Division of Labour: July 2009 Archives
July 31, 2009
Two books to recommend

I have just read two very well-written books on British history that should appeal to some DoL readers, particularly those of you interested in the history of ideas.

I'm about to finish John Stuart Mill: Victorian Firebrand (2007). The author, Richard Reeves, seems to have had a general, rather than a specialist, audience mostly in mind. He does an excellent job of weaving together Mill's life and his ideas. Reeves tells the story vividly, managing to keep up a nice pace throughout its nearly 500 pages. A quick scan of reviews available online indicate that the book was very well-received. I learned a great deal about Mill from the book. For example, I did not know the extent to which Mill was apprehensive about universal suffrage. Consider this, from p. 313 of the paperback (quoting ch. 8 of Representative Governenment (1861)):
"[Mill] also insisted that there should be no representation without taxation. Allowing non-taxpayers a vote, he said, amounted 'to allowing them to put their hands into other people's pockets for any purpose which they think fit to call a public one.'"

The second book I will recommend is Edward Vallance, The Glorious Revolution: 1688 -- Britain's Fight for Liberty (2007). The title is too modest in one way: the book is not focused solely on the events of 1688; it spans the reigns of James II, William and Mary, and Anne. The author tells this complex and important story very well, to favorable reviews. He also has a snappy website and blog that are well worth a visit.

Posted by Mike DeBow at 04:49 PM in Misc.

"Common Sense" Health Care

Here's Uwe E. Reinhardt with an excellent post on the impossibility of "common sense" health care reform.

Posted by Art Carden at 12:17 PM in Economics

July 30, 2009
Cash for Clunkers Suspended

Story here. The DC clowns can't even manage to give away a paltry (by DC standards) $1B for some junky old cars so why would anyone want this crowd in care of medical care?

Posted by E. Frank Stephenson at 10:43 PM

Posner interviewed, "How Judges Think" reviewed

Yesterday I stumbled upon the webbed version of the April 2009 issue of the Duke Law Journal, which is devoted to empirical studies of judges and the judcial branch. If you scroll down, you'll find a most interesting interview of Richard Posner, and a review of Posner's most recent book by the dean at Duke.

Here's my favorite bit from Judge Posner: "It’s as if lawyers had absolutely no conception about the conditions under which [appellate] judges work. We don’t know that much in the first place and we don’t spend that much time preparing for the individual case."

Posted by Mike DeBow at 03:34 PM in Law


Found at IMGUR:

and another one

Posted by Craig Depken at 03:01 PM in Funny Stuff

July 29, 2009
Dispatches from Mises U: Links for "Environmental and Resource Economics"

Here are some links based on my “Environmental and Resource Economics” lecture. The audio will be available at Mises.org soon. After the IHS Liberty & Society seminar I taught at in June, we collected links relevant to the discussions we had there. The links are here. For links on resource economics more specifically, here is an excellent EconTalk discussion with Mike Munger on the economics of recycling. This page includes a lot of great links on the economic way of thinking applied to environmental issues. Here is my paper “Economic Calculation in the Environmentalist Commonwealth” and a Forbes.com article based on it. I mentioned the work of the Property and Environment Research Center; here’s the article on DDT to which I referred. My advisor John Nye has a good article on Pigovian taxation and externalities in this issue of Regulation. I didn’t really get a chance to talk about this in my lecture, but while I’m enthusiastic about clean air it is important to note that hybrid cars are the world’s leading cause of smug. George Reisman has given several lectures on environmental economics at Mises University; some of these are available in his Mises.org media archive. Update: I was floored when I found out that one of the attendees at Mises U is a climatologist whose area of expertise is the Asian Brown Cloud, and another is a paleoclimatologist. I look forward to learning from them.

Also, my SSRN page contains links to draft versions of the Walmart papers I mentioned last night.

Posted by Art Carden at 03:16 PM in Economics

What (Josh and) I Have Been Writing Lately: The Institutional Necessity of Economic Freedom

Carden, Art and Joshua Hall. 2009. Why are Some Places Rich While Others are Poor? The Institutional Necessity of Economic Freedom. Working Paper, Rhodes College and Beloit College. Under review at Economic Affairs.

The Abstract:

We survey perspectives on the economic differences between countries and argue that economic freedom is the key to prosperity. We close by outlining the policy implications. Specifically, removing obstacles to the exercise of economic freedom is an important step toward prosperity.

Posted by Art Carden at 11:59 AM in Economics

July 28, 2009
Latest Dispatches

Here are 3 letters I sent off to the WSJ last week:

1. The article on the ramifications of health care legislation under consideration ("Your Stake in the Health Care Overhaul" July 22) makes it clear that my family and others have a substantial financial stake in the bill's outcome. After reading the article twice, however, I can find no mention of something else I have at stake in the legislation--my liberty to make decisions about which medical services to purchase and on what terms without interference from officious politicians or bureaucrats.

2. The article comparing pitching in the National League to pitching in the American League ("If Halladay's Scary Now, He's Horrifying in the NL" July 21) claims that "The average pitcher has a .140 batting average, compared to .275 for the average AL designated hitter [thereby giving] NL pitchers two or three extra outs per game that their American League counterparts don’t receive."

This statement is incorrect. Hitters typically come to bat four times per game; hence, designated hitters average a hit roughly once per game whereas pitchers average a hit approximately every other game. The difference in hits--roughly one hit every other game--is nowhere near "two or three extra outs per game." The increased difficulty of pitching in the AL instead comes from designated hitters' greater propensity to draw walks and to hit with power and perhaps from a greater talent level throughout the lineup.

3. The July 21 article on people earning more than Social Security's maximum taxable earnings threshold of $106,800 ("Top Earners' Pay Is Seen Eroding Social Security") states, "The growing portion of pay that exceeds the maximum amount subject to payroll taxes has contributed to the weakening of the Social Security trust fund."

This statement is false. Regardless of whether a person earns $1 or $1 million over the taxable threshold and regardless of whether people exceeding the taxable threshold are a small share or a large share of the labor force, earnings above the threshold do not affect the Social Security trust fund. The reason is straightforward--the maximum Social Security benefit is linked to the taxable earnings threshold so that earnings above the threshold do not lead to higher future benefits and therefore have no effect on the Social Security trust fund.

Posted by E. Frank Stephenson at 08:30 PM

Faculty Follies

1. From the Pensacola News Journal:

A University of West Florida assistant professor's extra-credit assignment is under review by the State Attorney's Office.

Wendy Habegger allegedly gave business students the option to make purchases from a local hair salon during the fall 2008 semester to improve their final grade.

2. Cambridge Police Profiling Still A Grim Reality for Harvard Faculty Assholes (Not for those offended by the last word of the title--apologies if I have offended--but very funny.)

I thank, without implicating, two friends for the pointers.

Posted by E. Frank Stephenson at 08:20 PM

Links on "Production and the Firm" (Updated)

My lecture on Production and the Firm was a complement to rather than a substitute for similar lectures by those who have gone before. Here are audio links to Peter Klein's "Economics of the Firm" lectures: 2007, 2005, and 2003 ("Theory of the Firm"). Here are all of Peter's lectures hosted on Mises.org. These include lectures from the Rothbard Graduate Seminar and his seminar with Joseph Salerno on "Fundamentals of Economic Analysis: A Causal-Realist Approach." In sum, they comprise a pretty complete treatment of the Austrian approach to the firm.

Cross-Posted at Mises.org. Here's the video of my lecture:

Posted by Art Carden at 06:51 PM in Economics

Dispatches from Mises U (and AIER): Irony

Two pieces of irony:

1. Walker Todd at AIER wears a baseball cap that says "Irony is Andrew Jackson on a Central Banknote."

2. On the wall at the Mises Institute, there's a proclamation from the Governor declaring September 1, 1992 "Ludwig von Mises Institute Day" in the state of Alabama.

Posted by Art Carden at 02:30 PM

Devil is in the details?

This one is making the rounds.

Posted by Craig Depken at 11:30 AM in Funny Stuff

She can dance for me but not for thee c. 1909

The July 28, 1909 NYT reports on the arrest and arraignment of one Gertrude Hoffman who:

was arrested last Friday evening at the theatre after giving her dance, on the charge of offending public decency, [and] had a second hearing of her case. The merits of the case were not gone into yesterday, however, as most of the lawyers concerned seemed anxious to get away on vacations...One result of yesterday's proceedings, however, will act as a limitation to the original unadorned act such as Miss Hoffmann gave before Police Commissioner Baker interfered and ordered her arrest after witnessing the performance from a front seat. The dancer will have to put ...
Wait, what? The Commish saw the dance and then decided to arrest her AFTER she was finished? I am sure the Commissioner was only doing his job by making sure that all counts of offending the public's decency had been accounted for. I am sure, as well, that the Commissioner had NO idea about Ms. Hoffmann's act. Yep, it's good to be the king, bishop, the Commissioner.

The temporary solution to reestablishing public decency in the case of Ms. Hoffmann is outlined in the story:

The dancer will have to put on her stage costume in her dressing room every afternoon and evening hereafter under the watchful eye of Mrs. McMahon, the probation officer of the West forty-seventh Street Station. The police insist that Miss Hoffman wear tights that come down well below her knees, until the court shall decide otherwise, and the Magistrate ordered Mrs. McMahon to see that long tights are used.

In an eerily similar manner one might suspect people to act today, the word had spread that Miss Hoffmann might show up to her court appearance in her dance costume, the prospect of which generated considerable interest:
The news had gone forth that Miss Hoffmann would probably appear in court in her flimsy dancing costume, thus allowing the Magistrate to decide at first hand just wherein the alleged immorality consisted, and the courtroom was thronged. It was observed that the crowding for good seats down in front was not confined entirely to the court attendance. Well-dressed men, apparently from the Rialto district, were on hand early, but they left hurriedly when Miss Hoffman appeared in an automobile costume of purple, which reached from head to foot.
To discourage such lewd behavior, the Magistrate could have insisted that once an individual was seated they had to stay until the end of the court's business that day. It would have been interesting to see whether a glipse of Miss Hoffmann would have commanded such a price.

Posted by Craig Depken at 11:05 AM in Culture

On a nationalized labor market c. 1909

Bad policy ideas are not new to our time. The July 28, 1909 NYT reports on a suggestion that we have a government run employment service:

[T]he National Bureau of Information at Washington can right now furnish to every one of the thousands of unemployed the names of more than one firm where his work is needed. Were the unemployed to go to such localities, the [National Liberal Immigration] League points out, it would be a benefit both to them and to their employers, but they cannot go. They lack the means to pay the traveling expenses, and generally are suspicious of offers from employers to advance expense money on their wages.
The NBI knows more than the individual? Perhaps. After all, I am confident that Monster.com or Google "knows" more than I do. However, the NBI or any organization doesn't know as much about me as I know about me (at least I still contend that this is true). Therefore, while the NBI might have served as an information clearing house - perhaps a low-tech Monster.com - it is difficult to imagine that the government would find the constraint to simply provide "information."

I have find the lack of funds to move down the road to take a new job to be an interesting argument. As a graduate student in the early 1990s I knew some people who joined the military, post Dessert Storm, to have a job. These people were willing to relocate to anywhere and to face potentially life-threatening danger to take a job. I knew others who, quite literally, would not relocate fifty miles down the road to take a job but decided to stay in their unemployed situation.

My experiences are not a broad sample. However, while it may be the case that the nominal costs of relocation stop some from doing so, my acquaintances chose not to relocate because the shadow costs of doing so were considered too high.

If the story had discussed the voluntary relocation of individuals, I wouldn't have much of a problem with the NBI providing information that might help matching jobs and the jobless. Unfortunately, such was not the case. One gets the feeling that voluntary relocation was not at the top of the League's list. The story ends with the conclusion:

The League urges that the Bureau of Information be authorized to pay for the transportation of laborers when it is necessary to do so to bring the work and the workmen together...
"Necessary" according to who's criteria? The implicit assumption of homogeneous preferences and homogeneous human capital is misguided and seems to be exactly the opposite of what modern Monster.com's seem to recognize.

Finally, the name "National Bureau of Information" is a bit Orwellian. Granted, the technology to gather and collate information in the early 20th century was much less developed than the technology available today. The NBI today would be a much scarier proposition than one hundred years ago, but the name sounds like something that the politicians would have hatched in the immediate post-9/11 world. On second thought, perhaps we did have such a proposal in the "TIA" or Total Information Awareness?

Posted by Craig Depken at 10:52 AM in Economics

Lyle Lanley? Barack Obama on Line One


Ed Glaeser discusses plans for high-speed rail and makes an explicit reference to a Simpsons episode that is a classic among economists. Consider: we laughed at "Marge versus the Monorail" for its sheer absurdity. Now we have a straight-faced, serious public policy through which we're spending billions on basically the same thing.

Posted by Art Carden at 10:07 AM in Economics

July 27, 2009
Consequences: Unintended, but Predictable?

Here is a very interesting article by Gary Galles on whether "unintended consequences" are excusable when they are predictable. The recent minimum wage increase is one salient example. We can be reasonably certain that the minimum wage will lead to a 2% reduction in teenage employment (thanks to the reader who caught the error in my letter to the editor yesterday). As I tell my students, you have a responsibility to know what you're advocating if you're going to advocate policy. Galles's article is worth the read.

Posted by Art Carden at 05:09 PM in Economics  ·  Comments (11)

Ok, Take Exit 185. Wait...what?

Story here

Posted by Craig Depken at 12:24 PM in Funny Stuff

Dispatches from Mises U: Phrases

Best t-shirt I've seen so far that I hadn't seen already: "I Shot the Tariff, but I did not Shoot the Subsidy."

Best cab company advertisement ever: "A Cab Fare is Cheaper than a DUI" (Twin City Taxi). Econ 101 question: what does this slogan suggest about appealing to our needs versus appealing to another's self-love as a way of motivating him or her to action? Advanced micro question: A cab fare is certainly cheaper than a DUI, but is a cab fare cheaper than the expected cost of drunk driving?

Posted by Art Carden at 11:22 AM in Economics

Dispatches from Mises U: Markets in Everything*

Joe Salerno mentioned a Ben Bernanke voodoo doll during his lecture on the marginalist revolution, and I thought (like any good capitalist) "market opportunity." Alas, it has already been exploited. See Pinhead Voodoo Dolls for your all of your non-partisan effigy needs.

*HT: Marginal Revolution for the "Markets in Everything" concept.

Posted by Art Carden at 10:45 AM in Economics  ·  Comments (10)

Mises University 2009

Mises University 2009 has started. The intellectual revolution will not be televised, but it will be streamed live and then archived and hosted on Mises.org. Tomorrow and Tuesday consist of "core curriculum" lectures, and the rest of the week will consist of concurrent sessions on applications and further explorations of the theory. You can follow it all on the Mises Blog. The first lecture, on "The Life and Work of Ludwig von Mises," was given by Guido Hulsmann. In addition to this lecture, here's a series of lectures series of lectures. Here is Hulsmann's authoritative bio of Mises in PDF at a price of zero. Here is Richard Ebeling's review essay on Hulsmann in from the Summer 2008 issue of the Independent Review, also available at a price of zero.

So why read Mises? And why read a 1000+ page biography of Mises? I can think of two reasons off the top of my head. The first is scientific. Mises laid a solid theoretical foundation for analytical social science. I have been in discussions with people who have argued that everything Mises said that was important has been absorbed into mainstream economics. I don't think that's true, but even if it is we do well to consider and explore the careful and detailed unfolding of the Misesian system. The second is historical. Mises's accomplishments came against a backdrop of almost insufferable hostility. He was professionally successful--Mises was an influential theorist and a Distinguished Fellow of the American Economic Association who turned down several academic appointments after his arrival in the United States. However, he fought a long and difficult battle over the possibility of socialist calculation and was chased out of Europe by the Nazis. The experience of Mises and other scholars in similar circumstances brings into high relief the principle that ideas have consequences. Mises's classic essay "Economic Calculation in the Socialist Commonwealth" and the Postscript by Joe Salerno--who will lead things off tomorrow with a lecture on "The Marginalist Revolution"--are well worth the time and effort. Here's an audio version of Salerno's essay.

Posted by Art Carden at 12:26 AM in Misc.

July 26, 2009
Letter RE: Minimum Wages

Don Boudreaux discusses an op-ed on the minimum wage in the Baltimore Sun. Here's my letter:

In a July 24, 2009 op-ed, minister Ken Brooker-Langston applauds the recent increase in the minimum wage as a “step up the ladder of economic opportunity” for some workers. Unfortunately, some workers will get kicked off the ladder as a result of the increase: the best estimates suggest that a ten percent increase in the minimum wage will reduce teenage employment by about two percent. In a recent op-ed in the Wall Street Journal, minimum wage expert David Neumark argues that the minimum wage increase is likely to cost about three hundred thousand jobs. Mr. Brooker-Langston cites research by UC-Berkeley economists and the Economic Policy Instiute to argue that the argument that minimum wages cause disemploymetn “falls apart under scrutiny,” but it is in fact the arguments in these studies that fall apart under scrutiny. After a decade and a half or so of rigorous debate about the employment effects of the minimum wage, the broad consensus is that minimum wages destroy jobs.

And who bears the brunt of these job losses? Tragically, it is the poor—the people for whom Mr. Brooker-Langston and the signatories on the “Let Justice Roll” petition claim to speak. Teenage unemployment is well above the national average, and African American teenage unemployment is much higher still. This is due in no small part to the minimum wage.

As an economist and as a person of faith myself, I stress the need to really understand the unintended consequences of the policies we advocate or adopt. When we support a higher minimum wage in the name of justice for the poor, we’re really giving them a raw deal.

Posted by Art Carden at 12:07 PM in Economics

July 25, 2009
You Have to Admit, It's Getting Better

Steve Horwitz has an excellent post on how improvements in travel inform his optimism. While I’ve always enjoyed spending time with my family and visiting relatives, there is more of nightmare than of nostalgia in my memories of seemingly endless hours in the cramped backseat of Dad's Dodge Aries. We just took a road trip from Memphis to Great Barrington, MA and then to New York City in a spacious Honda Pilot that is “ultra-low emissions” certified with our GPS leading the way, a selection of CDs, and iPods in case we needed (or wanted) to listen to something without distracting everyone else. Our soon-to-be-one-year-old son enjoyed the Sesame Street and Baby Einstein DVDs he was able to watch on the portable DVD player his grandparents got him for his birthday (in their wisdom, they gave it to him before we took our enormous trip). 21st Century Technology made it a far more pleasant trip than it otherwise would have been. Perhaps the best evidence I can offer for how much better travel is than it was 20 years ago, though, is the fact that I wrote part of this post in New York and part of it in Atlanta. If I’d bought the in-flight wifi connection, I could have posted it from cruising altitude. It’s hard to be pessimistic when you can blog from 35,000 feet.

Changes in standards of living are notoriously hard to measure, but someday, I think we’ll be able to develop crude proxies by watching The Simpsons. Someday, I want to write a paper trying to measure trends on late twentieth and early twenty-first century American standards of living by tracking “The Simpsons” over its entire run and seeing how their assumptions about average standards of living have changed. I’ve shown the episode “”King-Size Homer” in a presentation I’ve given to high school writing camp students, and the last time I watched it I was surprised at its assumptions about Everyman’s access to technology.*

*-“Homer Economicus Responds to Incentives,” and yes, the title is an homage to the brilliance of my co-author and co-blogger Josh Hall.

Posted by Art Carden at 02:31 PM in Economics  ·  Comments (0)

July 24, 2009
Policy and Housing Woes

In Commentary, John H. Makin chronicles points at which bad policy led to bad results in the housing market. Appropriately, he begins with Herbert Hoover ("As a people we need, at all times, the enouragement of home ownership.")

Posted by Wilson Mixon at 04:26 PM in Economics

Alex Tabarrok Beats Me to the Punch

Yesterday, Economix's Catherine Rampell solicited explanations for why firms support an increase in the minimum wage and then claimed that their reasons undermine econ 101. I commented on yesterday's first post and was going to comment on this one; here's

And now for something completely different. Richard Stroup gave an excellent talk on the economics of climate change yesterday. I'll be working some of his insights into my Mises U talk on the environment next week. Apparently, before DDT was outlawed, it was compulsory (and subsidized). Here's a nice PERC article on it.

Posted by Art Carden at 09:49 AM in Economics

July 23, 2009
Obama Bingo

Today's offering from the Rome News-Tribune's Mike Lester:


Posted by E. Frank Stephenson at 09:16 PM

Fraser Institute Contest

The Fraser Institute is giving away $10,000 in cash and electronics prizes in its 2009 Student Video Contest. The topic is: What is the appropriate role of government in the economy?

Contest enquires should be directed to:

Courtenay Vermeulen
Education Programs Assistant
The Fraser Institute
Direct: (604) 714.4533
Toll free: 1.800.665.3558 x 533

Posted by Robert Lawson at 06:52 PM in Economics

Complements to my Third Cup of Coffee

1. I'm excited about this book from Harriet C. Frazier: Lynchings in Missouri, 1803-1981. I expect it to be a source of very useful data for a lot of projects I'm working on.

2. Radley Balko offers a challenge and gets into an instructive discussion, asking left-wing bloggers to state the upper limits on the amount of government involvement in the economy with which they are comfortable. He gets an interesting response from Citizen Jane: apparently, we're just supposed to trust President Obama, who is "a well-educated man with good communication skills," and his "teams of experts capable of addressing particular problems." I won't question President Obama's education, charisma, and communication skills, and I agree with Citizen Jane's broader point that we should generally "avoid pooling our ignorance and trying to micromanage what we don't understand" (which is sound advice for members of Congress trying to micromanage the financial system, the auto industry, and other areas). However, I disagree with the idea that we should just trust the President and the experts to do the right thing. There are cases in which expertise is necessary and warranted. In other cases, it is over-rated. With regard to what we do and do not understand, Hayek was correct about the importance of economics: "(t)he curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." I suspect there's more common ground here than there appears to be at first glance.

3. I propose an alternative explanation: businesses that support higher minimum wages support them because higher minimum wages will hobble their competitors. Wal-Mart didn't endorse a higher minimum wage in 2005 because the company's executives woke up one morning with progressive social consciences. I suspect that something similar is at play here. In the post linked here Catherine Rampell argues that businesses don't always behave in the way that econ 101 predicts. I would argue that this is exactly what econ 101 predicts when businesses are responding to political rather than economic incentives. We'll find out in the Fall--I just added it to my Econ 101 notes.

4. Speaking of which, here's me on the minimum wage. I'm interested in the degree to which making certain labor market transactions illegal increases the relative returns to unscrupulousness. In the same way that the drug war has created international criminal empires, I would expect to see a strong relationship between labor market restrictions and "human trafficking," with all of the attendant costs that usually come with criminality. There are also a couple of paper ideas in all of this: welfare crowds out private charity to a certain degree. Do minimum wage laws have a similar effect? Do minimum wage laws increase demand for charitable services through their effect on employment while reducing the supply of charitable services? Is part of the reduction in supply (if there is one) due to charitable Atlases shrugging when they observe the continued implementation of destructive policies?

5. "Is this institution run by men, or gods?" Peter Klein explains why he didn't sign the Open Letter in support of Fed Independence.

With that, I think I've indulged my fascination with all things bright and shiny for today. My still-unwieldy paper on the economic history of the South will be my complement to cups of coffee 4 through n.

Posted by Art Carden at 10:04 AM in Misc.  ·  Comments (10)

July 22, 2009
Wisdom from Pee Wee Will*

I picked up my son from his day camp this afternoon and was driving home through a neighborhood that has a vacant lot where a factory (a textile mill probably) used to stand. He asked why the lot was vacant and I told him that a factory used to stand there but had been razed in the last few years. He then asked why there wasn't some sort of marker or sign indicating that a factory used to be there. I told him that people don't usually put up markers of that sort and that I had never seen one. His response--"but dad factories do a lot of good for people"--was spot on. A moment of reflection made me think he's on to something--puttinig up markers for factories would be a better indication of people who improved the lives of their fellow men than the statues of and monuments to politicians.

*He wants me to stop using Pee Wee as a pseudonym for him.

Posted by E. Frank Stephenson at 07:22 PM

Walter Williams on Good Intentions

With the minimum wage set to increase tomorrow, these videos of Walter Williams are worth considering (HT: Don Boudreaux).

Public Schools:

Minimum Wages and Occupational Licensing:


Cross-Posted at the Mises Blog and the Beacon.

Posted by Art Carden at 04:40 PM in Economics  ·  Comments (11)

Federal Reserve Independence

An “Open Letter” regarding Federal Reserve Independence went to Congress on Monday, signed by 386 economists, many of them faculty in top doctoral-granting economics departments. My name was not among the signatories.

The opening sentence warns that “the independence of U.S. monetary policy is at risk.” At risk from what? Not specified. Possibly the authors had Ron Paul’s bill to audit the Fed in mind. The letter continues:

We urge Congress and the Executive Branch to reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of U.S. economic stability.

If “independence” means discretion, then independent Fed policy in 2001-07 did not deliver stability, but fueled an unsustainable path in mortgage volumes and housing prices. The key to stability is not the independence but the restraint of the Fed, self-adopted or externally imposed. Failing self-adoption, external imposition is surely reasonable.

First, central bank independence has been shown to be essential for controlling inflation.

Actually, the correlation between measured independence and low inflation has been shown to disappear with a widening of the sample of countries.

Sooner or later, the Fed will have to scale back its current unprecedented monetary accommodation. When the Federal Reserve judges it time to begin tightening monetary conditions, it must be allowed to do so without interference.

No argument.

Second, lender of last resort decisions should not be politicized.

Consider cases where the Fed has intervened to stave off the resolution of an insolvent firm or to sweeten the deal for its acquisition, e.g. the cases of AIG and Bear Stearns. The Fed or its defenders may call those “lender of last resort” operations, but they weren’t. They had nothing to do with the standard historical (Bagehot) understanding of the LOLR role, which is to lend liquid reserves to solvent commercial banks facing temporary liquidity problems. The LOLR role does NOT include lending to insolvent firms, or lending to non-banks. The Fed’s actions in those cases had even less to do with the modern understanding of the LOLR, which is to prevent the money stock from shrinking. Likewise the Fed’s decisions to create new “loan facilities” for broker-dealers and money-market mutual funds had nothing to do with acting as a LOLR.

The Fed’s decisions in those cases were actually the sort of decisions that were traditionally left to Congressional appropriations (as in the Chrysler bailout of the 1970s). Congress should not be blocked from questioning (“politicizing”) the Fed’s fiscal-policy decisions simply because the Fed mislabels them or self-finances them.

Finally, calls to alter the structure or personnel selection of the Federal Reserve System easily could backfire by raising inflation expectations and borrowing costs and dimming prospects for recovery. The democratic legitimacy of the Federal Reserve System is well established by its legal mandate and by the existing appointments process. Frequent communication with the public and testimony before Congress ensure Fed accountability.

If the Fed’s legitimacy is established by mandates that the Congress gave it, how is it improper for Congress to revisit that mandate, for example to improve Fed accountability? We don’t want changes that raise inflation expectations, agreed. For that very reason we should welcome a new mandate that better restrains the Fed from inflating.

If the Federal Reserve is given new responsibilities every effort must be made to avoid compromising its ability to manage monetary policy as it sees fit.

Congressional backseat-driving of discretionary monetary policy is not an attractive prospect, granted. But this sentence reads like a blanket rejection of any and all rules that would usefully constrain the Fed’s conduct of monetary policy. Have 386 economists forgotten the lesson of Kydland and Prescott, that discretion means an inability to precommit to not inflating, which raises inflation expectations and thereby makes it more painful to achieve low inflation?

Posted by Lawrence H. White at 01:35 PM in Economics

If You're So Certain...

Julian Simon is one of my intellectual heroes for a lot of reasons, but one is because he was willing to put his money where his mouth was. This illustrates a vital characteristic of the market process: if you are blessed with superior insight, you should be able to make money by exploiting that insight. Here's an interesting challenge to climate change skeptics: if you truly, honestly don't believe in global warming, you should be willing to take a bet of this type.

Posted by Art Carden at 01:22 PM in Economics

Terminology, Part 2

We hear lots of chatter about reforming the health care system, but I think using the word system plays into the hands of statists and planners (men of the system in the words of the great one) by giving the impression that the provision of health care services is something that can be directed via central planning. We don't speak of the grocery system or the clothing system, so why refer to health care as a system?

Previous post here.

Posted by E. Frank Stephenson at 09:56 AM

Technology in the Classroom

My friend and colleague Leigh Johnson (aka "Doctor J") offers an interesting post on the use of technology in the classroom. I've been meaning to write an article for Lifehack on the use of Powerpoint for a while now, but I haven't gotten around to it. Here's my comment on Leigh's post:

"Nice set of points, powerfully presented. I rarely/ever use ppt, but I like having a projector so I can show clips that underscore my point (The Onion's "Flying Cars" video illustrates what a lot of conversations about economics are like). Google (Tufte Powerpoint) for Edward Tufte's view, and one of the best examples of how ppt can be used poorly is the Gettysburg Address powerpoint (easy to find via Google).

My rules for using ppt in lectures and conference presentations are pretty simple: max pictures, min text, min slides, never use ppt as a teleprompter/outline, never, ever, ever read directly from the slide unless you're giving a block quote from a Certified Great Thinker (and even that is debatable). In short, don't use your audience's ability to read as a substitute for your ability to present. For many more hints, tips, and tricks, see my paper "How to Be a Great Conference Participant," available here."

And here's the Gettysburg Address Powerpoint.

Posted by Art Carden at 08:52 AM in Economics

July 21, 2009
Help me please?

I have been staring at the computer screen for the past two days working on two projects with deadlines at the end of the month. Occassionally I take a break to see what's happening on the Internets and I came across this link to state-by-state breakdowns on the stimulus spending (via Resource Shelf).

I tried to sort the data by the amount "made available" and obtained the following:

Perhaps my brain is muddled but it seems to me that I have requested that the data be sorted from greatest to least (as witnessed by the little downward pointing arrow in the upper right corner of the second column of data) and yet the result seems all messed up. A similar problem occurs if you try to sort from least to greatest or if you change the sorting in any of the other two columns of data.

I am sure there is a simple coding error that can be attributed to some sleep deprived government contractor, but one wonders if this reflects a more systemic problem with government's ability to handle numbers - at least numbers with less than nine figures.

Posted by Craig Depken at 03:05 PM in Economics  ·  Comments (26)

A Good Word for BE Press

I just submitted the final version of our forthcoming paper "Wal-Mart and Values: Painting the Town Red?" to Business and Politics (WP version here). I have to put in a good word for the BE Press journals. This is the second paper I've published in a BE Press journal, and I have to give them props for for quick turnaround time and a relatively painless publication process.

Update: while I'm dishing out kind words, here's a piece on a feat by one of my HS classmates that's a pretty good candidate for feel-good story of the year.

Posted by Art Carden at 02:50 PM in Economics

The Importance of Property Rights

Here's a great tool that illustrates both the importance of property rights and the effect of violating those rights (HT: Craig Richardson). The scorched earth on the left is the communal land; the lush, reservoir-dotted land on the right is privately owned. If you click the "after" button, you get to see what happens to the privately-owned land when it is expropriated and redistributed to Robert Mugabe's friends and cronies.

Incidentally, the pictures illustrate important lessons about property rights but also important lessons about identifying causality.

Posted by Art Carden at 12:30 PM in Economics

Tullock on Pareto Criteria
Nonetheless, a slogan was invented that purported to solve the problem [of compensating those injured from changes from the status quo]. It was pointed out that if everyone agreed, then the move would injure no one. This, of course, assumes that the subjects of the change would make correct calculations. From our previous discussion, it can be seen that this was dubious.

Nonetheless, many economists began at least bowing in the direction called unanimous consent. I regret to say that I, particularly in joint work with Buchanan, did this myself. I apologize. In practice, this involved mere lip service. Reforms and changes were suggested, and references to obtaining unanimous consent were merely ceremonial. For example, no one suggested that we should await unanimous consent to reduce tariffs.

I have to admit that my work with Buchanan made this error. We suggested constitutional changes and said that they needed unanimous consent. I do not think, however, that any of our readers were fooled. We actually advocated some radical changes. The reference to unanimous consent was not very vigorous and probably merely ceremonial.

In this, we followed the mainstream. If you read any economic journal, you will find statements that various things are Pareto optimal. In most cases, this is merely a slogan.

Gordon Tullock, "Smith vs. Pareto," Atlantic Economic Journal 27, no. 3 (1999): 254-259.

Posted by Joshua Hall at 12:12 PM in Economics

Why An Understanding of History Is More Important Than Ever

From an academic counselor at Miramar College in California:

“There’s a lot of despair out there,” Cassar said. “You have no money. You can’t get into classes to graduate. And even if you could get into classes to graduate, you might not be able to find a job. I don’t know what the Great Depression in ’29 was like, but from what I hear from my grandparents, it sounds a lot like what’s going on now. It’s my job to be a cheerleader and keep people upbeat and tell them we’ll get them into classes on time.”

Excuse me while I channel my inner Angus, but holy crap, people! Not being able to get into the classes you need to graduate is comparable to the Great Depression? You mean the one with three years of over 20 percent unemployment? The one where, according to economic historian Gene Smiley, "Some people starved; many others lost their farms and homes. Homeless vagabonds sneaked aboard the freight trains that crossed the nation. Dispossessed cotton farmers, the “Okies,” stuffed their possessions into dilapidated Model Ts and migrated to California in the false hope that the posters about plentiful jobs were true." That Great Depression?

Posted by Joshua Hall at 10:44 AM in Economics

God Bless America

Buy a Truck, get an AK-47. I'll be interested in seeing how well this works.

Posted by Art Carden at 10:14 AM in Economics

July 20, 2009
The Lie Factor and the Budget

I finally read Edward Tufte's fantastic The Visual Display of Quantitative Information during my last year of graduate school; Frank's post below brings to mind one of Tufte's most important concepts: the Lie Factor. Tufte argues that the relationship indicated by the data should be the same as the relationship suggested by the data. The Lie Factor measures the degree to which the graphic misrepresents the relationship; several websites define it as the ratio of the relationship implied by the graphic to the relationship implied by the data. More generally, I would say that it is the ratio of the larger relationship to the smaller relationship to account for graphics that understate the magnitudes of different relationships. The graphic in Frank's post has a very high lie factor: the difference between the $2.6 trillion spent in 2005 and the $3.99 trillion spent in 2009 is much larger than that suggested by the graphic. Eyeballing it suggests that there is a difference of (say) 12 percent in the magnitudes of the 2005 and 2009 bars when we measure from the right. The difference between $3.99 trillion and $2.6 trillion is about 35 percent, The Lie Factor for this part of this graph is approximately 3, which is the factor by which the graphic understates the relationship.

Posted by Art Carden at 09:49 PM in Economics

Planning for the End of the World

Thanks to everyone who commented on my earlier post about the end of the world. On Sunday morning, I heard a radio broadcast arguing that the Rapture will occur on May 21, 2011. A quick Google search turned up this website, which makes this claim and arguing further that the world will be destroyed by fire on October 21, 2011. I just sent them the note below. I will blog their response when I get it.

Greetings. I am intrigued by your claim that the rapture will occur on May 21, 2011 and that the world will be destroyed by fire on October 21, 2011. I would be willing to pay $1000 for all of your worldly belongings (real property, real estate, automobiles, etc), to be transferred to me on the morning of May 22, 2011. You would get the $1000 now, and I would get your property after the rapture. If you are interested, please let me know and I will have my attorney draw up a contract.

Posted by Art Carden at 08:49 PM in Economics  ·  Comments (14)

New (and different) business models

The downturn has severely hit our local mega-mall Concord Mills. The company that owns the mall (name redacted), also owns malls of similar names in Grapevine, Texas, and other cities around the country.

While some long-time retailers have disappeared from the mall, especially a big anchor store Circuit City, some new retailers have popped up and are promising to come to the mall, including a Lego store, which sounds neat.

Two of the most interesting new businesses:

1. Free Market Warrior - which I haven't yet taken pictures of but I will next time I am at the mall (assuming the FMW has survived): the FMW is a kiosk located outside the Bass Pro Shop which sells anti-Obama t-shirts and bumper stickers as well as posters of Ronald Reagan, Barry Goldwater, and other libertarian/republican names. I wonder if we should try to sell some DoL gear there?

2. The Train: This is a small electric train with about five cars which drives around about 1/4 of the "circular" mall (actually it goes through the area of the movie theaters, which is of least pedestrian traffic during regular hours). It is a pretty neat thing for three bucks and the kids love it.

The head scratchers:

1. The Beef Jerky Outlet. We haven't been to the BJO yet, I just saw the sign yesterday (see picture below). The only thing I see on the surface the BJO has in its favor is that it is located next to the Harley Davidson store. Much like the Free Market Warrior and the train, perhaps location can make this business work, but I wonder. I put the over-under of the BJO at less than two months (perhaps lower if they only have one inventory delivery), but others have suggested a bit longer.

2. The Not-Everything's-A-Dollar Dollar store: This is a dollar store where not everything is a dollar. Some items are $1.25 and others are $0.75. Perhaps the average price is $1 - so why not just go with $1 for everything? The oddest price I saw was $1.16, for window cleaner or some such chemical. I don't understand what the owners hope to accomplish with such a pricing scheme. I thought the supply-side argument for the dollar store pricing was (at least) two-fold: reduced "menu costs" in that the store didn't have to change prices on all sorts of different products and reduced fraud on the part of the staff - inventory can easily be counted against receipts and any differential is easily determined.

On the demand side, a $1 price makes it easy for consumers to keep up with their total expenditure on the trip and and comparison between different products is ostensibly easier because all items are the same nominal price.

Not for these guys. These guys are paying someone (perhaps a family member) to label every item in the joint. For every product they price over a dollar they dramatically reduce the odds that I (personally) would buy a product and for every item they price under a dollar they do not increase the odds that I will purchase the product. Thus, in the dollar store I have an oddly shaped "kinked" demand curve. Maybe I am unique, but I wonder.

My over-under for this experiment is three months.

Cross posted at Heavy Lifting

Posted by Craig Depken at 07:15 PM in Economics  ·  Comments (28)

Now we know why it's called pork

This is from the front page at Drudge (I claim fair use):

If the stories are true (evidently they are HT: Phil Miller's facebook page), then this should put all debate over the merits of the stimulus package to bed. If the Republicans or some third party cannot come up with enough arguments to dethrone the current ruling class (not that the Republicans were/are great but would likely not pursue such policies as depicted above - though I admit that's not guaranteed) then we should all plan our exit strategy.

From my travels, the northern coast of Morocco is beautiful (I'll leave it up to the game theorists to think about whether that is an honest claim or not).

Cross posted at Heavy Lifting

Posted by Craig Depken at 06:35 PM in Politics  ·  Comments (29)

On technical improvement c. 1909

The July 20, 1909 NYT reports on a new world record in what I interpret to be speed walking or "pedestrianism":

WINNIPEG - Announcement was made to-day that at the Canadian athletic championship meet here Saturday, George H. Goulding of Toronto in the mile walk broke the world's record in 6:25 1-5. This lowered not only the American record of 6:29 2-5, but also clipped four-fifths of a second off the world's mark made by G. E. Larner at Brighton, England, in 1904.

The current American indoor record is 5:38.2 held by Tim Lewis.

So, given a century of technological and human capital improvement the speed walk has improved 22%. Not bad.

Posted by Craig Depken at 06:28 PM in Sports

Hanson on the EMH

I'm working on my lectures for Mises University, which starts this weekend at the Mises Institute. I found this post by Robin Hanson especially useful for my lecture on financial markets. It's worth taking a few minutes to read.

Posted by Art Carden at 02:57 PM in Economics

Economics Quiz

This caught my eye; it is from a comment on an article Mike Hammock and I published in the Memphis Commercial Appeal last week:

"I find it very interesting that the same people who argue so vehemently against public-sector competition in the private-sector health care insurance industry are those who argue so passionately for private-sector competition in the public-sector education industry."

Here's the quiz: Is there an inconsistency between advocating increased private-sector involvement in education while opposing increased public-sector involvement in health care? Why or why not?

Comments are open, and they will be on a more regular basis since Pete Boettke's post shamed me into deciding to open the comments more often--my reason for closing comments was due to floods of porn/gambling/mortgage refinancing spam rather than trolls.

Posted by Art Carden at 11:56 AM in Economics  ·  Comments (22)

Bryan Caplan Asks Very Tough Questions About Health Care

This post and the links contained therein are worth pondering. In a series of posts, Bryan Caplan points out the weaknesses in standard arguments for government provision of health care. Here is a particularly damning indictment of economists' support for government involvement in health care:

"All this suggests that economists' arguments in favor of socialized medicine are largely rationalizations of a policy that they favored long before they studied economics."

In discussions I've been involved in with economists and others, I've always been puzzled by the frequency with which people jump from the existence of a plausible reason why a policy might not be crazy--the existence of arguments for a minimum wage based on monopsonistic labor markets, for example--to the firm belief that the policy is a good idea. To adapt a phrase that I first heard from Bryan Caplan, people mistakenly infer probability from possibility.

I wonder: how many of the arguments for what we believe would be persuasive if our beliefs were determined randomly, and many are rationalizations for things we want to believe? In other words, to what degree does the causal arrow run from evidence to beliefs? To what degree does the causal arrow run from beliefs to evidence?

Posted by Art Carden at 11:47 AM in Economics  ·  Comments (2)

On Book Reviews

Josh McCabe at The Sociological Imagination asks about whether it is a good idea to review books. Here's my comment:

I agree with the comments here. I passed on a book review request once in grad school because I didn’t feel qualified to review the book in question. In retrospect, that was a mistake. In the last couple of years, I’ve found book reviewing to be an enjoyable and useful intellectual exercise.

Reviewing books makes you a better scholar in a few ways. First, it’s an excellent way to practice analyzing an argument. Since your research involves analyzing others’ arguments anyway, this is a very good way to continue refining your skills. Second, it’s an excellent way to practice writing for publication. Third, it’s a good way to stay abreast of developments in your field. Fourth, it’s a commitment device that forces you to read books that might otherwise slip to the bottom of the pile. Fifth, it makes you look at your own research in a different way. Finally, it’s a good way to build social capital. Being a prolific book reviewer probably won’t make the difference between an adjunct position at a community college and a chaired professorship in the Ivy League, but I would expect it to help at the margin.

Comments are open if you have thoughts on this. I promised a reader an article about book reviews last year. This provides motivation to get it finished.

Posted by Art Carden at 11:13 AM in Misc.  ·  Comments (28)

Obviously Not Drawn to Scale

This chart appears in yesterday's NY Post (HT: Instapundit). The last two years (2005 and 2009) indicate a 50% increase in spending but the bar for 2009 is barely taller than the bar for 2005.


Posted by E. Frank Stephenson at 10:29 AM in Economics

Inequality: Another Symptom of "The Albany-Trenton-Sacramento Disease"

A recent Wall Street Journal editorial, "The Albany-Trenton-Sacramento Disease," discusses three states that are getting hit the hardest by the recession: California, New York, and New Jersey. These are the states, according to the editorial, whose policies are the most progressive and, by the way, of most resemblance to the Obama-Reid-Pelosi government (and a lot of W. before them). The state policies singled out in the editorial are spending, taxes, unions, and government health care. For a comprehensive comparison, look at The Fraser Institute's Economic Freedom of North America index, which is a broad based index of government policies. Between 1981 and 2005, this index ranks New York, California and New Jersey as the 4th, 5th and 16th most interventionist state governments (take the mean of 1981-2005 Area 2 scores, subnational). As a result, returning to the editorial's theme, these states suffer higher unemployment, declining tax revenues, health sector problems and other ailments that tip of emigration. Folks, there are a lot of moving vans headed out of California these days. (Mine happens to be driving against that flow, but that is another story...)

In fairness, these three states have among the largest economies, so they might be expected to bear a greater burden during downturns. They're also coastal, which some commentators believe creates unique problems. Yet other large-economy states are doing better. Texas, for example, has the second largest economy of all the states but didn't have much of a housing bubble, and is in great fiscal shape compared to the disasters in Albany, Trenton and Sacramento. As for the coastal argument, perhaps the Gulf Coast just doesn't count?

Progressives are quick to the chime that there is an equity-efficiency trade off. High taxes and spending, plus heavy regulation of the market, are necessary to level the playing field against all the inequalities that capitalism creates. Some forfeiture of economic growth is simply part of the deal to achieve a more just distribution of income. It's a just sacrifice upon the altar of equal outcomes.

Curiously for this argument, California, New York and New Jersey have some of the most unequal distributions of income in the country. Take the Census Bureau's American Community Survey data, which breaks down the distribution of family income by income level and state. Now simply calculate ln[(percent of households earning $100,000 or more)*(percent of households earning $25,000 or less)] to arrive at a measure of "fatness" in the tails of the income distribution. Using 2004 data (a year I happen to have already), here are four most and least unequal states.

Most unequal states Least unequal states
California 6.095 South Dakota 5.168
New York 6.087 Montana 5.311
Massachusetts 6.031 Nebraska 5.352
New Jersey 6.025 North Dakota 5.366
Texas 5.960 Maine 5.386

And this is post-transfer income, folks! Quoting the notes attached to the ACS data:

"Total income" is the sum of the amounts reported separately for wages, salary, commissions, bonuses, or tips; self-employment income from own nonfarm or farm businesses, including proprietorships and partnerships; interest, dividends, net rental income, royalty income, or income from estates and trusts; Social Security or Railroad Retirement income; Supplemental Security Income (SSI); any public assistance or welfare payments from the state or local welfare office; retirement, survivor, or disability pensions; and any other sources of income received regularly such as Veterans' (VA) payments, unemployment compensation, child support, or alimony.

Notice Texas in the number 5 spot for most unequal. Yet on Economic Freedom Texas is very different from the other three states. Texas is 44th on the Fraser index for government intervention; that is, it has the seventh most free economy among the 50 states. For all their redistribution, California, New York, and New Jersey (ahem, not to mention Mass.) achieve only marginally better income inequality compared to a state with little redistribution, namely Texas.

If you want a more conventional measure of income inequality, the progressive Economic Policy Institute calcualtes the ratio of top-quintile to bottom-quintile income means (I believe they use pre-tax and -transfer income). As of the most recent data in the 2008 version of the study, CA, NY and NJ rank 1st, 8th, and 14th in inequality. Texas is right behind California again.

Period CA ratio (rank) NY ratio (rank) NJ ratio (rank) TX ratio (rank)
Mid 2000's  7.9 (8)  8.7 (1) 7.5 (14)  7.9 (9)
Late 1990's 7.1 7.9 6.9 7.1
Late 1980's 6.5 6.7 5.7 7.0
Source: Pulling Apart: A State-by-state analysis of income trends Employment Policy Institute (2008)

The picture would change somewhat if tax burden were included in the data because Texas sales taxes are high and the other three have progressive income taxes. Still, Texas's inequality just doesn't seem that much worse, even though it has far less redistributionist spending and regulation.

Like other phantom trade-offs (e.g. liberty for security, employment for inflation), maybe the equity-efficiency trade-off only sounds good until policymakers actually try it.

Posted by Edward J. Lopez at 08:40 AM in Economics

July 19, 2009
From my recent readings

I have been catching up on some reading for reading's sake - rather than for specific research projects. The current issue of the Journal of Economic Literature has three good book reviews:

1. "The Economics of Intercollegiate Sports" by Randy Grant, John Leadly and Zenon Zygmont;
2. "The Cult of Significance: How the Standard Error Costs Us Jobs, Justice, and Lives" by Stephen Ziliak and Deirdre McCloskey (the review to be required reading in my graduate econometrics class)
3. "Plight of the Fortune Tellers: Why We Need to Manage Financial Risk Differently," by Riccardo Rebonato (the review to be required reading in my graduate financial econometrics class and there is a great EconTalk interview of the author here)

Some great statements from two articles:

From the article "Is Economics Necessary?" by Kenneth E. Boulding in the April 1949 Scientific Monthly:

"Just as a pond develops an equilibrium population of frogs, fishes, bacteria, algae, and the like, all in subtle competitive and cooperative relationships with one another, so society is a great pond, developing equilibrium populations of Baptist churches, post offices, gas stations, families, counties, states, wheat farmers, chickens, and so on, which also exhibit complex cooperative and competitive relations one with another."


In a world of technicians, it is the economist who raises the cry that the technically most efficient is not necessarily, or even usually, the socially most efficient; that the best cow is not the one that gives the most milk; the best business is not the one that makes the most profits; the best army is not the one that creates the most havoc; and, above all, that the best training is not the best education. In a day when self-interest, nationalism, totalitarianism, militarism, and a dreadful pride threaten our very existence, economics points always toward the general interest, looks toward a free-trading world society, claims that the business of living even in a complex society can be accomplished with a small minimum of police coercion, urges that plenty is the source of power and war the greatest enemy of plenty, and by its very failures induces that humility for lack of which we perish.
"War as the greatest enemy of plenty" should be impressed on all those who claim that the Second World War somehow ended the Great Depression.

From the article "Mr. Keynes and the `Day of Judgement'" by David McCord Wright in the November 21, 1958 Science:

But the expanding society (any expanding society) is always advancing into what I have called a "fog of futurity." There are bound to be mistakes. Such advantages as socialism possesses in the matter of stability lie largely in the ability for the socialist bureaucracy to refuse to gratify the known wants of consumers and to slow down the whole process of growth-change to a slow enough pace (frequently very slow) for them [the bureaucracy] to handle.
A statement that should be impressed on all those who lobby for national health care.


While Keynes himself knew better (and often remember to say so), the general trend of his argument, and the normal reaction of most of his disciples is: In the face of a drop in output and employment, just stimulate demand. Put in more money, it will be said, by increasing the national debt through bank credit, or discourage saving by "soaking the rich."
Which just about sums up the entire "bailout/sellout" mentality of the last two presidential administrations and the complicit members of Congress.

How many politicians, much less economists, have tried to wade their way through Keynes's General Theory to realize that, for the most part, it is a bunch of clap-trap and, perhaps, might have been written as one big hoax?

Posted by Craig Depken at 03:00 PM in Economics

The Socialist Calculation Debate

In this newly available video, recorded in the library at the Foundation for Economic Education earlier this summer, I discuss the socialist calculation debate. Of course, nobody advocates nationalization or government ownership of industries these days, so this is only of interest to historians of ideas ...

Posted by Lawrence H. White at 11:24 AM in Economics

July 18, 2009
Commissars, not Tsars

From Pravda, Czar? You Mean Commissar:

There is a new silliness in the Western Anglo Media, comparing the US Emperor's Czar program to the number of Tsars that Holy Russia had. It is a good thing that the US/UK public is ignorant not only of ancient history but also of recent history, otherwise they might start to worry.

So let us go back and establish some historic references. Czar or rather Tsar, is a degradation of the Latin term Ceasar, similar to Germany's Kaiser. [...]

In order to control the vast nation and its revolutionary reshaping during a chaotic time, Lenin and later Stalin, created a system of Commissars. These were not limited to military and instilling party loyalty, but were used throughout Soviet society. A commissar and his staff had absolute authority, answering only to the dictator and by-passing the various local councils and people's senates. Two things to note here:

1. their spheres were ambiguous and often over lapped responsibilities of other commissars. This in turn caused a large volume of infighting. Sure this is very wasteful of resources and confusing, but what it does do, is allow the dictator to keep ultimate power by keeping his most powerful minions at each others throats with the dictator as the ultimate arbitrator of power.

2. The commissars were mostly young, had little achievement outside the power structure, self assured, true believers. They knew very well that outside their positions, created and granted by the dictator, they had little hope of career success. They were given responsibility much higher then their experience levels, further beholding them to their owner. It made them extremely jealous of their power, which in turn made them vengeful against anyone who stood in their way, especially other power hungry commissars.

Fast forward to modern transitional America. The American Emperor has taken the six commissars of his leftist predecessor and created at least 28 more. Yes, commissars do multiply quickly at first and many more are in the works, until the American parliament (congress) and the oblasts (states) assemblies (state senates) are powerless show pieces and all power centers (commissars) flow only to the dictator.

Posted by Wilson Mixon at 04:34 PM in Politics

A News Flash

According to The Telegraph, the U. S. has a free market in health care:

A lobby group that supports the current free market in US health care is spending $20 million trying to derail Mr Obama's reforms - the centrepiece of his domestic programme - by broadcasting "horror stories" on television.

Some free market: Medical practitioners must be licensed by the state after being approved by organizations whose interests lie in restricting supply, hospitals are regulated by the state, ditto insurance companies. Not to mention Medicare and Medicaid, and policies that favor third-party payments to the extent that "insurance" is really pre-paid medical care.

Posted by Wilson Mixon at 03:33 PM in Economics

July 17, 2009

Thoughts on two bits of public discourse:

1. I recently refereed a paper that purported to examine the "access" to health care--in reality it estimated an empirical model of the percentage of people who purchased a particular form of medical services. It struck me as odd that people who don't purchase a particular medical service are said to lack access to that service. After all, most people live within a reasonable distance of providers of this particular medical service. Moreover, if I choose not to purchase a good or service (say, an Xbox or the right to play a round of golf) people don't say I lack access to that good or service. It's true that some medical services (though not the one that was the focus of the paper I reviewed) are expensive and may be difficult for some people to afford. In this circumstance, people may be saying access instead of affordability, but it still strikes me as sloppy usage to talk about "access" to medical care.

2. Since most folks who prattle on about "social justice" advocate the coercive redistribution of property a better term would be "anti-social injustice."

Posted by E. Frank Stephenson at 08:28 PM

Friends, Romans, and Countrymen ...

... protest against Obamacare. Good to see some folks willing to stand up for liberty instead of falling for the silver-tongued peddler of socialism.

Posted by E. Frank Stephenson at 07:53 PM

A Hero of Capitalism

With apologies to our friends at the HOC blog, it was 107 years ago today that Willis Carrier invented air conditioning. The pointer is from Instapundit.

Posted by E. Frank Stephenson at 07:34 PM in Economics

July 16, 2009
Dispatches from the Dan Quayle Reputation Rehabilitation Society

Ladies and gents, VP Joe Biden:

Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

I think the Aflac duck sums Biden up nicely:

Posted by E. Frank Stephenson at 08:18 PM

Need an indulgence? There's an app for that

Next time you're thinking of skipping church.....


HT my boy Phil Duncanson, taking the photo with his iPhone of course.

Posted by Edward J. Lopez at 04:26 PM in Culture

Sightings Around Town

It's not uncommon to see roadside vendors selling produce, flowers, or Confederate flags, but until today I don't think I've ever seen one peddling bedding. However, at a defunct convenience store across from the mall a woman had pitched a tent and was offering sets of sheets for $20.

I also noticed the local Arby's is selling 5 roast beef sandwiches for $5. I've always found this pricing strategy a bit odd because very few people (large families? people with the munchies?*) buy 5 roast beef sandwiches in a visit. Maybe it's the same strategy that Kroger uses--it advertises, say, spaghetti sauce at 2 for $3 but will sell 1 jar for $1.50--to try to induce shoppers to buy more than if prices were simply posted per unit.

*Re this market segment: The late Rodney Dangerfield made tv ads for Arby's 5 for $5 promo. An acquaintance who once worked on a film with Dangerfield indicated that he, like the busted Harry Potter star in Bob's post, had a fondness for cannabis. I, of course, have no way of knowing if this is true.

Posted by E. Frank Stephenson at 03:46 PM

Take my picture boy and I'll search your car!

James Waylett, the boy who plays Crabbe in the Harry Potter movies, just got busted for possessing and growing a little mj.

On Thursday, he pleaded guilty to producing cannabis at a court hearing where it emerged that the pair were detained after Waylett took a photo of police while driving past a group of officers.

I know they don't have a 4th Amendment in England, but holy cripes? All he did was take a photo of the police? I guess in England only the police are allowed to take photos now? Sheesh.

Posted by Robert Lawson at 03:01 PM in Politics

Innovation and Path Dependence in New York

New York City spends a million dollars on typewriters for the NYPD. (HT: Matt Babb). I assume that these typewriters are equipped with QWERTY rather than Dvorak keyboards.

Posted by Art Carden at 01:23 PM in Economics

Recent Reading and Writing

1. Here's Tyler Cowen on the autistic spectrum and academia. I've thought for some time that the rhetoric of "disability" is damaging. I'll be reviewing Cowen's new book for Lifehack.org.

2. With Mike Hammock, here's an op-ed in today's Memphis Commercial Appeal on charter schools. Are they perfect? No. Are they "still an unproven entity" as the chairman of the Shelby County School board claims? If we're comparing state-funded school competition to state-funded monopoly, it's the state-funded monopoly that is the unproven entity. Here's Kerry King's website; she has written a couple of very interesting papers on competition in education.

3. Thoughts on Mises's Interventionism: An Economic Analysis.

4. A review of Donald Stabile's interesting The Living Wage: Lessons from the History of Economic Thought for EH.net.

Posted by Art Carden at 10:36 AM in Economics

July 15, 2009
Zimbabwe Prices?

Pizza And Soda? That'll Be $23 Quadrillion, Please

HT: Jen

Posted by E. Frank Stephenson at 04:56 PM

What Do You Get if You Cross Starbucks and Hooters?

The Bikini Beani:

Even though it serves coffee and cold drinks to go by women in bikini tops, the owner says the Bikini Beani Coffee and Drink Hut was “covered up” last weekend.

“You couldn’t have gotten another car in the parking lot on Saturday,” said Josh McClain, who opened the business at 917 N. Third Ave. “We didn’t have time to breathe.”

Iced coffee and “bikini sodas” may have accounted for some of the trade, but the bikini car wash with the help of the bikini “baristas” — properly defined as coffee shop employees — probably didn’t hurt either.

UPDATE: A co-blogger clicked through to the story and noticed the sentence "McClain, a 2000 graduate of Murray County High School, realizes his business may be out of the mainstream for a conservative, Bible Belt town in the South." He then sent me an email asking if the lattes or the bikinis are out of the mainstream for the South. It's definitely the lattes--click here for a northern version of the bikini beani.

Posted by E. Frank Stephenson at 01:58 PM

Coolest. Fan Costume. Ever?

I wonder if "Cardinal Carl" gets a discount on his season tickets? Should he? Should teams offer discounts to SuperFans because they are "part of the show" or should they charge extra because dressing up like this might signal a high willingness-to-pay for tickets? How could they do it?

The combination of empty seats and long concession lines at sporting events has always puzzled me, especially in light of the innovative ways teams try to price discriminate. For example, the Cardinals might offer a four-game ticket package that includes tickets to games against the Cubs and Dodgers packaged with tickets to games against the Pirates and the Nationals (I bought a ticket package like that once). Comments are open if you have a good explanation.

UPDATE: The guy next to Cardinal Carl in the Jack Clark jersey is pretty awesome, too.

Posted by Art Carden at 01:58 PM in Economics  ·  Comments (2)

Environmental Consciousness or Price Discrimination?

Freakonomics links to a report that a brothel in Berlin is offering "discounts to customers who arrive by bike or public transportation." Is this really an expression of environmental consciousness, or is it price discrimination? My money would be on the latter: bike riders and public transit users are likely to have more elastic demand curves for the brothel's (ahem) "services" than car-driving customers.

Posted by Art Carden at 11:07 AM in Economics

July 14, 2009
The Size of Big 2.0

Some of my favorite Deirdre McCloskey questions are "how big is big?" and "compared to what?," and I'm trying harder and harder to incorporate them into my scholarship and teaching. Richard Ebeling just gave a fascinating lecture at AIER on 19th century liberalism, nationalism, socialism, and statism that set the stage for his later lecture on twentieth-century Keynesianism. In the lecture, he mentioned the wholesale slaughters of civilian populations by totalitarian governments. To the best of my knowledge, no one has tried to construct a rigorous estimate the cost of the slaughters, but I played around with Wolfram Alpha a little bit to try construct a crude estimate of the annual cost of war-related deaths. Taking median per-capita income of $3596 over a sample of years stretching back to 1993 as the value of a disability-adjusted life year and using the estimate of 6.29 million disability-adjusted life years lost to war deaths, we get a very crude estimate of the annual cost of war from deaths alone of $22.6 billion. By comparison, the market value of Target, #28 on the Fortune 500, was $25.7 billion as of March 27, 2009. According to Wikipedia, the IMF's estimate of the nominal GDP of El Salvador was about $22.1 billion. If this estimate is too low by a factor of ten, the cost of war deaths would be comparable to the market value of Wal-Mart or the GDP of Malaysia. If this estimate is too high by a factor of ten, the cost of war deaths would be comparable to the market value of Saks or the GDP of Suriname (give or take a few hundred million).

Of course, a little knowledge can be a dangerous thing: on one hand, the ready availability of cheap data improves our ability to make informed decisions. On the other hand, however, since the the cost of one input (computation) is rapidly approaching zero while the cost of the complementary input (analytical ability) isn't falling as fast, is staying constant, or is increasing, the opportunity cost of high-quality analysis is increasing and the opportunity cost of low-quality analysis is falling. Hence, I expect the signal-to-noise ratio in scholarship and public discourse to fall.

This has me curious now because these are definitely very-crude-but-possibly-maybe-plausible estimates. I'll put on my "assistant editor of the Journal of Economics" hat and suggest a paper idea: estimate the annual global cost of war and/or estimate the cost of 20th-century democides. R.J. Rummel's book Death By Government is the authoritative source for data on democide, and another good place to start for is Claudia D. Goldin and Frank D. Lewis, "The Economic Cost of the American Civil War: Estimates and Implications," which appears in 35(2) of the Journal of Economic History (June 1975), and a minute or two with Google Scholar turns up some interesting hits.

Posted by Art Carden at 05:31 PM in Economics  ·  Comments (6)

There's a Market for That: On Discrimination

A few weeks ago I wrote a piece for the Mises Institute on discrimination and argued that an ordinance in Shelby County against some kinds of discrimination is a bad idea for several reasons. Basically, government intervention is the wrong way to fight discrimination. Here's the right way: FedEx, a private firm, has strengthened its anti-discrimination policy.

Posted by Art Carden at 03:05 PM in Economics

It's the End of the World As We Know It

A student asks:

"When people are preparing for the apocalypse, what do they buy? I need to get in that futures market. Wait, the market has already adjusted for that, hasn't it?"

I respond:

"It probably has, unless you have unique information. If your eschatology is systematically better than everyone else's, you can profit accordingly. Since the Bible says that no one knows when Jesus Christ will return, it should probably enter into all of our economic calculations as a purely random event--an act of God, if you will. However, the Bible is considerably more opaque on the events that will follow. If the dispensationalist view is correct--the view expressed in the "Left Behind" books--then you'll probably want to short pretty much all currencies and government securities, go long on precious metals, and stockpile Bibles. I can't find betting markets on the end of the world at www.intrade.com and similar sites, which suggests a market opportunity."

Comments are open if you have any other suggestions.

Addendum: I'm going to use the answers to compile an Economist's Guide to the End of the World. If you were stocking a survival kit, what would you put in it?

Posted by Art Carden at 09:03 AM in Economics  ·  Comments (20)

July 13, 2009
Universal Car Care

HT: Mason Drake

Posted by E. Frank Stephenson at 10:13 PM in Economics

Knocking off the knock-offs

Adaptive entrepreneurship from the ever clever Counterfeit Chic, who frames a trend in counterfeiting hand bags. From "counterfeit bags overtly labeled as such," to someone sticking FAKE on the broadside of a genuine bag, the cool pics also include a paper sack drizzled up to look like Chanel (never mind the scary feet in the photo).

Posted by Edward J. Lopez at 10:04 PM in Economics

Consumerism--Quelle Horreur!

In order to help viewers determine if movies have objectionable content, Netflix provides content info on some films. (Netflix says, "This information for parents is provided by Common Sense Media, a non-profit organization dedicated to improving kids' media lives.")

"Marley and Me" is the next item in the Stephenson queue and I wondered if it might be suitable for Pee Wee (my impression, apparently correct, is that the film is relatively clean) so I clicked through to see the content info. Most of the categories on which the film is evaluated are unsurprising--sex, language, violence, drug use, etc. But there is also a category for "consumerism" and here's the consumerism evaluation of "Marley and Me":

Jenny and John pursue the American dream: a nice house in a good neighborhood, a nice car, a big trip, etc. But the pursuit is also a struggle, and viewers see how John and Jenny sacrifice to gain the material pleasure that they eventually achieve. Specific products/brands shown/mentioned include Volvo, the Philadelphia Enquirer and the New York Times.

For this consumerism content, the film earns a red dot indicating "Not appropriate for kids of the age most likely to want to see it." How awful--two people want a nice house and they sacrifice and struggle to obtain it. Then again, maybe Paul Krugman, Frank Rich, and the rest of the NYT warrant a red dot.

Just for kicks here is "Jerry Maguire" which also gets a red dot for consumerism:

Athletes are shown endorsing various products and companies; brands such as Chevrolet and Reebok are mentioned. A woman is shown drinking a Coke.

Maybe the raters are Pepsi drinkers. Since the raters object to "Marley & Me's" depiction of sacrificing for material goods I decided to check "Million Dollar Baby" to see if the raters object to government handouts (the movie contains a scene in which a mother turns down a house from her daughter because it would affect her welfare eligibility. Not surprisingly, no mention of handouts in the ratings.

I'll leave comments open for a few days if readers come across other examples.

Posted by E. Frank Stephenson at 09:53 PM in Economics  ·  Comments (0)

Markets in Everything: Sunshine Insurance Edition
Sun-seekers whose holidays are spoiled by bad weather could be reimbursed after French travel agencies launched insurance cover for unwanted interruptions to the sunshine.

The insurance policy, launched by holiday groups Pierre et Vacances and FranceLoc, will allow holiday-makers to claim back part of the cost of their trip if they suffer at least four days of rain in any one week.

Source. Thanks to Dan Alban for the pointer and to MR for the MIE concept.

Posted by E. Frank Stephenson at 09:10 PM in Economics

Government Efficiency

From today's WSJ:

WASHINGTON -- A secret Central Intelligence Agency initiative terminated by Director Leon Panetta was an attempt to carry out a 2001 presidential authorization to capture or kill al Qaeda operatives, according to former intelligence officials familiar with the matter.

According to current and former government officials, the agency spent money on planning and possibly some training. It was acting on a 2001 presidential legal pronouncement, known as a finding, which authorized the CIA to pursue such efforts. The initiative hadn't become fully operational at the time Mr. Panetta ended it.

Holy cr@p people (with apologies to Kevin Grier)--8 years and the program was not "fully operational." If 8 years isn't enough to get after Bin Laden then surely we should give the porkulus stimulus package more than 6 months to show some results.

Posted by E. Frank Stephenson at 10:15 AM

Cops and Donuts

Playing to stereotype, some police officers in Clare, Michigan bought a bakery (story here; video here). I stopped in this bakery about 6 months ago for pastries and coffee and am glad it will remain in business.

Posted by E. Frank Stephenson at 09:57 AM in Misc.

July 11, 2009
"The man of system, on the contrary, is apt to be very wise in his own conceit ..."

From The Economist:

[Energy Secretary Steven] Chu’s job is harder: he is charged with spotting, nurturing and promoting promising energy technologies, thereby helping America to create the tools that the world needs to wean itself off fossil fuels.

He certainly has the qualifications to do so.

Nope, no person--not even one as smart as Mr. Chu--has the necessary knowledge to accomplish such a task. Methinks Mr. Chu needs to cozy up to some Hayek and a bit of humility.

Posted by E. Frank Stephenson at 11:35 PM in Economics

What's Wrong With This Picture?


Answer (and an update) below the fold.

Read More »

Posted by E. Frank Stephenson at 11:21 PM in Economics

On Obama, Africa, and Institutions

Like Tim, I also had a mixed reaction to Obama's comments today in Ghana. While it's great that Obama said, "Africa doesn't need strongmen,it needs strong institutions," it's hard to take such comments seriously from a president who's undermining institutions such as bankruptcy and contract law by strong-arming GM bondholders and AIG employees due to receive bonuses.

Posted by E. Frank Stephenson at 09:58 PM in Economics

On Medical Expenses, Wage Garnishment, and Bankruptcy

I've long been skeptical of the claim that half of bankruptcies are attributable to medical expenses so I was pleased to see a study from Fraser comparing US and Canadian bankruptcy rates. Bankruptcy rates are higher in Canada even though folks there don't have to worry about medical expenses.

Also re bankruptcy, I saw this article a few days ago:

States that allow debt collectors to seize consumers' wages have sharply higher bankruptcy rates than neighboring states that prohibit or strictly limit the practice, an Associated Press analysis has found.

While bankruptcy rates vary for many reasons, the five states that prohibit or strongly limit wage seizures — North Carolina, Pennsylvania, South Carolina, Florida and Texas — all have drastically lower rates than their neighbors, with particularly striking differences along borders, where economic conditions are similar but bankruptcy rates are not.

South Carolina's bankruptcy rate is almost one-quarter that of Georgia's; Pennsylvania has half the rate of Ohio; North Carolina has about one-third the rate of Tennessee; Texas has a smaller rate than all its neighbors; and Florida has just about half the rates of Georgia and Alabama.

Posted by E. Frank Stephenson at 09:47 PM in Economics

Obama going North in Africa

From an AP story on Yahoo, the President seems to agree with Douglass North:

"No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery...Africa doesn't need strongmen, it needs strong institutions."

And later, "he said the West is not to blame 'for the destruction of the Zimbabwean economy over the last decade, or wars in which children are enlisted as combatants.' Nor for the corruption that is a daily fact of life for many, he said."

Which reminds me of the saying about a broken clock being right twice a day. Of course, there are several other times of the day when it's way off:

"No business wants to invest in a place where the government skims 20 percent off the top."

Hopefully Ghana and the rest of Africa won't pay attention to whether businesses will continue to invest in a place where the government owns a major auto manufacturer, or the prospects of tax rates likely much higher than 20% once Medicare and Social Security go belly up.

Posted by Tim Shaughnessy at 01:37 PM in Economics

Age of Convenience

Mark Steyn on princes and such:

As the British newspaper The Independent reported;

“Capitalism and consumerism have brought the world to the brink of economic and environmental collapse, the Prince of Wales has warned… And in a searing indictment on capitalist society, Charles said we can no longer afford consumerism and that the ‘age of convenience’ was over.” [...]

In the old days, we didn’t have these kinds of problems.

But then Mr and Mrs Peasant start remodeling the hovel, adding a rec room and indoor plumbing, replacing the emaciated old nag with a Honda Civic and driving to the mall in it, and next thing you know [...] they begin taking vacations in Florida.
[A]t this week’s G8 summit, America’s allies would commit only to the fuzziest and most meaningless of environmental goals. Europe has been hit far harder by the economic downturn. When your unemployment rate is 17 per cent (as in Spain), “unsustainable growth” is no longer your most pressing problem.

The environmental cult is itself a product of what the Prince calls the “Age of Convenience”: it’s what you worry about it when you don’t have to worry about jobs or falling house prices or collapsed retirement accounts.

Posted by Wilson Mixon at 11:47 AM in Politics

July 09, 2009
Shameless Commercialism, Once More

My baby boy Shane has a second restaurant, in Oakhurst Village, Decatur.

Here's the last paragraph from a Creative Loafing review:

Did I mention that portions are huge? Neither of us could eat more than half our pasta entrees, so plan to share a starter. These four dishes cost under $35. I’ve had many meals twice the price that didn’t come close to Saba’s quality.
Posted by Wilson Mixon at 10:22 AM in Personal

July 06, 2009
A Second Stimulus?

All the world's abuzz with talk of a second stimulus (see, for example, Tyler's post). All this discussion overlooks an important point--the first so-called stimulus contained little or nothing to stimulate the economy. The $787B porkulus was the Dems reward for sweeping the election; maybe now they'll get on with some serious economic policy.

Posted by E. Frank Stephenson at 04:22 PM

Sumner: The Challenge of Facts

Our summer odyssey is underway. We arrived in Great Barrington, Massachusetts today for a three-week stay at the American Institute for Economic Research. At the end of this month, I'm teaching at Mises University in beautiful Auburn, Alabama. In August, we're spending a week in Panama City, Florida and then I'm off to a Jack Miller Center Summer Institute in Santa Fe, New Mexico.

Then classes begin. One thing that caught my eye when strolling through the AIER library a few minutes ago was a collection of essays by William Graham Sumner entitled "The Challenge of Facts and Other Essays." I assigned his "The Forgotten Man" a few years ago in econ 101 with some success, and I look forward to seeing if I can find any good readings in this volume.

Fortunately, Google Books is here to help. Here's the book in its entirety:

Posted by Art Carden at 03:41 PM in Misc.

July 05, 2009
Apples Meet Oranges

From today's AJC:

Georgia ranks 39th among the states in spending per resident on public health, despite having the nation’s ninth-largest economic output.

So we have a comparison of spending per capita to aggregate output (presumably gross state product) instead of output per capita. As it happens, Georgia ranks 41st in gross state product per capita. Source (scroll down to the gsp per capita section and click on link to table 1).

Posted by E. Frank Stephenson at 02:52 PM in Economics

July 03, 2009
Can the Monetary System Regulate Itself?

Our current system, no, but a free banking system on a gold standard, yes. So I argue in this 51-minute talk, taped at Rhodes College in March. Not just a talking head video, this one features some actual walking around! Thanks to co-blogger Art Carden for organizing the event and posting the video.

Posted by Lawrence H. White at 08:19 PM in Economics

The Rent Seeking Society

Articles in today's WSJ (here and here, respectively) mention a couple of interesting trade associations: the National Association of Blind Merchants and the American Pyrotechnics Association.

I'll leave comments open for a day or two--feel free to add other interesting examples of rent seeking trade associations.

Posted by E. Frank Stephenson at 07:23 PM

And with N = 2, your R2 = 1.0!


Personally, though, I prefer N = 1 so I can fit any slope I want.

Posted by Robert Lawson at 11:39 AM in Funny Stuff

July 02, 2009
Bad news or bad reporting?

The AP headline: Baaad news? Global warming now shrinking sheep

The content: local warming is reducing mortality among some wild sheep in Scotland. Wonder if the runts that now survive would count this as baaad news? Did I insert enough a's?

Posted by Wilson Mixon at 04:41 PM in Politics


Scott Beaulier's post yesterday reminded me of how fragile city-level unemployment data are especially for small cities.

According to the Department of Labor, Bismarck, North Dakota has the lowest unemployment rate for a metropolitan area (3.5%). El Centro, California has the highest rate (26.8%).

Detroit, MI continues to have the highest rate for cities with 1 million or more people (14.9%).

I have a pretty good sense of why Detroit's rate is high, but do any of our readers know much about Bismarck or El Centro?

The Current Population Survey (CPS) upon which (if I am not mistaken) all unemployment figures are based represents a survey of approximately 110,000 individuals. according to BLS. El Centro has a population of about 40,000 people. Assuming El Centro has a representative number of respondents in the CPS, there are probably only about 15 respondents in El Centro. Of which, let's say only 10 are in the labor force. Thus the unemployment rate for El Centro is probably 2ish out of 10. But man alive if one of them got a job, the unemployment rate would fall by half!

UPDATE: A reader sends in the following correction (Thanks!):

The CPS data is used to calculate the national unemployment rate. Each state also has access to the CPS data (not published). However, because the sample size is small in most cases for the states, the state CPS is very volatile. And so the state unemployment rates are not determined by the CPS (due to volatility) but by the LAUS program. The state unemployment rates are modeled with an econometric regression. The county and city rates are determined separately using different methods from the state model. The bottom line is that the city rates are not determined by the CPS, but are determined by the LAUS model. More information about the LAUS program can be found on the BLS website. Tom Dougherty
Posted by Robert Lawson at 11:30 AM in Economics

Foul developments

Here is a satellite shot of the Fort Trumbull neighborhood in New London, CT. Google Maps says the red marker is the former site of Susette Kelo's house. The several blocks of brown to the east and north is the defunct redevelopment area. After spending something like $18 million to acquire the tract and clear it of the homes that were previously on it, the area has sat completely undeveloped.


Now according a story in the local fishwrapper, the area smells bad---literally stinks (thanks to Reason blog for the pointer).

Maybe this is because of bad publicity. That's what attorney Wes Horton, who argued the city's case before the Kelo Court, said to me when I debated him at Trinity College last fall. Perhaps, though bad publicity couldn't have been the sole factor. And that does not exonerate all the other failures of centrally planned development by way of eminent domain.

Here is Ilya Somin on the failure of Poletown:

Although GM and the City of Detroit promised that the new plant would create over 6000 jobs for the community, in reality the new plant employed less than half that many workers. By destroying hundreds of homes and numerous businesses, churches, and other institutions, the Poletown condemnations very likely inflicted more economic harm than they created benefits.

Here is Carl Close on how eminent domain destroyed the Fillmore neighborhood in San Francisco.

Here is Time on the failure of urban renewal in New Haven, CT, where it was used more aggressively than anywhere else.

Here is me on successful economic development projects without using eminent domain.

And here is the introduction chapter to my forthcoming Law Without Romance, which contains two chapters on development takings.

Posted by Edward J. Lopez at 11:01 AM in Economics

Markets in Everything: Free Hugs and Deluxe Hugs

HT: Phil Heidenreich and Brent Butgereit, Marginal Revolution for the "Markets in Everything" concept.

Posted by Art Carden at 09:45 AM in Economics

Walmart's Progressive Turn?

Here is Megan McArdle's succinct take on Walmart's endorsement of government-andated health coverage (HT: Sheldon Richman). The story was front-page news in yesterday's Wall Street Journal, and today the Journal editorializes--correctly, I think--on the hidden politics of the move. I'm skeptical of the company's ominous claim about wanting a "level playing field;" the public choice literature suggests that "leveling the playing field" via government action usually means "kneecapping potential competitors with legislation."

Posted by Art Carden at 09:38 AM in Economics

July 01, 2009
The Toaster Project and The Great Conversation

You might have by now read about The Toaster Project, a project in which a student at the Royal College of Art in London tries to make a toaster completely from scratch. Here's Radley Balko's article on his piece, and here is a reply by the artist, Thomas Thwaites, that takes exception to Balko's interpretation.

From what I can gather, his project accomplished its purpose: to get people talking. I'm looking forward to finding ways to incorporate his project into the parts of econ 101 where I cover "I, Pencil."

Posted by Art Carden at 02:49 PM in Economics

Unpublished Letter

Here's a letter that I sent to the Memphis Commercial Appeal a few weeks ago that was never published:

"The "prevailing wage" ordinance passed by the County Commission on June 15 was a mistake that will end up hurting Shelby County workers. Opponents argued that it would "hurt businesses and raise costs," but it will also hurt workers. Specifically, it will hurt the workers who are unable to find construction work because their skills are not worth the "prevailing wage."

Ordinance supporters said that "it will help raise living standards and lead to safer work sites since better-trained workers will be on the job." This is half true. First, to add insult to injury, the windfall workers are expecting from the ordinance will evaporate as workers compete for employment on margins other than wages and productivity (waiting for work, specifically). Second, the reason "better-trained workers will be on the job" is because lower-skilled workers have now been legally barred from competing with them.

Price floors are always bad ideas, but they are especially bad ideas during recessions. In a period of rising unemployment, we should be looking to create opportunities rather than destroy them."

Posted by Art Carden at 10:28 AM in Economics

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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