Been Writing Lately, Part II
Forthcoming in New Perspectives on Political Economy, here's "A Note on Profit, Loss, and Social Responsibility." The abstract:
This short note discusses the role of profits and losses in organizing information. I explore the ethical status of a firm earning losses and argue that to earn a loss reveals important information about the production plans that are likely to be successful. I further argue that the information revealed in a profit-and-loss economy is socially beneficial.
What I've Been Writing Lately
Just in time for Earth Day, here's "Economic Calculation in the Environmentalist Commonwealth," under review at the Quarterly Journal of Austrian Economics. The abstract:
Do environmental initiatives like carbon accounting provide a viable alternative to monetary calculation based on profit and loss? Economic insights about calculation and imputation suggest that they do not provide a reliable, rational guide to action. Non-monetary calculation of the environmental effects of action runs into the same problems of in natura calculation and commonly-owned means of production. The information needed for rational economizing does not exist when we forsake the price mechanism. A legal regime based on strict private property rights solves environmental problems. Relaxed restrictions on property rights can generate environmental benefits and reduce our contribution to environmental degradation. Examples include the elimination of restrictions on housing markets and privatization of municipal recycling and garbage collection.
Cross-posted at the Mises Blog and The Beacon.
Rent-seeking c. 1909
The April 20, 1909 NYT publishes a letter to the editor that contains rhetoric of which we are all to familiar today. In this case, the appeal is to license chauffeurs who are gripped by "speed mania" and who are thought of as "thieves" and "grafters":
The only solution of the speed mania lies in the license. There are at present some thirty thousand chauffeurs licensed in new York State. Of this number how many would be left if they had to pass a thorough examination? There are plenty of so-called chauffeurs who only know how to start and stop their cars, but absolutely nothing about the car in general.I admit that I am not able to tell if the letter writer is talking about private chauffeurs who are hired by individuals on a nearly full-time basis or if the letter-writer is talking about essentially taxi drivers. Perhaps it is a mix? After all were there 30,000 private drivers in New York State in 1909? Regardless, it is not clear why knowledge of the car aids in the performance of a chauffeur. I wager that many chauffeur's today know very little about the cars they drive. If the chauffeur is hired by a single household to drive them about town, then the quality of the chauffeur, or lack thereof, would seem to be monitored by the person paying the bills. If the chauffeurs are generally driving on-off fares, there might be an information asymmetry problem, but it is not clear how exams will necessarily solve that problem.
How to ensure a good chauffeur?:
By all means have the license hard to procure, so that only men of good character, habits, eyesight, hearing, knowledge, and judgment who are able to pass such an examination be allowed to operate automobiles on our crowded highways.All of this has some aesthetic appeal but such normative criteria such as "good character" and "good habits" would seem to be less important than "driving skills" with which the chauffeur and his fare are a bit more safe.
Those familiar with rent-seeking activities should feel good, as the last paragraph comes to the point of the licensing efforts:
The better class of chauffeurs, among whom I count myself, hope for some reform in the way of granting a license. We are tired of being called thieves, grafters, and a great many other degrading names.
Of course, the letter writer is an excellent driver. The reform of the granting of a license seems more about constraining the supply of chauffeurs and thereby increasing the wages chauffeurs can command than about the safety of the riding public.
Anti-competition economics c. 1909
The April 20, 1909 NYT reports on plans by Major League Baseball to engage in "war" on an "outlaw league" which threatened to undermine the monopoly status of MLB:
War on the California State League, which is classes as an outlaw league, was declared by the National Baseball Commission in session here [Cincinnati] late this afternoon. An assessment on the sixteen clubs of the two major leagues will be made to provide a substantial sum to be expended in the fight to be made on the California League.Baseball has yet to be granted their "antitrust exemption" however the juxtaposition to the steel wire story couldn't be more telling.
Anti-trust economics c. 1909
The April 20, 1909 NYT reports on how the market forced the steel trust to adjust prices downward in the face of competition:
The American Steel and Wire Company, which is a subsidiary of the United States Steel Corporation, announced yesterday a reduction in all classes of steel wire products of 10 cents per 100 pounds, which is equivalent of $2 a ton.No government bureaucrats dictating that the mega-corp lower their prices. Rather independent producers lowered price and the steel trust, notwithstanding its presupposed market power, responded in kind.
Boston Marathon Today
9:22 a.m. Wheelchair Division Start
Good luck to all my friends (Scott, Laura, Dink, Rita, Georg) running today. I'll see you there next year.
P.S. Auburn MBA student David Wishart is hoping for an under 2:25 time and top 25 place. Good Luck David!
You can track your favorite runners here.
April 19, 2009
Minimum Wages Again
A debate over the merits of the minimum wage rages in the "letters to the editor" section of the local newspaper. Since Movable Type hates Mac, I can't give links. Here's a letter I sent today:
"Regarding the letter on wages of April 19 ("Raise Wages, and Prosper"), if we can in fact do well and do good with a minimum wage free lunch, are we not ignoring our moral duties by stopping at the "prevailing wage?" Would we not do well and better still by imposing a Shelby County minimum wage of $1,000,000 per hour?
The idea that workers exposed to a minimum wage benefit from gains from trade that are transferred from their employers has some merit but it is ultimately crushed under theory--people respond to incentives, and they make decisions in response to marginal costs and marginal benefits--and evidence. Interested readers can enter the following Google search string (Neumark Wascher minimum wage) to find a free version of a study by economists David Neumark and William Wascher in which they survey the empirical research on the employment effects of minimum wages. The causal effects of a minimum wage are clear: lower employment, higher poverty, less experience, and lower educational attainment.
As a pro-poor, anti-poverty policy, the minimum wage has been tried, measured, and found wanting. I stand by my earlier claim that a prevailing wage ordinance in Shelby County will be a raw deal for the poor."
April 18, 2009
The Economics and Theology of Aid
William Easterly invites a response to his earlier post on a prayer for the end of poverty that reads "(t)he world now has the means to end extreme poverty, we pray we will have the will." As I read it, the prayer means "the political will to transfer resources from rich people to poor people, using force if necessary." The response closes with the following question: "What is the theology of not vigilantly supporting and/or advocating the most effective poverty solutions available?"
It's an excellent question (more on my suggestion in a minute) but my knee-jerk response is to answer a question with a question: "what is the theology of vigilantly supporting and/or advocating anti-poverty programs that are demonstrable failures?" To paraphrase Murray Rothbard, what is the theology (and ecclesiology) of having outspoken opinions about economic issues while not knowing any economics? In his excellent book The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, Thomas Sowell speaks of an imperviousness to evidence that, I'm afraid, characterizes a lot of advocates of anti-poverty programs. Note that I did not say "people who wish to eradicate poverty" because people who wish to eradicate poverty and supporters of anti-poverty programs aren't necessarily the same people. While we're speaking in Biblical terms, a lot of aid programs in the last five decades have given us a lost half century of terrible stewardship.
So what are the alternatives to failed aid programs? I offer, once again, Lant Pritchett's Let Their People Come: Breaking the Gridlock on Global Labor Mobility, available for free download from the Center for Global Development. Pritchett estimates the global gains from an international free market in labor, shows that they dwarf any and all gains from even the most successful aid programs, and casts the international immigration in explicitly moral terms. I would therefore rephrase the question asked at the end of Jonathan Denn's response to William Easterly: what is the theology of vigilantly supporting and/or advocating the use of force to prevent mutually beneficial voluntary exchanges, particularly when those voluntary exchanges have the potential to carry us a long way toward the elimination of extreme poverty?
Along those lines, here's a picture I drew on my office whiteboard after reading Pritchett's book (meme HT: www.thisisindexed.com). While she was visiting Rhodes, Deirdre McCloskey kindly asked to be added to the intersection. This perhaps suggests a new personal mission statement: make both sets bigger, and increase the degree to which they overlap.
April 17, 2009
Posting in which Bob Higgs discusses his lineage (and its relevance), the nature of political discourse in the era of The Uniter, and his hope for the future, to wit:
We can transcend this disgusting political spectrum, placing ourselves neither on the left nor on the right – nor even in the so-called "independent" zone somewhere between them – but rather rising above the entire line and insisting that red-state savagery and blue-state savagery are equally despicable and intolerable. I daresay that the future of our civilization hinges on whether a sufficient number of us will choose this transcendence.
Cavalcade of Miscellany
Courtesy of Reason.tv, here's Pete Leeson on The Invisible Hook:
The DMV will now service your GM or Chrysler Vehicle:
NB: if we let GM & Chrysler go under and liquidate their inventories at low prices, there will be an entrepreneurial opportunity for people who know how to fix them. People like, say, laid-off GM and Chrysler employees.
April 16, 2009
Take the terrorist quiz for yourself!
xkcd on Borders
For APEE 2009 Attendees
As a thank you to the students who volunteered their time to make the 2009 APEE Conference such a great success, I made a donation in their name to the UFM ITA scholarship program. If you would like to donate, you can find a secure donation form online here.
First Class Inefficiency
That's the title of my op-ed (with students Ben VanMetre and Nick Abraham) on Forbes.com today. You can find the whole op-ed here. My favorite part:
This may be--and likely is--true. But we don't know if Saturday delivery is a good idea or not because the post office is a public monopoly.
Congratulations Ben and Nick!
Conformity, Virginity, and Booze
Ian Ayres offers an interesting post on conformity: people tend to conform to what they think others are doing, and he stresses the implications for public service announcements about teen sex and drug use. In a similar vein, here's Jeffrey Miron and Elina Tetelbaum on the ineffectiveness of the drinking age.
Various flyers about drugs and alcohol I've seen around campus are putting Ayres's point into practice. They don't encourage people to "be different." They point out that according to surveys the College has done, binge drinking at Rhodes is relatively rare. I'll be interested in seeing how effective the campaign is in a few years.
April 15, 2009
Slumping Towards Socialism: The Bane of Unfettered Democracy
(I'm feeling cranky this morning, so I need to vent. The URLs herein are intended for the newcomers to this forum.)
With the increased public regulation of the financial, insurance, and even manufacturing industries in our economy, as well as an expanded role of the Federal Reserve Bank in directly subsidizing specific businesses within our faltering financial industry, our Economic Freedom Index will surely be falling significantly next year. Our Civil Liberties Index may well follow suit (though in truth, they are not that far apart conceptually).
I sense a palpable change in personal philosophy among the rank and file U.S. citizenry, fueled by the main stream media. Our uniquely American economic and political freedoms are now simply looked at by many citizens as some grand but somehow failed social experiment that has apparently run its course.
Our lack of vigilance as a free society has slowly allowed freedom preserving institutions to be eroded, with their decreasing potency allowing a much more volatile and less predictable process for creating prosperity. The eyes of our complacent citizenry see a decreasingly meritocratic determination of income generation in society, resulting in a less egalitarian distribution of economic status--life just doesn't seem fair under capitalism anymore.
Yet, our people fail to connect their unfulfilled utopian vision for the American experience to the demise of individual freedoms in American society. Prosperity, apparently, should be automatic, consistent and costless. Change was demanded; democracy was exercised; the people's voice was heard. The role of government in American economic lives has now substantially expanded.
Without preserving the constitutional protections against the encroachment of government upon individual freedoms, the noble institution of democracy simply becomes an energy efficient vehicle for transporting us down the short highway to the land of unfettered socialism.
Comparing societies throughout history has shown that capitalism is the superior institution for channeling individual self-interest towards producing prosperity. Further, capitalism is more effective than democracy at promoting individual well-being in society, especially for women.
But the institution of capitalism does not deliver perfection. Its preservation and maintenance is not free--it requires eternal vigilance. Capitalism is simply the institutional arrangement with the lowest social opportunity cost.
Perhaps the American people will soon awaken from their intellectual stupor, ignore the media, and demand from their elected representatives that all their freedoms be returned. Maybe...
John O'Sullivan's Conversation with F.A. Hayek
Posted by FEE, HT: Jeff Tucker. We're talking about Hayek's article "The Use of Knowledge in Society" in Classical & Marxian Political Economy tomorrow.
Tax Day tidbits
A couple of quirky things I've learned this year about taxes in these United States.
(1) The social security payroll tax taxes your first $102,000 (in 2008) of wages at a rate of 12.4% -- 6.2% which you see on your paystub and 6.2% paid by your employer without you seeing it. Any dollar earned over $102,000 is not taxed by social security. Ok. That's easy enough.
But what if you have two jobs during the year earning less than $102,000 but that sum to more than $102,000? Both employers will remit the 12.4% tax to social security and you will have overpaid because you're not supposed to be taxed an any earning over $102,000. This is not a problem for you the individual taxpayer as your overpayment (anything greater than 6.2% of $102,000) is treated as a credit on your 1040 (line 65) and can be used for other income taxes or be refunded. But what about the two employers who paid 6.2% of your behalf? Shouldn't the employers be allowed some kind of credit for overpaying for their part? Answer: No. The employers are screwed here.
(2) If you move residences from one state with an income tax to another with an income tax it is all but impossible to avoid some double taxation. Wage and salary income is easily divided between State A and State B so that you pay income taxes only on the earnings made while resident in the respective states. But business income (i.e., Schedule C type income) and some interest/dividend/pension income payments can not be allocated to one state or the other. In fact, both states you resided in may tax these same sources of income.
Btw, I had five, count 'em 5, did you hear that? FIVE!, income tax returns to file this year.
Thanks to Scott Beaulier ...
... of Mercer for his visit to Berry yesterday. Scott had a lively Q&A session on his Botswana research with my colloquium class and followed it up with a fantastic public lecture.
Scott was part of our Making Poor Nations Rich speaker series this semester; next week we conclude the series with Karol Boudreaux of GMU.
Posted by E. Frank Stephenson at 09:01 AM
I'd Take the Tea Party Movement More Seriously If ...
... the one in Rome didn't feature a congressman who scored a paltry 52% on the Club for Growth's RePork Card. The congressman isn't the solution--he's part of the problem (though, to be fair, he's not alone and is hardly the most egregious).
April 14, 2009
We Don't Care. We Don't Have To. We're the Phone Company."
We start talking about monopoly in econ 101 today.
Ought, Can, and Calculation
We're discussing Mises's "Economic Calculation in the Socialist Commonwealth" in Classical & Marxian Political Economy today, and I'm planning to distribute Steve Horwitz's excellent (and short) essay "Ought Presupposes Can." Mises's demonstration of the impossibility of economic calculation without private ownership of the means of production is an incredibly important contribution to social theory, and its implications for the feasibility of government intervention are considerable. Any social policy must be economically possible before it can be considered morally desirable; borrowing Steve's title it has to be shown that there is a "can" before there can be an "ought." The implication of Mises's thesis is that many assumed interventionist "cans" are in fact "cannots." Therefore, a number of interventionist "oughts" have to be eliminated from ethical debate. John Lennon was free to imagine all he wanted and people were free to join him, but in light of the Austrian analysis of a world with "no possessions" he and his cadre of dreamers were wasting their time.
Cross-posted at the Mises Blog.
Excellent and Vivid Example from Don Boudreaux
What are the differences between trade in drugs, wine, chocolate, and cars?
What I've Been Writing Lately
Here are a couple of recent pieces:
2. Patriotic Shopping Sprees. Incidentally, there was an interesting article in this morning's WSJ about slowdowns in container traffic at the Port of Los Angeles. Much of the slowdown is attributable to global macroeconomic trends, but there's an important point here about trade: all of those protected auto manufacturing jobs in the midwest are coming at the cost of employment opportunities for longshoremen in Southern California.
3. Stimulating Anachronism, Stifling Innovation. Bailouts aren't a free lunch, and this is just one tiny example. What is seen: more output from government-supported dinosaurs like GM. What is not seen: less output and innovation from new firms like Tesla Motors. Update: Mike sends this. Rent-seeking gives the rent-seekers competitive advantage, which encourages their competitors to rent seek.
4. Time to end war on drugs. The original title was "The Drug War is Reefer Madness."
April 13, 2009
Joseph Salerno Block Quote of the Day
From his postscript to Mises's "Economic Calculation in the Socialist Commonwealth":
With the impossibility of building up and maintaining a capital structure in the absence of monetary calculation, human economy under socialism comes to consist of super-short and repetitive household processes utilizing minimal capital and with little scope for adjustment to new wants. The result is that time itself--in the praxeological sense of a distinction between present and future--ceases to play a role in human affairs. Men and women, in their capitalless, hand-to-mouth existence, begin to passively experience time as the brute beasts do--not actively as a tool of planning and action but passively as mere duration. Humanity as a teleological force in the universe is therefore necessarily a creation of the inextricably related phenomena of calculation and capital. In a meaningful sense, then, socialism not only exterminates economy and society but the human intellect and spirit as well.
Mises Block Quote of the Day
From "Economic Calculation in the Socialist Commonwealth," which we're discussing in Econ 323 tomorrow:
To Otto Bauer the nationalization of the banks appears the final and decisive step in the carrying through of the socialist nationalization program. If all banks are nationalized and amalgamated into a single central bank, then its administrative board becomes "the supreme economic authority, the chief administrative organ of the whole economy. Only by nationalization of the banks does society obtain the power to regulate its labor according to a plan, and to distribute its resources rationally among the various branches of production, so as to adapt them to the nation's needs."  Bauer is not discussing the monetary arrangements which will prevail in the socialist commonwealth after the completion of the nationalization of the banks. Like other Marxists he is trying to show how simply and obviously the future socialist order of society will evolve from the conditions prevailing in a developed capitalist economy. "It suffices to transfer to the nation's representatives the power now exercised by bank shareholders through the Administrative Boards they elect,"  in order to socialize the banks and thus to lay the last brick on the edifice of socialism. Bauer leaves his readers completely ignorant of the fact that the nature of the banks is entirely changed in the process of nationalization and amalgamation into one central bank. Once the banks merge into a single bank, their essence is wholly transformed; they are then in a position to issue credit without any limitation.  In this fashion the monetary system as we know it today disappears of itself. When in addition the single central bank is nationalized in a society, which is otherwise already completely socialized, market dealings disappear and all exchange transactions are abolished. At the same time the Bank ceases to be a bank, its specific functions are extinguished, for there is no longer any place for it in such a society. It may be that the name "Bank" is retained, that the Supreme Economic Council of the socialist community is called the Board of Directors of the Bank, and that they hold their meetings in a building formerly occupied by a bank. But it is no longer a bank, it fulfils none of those functions which a bank fulfils in an economic system resting on the private ownership of the means of production and the use of a general medium of exchange--money. It no longer distributes any credit, for a socialist society makes credit of necessity impossible. Bauer himself does not tell us what a bank is, but he begins his chapter on the nationalization of the banks with the sentence: "All disposable capital flows into a common pool in the banks."  As a Marxist must he not raise the question of what the banks' activities will be after the abolition of capitalism?
Here's some wonderful Misesian satire on "Nationalized Citibank." Warning: lots of f-bombs, so proceed with caution.
April 11, 2009
Klein and Roberts on Theory of Moral Sentiments
This podcast between Dan Klein and Russ Robert on The Theory of Moral Sentiments is just fantastic. I cannot wait to hear the rest in the series, especially since my Koch Colloquium is reading TMS this term. By the way, the discussion between variou s commenters and Klein here is excellent and shouldn't be missed either.
Seen on a t-shirt at breakfast this morning, apparently worn without irony:
"Welcome to America. Now SPEAK ENGLISH!"
My first thoughts, of course, were about Bryan Caplan's work on anti-foreign bias in The Myth of the Rational Voter. The fact that at least some people are willing to pay a price to advertise their anti-foreign bias suggests to me that anti-foreign bias rather than material self-interest drives immigration policy.
There's a silver lining in this dark cloud, though. People who are divided by culture are united by commerce. I'm virtually certain that there are people all up and down the supply chain who don't speak particularly good English who contributed to our bias-advertising shirt-wearer's meal this morning. And I would also bet that the shirt was made somewhere outside the US. As economists like Milton Friedman, Deirdre McCloskey, and others have pointed out, the social miracle of the marketplace is that it helps people care for one another even when they don't care about one another. In fact, people with positive antipathy toward one another can still find ways to cooperate to mutual advantage through the market process.
I know I've linked to this before but here again is Lant Pritchett's brilliant Let Their People Come: Breaking the Gridlock on Global Labor Mobility, which is required reading for anyone interested in immigration. I hope that in a few generations people look back with revulsion at coercive restrictions on labor mobility the same way we look back with revulsion at chattel slavery.
The Greedy Hand: Streetlight User Fee Edition
April 10, 2009
"The H&R Block and Liberty Tax Stimulus Plan"
A recent issue of Business Week had an article on the tax cuts (really just welfare sent through the IRS); an excerpt:
As federal stimulus dollars begin to flow, one unlikely beneficiary is the $30 billion tax-preparation industry. Prep specialists from top dog H&R Block on down are celebrating as the Apr. 15 deadline approaches. The fresh treat: billions of dollars in new and expanded tax credits for individuals and small companies.
The issue also had an interesting article on "loopholes galore" in Geithner's toxic asset plan.
Contra Jacob Hacker ...
A few years back, Yale's Jacob Hacker wrote The Great Risk Shift in which he argued,
The currently favored response to rising insecurity is to throw more tax breaks and individual accounts at Americans to encourage them to save and invest on their own. This may help the privileged, but it won’t provide strong guarantees of economic security to ordinary Americans, who are just barely staying afloat. Nor will it stop the huge shift of risk onto these hardworking families as jobs, health care, and retirement all become less secure.
The book was blurbed by John "Breck Girl" Edwards and the CBO (then headed by Obama budget director Peter Orszag) found that income volatility had been little changed since the early 1980s so there's reason to doubt Hacker's thesis.
But Hacker's book came to mind because a recent NBER Working Paper finds, "The income [and consumption] of ... rich households [are] now more vulnerable to aggregate fluctuations than [those] of poorer households ...." Hmmm ... maybe Hacker will now bemoan income volatility among high income earners. Or maybe his book had more to do with old fashioned redistribution than with the mitigation of risk.
Your Vote Matters: Help Pete Leeson get on "All Things Considered"
Article here. Bleg from Pete here. Revolutions have to start somewhere, so please recommend and leave a comment. Shameless plug: if you're going to the Southern Economic Association meetings, I'm organizing a symposium on Pete's book that features comments from Peter Klein, Charles North, Virgil Storr, and me (note to self: get a better website).
Econ 101 Exam Question?
The local paper editorializes in favor of burdening county contractors with a "prevailing wage" ordinance. I respond:
In response to your April 10 editorial on a "prevailing wage" ordinance for city contractors, my econ 101 students should be able to see at least four things wrong with your reasoning.
First, the editorial pretends that a prevailing wage ordinance is a free lunch. It isn't: the resources needed to pay above-market wages have to come from somewhere. If we want to insist on wages that aren't justified by productivity, we need to recognize that one person's higher wage will be his neighbor's pink slip.
Second, using ordinances to interfere with prices wastes resources. We will sacrifice the opportunity to produce goods for which the benefits exceed the costs in order to produce goods for which the costs exceed the benefits. To adopt a Biblical perspective, this is terrible stewardship.
Third, the benefits that the editorial expects to be transferred from employers to employees will not materialize. These ordinances distort incentives: people have incentives to waste their time and energy on unproductive activities like waiting in line for these higher-wage jobs when they could be working elsewhere.
Finally, the tragedy of ordinances like these is that they do exactly the opposite of what their supporters want. The law of unintended consequences suggests a cruel irony: the burden will fall disproportionately on the people most in need of help.
A prevailing wage ordinance is a raw deal, particularly for the poor. If we are really interested in alleviating poverty, then we should be liberalizing the local labor market instead of burdening it with additional restrictions.
If Only It Were That Few ...
Rep. Spencer Bachus, the top Republican on the Financial Services Committee, told a hometown crowd in Alabama today he believes there are several socialists in the House.
Source. A more accurate count would be something around 400, perhaps including Rep. Bachus.
April 09, 2009
Letter to the Editor on Stadium Subsidies
Following Don Boudreaux's example, I sent this letter about stadium subsidies to the Birmingham News today:
When I moved to Alabama for college in 1997, Birmingham residents were talking about a domed stadium. When I left Alabama in 2001, Birmingham was still debating a domed stadium. Now, in 2009, as the Super 6 football championship prepares to move to Tuscaloosa and Auburn, people are asking whether a domed stadium would have made a difference. It's time for Birmingham residents to give up on government financing for a domed stadium, and there are very good reasons to do so.
The wild claims of poorly-done "economic impact studies" notwithstanding, carefully-done research by economists who study stadium subsidies show that the economic impact of government stadium subsidies are trivially small if not negative. Stadiums redistribute resources within an area instead of creating new wealth and they discourage non-sports-related travel. Further, all of the supposed benefits of government-financed stadiums will be absorbed as people jockey for favor through the political process.
Government money for stadiums is money very poorly spent, and Birmingham residents should hope that a government-financed downtown stadium never becomes a reality. They will remain richer for it.
For more information, here's a great article by Dennis Coates.
Douglass C. North at Rhodes, April 23
Douglass C. North, 1993 Nobel Laureate and one of my dissertation committee members, will speak at Rhodes on April 23. The lecture is free and open to the public, and it will take place at 5:30 PM in the Orgill Room. His lecture will be based on his book Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History.
On a somewhat unrelated note, Don Boudreaux takes some of his critics to task and argues that his status as a tenured professor of economics is irrelevant to his support for free trade. To add a data point to Don's argument, I'm an untenured professor, and I'm a fervent supporter of unrestricted trade and immigration. I don't remember if Bryan Caplan addresses this or not, but I would be surprised if the marginal effect of tenure on support for free trade is very large.
UFM Interviews with APEE Members
Lots of interesting interviews here.
Some highlights include:
1. J.R. Clark
2. Dwight Lee
3. Ed Stringham
The Association of Private Enterprise Education is Decadent and Depraved: Reflections on the 2009 Conference
Following Larry and Frank, here are my observations:
1. I'm more optimistic about the future of the social sciences after APEE. The ratio of good papers to bad papers was higher than at a lot of conferences I've been to.
2. Apparently some Guatemalan tobacco shops are set up to disguise your Cuban cigars as Dominican cigars (no, I didn't smuggle any contraband stogies into the US). I was about to say that this illustrates the folly of law, but it doesn't. It illustrates the folly of legislation. Trying to prevent people from enjoying gains from trade will almost always be ineffective, counterproductive, or both. Since Cuba trades freely with the rest of the world, the US embargo has been both ineffective and counterproductive. It has been ineffective in that it has had little impact on the Cuban economy and on the Cuban government. Recently, Deirdre McCloskey pointed out to me that during an experiment in which people were allowed to spend dollars in Havana, Havana prices were almost the same as Miami prices. It has been counterproductive in that it has given Castro a golden opportunity to blame the evil capitalist United States for the failures of communism.
3. Speaking of Castro, I wonder how he, Che Guevara, and Salvador Allende have gotten a free pass from twentieth century history. Jose Pineiro, one of the architects of the Chilean reforms of the 1970s, gave a plenary lecture contrasting the Cuban Revolution with the Chilean Revolution. In doing some work on human rights violations, economic liberalization, and the Chilean experience, it is hardly clear that Allende's human rights record would have been superior to Pinochet's. The association of Milton Friedman and libertarianism with the human rights abuses of the Pinochet regime is a grave intellectual error, and one that deserves to be corrected. More on this later.
4. Universidad Francisco Marroquin is inspiring and uplifting. Their slogan, "Veritas, Libertas, Justitia" embodies the foundational principles of a society of free and responsible people, and their educational philosophy of teaching principles rather than practice will, I expect, pay large dividends in the 21st century.
5. I wonder how an "end the drug war" petition from economists would be received. Groups like the Cato Institute and the Independent Institute have been circulating petitions about free immigration, free trade, and the stimulus package. I wonder how a similar petition from economists to end the war on drugs would do.
6. Via Facebook, I was able to meet up with Colleen Haight of San Jose State and Debi Ghate of the Ayn Rand Institute for an early dinner at DFW. The cheese and spinach dip at Reata in Terminal D was pretty good.
7. The search for the Great American Novel is over. As far as I'm concerned, "Atlas Shrugged" is the Great American Novel until something better comes along.
8. Congratulations are in order for Rhodes seniors Jill Carr and Dustin Sump, who did excellent jobs presenting their honors research at the conference.
9. I prefer Coke to Pepsi, but sugar-sweetened Pepsi tastes better than HFCS-sweetened Pepsi. If consumer advocates are looking for a cause that isn't counterproductive, ending sugar protectionism would be a good one.
ABBA to Zeppelin, Led and DOL Ranked
among the top 50 economic blogs by Bankling.com. Thanks!
APEE Conference and Roundup
Like Larry, I also congratulate Bob Lawson on winning APEE's Distinguished Scholar Award. I'm guessing it was our paper on ratemyprofessors that got him over the top. :-)
[UPDATE: Art's post reminded me that I neglected to mention my student Shawn Regan's splendid presentation on common property bicycle programs. Well done Shawn.]
Also regarding APEE's meeting in Guatemala City--special thanks to our hosts at the Universidad Francisco Marroquin for making it such a smooth and pleasant conference. The UFM students who assisted at the conference were extraordinarily friendly and helpful.
A few things that caught my eye over the past few days:
1. As usual, this week's Econtalk podcast looks interesting. This week Russ Roberts chats with Dan Klein about Smith's Theory of Moral Sentiments. Look for four follow up podcasts starting April 15.
3. Men's underwear sales--reportedly an economic indicator followed by Maestro Greenspan (maybe he was contemplating boxers or briefs instead of minding monetary policy from 2003-2005)--are expected to decline this year. This is probably nothing to get one's undies in a bunch about as long as people don't skimp on laundering their skivvies a la their shirts.
4. Y'all come on down: Atlanta is the top destination for UHaul rentals. (Source.)
5. Polticians as menus costs: Greg Mankiw points to Lee Ohanian's research on Hoover's rigid wage policy's role in worsening the Great Depression. Yet another reason to debunk the high school history version of the Great Depression.
[UPDATE (4/10)--A reader who saw my mention of ratemyprofessors points me to this analysis comparing prof salaries to the ratemyprofs ratings.]
April 08, 2009
I had a good time at the 2009 APEE meetings in Guatemala City. Congratulations to Bob Lawson for receiving the 2009 Distinguished Scholar Award! Bob muttered that this is what happens when you miss the board of directors' meeting, and that may indeed contribute to the timing, but of course that's not sufficient to be chosen. (Disclaimer: I have a vested interest in upholding the reputation of the award.) Co-bloggers Josh, Frank, Ed, and Art were also on the program.
Today's return flight GUA-DFW was chock-full of APEE attendees. Me to Alan Russell and Giancarlo Ibarguen, who were standing in front of me on a moving sidewalk in DFW: "Gentlemen! Opportunity cost!" Alan: "Hah. I have a four-hour layover here." Touche.
Culinary note: Urban Taco on DFW's C concourse offers excellent nouvelle tacos and sides.
Posted by Lawrence H. White at 07:49 PM
April 07, 2009
The art of the understatement c. 1909
From the April 7, 1909 NYT:
LITTLE ROCK, Ark. - The State Senate to-day passed a bill placing a heavy penalty on persons drinking intoxicants on trains in the State or on station platforms. This will probably affect buffet cars, although intended only to stop rowdyism.
April 06, 2009
How's this for an Orwellian ministry acronym?
In Britain, the National Institute for Health and Clinical Excellence (NICE) reviews new medical treatments to determine whether or not a treatment's effectiveness justifies its price tag. Based on this assessment, NICE recommends whether new treatments should be covered under the country's public health care system, the National Health Service. Most of the time the NHS makes those recommendations hard-and-fast policy. As a result, NHS physicians are often prohibited from prescribing newer, more expensive treatments because NICE has determined they're not worth the cost.
Headline News just reported about a letter sent to President Obama by a couple of young girls asking why it is taking Congress so long to help people like their father, who is looking for work. The dark cloud: after piles of government make-work programs, the state might get numerous devotees and fans for life. The silver lining: maybe massive state failures will cause crises of faith among young statists.
April 05, 2009
Cato Journal issue on the financial crisis
Revised and updated papers from the Cato Institute's excellent November conference on "Lessons from the Financial Crisis" are now available online. The lineup includes Anna J. Schwartz, Roger W. Garrison, Gerald P. O'Driscoll, Jr., Kevin Dowd, Jeff Miron, Allan H. Meltzer, Charles W. Calomiris, and my own paper on "Federal Reserve Policy and the Housing Bubble". (Btw I don't remember picking that paper title; in the literature "bubble" often means a self-generating event, and my argument is that the housing boom was Fed-generated.)
April 03, 2009
Last night Berry's ODE chapter held it's 2008-09 induction ceremony. Congratulations to Marcy, Erin, Shawn (who like two of Art's students will be giving a paper at APEE), Damien, Paul, and Tyler on their induction. Congratulations, too, to Katie Myles who was named this year's winner of the J. Wilson Mixon, Jr. Outstanding Senior in Economics Award.
Special thanks to Chris Westley of Jacksonville St. for being our guest speaker and to Paul, Tyler, and my colleague Melissa Yeoh for their diligence in organizing the dinner.
Posted by E. Frank Stephenson at 11:16 AM
Student Programs and a Culture of Excellence
Peter Boettke offers two great posts on recent developments among my generation of economists. First, two of his former students, Adam Martin and Claudia Williamson, are joining NYU's Development Research Institute. These are great placements for two excellent young scholars. Second, he has a post describing the student programs being built and supervised by some of his former students. Programs at San Jose State, Trinity College, Suffolk University, James Madison University, Mercer University, Loyola University-New Orleans, Beloit College, West Virginia University, Saint Lawrence University, and George Mason University are being supervised and nurtured by some of Pete's students and colleagues past and present. I consider myself a fellow traveler with Pete's students (and with good reason: my advisor, John Nye, is now at GMU) and I'm really excited about what they are doing. More on that in a minute.
Pete has said before that a dog that can't wag it's own tail is a pretty sad dog, so I'm going to take an opportunity to highlight some of the things our students at Rhodes are doing. First, seniors Jill Carr and Dustin Sump will present their research at the APEE meetings in Guatemala City this weekend. Jill is entering the PhD program at Texas A&M in the Fall, and Dustin will be working as a member of the Koch Associates Program next year before entering a PhD program. Allyson Pellissier, a junior, is weighing several exciting opportunities for this summer and will pursue a PhD in economics after she graduates. I anticipate that a few dozen Rhodes students will participate in summer seminars sponsored by IHS, the Mises Institute, FEE, and other organizations. In the last few years, Rhodes students have been instrumental in bringing William Easterly, Bryan Caplan, Randall Parker, Chris Coyne, J.C. Bradbury, John Hasnas, Mike DeBow, Randall Holcombe, Larry White, Ken Elzinga, and Deirdre McCloskey to campus. We're rounding out this list of speakers with a visit from Douglass C. North on April 23. In Fall 2007, some of my economic history students wrote articles that were published in the Tennessee Encyclopedia of History and Culture. In just the last week, a lot of students have expressed interest in doing graduate work in economics. Mike Hammock nails it in his description of what he likes most about Rhodes: "You know you're at a good school when students choose to sit next to you in the dining hall so that they can talk about economics outside the classroom."
I remember a conversation I had with Pete in graduate school about building a culture of excellence among the scholars of my generation. In my estimation, that is exactly what is happening: people like Pete Leeson, Chris Coyne, Claudia Williamson, Ben Powell, and Ed Stringham, just to name a few, are doing work of lasting importance that is being published in excellent journals, and they are being rewarded with excellent opportunities. Having peers, colleagues, and students of this caliber makes me very optimistic for the future of our cherished discipline.
And so we continue our preparations for APEE. Division of Labour will be well-represented: Josh, Ed, Frank, Larry, Bob, and I are all on the program. I expect that a good time will be had by all.
Wind in sails of Atlas Shrugged movie...?
The Risky Business Blog has an update on financing, producing, directing, and possible players.
Editorial: I'm down with Jolie as Dagney. But anyone who starred in a movie called Bride Wars should be off the list.
2009 Digital Money Forum presentations
I greatly enjoyed participating in the 2009 Digital Money Forum in London earlier this week, and I learned a lot about the cutting edge in payments technology. Now you can too. Links to the presentations given at the Forum, including the slides accompanying my own historical talk on "Currency 2.0," are now available here. Unfortunately the text of my remarks, which I saved as notes under the slides in Power Point, did not survive the transition to pdf. I'll have to see whether I can get that corrected. In the meantime you can look at the pretty pictures and infer what I might have said!
The Forum was organized by the amiable payments guru Dave Birch. To stay abreast of developments in the field of digital money, read Dave's Digital Money Forum blog.
April 02, 2009
A Doubleheader of Me in The Freeman
I have an article challenging T. Boone Pickens's baloney that importing oil is a transfer of wealth. Readers will recall my posts on this topic last summer. My article is well-timed b/c this mole needs to be whacked again--Pickens was spouting off about his plan on last night's Sean Hannity tv show.
I also review Russ Roberts's superb book The Price of Everything.
Posted by E. Frank Stephenson at 10:56 PM
Libertarian blind spots
A commenter at ryanavent.com says:
Libertarianism has much to offer our political discourse, but every belief system has its dogma, its blind spots. Libertarianism classically has two:
Hmmmm....well this libertarian believes the following:
1. Only people can be agents of oppression. All people in government are agents of oppression; people engaged in market exchanges are never agents of oppression; people not in government or in markets are sometimes agents of oppression (theives) and sometimes not (friends).
2. People in government can do the right thing or the wrong thing, but either way, only by violating my freedom.
Should I start a new category called "Illegal in Alabama"?
(2) Home brewing
(4) Sale of sex toys*
*Available with a medical Rx. No lie.
Good Journalism = Bad Economics
Yesterday's cigarette tax hike prompted a number of stories that claimed cigarette sellers increased cigarette prices before the tax increase in order to gain some extra profits before the new tax took effect. Example:
The cigarette excise tax that tobacco companies must pay the federal government rose Wednesday by 61.6 cents per pack, or $6.16 per carton. The tax now comes to about $10.10 per carton, or $1.01 per pack.
Now, if the cigarette sellers could increase prices willy nilly to increase profits then why did they wait until the impending tax hike to do so? Were they just being nice before March?
The real explanation is surely that cigarette buyers increased their demand for cigarettes in anticipation of higher future prices, and given that the short run supply of cigarettes is inelastic, this forced the price upward.
But the idea that poor downtrodden buyers would ever be the cause of price increases instead of evil greedy sellers just doesn't fit the typical journalist's world view.
April 01, 2009
Regime Uncertainty Everywhere
From an NPR story on the CEO of a small bank that is returning TARP funds:
DePaolo says Signature returned the money for three reasons: Legislation passed Feb. 17 would limit the compensation for salespeople, make it difficult to recruit bankers and cause uncertainty.
Now a snip from a WSJ story "Ford Fears Rivals' Revamps":
Even without a bankruptcy, some Ford officials fear that the uncertainty surrounding the car makers over the next few months could keep shoppers from considering a vehicle from a domestic maker.
Here's a Tyler Cowen commentary on uncertainty.
Markets in Everything
Tauntaun sleeping bags (HT: Mike Hammock, Marginal Revolution for the "Markets in Everything" concept). Mike is right: my son will have one of these someday.
I keep expecting Mr. Thomps--er, President Obama to announce the Automobile Unification Plan or to see that someone named Cuffy Miegs is now CEO of Chrysler any day now, but the very existence of a Tauntaun sleeping bag renews my optimism for the future.
"Capitalism isn't working"
So sayeth a protestor's sign at the London G-20 meeting. Evidence? I'm sure that the spray paint, signs, and assorted protestor paraphernalia were not products of capitalism. One wonders what possible system of social organization and exchange would make possible the ability of thousands of people to take an entire day off of work in order to protest G-20, and still be able to afford the necessities of life.
Meanwhile, a 17-year-old student, taking part in a protest, wore a balaclava to hide his identity. He described himself as an environmental protester and said things were "going into meltdown." He added: "The whole thing is collapsing. If we can't change things by democratic means then this is the way to go."
Of course, before capitalism this guy would be considered middle-aged. I counter his statement with that of Kent Brockman: "I've said it before and I'll say it again: Democracy simply doesn't work."
And how does a Middle Eastern dessert hide your identity?
P.S. I've been light on the blogging lately since my wife and I contributed to overpopulation on March 16. If I knew enough about the DoL editor, I'd post pics of Michael Patrick Shaughnessy, but for now use your imagination.
What's in a name? Apparently self-selction, for one
From my Reuters "news of the weird" feed a couple of days ago.
Balls and Bottoms give way to Wangs in name game Thu Mar 26, 2009 11:02am EDT
Hmm. Seems there should be more to it than switching names or emigrating. Like procreating---unless you assume (or know) that the rate of non-procreation is evenly distributed across surnames. That doesnt' sound right, though. Wouldn't a guy named Smellie have more difficulty attracting women and having babies?
Actual vs. perceived value c. 1909
The April 1, 1909 reports (
The noted French bulldog Mareschel Ney II, owned by Lincoln Bartlett of Chicago and valued at $10,000, has died. The dog swallowed some corks thrown to it by children while playing.
Don't Know Much About History: Neo-Hooverite Nonsense Edition
Tyler Cowen points to this passage from Matt Yglesias (emphasis added):
Suppose Geithner had asked Congress to appropriate $1 trillion to implement a program of bank nationalization, asset writedowns, and loan guarantees—what would that have accomplished? It certainly wouldn’t have gotten Congress to appropriate $1 trillion to implement a program of bank nationalization, asset writedowns, and loan guarantees. It might have derailed the budget and thrown the political momentum on the Hill to proponents of a neo-Hooverite spending freeze program.
Whatever the merits of trying to spend our way out of the current mess, Yglesias is wrong to invoke Hoover. Hoover did not freeze spending; he was an activitist. Here's Amity Shlaes (The Forgotten Man, p. 91):
Right away [following the stock market crash]--in November 1929--Hoover pushed to expand an existing public buildings program by the healthy sum of $423 million on the theory that the spending would boost the economy. In Washington, builders put up great structures--a new agriculture department, for example.
More Hooverite activism is documented in Steve Horwitz's lecture on the high school history version of the Great Depression; I live blogged it here.
UPDATE: Steve Horwitz lists more Hooverite activism in this post. In the comments to the post, Mario Rizzo points to this document which reports (Table 1.1) that government spending was $3.127B in 1929, $3.32B in 1930, $3.377B in 1931, and $4.659B in 1932. The increase in real terms was probably larger because of deflation.
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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