Division of Labour: February 2010 Archives
February 28, 2010
2010 will need to be really interesting to top the Greek story

OK, as expected, the Greek government is looking for every cent, and trying to tax everything under the sun. Many fear the Greek government is about to circumscribe the ability to move liquidity out of the country, and then tax bank accounts. Not surprisingly, many Greek holders of Euros are heading for the doors, threatening a run on Greek banks. Oh, well, the tanking Euro multiplier ought to reduce Euro-zone inflation worries some. Ill winds, and all that.

On the other hand, the French and German governments appear to have decided that the Greeks will be unable to get the house back in order, as the Irish seem to have done; that Greek sovereign default will destroy the Euro, and that protecting the Euro is worth the electoral price their currently nationalisitc-leaning electorate may dish out. Both here and here, the German government seems willing to stake tax-Euros to prop up Greek debt.

And if the bouillabaisse isn't spicy enough, check out Eurocrat-in-chief Herman Van Rompuy who "has submitted a text calling for the creation of an "economic government" that shifts responsibility for economic planning from national authorities to the "EU level". " Fellow Eurocrat Top Banana, Jose Barroso said Brussels has treaty powers allowing it to "take the reins of economic management."

"This is a time for boldness. I believe that our economic and social situation demands a radical shift from the status quo. And the new Lisbon Treaty allows this. Economic policy isn't a national, but a European matter. No modern economy is an island. When a member state doesn't make reforms, others suffer because of that."

Do you remember all those people who feared the European Union would be the end of national sovereignty? That the European Union would become a (largely) un-elected government, only vaguely answerable to an electorate? And do you remember all of the pro-EU people who pooh-poohed those fears, and said it would never happen? I do.

Anyhoo, for my fellow Americans, at least our summer vacations to Europe will be affordable again.

Posted by Noel Campbell at 09:39 PM

Music to My Ears: Johnny Cash's American VI: Ain't No Grave

I thought I got a great deal on Johnny Cash's new album American VI: Ain't No Grave for $10 at Walmart yesterday (I visit Walmarts and other retailers when I'm on the road--since I've been studying retail, I figure it's a good idea to follow Coase's advice and look out the window every so often). Lo and behold, it's $8.99 on Amazon. Was I ripped off? No: WM had it at a price I was willing to pay in a store in rural New York, and I could listen to it on my drive to the airport. At $10 plus tax, it was a great deal. At $8.99 without tax, it's an even better deal. It's a fantastic album from start to finish, and the title track is one of the best if not the best track in his later "American" catalog: it's expertly and beautifully produced--haunting in some places and inspiring in others. The American recordings were not the ones that made Cash a superstar, but they were a fitting and reflective end to a great career and a great life.

The Man in Black would have been 78 this past Friday. Here's Dr. J's take.

Posted by Art Carden at 03:01 PM in Culture

The Pinto Treatment Once More

Steve Chapman weighs in on Congress and Toyota:

When it comes to defects, the company is hardly unique. Over the past five years, The Wall Street Journal reports, the federal government got more complaints from owners of Fords than owners of Toyotas. Out of 20 carmakers, says Edmunds.com, Toyota is fourth best in the number of complaints per vehicle sold. But none of the others is being used as a piñata.

A more expansive government role is one of those answers that is neat, simple and wrong. "There are 250 million vehicles with 3,000 parts apiece," says Hurley. It's safe to assume the government couldn't police them all, even if it chose to do nothing else.

Fortunately, it doesn't have to do that in order for consumers to be protected. A carmaker's need to attract buyers is a far more powerful force for safety. As Yoshimi Inaba, head of North American operations, told Congress, "Nothing costs Toyota more than the loss of customer trust in our vehicles." Another reliable motivator is the urgent desire not to pay millions of dollars in damages, as Toyota is likely to do once the courts have had their say.

Posted by Wilson Mixon at 09:45 AM in Politics

February 27, 2010
Diversity vs. Social Capital

I don't remember seeing this when it came out two years ago:

IT HAS BECOME increasingly popular to speak of racial and ethnic diversity as a civic strength. From multicultural festivals to pronouncements from political leaders, the message is the same: our differences make us stronger.

But a massive new study, based on detailed interviews of nearly 30,000 people across America, has concluded just the opposite. Harvard political scientist Robert Putnam -- famous for "Bowling Alone," his 2000 book on declining civic engagement -- has found that the greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects. In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings. The study, the largest ever on civic engagement in America, found that virtually all measures of civic health are lower in more diverse settings.

HT: GR

Posted by E. Frank Stephenson at 08:33 PM

Mr. Gandhi Meet Mr. Laffer

A news item out of DC:

In his letter to the mayor and D.C. Council, Chief Financial Officer Natwar M. Gandhi informed them that a $.50 per-pack cigarette tax hike implemented last October has not gone as planned.

Because the increase, to $2.50, catapulted the District's rate over Maryland's $2-per-pack rate, Gandhi explains, many Maryland smokers who'd bought their tobacco in the District switched back to buying in Maryland. Add that to all the D.C. smokers who started buying cheap-as-dirt Virginia smokes, and you get the picture---instead of $45.4 million in revenue, Gandhi says the District will only bank $30 million.

But the legislative screw-up is more profound than that: The projections are now that this year's estimated cigarette tax revenues will fall below the pre-hike FY2009 levels ($37.6 million)---in other words, the tax hike got the city less revenue, not more.

Posted by E. Frank Stephenson at 08:16 PM in Economics

I recommend "The Crisis of Islam"

I just completed Bernard Lewis's The Crisis of Islam: Holy War and Unholy Terror. Read one short, quick book and you, too, will be better informed than 95 percent of the non-Muslim population. The book is under 200 pages, and Lewis' elegant writing will let you breeze through it in a matter of hours, despite the volume of information and analysis the book conveys.

There is enough in the traditional culture of Islam on the one hand and the modern experience of the Muslim peoples on the other to provide the basis for an advance toward freedom in the true sense of that word.
The war against terror and the quest for freedom are inextricably linked, and neither can succeed without the other. The struggle is no longer limited to one or two countries, as some Westerners still manage to believe. It has acquired... a global dimension, with profound consequences for all of us."
If freedom fails and terror triumphs, the peoples of Islam will be the first and greatest victims. They will not be alone, and many others will suffer with them.
Posted by Noel Campbell at 06:39 PM in Culture

Incentives Matter: Unemployment Insurance and Job Search Edition

The abstract of a new paper from Alan Krueger and Andreas Muelller:

This paper provides new evidence on job search intensity of the unemployed in the U.S., modeling job search intensity as time allocated to job search activities. The major findings are: 1) the average U.S. unemployed worker devotes about 41 min to job search on weekdays, which is substantially more than their European counterparts; 2) workers who expect to be recalled by their previous employer search substantially less than the average unemployed worker; 3) across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits, with an elasticity between −1.6 and −2.2; 4) job search intensity for those eligible for Unemployment Insurance (UI) increases prior to benefit exhaustion; and 5) time devoted to job search is fairly constant regardless of unemployment duration for those who are ineligible for UI.
Posted by E. Frank Stephenson at 04:17 PM in Economics

The Wages of Labour (Updated)

The Rhodes field hockey team (2009 SCAC champions) has been doing a series of fundraisers for a trip to Ireland. Field hockey player and aspiring economics graduate student Rachel Webb told me about some of the fundraisers, and I asked her a couple of econ questions: what's the implicit wage? Is it efficient? What might be more important than implicit wages from a project like this?

Her response was spot-on. She calculated implicit wages for three of their fundraisers ($3.75 per player-hour for one, $5.00 per p-h for another, and $8 per p-h for a third, overall implicit wage = $5.38 per player-hour).

Her explanation: it's (naively) "inefficient" because they could earn more from part-time jobs at minimum wage. However, flexibility matters (check), it saves on search costs relative to job hunts (check), it helps advertise the team (check), and it "facilitat(es) team bonding outside of the season that could lead to better cohesion on the field in the fall" (check check).

Excellent answers. There's a broader institutional lesson about the market process: labour is defined in the process of its employment (if that sounds familiar, see James Buchanan's short essay "Order defined in the process of its emergence").

To learn more about Lynx Field Hockey, go here.

Update: a reader kindly points out that we should have mentioned taxes. Wage income is taxed, while the proceeds for the fundraiser are untaxed.

Posted by Art Carden at 02:18 PM in Economics

I'm Almost Sympathetic to Herbert Hoover

Hoover was a rotten president but people could at least blame him for his actual legacy. Case in point, this piece by Richard Riehl in the North County Times :

Our confused congressman [Issa] appears to be neglecting his homework.

Issa mentions job creation twice on his Web site, questioning the Obama administration's method of tracking the success of the recovery act and offering his solution to unemployment: "stop the threat of policies like a national energy tax and a government health care take over that scare private sector employers away from expanding their businesses and hiring new employees." In Issa's America, the job market will bloom again if the government adopts Herbert Hoover's strategy of benign neglect.

Naturally, such nonsense prompted a letter from yours truly:

Richard Riehl (“Photo op illustrates confusion” February 26) claims that “confused congressman [Issa] appears to be neglecting his homework” and asserts “In Issa's America, the job market will bloom again if the government adopts Herbert Hoover's strategy of benign neglect.”

Rep. Issa may or may not be confused and may or may not need to do more homework. However, the characterization of Hoover’s policies as “benign neglect” makes it quite clear that Mr. Riehl himself is both confused and neglectful of his homework.

During Hoover’s term, federal government spending increased from $3.127 billion in 1929 to $4.659 billion in 1932—a 50% increase in three years. Indeed, Hoover readily acknowledged his activist approach in his remarks upon being re-nominated by the Republicans in 1932:

We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put that program in action…

These are hardly the words or actions of someone practicing or dedicated to “benign neglect.”

Some background here. The Hoover quote is taken from Steve Horwitz's EJW piece.

UPDATE: Another example is below the fold.

Read More »

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

Distance, Trade, and Income – The 1967 to 1975 Closing of the Suez Canal as a Natural Experiment

That's the title of a recent NBER WP from James Feyrer. The abstract:

The negative effect of distance on bilateral trade is one of the most robust findings in international trade. However, the underlying causes of this negative relationship are less well understood. This paper exploits a temporary shock to distance, the closing of the Suez canal in 1967 and its reopening in 1975, to examine the effect of distance on trade and the effect of trade on income. Time series variation in sea distance allows for the inclusion of pair effects which account for static differences in tastes and culture between countries. The distance effects estimated in this paper are therefore more clearly about transportation costs in the trade of goods than typical gravity model estimates. Distance is found to have a significant impact on trade with an elasticity that is about half as large as estimates from typical cross sectional estimates. Since the shock to trade is exogenous for most countries, predicted trade volume from the shock can be used to identify the effect of trade on income. Trade is found to have a significant impact on income. The time series dimension allows for country fixed effects which control for all long run income differences. Because identification is through changes in sea distance, the effect is coming entirely through trade in goods and not through alternative channels such as technology transfer, tourism, or foreign direct investment.
Posted by E. Frank Stephenson at 01:39 AM in Economics

February 26, 2010
Whither Afghanistan?

In the title, I’m borrowing from P. J. O’Rourke to joke about a serious matter. Seriously, though, what is the union set of “can be done in Afghanistan” and “should be done in Afghanistan?” Let’s deal with a semantic issue first. Nowhere is “the West” involved in “nation building.” Using common economics parlance, we are “institution building,” and by institutions, I mean “the rules of social and economic interaction that everyone knows, and that are usually enforced and obeyed.” A government which provides total benefits in excess of total costs and which does not impose grave external costs on other governments and people requires some specific institutions that operate above a certain threshold of effectiveness. We may deem national governments that fail to meet either or both criteria as “failed states.” Eight years into our intervention in Afghanistan, it remains a failed state. Well, it would fail within weeks absent U.S./NATO armed support.

Read More »

Posted by Noel Campbell at 01:08 PM

Pattern? What Pattern?

From an email that fell in my box today:

I think I might have to read the book.

Posted by Craig Depken at 01:07 PM in Economics

$170 million community center?

From today's Sports Business Journal:

The $170 million speedskating facility is exactly what the International Olympic Committee has called for in Olympic venues. It’s an environmentally sustainable building that earned LEED Silver status from the Canadian Green Building Council, and it will be converted into a community recreation facility after the Olympics, thereby guaranteeing it won’t become an unused white elephant.
This paragraph describes the speed-skating venue in Vancouver.

A couple of quick comments. LEED status is not necessarily a good thing. There have been no compelling studies, at least of which I am aware, that suggest that LEED status of SILVER, GOLD, PLATINUM actually pay for themselves. Indeed, an aborted study I worked on a year or so ago suggested that, at least in the US, the probability of LEED status of SILVER, GOLD, or PLATINUM was much higher if the building was built by the public sector or was a bank branch (don't really know how to explain the latter).

Second, LEED certification is a combination of actually impressive architectural feats and a bunch of (potentially) silly issues. For instance, one building can achieve a specific level of certification points by having a water reclimation system and a geo-thermal heating system, both of which might be very impressive and potentially money-saving for the builder and tenants. However, another building can achieve the same certification score by having any number of bike racks out front - an outcome that is not necessarily going to contribute much to "green" behavior (whatever that really means).

Third, to claim that turning the venue into a community recreation center ensures that the building will not become a "White Elephant" is not guaranteed at all. Indeed, how many community centers do we see in disrepair and unused? How many cities would EVER build a $170 million community recreation center?

It gets better:

The result is a community center that will feature eight gyms, two international-size ice rinks, a 200-meter running track and 21,000 square feet of additional training space for martial arts, yoga and other activities.

"I expect this building will easily attract 1 million visitors a year," Johnston said. "That’s unheard of in terms of what other Olympic ovals have done post-Games."

That seems like a lot of space for a relatively small community. One million visitors a year? He "expects"? Hmmmmm.

Recent history (Athens and Beijing especially) suggest that the venues are not used as much as predicted (shock) and can move into disrepair much faster than anyone anticipates.

Good luck to Vancouver. I don't think any sports economist wishes bad upon any Olympics host but it always seems to be an uphill battle to justify the expenditure on Olympic venues and events.

Potentially gated story here

Posted by Craig Depken at 01:04 PM in Sports

CTV, not the Onion

"Aid officials" tell Haitians to "leave their tent homes and return to their destroyed neighborhoods." Apparently, it's due to heavy rain.

Posted by Art Carden at 07:36 AM in Misc.

February 25, 2010
The Pinto Treatment

Frank correctly observes that Toyota is getting the Pinto treatment. Wikipedia provides a good summary of Gary T. Schwartz's review of the central case in that episode: "The number who died in Pinto rear-impact fires, according to Schwartz, was well below the hundreds cited in contemporary news reports and closer to the twenty-seven recorded by a limited National Highway Traffic Safety Administration database. Given the Pinto's production figures (over 2 million built), this was not substantially worse than typical for the time. Schwartz argued that the car was no more fire-prone than other cars of the time, that its fatality rates were lower than comparably sized imported automobiles, and that the supposed "smoking gun" document that plaintiffs claimed showed Ford's callousness in designing the Pinto was actually a document based on National Highway Traffic Safety Administration regulations about the value of a human life rather than a document containing an assessment of Ford's potential tort liability."

The original Rutgers Law Review article is here.

Posted by Wilson Mixon at 08:12 PM in Law

Cavalcade of Miscellany: Quotes and Links (updated)

0. For St. Lawrence readers, here is my recent Freeman article on Walmart that summarized some of the points I made in our discussion this evening. For non-St. Lawrence readers, the talk was recorded and will be podcast. Or is it "podcasted?"

1. I gave a guest lecture in Jeremy Horpedahl's Economic History class at St. Lawrence University today. Here's the quote I promised to blog, along with another:

Jeffrey Rogers Hummel, from his essay in Government and the American Economy: "(t)he Civil War...represents a simultaneous culmination and repudiation of the radical principles of the American Revolution."

2. I was going to post the Sowell quote with which I introduced the discussion, but Google turned up this page of Sowell quotes.

3. Arnold Kling grades the Health Care Summit.

4. A thought: should I be willing to overlook the disastrous and unintended but predictable consequences of the policies you advocate just because you claim to mean well?

5. The new issue of The Freeman is excellent. I especially enjoyed Gene Callahan's article on how fantasy is not an adult policy option, Steve Horwitz's article about unintended consequences, and Sheldon Richman's article about how the market doesn't "ration" anything.

6. This won't be replacing "Jesus Loves Me" as part of Jacob's bedtime routine anytime soon, but we're expecting a daughter in July (Taylor Grace Carden) and this could be her first Halloween costume.

7. "But if we eliminate government involvement in education, what will happen to the poor?" Here's Reason on Aid Watch on James Tooley (HT: Will Wilkinson).

Posted by Art Carden at 05:06 PM in Economics

Governments cannot make credible commitments, and that causes macroeconomic trouble

Let’s recall that, in order to participate in the common European currency, the sovereign governments of adopting states must agree to constrain themselves in fiscal policy: Annual deficits can be no larger than 3% of GDP and accumulated debt can be no greater than 60% of GDP under normal circumstances. In return for binding their hands, fiscally, member states are permitted to give up their sovereign power over monetary policy. A European central bank beholden to no single sovereign government determines monetary policy for all member states. Given that individual states had seemed to mismanage their monetary policies so badly, giving up fiscal flexibility to allow someone else to take away your monetary flexibility seemed like a winning deal for many European states.

OK, back to Principles of Macro. Let’s think about stabilizing a macroeconomy in the event of, for example, a recessionary shock. Governments almost invariably turn to fiscal and monetary policies designed to stabilize aggregate demand and prevent further declines in overall spending. To the extent and over the time period to which activist fiscal policy works, economic outcomes are altered by the policy. However, the Euro-using countries chose to foreswear using fiscal and monetary policy to stabilize total spending. If the government will not manipulate aggregate demand to ease a recession, the market will regulate itself—the old, Neo-Classical way—by adjusting nominal wages and employment levels. In short, for Euro-zone economies to weather the business cycle well, they must have flexible labor markets: easy to hire, easy to fire, and easy to adjust wages. These sorts of necessary reforms to European labor (labour?) markets didn’t happen. As a result, the PIIGS are flagrantly violating the EMU fiscal restrictions and are threatening to tear the Euro apart. That’s the pretty standard story.

However, this recent piece in the WSJ turns the fire up, making things hotter. According to the story, almost since the introduction of the euro, “Economies across the Continent have used complex financial transactions—sometimes in secret—to hide the true size of their debts and deficits.” In other words, the euro may be on the brink of disaster not only because of failure to liberate labo(u)r markets, but also because they could not commit themselves to obeying the participatory fiscal rules—sometimes going to great lengths to break those rules!

Posted by Noel Campbell at 03:06 PM

How Does One Say Pinto in Japanese

Looks like Toyota's about to get the Ford Pinto treatment:

In an internal presentation, Toyota staffers boasted of the company saving $100 million by negotiating a limited recall for Toyota Camry and Lexus ES cars over a problem that could cause unintended acceleration.

In an internal Toyota (TM) document used as part of a company presentation on its government relations, dated July 6, 2009, the phrase "Negotiated 'equipment' recall on Camry/ES re: [sudden acceleration], saved $100 million+ with no defect found" is among a bullet-pointed list of "wins."

Posted by E. Frank Stephenson at 10:44 AM

Compare and Contrast

Paul Krugman:

In Britain, the government itself runs the hospitals and employs the doctors. We’ve all heard scare stories about how that works in practice; these stories are false.

A news report from The Times:

Patients were routinely neglected or left “sobbing and humiliated” by staff at an NHS trust where at least 400 deaths have been linked to appalling care.

An independent inquiry found that managers at Mid Staffordshire NHS Foundation Trust stopped providing safe care because they were preoccupied with government targets and cutting costs.

The inquiry report, published yesterday by Robert Francis, QC, included proposals for tough new regulations that could lead to managers at failing NHS trusts being struck off.

Staff shortages at Stafford Hospital meant that patients went unwashed for weeks, were left without food or drink and were even unable to get to the lavatory. Some lay in soiled sheets that relatives had to take home to wash, others developed infections or had falls, occasionally fatal. Many staff did their best but the attitude of some nurses “left a lot to be desired”.

Posted by E. Frank Stephenson at 10:40 AM

February 24, 2010
Admiral Ackbar for Ole Miss Mascot?

Best. Idea. Ever. And if it goes through, I would want the JumboTron Operators at Bryant-Denny Stadium to show the clip of Admiral Ackbar saying "we can't repel firepower of that magnitude!" every time Alabama scores on them.

Also, I wonder how powerful informal norms are: what would it take for students to adopt Ackbar as an informal mascot even if the University doesn't?

Posted by Art Carden at 09:28 PM in Sports

Walmart, Obesity, and Produce

This story on the produce selection at Walmart and Whole Foods has been making the rounds. I posted what follows as a comment at the Coordination Problem, but I thought it would be useful to revise it and summarize where Charles Courtemanche's and my Walmart-and-obesity research stands.

We reoriented our WM/obesity paper and focused on Super Walmart after, at the suggestion of a referee, we adopted an IV strategy and found that about 10% of the increase in obesity over the last two decades or so can be explained by Super Walmart. We don't estimate a full structural model and can't identify the transmission mechanism precisely, but it probably is lower food prices.

We also estimate consumers' savings and the obesity-related health costs associated with Super Walmart, and we find that the obesity-related health costs are very small relative to WM-related savings. Our point estimates on the Walmart Discount Store and Warehouse Club coefficients are very similar to those that appeared in the older version of the paper. This still suggests a trivial reduction in obesity from discount stores and warehouse clubs and might imply that there are strong income or behavioral effects from discount stores and warehouse clubs, but the Super Walmart effect really jumped out. We're waiting for another response from the referees, and we're collecting more data now in the hopes that we might be able to develop an IV strategy that will allow us to identify the discount store and warehouse club effects more precisely.

It's also important to note that man does not live on BMI alone; reduced micronutrient deficiencies are probably associated with greater food intake, but that remains an untested speculation.

Comments welcome, as always. And, as an added bonus, here's my review of Tom DiLorenzo's Hamilton's Curse. HT: Steve Horwitz.

Posted by Art Carden at 12:33 PM in Economics

February 22, 2010
Thought Experiment in the Economic Way of Thinking (UPDATED)

Shouldn't everything in this house be mandatory, and aren't the writers of building codes failing in their moral and political duty by not mandating all of these safety features? After all, if it saves one life, it's worth it.

Updated, 11:59 AM: How do we explain this? Is it pure profit-extracting caprice on the part of the studios? Is greed the one ring that rules them all? HT: Scott Cunningham.

Posted by Art Carden at 11:41 AM in Economics

Think about how bad it could have been

Proponents of hosting sporting mega-events run into a buzz-saw of empirical evidence from economists that suggest that the events are not the economic windfall they are advertised to be. This is not to suggest that the Super Bowl doesn't contribute to the host-city's economy, economists readily admit that it does. Rather, the impact is about 1/4 to 1/10 of what proponents claim.

In the face of the empirical evidence that spending in the local economy doesn't surge as anticipated, proponents often fall back on the non-monetary arguments for hosting the event: city image, advertising to potential firms, advertising to potential tourists, advertising to potential migrants. Economists generally scoff at these claims because it is not clear exactly how hosting a Super Bowl in a city that, almost by definition, is among the top 20 cities in terms of size, tourism, etc.

How about South Florida's "image" after hosting the Super Bowl earlier this month? Nothing changed:

The Miami market received no measurable image boost among television viewers for hosting Super Bowl XLIV, according to a report to be released today by Competitive Edge Research & Communication.

Let us repeat - NO MEASURABLE IMAGE BOOST. Yet, using the current-day logic, the boosters might retort that Miami's image would have been that much worse if not for the Super Bowl. In other words, the Super Bowl might not improve your city's image but it might just save it.

Here is graphic of image effects of the Super Bowl:

Not so impressive.

locked story here

Posted by Craig Depken at 10:54 AM in Sports

February 20, 2010
Markets in Everything

Cell phone recharging in Haiti: "[Y]ou can find enterprising hustlers who have hooked up power strips to car batteries. For about 40 cents, they'll sell you a recharge for your mobile."

HT: Common Sense

Posted by Wilson Mixon at 05:21 PM in Economics

Free-Range Kids

Bryan Caplan and Steve Horwitz are both very enthusiastic about Lenore Skenazy's Free-Range Kids. After reading it last night, I am too. I agree with Bryan that it isn't a work of social science and it doesn't try to be. It's an exercise in fast-paced, well-written, applied common sense. Dare I say it, it's also a book in applied economics and statistics. Skenazy argues throughout that just because something is possible doesn't mean it is probable. Consider the annual hand-wringing about Halloween candy. She reports that apparently there is no evidence that sickos are poisoning Halloween candy or putting razor blades in apples or anything like that (when I related the story this morning, my sister told me that she "knows someone who" got a razor blade in an apple one time but never reported it to the police). Every time someone says something about the latest X that is supposed to be associated with a very terrible Y, my inner econometrician starts asking "in what doses? With what probability? How precise is the estimate? How was the experiment designed?" Sometimes, my inner econometrician starts speaking on behalf of my outer concerned parent. Then things get interesting.

It's a great book for parents and parents-to-be, and it sets the table for Caplan's forthcoming Selfish Reasons to Have More Kids.

Posted by Art Carden at 11:03 AM in Misc.

Death of Global Warming

Walter Russell Mead at The American Interest has the best analysis I've seen about the death of global warming as a polticial issue. He writes from the viewpoint of one who considers climate change to be a real danger and, as such, he shows special disregard for and anger toward those who led to this political reversal. From his most recent post:

Anyway, as the [Washington] Post now belatedly acknowledges, the movement to stop climate change through a Really Big and Comprehensive Grand Global Treaty is dead because there is no political consensus in the US to go forward. It’s dead because the UN process is toppling over from its own excessive ambition and complexity. It’s dead because China and India are having second thoughts about even the smallish steps they put on the table back in Copenhagen. [. . .] A year ago [the global greens] were the last, best hope of the world, a shining band of brothers (and sisters) who were saving the planet and taming the excesses of self-destructive capitalist greed. The Force was with them and the world lay at their feet. They were going to be greeted as liberators by a grateful world desperate to be saved.

Now they are just another piece of roadkill on the heartless historical highway–an unforgiving place for people who seek to change the behavior of the world through comprehensive treaties, like the nuclear freeze proponents before them and like the advocates of the Grand Global Treaty Against War in the 1920s. (And at least the 1920s peace movement got its Grand Global Treaty: the 1929 Kellogg-Briand Pact outlawed war forever, sparing all future generations from this terrible scourge.)
[. . .]
Failure to deal sternly and coldly with those who made these errors will leave the same incompetents in charge for the next stage of the movement. This will probably happen; social promotion is something liberals do very well and the blame for this mess is so widespread that few of the movement’s leaders will want any uncomfortable questions to be asked.

Frankly, I blame Al Gore. Unlike naive scientists who know little about life beyond the lab, or eco-activists whose concepts of the international political system come from writing direct-mail solicitations to true believers in rich countries, the former vice-president had decades of experience with high politics.
[. . .]
The greens claim to understand the dynamics of complex ecosystems better than the rest of humanity; the simplistic assumptions and unrealistic strategies with which they’ve approached the complex ecosystem of international politics don’t provide the dispassionate observer with much evidence in support of this claim.


Posted by Wilson Mixon at 10:22 AM in Politics

Call for Papers: Seventh Mises Seminar

In today's inbox...

I have attended in the past as a "Young Scholar" and Carlo and Instituto Bruno Leoni are great hosts and put together a fantastic event. If you qualify, I highly recommend submitting an abstract.

Read More »

Posted by Joshua Hall at 09:09 AM in Economics

February 19, 2010
Lots-o-Links Roundup

Lots of great stuff on teh interwebs recently. HT to everyone for links to the following:

1. Will Wilkinson on "The Progressive Fallacy on Free Speech." A good passage: "Corporations are not essentially villainous agglomerations of money and power. They are a convenient form of social organization that enables large numbers of people to undertake cooperative endeavors."

2. Speaking of progressives and conservatives, Steve Horwitz talks about constitutional consistency. Why have constitutions if we're just going to chuck them out the window when they get inconvenient?

3. Speaking of consistency and the Constitution, Andrew Napolitano argues that military tribunals for suspected terrorists are unconstitutional without a formal declaration of war. Presumably, we have a constitution to prevent just this kind of thing.

4. Speaking of Steve Horwitz, here's his new NBR post. The takeaway point, which I'll add to future discussions of capital, production, and macroeconomics: capital goods are more like legos than like Play-Doh.

5. Roderick Long discusses the tea party movement. So does Gene Healy. As always, I wonder what the starting point is for narratives of decline. I'm also a little concerned that some of the tea partying isn't so much about principled objections to government power as it is about people being upset that someone else might get the first-class upgrades they were expecting on the government subsidy gravy train (cf. "keep your government hands off my Medicare").

6. Radley Balko discusses a new article in The American Conservative that takes an impressively data-driven look at the relationship between immigration and crime and finds that, contrary to a lot of hysteria, immigrants (including undocumented immigrants) aren't causing a crime wave. I agree with Radley: given the resonance of all things anti-foreign with a lot of conservatives, this was a gutsy journalistic move for AmConMag. I'm guessing that Darryl Weathers from the Construction Workers' Union is not amused.

7. Speaking of foreigners, people have complained that the Chinese are manipulating their currency. As Mark J. Perry explains, they're doing us a favor if they manipulate their currency to make their exports cheaper.

Posted by Art Carden at 11:45 PM in Misc.

Recent Reading

1. Paul Dragos Aligica and Peter J. Boettke, Challenging Institutional Analysis and Development: The Bloomington School. if you've been scoring at home, my motivation for reading this was obvious. It's a very succinct discussion of the features that make the Bloomington School distinctive. It's a very useful survey of the contributions of Political Economy to Social Science. They offer a beautiful quote from Vincent Ostrom on pp. 61-62 that should give enthusiasts for intervention pause:

The greatest evils inflicted upon humanity have been the work of those who are so confident of their efforts to do good that they do not hesitate to use the instruments of evil available to them on behalf of their righteous cause.

2. Elinor Ostrom, Understanding Institutional Diversity. Again, the motivation is obvious. Books packed with game-changing insights make my head asplode. This is one of those books.

3. Virginia Postrel, The Substance of Style. This was one I have been meaning to read for years. I've read a lot of the surrounding material and am familiar with the argument, but I'd never actually sat down and read the book. For polemical force, it's every bit as good as The Future and Its Enemies. As social criticism, it's better. Given how much I loved Future, it goes without saying that I think this is a must-read.

4. Walter Williams, South Africa's War Against Capitalism. I bought a used copy through the Amazon Marketplace. When it arrived in the mail, I opened it to discover that it's signed by Walter Williams. Epic Win. Williams offers a brief survey of South African history and shows how apartheid was a decades-long institutional revolution against the institutions of free-market capitalism.

5. Julie Rose's new translation of Les Miserables. Tyler Cowen described this as the definitive translation. The sheer depth, breadth, and magnitude of the story is astounding. This is the first time I've read it since reading Atlas Shrugged, and it's clear that Hugo's influence is all over Rand. Indeed, one thing I learned from Jennifer Burns's Rand bio is that Rand wrote a detailed outline of Les Miz while working on Atlas. The Rose translation is beautiful.

Posted by Art Carden at 06:04 PM in Misc.

Indiana Retrospective

CardenOstrom.jpg

L: Me. R: 2009 Nobel Laureate Elinor Ostrom.

At the invitation of The Perfect Substitute's Justin Ross, I had the honor of visiting Indiana University earlier this week. I had the pleasure of presenting a paper at the Workshop in Political Theory and Policy Analysis before giving a speech on Walmart at the School of Public and Environmental Affairs.

The trip was amazing, and I was especially thrilled to visit the Workshop. The Tocqueville Room at the Workshop is one of the best seminar spaces I've ever been in. It had a very comfortable, lived-in feel, there was a lot of cool Ostrom memorabilia on the walls, the technology worked flawlessly, it was well-lit, and they had an urn of hot coffee ready to go for the seminar. The seminar participants were enthusiastic and energetic, and they asked a lot of fantastic questions that will improve our paper considerably.

The SPEA/Walmart audience was also enthusiastic, and the Tavis Smiley Atrium (where I gave the talk) was also a very good presentation space. Again, the projection technology worked flawlessly. Students asked a lot of very good questions, and I got to meet DOL reader Chris Ashbaugh, who made a special trip to IU just for the talk.

I'm headed to St. Lawrence University in Canton, NY next week to reprise my Walmart talk and speak to an economic history class about the Civil War and Reconstruction, and then I'll be off the road until APEE in April. Blogging will probably be ultra-light as I try to finish some of the projects I'm working on. Anyway, thanks again to Justin for putting together a great visit to IU.

Posted by Art Carden at 04:44 PM in Economics

How about this logic?

From the press release concerning this recent Center for Economic and Policy Research report that the national deficit (and then by extension the debt?) is nothing to worry about:

"There would be no short-term or long-term benefit from reducing the current deficit," said Dean Baker, co-director of CEPR and the author of the report. "If the budget deficit were smaller we would see higher levels of unemployment."
It is perhaps true that unemployment TODAY would be higher without the "Big G" spending money. However, what of the possibility that adjustments in the labor force are not occurring as they otherwise would because of the "Big G"? How can the deficit not eventually crowd out private investment, whether here in the United States or elsewhere? Is every government project the best use of capital? Is it impossible to conceive of mal-investment in the public sector as well in the private?

These are just questions that pop in my mind. I am not a macroeconomist and have never claimed any different.

Posted by Craig Depken at 04:12 PM in Economics

On the skedaddle effect c. 2010

In the debate surrounding the economic benefits of hosting mega-sporting events such as the Super Bowl or the Olympics, economists have been toiling away at the data to see if the economic impacts are as boosters and promoters advertise. Unfortunately (or fortunately?) we haven't found much support for the grandiose claims that occur before the event occurs.

I have spent countless hours thinking about this discrepancy (and I am not the only one) and in the past month or so have spent several hours talking with reporters about the expected impacts of the Super Bowl in South Florida, the 2010 NBA Allstar game and 2011 Super Bowl in Arlington and Dallas-Fort Worth, and the Olympics in Vancouver. I point out that I am not the only one thinking about these issues, co-author Dennis Coates, Victor Matheson, Robert Baade, and Phil Porter (to name a few) have also made great(er) contributions in this area of research.

In a soon-to-be resubmitted paper looking at the net impact of sporting events on taxable activity in host cities in Texas, Dennis and I outline four reasons for the disparity between ex post estimates and ex ante predictions (all abstracting away from principal-agent problems that present themselves in ex ante predictions):

1. Tourist substitution: some tourists choose not to visit the host city during the event and are replaced by other tourists. Whether replacement tourists spend more per-capita per-day or more in aggregate is not immediately clear.

2. Participation of locals: locals might participate in the festivities associated with the big event. Some locals might spend their leisure money on attending the event rather than on other local leisure activities, which would contribute nothing new to the local economy. Some locals might transfer future leisure spending to attend the event, thereby perhaps reducing spending in the host city in the future (for example, an individual might spend $600 to attend a World Series game but not spend on greens fees for the next six months). In aggregate the spending might not change over the course of the year, but the impact on the golf sector might be non-trivial.

3. Locals sit out the event - This effect I term the "hunker down" effect. Locals might choose not to go out and about during the event, perhaps not choosing to visit their favorite restaurant, because of the perception or reality of facing huge crowds. If, for example, an individual doesn't visit their restaurant during the event and they are not replaced by a visiting tourist, this might harm the local restaurant because it is unlikely that the local will visit the restaurant twice immediately after the event. The "hunker down" effect therefore introduces a negative influence on local spending during and perhaps immediately following the event.

4. Locals leave the city - This effect I term the "skedaddle" effect. In this case, some locals leave the city entirely and spend money in a different city during the event. This introduces yet another drain on local spending during the event.

The upshot is that even if ex ante predictions were not biased they are likely incorrect because the traditional input-output approach to economic impact studies abstracts away from these potential drains on local spending during the event. On the other hand, ex post studies look at the actual data in "reduced form," that is, ex post studies look at NET effects rather than GROSS effects.

The recent streams of research suggest that the ex ante predictions might be anywhere from 8 to 10 times larger than the ex post estimated net effects. The ex post studies likely miss some spending associated with the event, most likely because it is not possible to know what the relevant geographic market is: is it the host city, the metropolitan area, the general area of the state? However, one reason to focus on the host city, rather than the region, is because generally the host city fronts the expenses to host the event (such as police, fire, bomb squads, stadium construction, beautification efforts). Thus, even if the ex post studies are somewhat off, they are not likely to be 8 to 10 times off.

I like the tags "hunker down" and "skedaddle" because most reporters and students can recognize them and they are somewhat easy to remember. However, there is always a lurking question: just how big are these effects? Just how many people hunker down? Just how many people skedaddle? It is impossible for us to know at this point, there haven't been any studies that I am aware of that have tried to measure any temporary diaspora associated with big-time sporting events.

Anecdotal evidence appeared during the 1996 Olympics in Atlanta hundreds (if not thousands) of people rented out their houses during the games (to the chagrin and consternation of the USOC) and planned to leave town during the games. Unless only those who rented their house left town, the skedaddle effect would seem to be non-trivial as well.

During home football games in Athens, Georgia, there are a large number of student apartments close to the stadium/campus for rent during the weekend. During the same weekends there are several houses for rent that are a bit bigger and a bit further from campus. Student apartments are generally not for rent during the basketball season, suggesting that students are willing to forego the weekend of football related activities. I am not sure if the only people leaving town during a football weekend are those who rented their apartment.

I admit that the possible magnitudes of these effects are currently the focus of thought experiments, butI am confident that future research by myself and others will continue to flesh the effects out in more detail and help us contribute to the public debate in a meaningful (and helpful?) way.

Given my thoughts in this area and the work of others who suggest similar substitution effects associated with big-time sporting events, it was reassuring to read this post by George Washington University professor Lisa Neirotti at Sports Business Daily:

Based upon informal conversations, it appears half of the population considers the Games an expensive inconvenience and are leaving town — newspapers report approximately 250,000 residents flying the coop — with the other 50 percent excited to welcome the world.

50% are leaving town? Now that might introduce a huge drain on local spending relative to a normal February, thereby reducing the net impact of the games on the local economy. Moreover, because tourists generally stick to "touristy" areas and do not necessarily frequent those establishments that the locals know and love, the impact of the Olympics can be very disparate throughout the city. Some restaurants and bars are jammed to the gills while other restaurants across town are severely worse off than they normally would be during a February.

I love economics - more right than wrong, notwithstanding recent navel-gazing by some economists.

Posted by Craig Depken at 03:57 PM in Sports

Lecture and Exchange on the Gold Standard

A talk of mine on the gold standard, given last summer at the Young Scholars Conference put on by the Foundation for Economic Education, is now available online. Here is the mp3 audio file and below is the video format.

In the couse of my talk I defended fractional-reserve banking on economic and jurisprudential grounds. A leading critic of fractional-reserve banking, Walter Block, was in the audience for my talk. (Walter also a lecturer at the conference.) The last five minutes of the Q&A is an exchange between me and Walter that followers of the long-running debate over fractional reserves might find interesting. It's hard to hear Walter's questions on the video, but not so hard if you turn up the volume on the audio version of the talk.

P.S. If you click on the video's "MENU" button, you'll have the option to see other lectures from the conference, including mine on public goods theory.

Posted by Lawrence H. White at 03:08 PM in Economics

For the car lover c. 2010

My buddy Dane P. sends me a heads-up about an upcoming exhibit at the High Museum in Atlanta called the "Allure of the Automobile." Here's the line-up of the cars in the show:

  • 1933 Pierce-Arrow Silver Arrow
  • 1934 Packard Twelve Runabout Speedster, formerly owned by Clark Gable
  • 1935 Duesenberg JN Roadster, formerly owned by Clark Gable
  • 1937 Mercedes-Benz 540 K Special Roadster
  • 1937 Bugatti Type 57S Atalante Coupe
  • 1937 Delage D8-120S, Surbaisse, formerly owned by Louis Delage
  • 1937 Hispano-Suiza H-6C "Xenia" Coupe
  • 1938 Alfa Romeo 8C2900B Touring Berlinetta
  • 1938/39 Porsche Type 64 Coupe replica
  • 1953 Porsche 550 Le Mans/La Carrera Panamerica Coupe
  • 1955 Mercedes-Benz 300SLR "Uhlenhaut" Coupe
  • 1957 Jaguar XKSS Roadster, formerly owned by Steve McQueen
  • 1961 Aston Martin DB4 GT Zagato
  • 1961 Ferrari 250 Short-Wheelbase Berlinetta, "SEFAC Hot Rod"
  • 1948 Tucker Model 48 Torpedo
  • 1954 Dodge Firearrow III Concept Coupe
  • 1957 Cadillac Eldorado Brougham
  • 1959 Chevrolet Corvette "Bill Mitchell" Stingray Prototype
  • That line-up might be a once-in-a-lifetime opportunity.

    More here

    Posted by Craig Depken at 11:07 AM in Sports

    February 18, 2010
    Eat your heart out Leibniz

    KID (who is taking pre-calc right now): Dad, what's this Calculus stuff going to be about?
    ME: Uh, slopes.
    KID: Slopes? I hate those. Why does anyone need to know about slopes?
    ME: Well, if you're climbing a mountain, what's the slope when you get to the very top?
    KID: Uh, zero?
    ME: Right. And if you going down a valley and get to the very bottom, what's the slope?
    KID: Zero?
    ME: Right. So how do you know if you've reached the top or the bottom of something?
    KID: The slope is zero?
    ME: Right. That my dear is what calculus is all about.

    Posted by Robert Lawson at 12:05 PM in Science

    February 17, 2010
    Greetings from Indiana

    Photo 153.jpg

    At Indiana with Justin Ross from The Perfect Substitute. I presented a paper on the Memphis Riot in the Workshop in Political Theory and Policy Analysis and a public lecture on Walmart at the School of Public and Environmental Affairs. The penultimate preliminary version of the Memphis riot paper is available on the Workshop's website; comments are always welcome.

    Posted by Art Carden at 04:52 PM in Economics

    Adam Smith Live in Prime Time

    My colleague Russ Roberts did a great job last night on C-SPAN's live Book Notes call-in show devoted to Adam Smith and The Wealth of Nations. Watch the video here. It's 1:09 in total. Listen carefully around the 59:00 mark to hear the part I liked the most. Russ was paired with Sam Fleischacker, a political philosopher who is also an excellent Smith scholar.

    Posted by Lawrence H. White at 04:21 PM in Economics

    Measurement error and temperature records

    For what it's worth, the Times UK runs this story, "World may not be warming, say scientists," which piles a further and even more interesting layer of doubt atop the Intergovernmental Panel on Climate Change.

    The IPCC faces similar criticisms from Ross McKitrick, professor of economics at the University of Guelph, Canada, who was invited by the panel to review its last report.

    The experience turned him into a strong critic and he has since published a research paper questioning its methods.

    “We concluded, with overwhelming statistical significance, that the IPCC’s climate data are contaminated with surface effects from industrialisation and data quality problems. These add up to a large warming bias,” he said.

    Such warnings are supported by a study of US weather stations co-written by Anthony Watts, an American meteorologist and climate change sceptic.

    His study, which has not been peer reviewed, is illustrated with photographs of weather stations in locations where their readings are distorted by heat-generating equipment.

    Some are next to air- conditioning units or are on waste treatment plants. One of the most infamous shows a weather station next to a waste incinerator.

    Watts has also found examples overseas, such as the weather station at Rome airport, which catches the hot exhaust fumes emitted by taxiing jets.

    Posted by Edward J. Lopez at 01:48 PM in Economics

    On the CEA and Economic Performance

    Greg Mankiw recently posted on the quality of the CEA under different administrations. In the current issue of Public Choice, Brian Goff examines CEA composition and macroeconomic performance. The abstract:

    Using data on members on the Council of Economic Advisors as well as US Treasury secretaries and OMB directors from 1952 through 2005, I investigate the effect of economic advisors’ educational and employment backgrounds on the time series performance of several policy variables. Ivy League advisors appear to raise non-defense government spending, although the size of the impact differs by president. While voter preferences appear to matter for a wider variety of policy variables (changes in federal regulation and marginal tax rates), the share of Ivy League advisors is at least as important as voter preferences in explaining non-defense spending.
    Posted by E. Frank Stephenson at 01:29 PM in Economics

    Fed bought 80% of 2009's Treasuries?

    I realize I'm probably behind the times on this, but I came across this segment only recently. In the clip, the CNBC "Market Edge" anchor floats the finding the the Fed purchased EIGHTY PERCENT of new Treasury debt issued in 2009. The guests, Mike Holland and David Spika, don't quibble with the figure.

    I'm incompetent to link to a video.

    Folks, I know that I'm a finalist for the annual Nouriel Roubini "Dr. Doom" Alarmist Economist Prize, but this is disturbing. It speaks ill of our medium-term sovereign solvency and heightens my concerns over the possibility of rapid inflation in the medium term. However, it also heightens short-term risk. As we've seen, financial flows can change very rapidly. It's anybody's guess how much more of this behavior international bond holders will tolerate before they begin to liquidate parts of their positions.

    The most common counter argument is that it's in no one's best interest to spark a sell-off of U.S. debt. True, but that doesn't mean it won't happen. After all, it was in no one's best interest to sell off tech stocks and pop the tech bubble in 1999, but that's exactly what happened.

    Interesting times, indeed.

    Posted by Noel Campbell at 11:38 AM

    February 16, 2010
    On perfect foresight c. 1910

    From the February 16, 1910 NYT:

    The stockholders of the Delaware Railroad Company in special session at Dover today decided to lease the road for a ninety-nine-year period to the Philadelphia, Baltimore & Washington Railroad Company, for many years its lessee. The Philadelphia, Baltimore & Washington is controlled by the Pennsylvania Railroad. The project now goes to the shareholders of the Philadelphia, Baltimore & Washington Railroad for action at a special meeting to be held in Wilmington next Monday.

    Posted by Craig Depken at 10:49 AM in Economics

    Markets in Everything: Perky Jerky

    Yep, just what the world needed, caffeine laced beef jerky.

    Posted by E. Frank Stephenson at 09:11 AM

    February 15, 2010
    Malinvestment Anyone?

    From the WSJ:

    Given the state of housing, it seems like builders wouldn’t start a home without a signed buyer. But that is exactly what they’re doing: They’re ramping up speculative construction to attract last-minute home buyers who want to tap the soon-to-expire tax credit.
    Posted by E. Frank Stephenson at 08:36 PM in Economics

    Aristocrat of Pull

    From the WSJ:

    Sen. Robert Menendez of New Jersey urged the Federal Reserve last July to approve an acquisition to save a struggling bank in his state. He didn't mention that the bank's chairman and vice chairman were big contributors to his political campaign.

    If the acquisition had been approved, it would have prevented the two executives from losing what was left of their investments in the bank.

    Posted by E. Frank Stephenson at 08:33 PM

    I’m behind the times on non-parametric stats!

    Prof. Koppl sent me the link to this gem on his SSRN page .

    The Angular Distribution of Asset Returns in Delay Space We develop and apply a set of hypothesis tests with which to study changes in the angular distribution of points in delay space. Crack and Ledoit (1996) plotted daily stock returns against themselves with one day's lag. (This might be described as a plot in delay space). The graph shows these points collected along several rays from the origin. They correctly attribute this compass rose pattern to discreteness in the data. Asset prices move in discrete ticks. Our testing procedures allow one to test for changes in Crack and Ledoit's compass rose pattern. Our case study gives an example of such a change in distribution being caused by a change in regime. We plot the number of points along a given ray of the compass rose against the angle of that ray. This creates a theta histogram which describes the angular distribution of the points in delay space. We compare this distribution to a standard theta histogram created by a simple bootstrap procedure. The chi-square test is then performed in order to estimate quantitatively the consistency of the actual data with the standard theta histogram. Extensions of this technique are discussed. We apply our technique to an important episode of Russian monetary history. In the late nineteenth century, the credit ruble was a floating currency unlinked to precious metals. Generally, the finance ministry actively intervened to influence the ruble exchange rate. The one exception was during Nicolai Bunge's tenure as finance minister. Bunge's successor, Ivan Vyshnegradsky, was an unusually vigorous interventionist. The shift in regime from Bunge the non-interventionist to Vyshnegradsky the interventionist produced a marked change in the behavior of the ruble exchange rate. The angular distribution in delay space of the ruble's exchange rate against the German mark shifted dramatically under Vyshnegradsky. Hypothesis tests support the view that Vyshnegradsky's activism caused a disproportionate number of points of the compass rose to accumulate on the main diagonals in delay space. The theory of Big Players (Koppl and Yeager 1996) helps to explain why. Our results are consistent with those of Broussard and Koppl (1996) who use a GARCH(1,1) model.

    Exactly! This is speaking the language of the orthodox, who will pick up this paper and learn some solid Austrian goodness, rather than choose not to read it.

    Prof. Koppl also referenced his Society for the Development of Austrian Economics presidential address, published as “ Austrian economics at the cutting edge :”

    We have two paths before us. First, we can read the works of the heterodox mainstream; we can learn what heterodox mainstream economists view as puzzles and open problems; and we can speak to those problems in a language understandable to the heterodox mainstream. This is the path of engagement. Second, we can ignore the heterodox mainstream, declaring it taboo for ideological or methodological reasons; we can cleave to our old language and methods; we can write books and papers meant only for one another. This is the path of disengagement. If we choose the path of disengagement, the Austrian school will sink into obscurity and irrelevance. If we choose the path of engagement we can continue to exist as a school and we will have a constructive role to play in the emerging new orthodoxy in economics.

    …from someone with much better Austrian street cred than I’ll ever muster.

    Posted by Noel Campbell at 01:24 PM

    Regime Uncertainty: STILL Unclear on the Concept

    I swear to you, this stuff writes itself. Why has private investment not recovered? Why has hiring not picked up? Because no one in the business world know what the rules will be next month. Astute readers will recognize that I could have written this post during any randomly selected week of the Obama administration.

    Posted by Noel Campbell at 11:45 AM

    February 13, 2010
    I'm willing to be Acemoglu's coffee gofer

    Check out one of his latest NBER abstracts).

    Many of the most pernicious economic institutions and policies create entry barriers or manipulate factor prices to transfer resources from entrepreneurs and workers to groups that hold political power. These inefficiencies partly result from the fact that direct and efficient fiscal instruments that can be used for taxation and redistribution of resources are absent. One might then conclude that increasing state capacity and expanding the set of available fiscal instruments should improve the allocation of resources by preventing the use of these inefficient, indirect methods of redistribution. This reasoning ignores the effect of greater state capacity and the change in the set of available fiscal instruments on the political equilibrium, however. Because the availability of more efficient means of taxation increases the potential benefits of controlling state power, it also intensifies costly political conflict aimed at capturing the control of the state. This indirect effect counteracts the benefits from more efficient taxation and may dominate the direct benefits. The paper establishes the possibility that the allocation of resources may deteriorate substantially in response to an autonomous increase in state capacity and the set of fiscal instruments. It also argues that in the British case, which is a key historical example that points to the central role of increased state capacity in economic development, this change was not autonomous; instead, it was an equilibrium response to changes in political institutions that placed better checks on the exercise of power by the executive. This reasoning suggests that the study of the effect of fiscal capacity and the evaluation of policies aimed at increasing state capacity in less-developed economies should be done in the context of dynamic models of political economy, in which fiscal capacity and political constraints are jointly determined.

    Acemoglu always seems to write the papers I want to write, if only the ideas had occurred to me and if only I had the crazy-mad econ skills.

    Posted by Noel Campbell at 01:32 PM

    Trust Pete Boettke. I do!

    Trust Pete Boettke to always have a good response. Despite his high productivity, he apparently still has time to read a lot of junk (i.e., my blog post here ). If you’ve never had a chance to hang out with Pete, I strongly recommend it. Not only is he an accomplished raconteur, but the breadth of his knowledge is astounding. A typical conversation might go like this:

    Person A: “You know, there was this 6th century Buddhist monk who wrote a thousand-word essay on uncertainty in human life on a grain of rice.

    Pete: “Yeah, it strongly prefigures the work by (five economists, two philosophers, and one hard scientist, none of whom you know of). Ten years ago last Tuesday, I wrote a manuscript re-constructing, deconstructed, and turning sideways that very concept.”

    You: “Huh? Whut?” (Open another beer)

    More below the fold.

    Read More »

    Posted by Noel Campbell at 01:21 PM in Economics

    February 12, 2010
    How to Privatize Currency

    Bill Woolsey explains why it wouldn't be difficult.

    Posted by Lawrence H. White at 02:59 PM in Economics

    Knowing is Half the Battle, Revisited

    There were some great comments on my post the other day about what you need to know if you're going to pontificate. Robert Murphy calls Mike Munger and me to the mat. I agree with Bob that it's nice to see people adopting the economic way of thinking with respect to politics and I agree that perhaps Klein deserves a Scooby Snack for his insight; I thought it would be interesting to see what people think about the obligation to know (or at least, to demonstrate the willingness to know and the humility to accept that you might not) if you're going to pontificate about things. Klein identifies a larger problem that I've been thinking about in a variety of contexts in recent weeks and months: should we really be that surprised when politicians behave in ways that can be predicted or explained by public choice theory? Further, which policy disasters could have been prevented had people taken public choice seriously over the last few decades? Along these lines, here's Theodore Dalrymple on John Kenneth Galbraith.

    Posted by Art Carden at 01:43 AM in Economics

    February 11, 2010
    Cavalcade of (Semi-)Miscellany: Bloomington School Resources

    I'm headed to Indiana University on Tuesday; I'm presenting a paper in the Workshop in Political Theory and Policy Analysis at noon on Wednesday (info here, old version of the paper here, a new-but-still-very-preliminary-version of the paper will be available online tomorrow, comments very welcome), and then giving a public lecture on Walmart at the School of Public and Environmental Affairs in the Tavis Smiley Atrium at 2:30 (info here). Here are a few resources on the Bloomington School:

    1. Video of Elinor Ostrom's Nobel Lecture.

    2. Social Capital: A Multifaceted Approach. Ostrom's chapter should be available in its entirety in Google Books.

    3. Aligica and Boettke, Challenging Institutional Analysis and Development: The Bloomington School, available in paperback.

    Posted by Art Carden at 09:33 PM in Economics

    Yeah, But It'd Cost a Lot More If There Were No Snow

    That's my snarky response to the Drudge headline: "Feds Warn: Snow Costs Taxpayers $100 Million A Day." The linked story is here.

    Beyond the snark, the story is also interesting because it reports that "some Washington, D.C., area businesses are hailing the wintry mess of the past four days as a "shovel-ready" economic stimulus project in the making."

    BONUS SNARK: First Lady Michelle Obama says "Let's Move." Sounds great--how about back to Chicago?

    NO SNARKY COMMENT NEEDED: A Florida school system is using $350k of porkulus stimulus money to give IPods to some parents of disabled students. Wonder how many jobs saved or created will be conjured up from the giveaway. (Oop, I guess that's a snarky comment after all.)

    Posted by E. Frank Stephenson at 08:44 AM

    February 10, 2010
    On running up the score c. 1910

    The Feb. 10, 1910 NYT also reports on a rather non-PC sports score:

    Cathedral College basket ball team yesterday scored 103 points to 11 against Bryant High School Midgets
    I, of course, do not endorse such language but that is what was published in the paper. It seems Cathedral might have run up the score because the paper reports another score:
    Mackenzie School defeated Irving School of Tarrytown at Dobbs Ferry in basket ball yesterday by the score of 29 to 8.

    Posted by Craig Depken at 02:37 PM in Sports

    On potential moral hazard c. 1910

    I returned from a teaching stint in Hong Kong on Monday evening and I am still trying to get my internal clock back on Eastern Standard Time. That said, I was able to get to the February 10, 1910 NYT to see this little gem:

    The life of Eddie Smith, who will referee the Nelson-Wolgast fight, has been insured for $10,000. In the event Smith dies before the fight comes off each contestant will receive $5,000.

    I wonder why Smith was so important - was there no one else to referee the fight? Did Smith arrange a contract specifying that only he could referee the fight? One wonders if announcing the insurance policy was itself an insurance policy.

    Posted by Craig Depken at 02:34 PM in Sports

    Austrian econometrics

    I'm not trying to pick a fight, nor trying to churn activity for DoL, as I have been (correctly) accused of doing in the past. This is an honest, serious question.

    Why aren't Austrian economists testing their hypotheses using non-parametric statistical methods?

    I fully understand the old chestnut about the difference between uncertainty and sheer ignorance. I get it, and I respect the insight. Sheer ignorance, taken seriously, markedly reduces the usefulness of ordinary, parametric statistics.

    Even so, Austrian economists are social scientists and work to find ways to empirically test hypotheses.

    So why not use non-parametric statistical methods? Many of these methods are non-parametric precisely because they do not make assumptions about the structure of "what we don't know," nor do they assume things about the nature of the underlying distribution of the data. In short, these methods take uncertainty seriously.

    If more Austrians adopted non-parametric hypothesis testing as their empirical platform, I could see several advantages. One big one is that Austrians could then have theoretically supportable use of all of the secondary data that orthodox economists use, i.e., more testing of more hypotheses at lower cost. Another big advantage--rightly or wrongly--would be broader publishing access. One could still say Austrian things and test Austrian hypotheses, but the statistics would be a veil, making the work more palatable to orthodox economists who would otherwise (1) reject the paper as referees, or (2) fail to read the papers as the audience.

    I'm interested in your thoughts: noelecon@gmail.com , please, not my university email address.

    Posted by Noel Campbell at 11:39 AM

    February 09, 2010
    Amazon.com FAIL

    klein amazon FAIL.JPG

    Posted by Robert Lawson at 10:58 AM in Economics

    The Principal-Teacher Problem

    The abstract of a new NBER WP from Brian Jacob:

    This paper studies the effect of employment protection on worker productivity and firm output in the context of a public school system. In 2004, the Chicago Public Schools (CPS) and Chicago Teachers Union (CTU) signed a new collective bargaining agreement that gave principals the flexibility to dismiss probationary teachers (defined as those with less than five years of experience) for any reason, and without the elaborate documentation and hearing process typical in many large, urban school districts. Results suggest that the policy reduced annual teacher absences by roughly 10 percent and reduced the prevalence of teachers with 15 or more annual absences by 20 percent. The effects were strongest among teachers in elementary schools and in low-achieving, predominantly African-American high schools, and among teachers with highpredicted absences. There is also evidence that the impact of the policy increased substantially after its first year.

    Incentives matter.

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

    February 08, 2010
    New Light on the Star Wars Saga

    R2-D2 and Chewbacca: long-term Rebel agents (HT: Mike Ray). I've wondered about what I see as a hole in the plot at the end of ROTS: first, since it's clear that Palpatine is very, very strong--too strong for Obi-Wan alone--and that Anakin is strong and getting stronger, why didn't Obi-Wan and Yoda team up to take out Palpatine and then hunt down Anakin? Given Obi-Wan's experiences fighting Count Dooku and the fact that Palpatine very quickly dispatched the Jedi who had accompanied Mace Windu to arrest him, this looks like a pretty serious tactical blunder. Comments are open.

    Posted by Art Carden at 03:55 PM in Culture  ·  Comments (11)

    Good News from the Top Co-ordinator

    Geithner Says U.S. Will ‘Never’ Lose Aaa Debt Rating

    Hope you're as reassured as I am.

    Posted by E. Frank Stephenson at 03:35 PM

    This is why economists will always be employed

    A Jan 26-27 Gallup poll asked people about economic concepts, including how much we all like socialism:

    More than one-third of Americans (36%) have a positive image of "socialism," while 58% have a negative image. Views differ by party and ideology, with a majority of Democrats and liberals saying they have a positive view of socialism, compared to a minority of Republicans and conservatives.

    and yet

    Americans are almost uniformly positive in their reactions to three terms: small business, free enterprise, and entrepreneurs.

    A third of us have a positive view of the philosophy that spawned the bloodbath that was the 20th century's flirtation with socialism?

    Posted by Tim Shaughnessy at 03:09 PM in Economics

    The Truth Isn't Always Found By Meeting in the Middle

    Via XKCD.

    Posted by Art Carden at 02:02 PM in Funny Stuff

    Yandle on the current economy

    Was the current recession over as of July-August-September of 2009? Will it be a caterpillar recovery? What in the recovery is real, and what is stimulus? How do states measure on economic freedom and knowledge-intensity?

    Learn more and bask in the reassuring cadence of Bruce Yandle speaking in his new podcast from Inside State and Local Policy. About 20 minutes.

    Posted by Edward J. Lopez at 01:24 PM in Economics

    February 07, 2010
    Knowing is Half the Battle

    Mike Munger ladles mockery upon Ezra Klein for his shock and dismay about politicians acting like politicians. This always brings me back to one of my favorite quotes, from Murray Rothbard:

    "It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."

    I spend time in econ 101 talking about how understanding and applying the economic way of thinking is an important part of developing a good ethos. It raises a question about intellectual responsibility: if you're going to pontificate, what do you have a duty to know? Comments are open.

    Posted by Art Carden at 09:14 PM in Economics  ·  Comments (17)

    Truly Frightening

    Those are the only words appropriate for describing today's cartoon by the AJC's Mike Luckovich. I don't know what promted the GA Senate to pass a bill opposing the forced implantation of microchips nor do I know why anyone would even want to force people to have microchips implanted. But somehow finding a bill opposing forced implantation objectionable means Luckovich has about as illiberal attitude as one could possibly have. (I bet he also considers himself, without recognizing the irony, to be "pro-choice.")

    UPDATE: This article explains that the Senate passed the bill 47-2 and that if the bill becomes a law GA would join states including CA and WI in having such a law. It's hard to fathom why Luckovich could consider such a bill to be harmful.

    UPDATE2: Maybe there's a good reason to fear forced implants. After all: The government has your baby's DNA.

    Posted by E. Frank Stephenson at 07:48 PM in Culture

    Super Bowl Subsidy Shuffle

    In honor of Super Bowl Sunday and the Simpsons Coke commercial earlier, I offer the words of C. Montgomery Burns on "the American Dream: a billionaire using public funds to build a construct a private playground for the rich and powerful." From the archives, here are a few links on The House that Jerry Jones Built With Money He Took From Other People. Here's Evan Weiner on The Subsidized Bowl: both participating teams have gotten loads of money from various governments.

    Posted by Art Carden at 07:46 PM in Economics

    February 05, 2010
    Milton Friedman on Steel Protectionism

    Friedman makes a couple of important points: a special interest is a special interest, whether it's a business or not, and just because a police is good for--i.e., creates rents for--a specific industry or a specific business doesn't mean it's consistent with free enterprise. Also, it's easy to see the trouble and suffering of the steel worker who loses his or her job. It's much more difficult to consider the innovations and increases in standards of living we sacrifice in order to protect jobs in specific industries.

    HT: Don Boudreaux.

    Posted by Art Carden at 03:44 PM in Economics

    Has "Technology...Subverted the Original Idea of America?"

    Robert Wright thinks so (here's Derek Thompson). I've been wondering more and more what the reference point is for those who lament the alleged moral bankruptcy or cultural famines of modernity because it seems like Wright's "original idea of America" is, at best, a pleasant fiction. Yes, it is true that perhaps today's world of pick-and-choose media allows people to insulate themselves from reality, but that was also true 150 years ago. In Memphis, for example, there were (I think) seven different newspapers that allowed readers to wallow in confirmation bias to their hearts' content. Indeed, during the Memphis riot of early May, 1866, members of the mob hoisted the editor of the Avalanche on their shoulders and threatened to burn the offices of the Post, which was a pro-union newspaper in town (to his credit, the editor of the Avalanche discouraged them).

    Perhaps, though, people yearn for the days when our national news options were more or less limited to Dan Rather, Tom Brokaw, and Peter Jennings. This concerns me because it translates to a yearning for the days when We (whoever "we" are) controlled the conversation and didn't have to worry about competition from dissenters like Fox News. On Fox News, here are David Henderson and James Otteson.

    Finally, Nick Gillespie makes an important point on how left-wing condescension short-circuits meaningful discussion (HT: Steve Horwitz). It reinforces my belief that American conservatives and liberals are like Coke and Pepsi: they taste different, but at the end of the day, they're basically the same thing. Conservatives believe we can turn our guns outward and plan the lives of foreigners; liberals believe we can turn our guns inward and plan the lives of Americans. To borrow from Bryan Caplan, this is to-may-to, to-mah-to for libertarians whose relevant political spectrum extends from the totalitarian Joseph Stalin to the anarchist Murray Rothbard. Along these lines, here's F.A. Hayek explaining why he is not a conservative. And here's George Orwell's classic essay "Politics and the English Language."

    Posted by Art Carden at 12:04 PM in Economics

    Buena Vista Links and Suggestions

    I gave a couple of talks on Walmart at Buena Vista University yesterday and promised to post some links relevant to some of the questions people asked. On the importance of private property rights, play the bunny game from the IHS. Here's my Mises Media Archive, with audio of my "Environmental and Resource Economics" lecture. Here's my list of links from a panel at Rhodes; it includes links to Lant Pritchett's excellent book Let Their People Come. I also recommend William Easterly's wonderful The White Man's Burden and C.K. Prahalad's The Fortune at the Bottom of the Pyramid.

    Addendum: Here's my paper with Charles Courtemanche and Jeremy Meiners on Walmart and values, available for ungated download from BEPress.

    Posted by Art Carden at 10:51 AM in Economics

    Markets in Everything: Rent-a-Crowd Edition

    From today's WSJ:

    Want to ensure a bigger draw for your lackluster candidate? In Ukraine, just contact Vladimir Boyko and he'll rent you a crowd.

    Mr. Boyko says his company, Easy Work, has assembled a database of several thousand students and can mobilize them on a day's notice to turn up at demonstrations anywhere in Kiev, stand for hours at a time, and cheer or jeer on cue.

    Posted by E. Frank Stephenson at 08:46 AM in Economics

    Vote early and vote often

    I have been having a good time in Hong Kong - hence no activity from me lately.

    I did have this come across my email box and figured to share with the others.

    Open voting for the three economists who most contributed to the financial meltdown is the topic for this year's IgNobel prize in economics.

    Vote early and vote often

    Posted by Craig Depken at 04:37 AM in Economics

    February 04, 2010
    Caught My Eye

    Co-blogger Art's comparison of Obama and Steve Jobs speeches given on January 27.

    Steve Horwitz on the federal government, a GM owner, having a conflict of interest in the Toyota gas pedal mess.

    Thomas Hazlett on Google.

    Jay Schalin on the debate over the causes of low college graduation rates: Are low completion rates caused by poorly prepared students or by inadequate resources?

    A USA Today piece on the backlash against revenue redlight cameras.

    And from the shameless self-promotion department--yours truly on Georgia's budget issues.

    Posted by E. Frank Stephenson at 01:00 PM

    My Friend Sarah

    Nice vid from a GMU undergrad.

    Posted by E. Frank Stephenson at 09:59 AM

    Do We Need a Deficit Reduction Commission?

    The President is promoting a special, bipartisan commission to deal with deficit reduction. It is supposed to produce proposed tax hikes and spending cuts to bring the deficit down. I thought we already had such a commission: it's called Congress.

    Posted by Brad Smith at 01:02 AM in Politics

    February 03, 2010
    Markets in Everything: Tiger Mistress Golf Balls

    Tiger Woods Mistress Golf Ball Set

    Posted by E. Frank Stephenson at 11:01 PM in Culture

    February 02, 2010
    Summer 2010 Opportunities

    So you're a graduate student and you're wondering "what should I do this summer?" I would encourage you to apply for a Rowley Summer Fellowship from the Mises Institute. I spent a few weeks there in the summer of 2003, attended the Rothbard Graduate Seminar on Man, Economy, and State, and generally enjoyed the outstanding intellectual environment (the change of scenery was nice, too). HT: Tom Woods.

    Speaking of nice scenery and outstanding intellectual environments, the American Institute for Economic Research also has a student summer fellowship program. I've been to AIER as a Visiting Research Fellow twice, and I've loved it both times. Suffice it to say that the summer climate in the Berkshires is much, much more pleasant than the summer climate in Memphis.

    Here's my "Opportunities for Students" page, which I expect to update periodically. It has links to a handful of other resources.

    Posted by Art Carden at 01:58 PM in Misc.

    I, Beer

    Yesterday I blogged about I, Pencil. Today as I begin class I will have the following on the projector.

    I, Beer

    In tribute to Leonard E.Reed

    I, beer, simple though I appear to be, merit your wonder and awe. Millions take me for granted, yet not a single person on the face of the earth knows every process required to make me. Think of the complex web of people and the numberless skills that went into my creation. I, beer, am a complex collection of miracles: hops, barley, yeast, water, glass bottles, metal caps, printed labels, and so on. Contemplate all the tractors and sprinklers and fertilizers and other implements used in growing and harvesting the hops and barley. Think of all the persons and the countless skills that went into their production: the mining of ore, the making of steel and its refinement into blades and machine parts, the many miles of irrigation pipes and canals that bring water to the fields, and so on. But to these miracles an even more extraordinary miracle has been added: the configuration of creative human energies -- milions of know-hows spontaneously responding to human necessity and desire in the absence of any governmental or any other coercive masterminding. Indeed, the seemingly simple task of producing one beer such as I is so vastly complex that no one could plan it. If you can become aware of the miraculousness which I symbolize, you can help save the freedom humanity is so unhappily losing.

    As far as I know, this was written by a group of Koch Summer Fellows in the summer 2001, when I was visiting at GMU. They made t-shirts, which were quite cool. I got the text from Rob Frommer.

    Posted by Edward J. Lopez at 12:27 PM in Economics

    The Myopia of Politics

    I found this interesting (HT: Doctor J) because it illustrates the myopia of politics. This played right into what I' thinking about this morning as I prep for a couple of trips this month and as I think about how the history of twentieth-century economic thought will be written. My question, in response:

    "Hey you. You there in the 'Hope and Change' t-shirt (or with the "W-The President" sticker on your car--it doesn't really matter). If I pawn my car title, am I richer because I have more cash in my wallet?"

    In reviewing a handful of books on Walmart by self-styled progressives and in prepping for taking a revised Walmart lecture on tour, I'm struck by the implicit view that the Big Business/Big Government/Big Labor iron triangle represented by the new industrial state of the 1950s and 1960s was a stable, long-run equilibrium. As we've learned in recent years, you can only consume so much capital before you run out. Here's Bryan Caplan quoting Amar Bhide on big corporations losing money. Here's George Reisman on where GM might be without the UAW. My prediction: if retail is unionized and all else remains equal, the government will someday end up taking over or bailing out Walmart, Costco, and Target the same way they did with the car companies.

    Posted by Art Carden at 10:00 AM in Economics

    Mike Lester on TOTUS

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

    LesterTOTUS.jpg

    Posted by E. Frank Stephenson at 09:46 AM in Politics

    February 01, 2010
    What is the market?

    It's that time of the semester. This week I am teaching from "I, Pencil" about incentives and institutions, with the punch line going something like this:

    What is the market? Consider the statements of three famous economists from the previous three centuries…

    Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By…directing that [labour] in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Adam Smith (1723-1790) An Inquiry Into the Nature and Causes of the Wealth of Nations (1776)

    The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody’s actions aim at the satisfaction of other people’s needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself, an ultimate end for himself and a means to other people in their endeavors to attain their own ends.
    Ludwig von Mises (1881-1973)
    Human Action: A Treatise on Economics (1949)

    When goods are produced and exchanged in competitive free markets in which people trade at market prices, economic activity leads to efficient outcomes… [That is], individual rationality, coupled with competition and prices, leads to efficient outcomes…in which there remain no unexploited opportunities to improve everybody’s welfare. This is so even though individual rationality and competition without prices rarely leads to such desirable outcomes.
    Steven Landsburg (1952- )
    The Armchair Economist: Economics and Everyday Life (1993)

    I think these passages complement each other nicely and give students a couple of different entry points for seeing the ideas and their constancey. Now onto Chapter 1 of the textbook.

    Posted by Edward J. Lopez at 05:39 PM in Economics

    Econ Talk podcast on Hayek and Money

    Last week I stopped by the office of my GMU colleague Russ Roberts to chat about Hayek's theory of the business cycle and his proposals for monetary reform. Lo and behold, the conversation is now available for everyone to hear at the Econ Talk podcast site that Russ hosts. So that's what those microphones were for ...

    Posted by Lawrence H. White at 12:08 PM in Economics

    An agenda for real banking reform

    Richard Ebeling of Northwood University punctures the myth that central bankers know best and lays out a six-point plan for banking reform with no punches pulled.

    Posted by Lawrence H. White at 11:43 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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