Division of Labour: April 2010 Archives
April 30, 2010

Here's an interesting look by Jim Manzi at the famous jam experiment that has given a lot of momentum to the "paradox of choice" literature (HT: Will Wilkinson). Here's a summary of the economics sniff test:

Before getting into the detailed analysis, stop to notice that if this result were valid and applicable with the kind of generality required to be relevant as the basis for social policy, it would imply that lots of retailers could simultaneously eliminate 75 percent of their inventory and increase sales by 900 percent. I don’t believe in purely efficient markets, but that doesn’t seem very plausible to me.

This illustrates one of the most important things the economic way of thinking brings to the table: it provides a ready test of almost any proposition about social policy. If this claim about the paradox of choice is true, then there is an opportunity for someone to earn massive profits by correcting it. The same logic holds for claims attributing pay gaps to discrimination. People generally don't step over piles of money, and this means that markets have built-in mechanisms that punish entrepreneurial errors.

Posted by Art Carden at 10:27 AM in Economics

Sport c. 1910

From a short article in the April 30, 1910 NYT:

SARDIS, Miss. - The Rev. Dr. Mitchell, Methodist minister and father of Robert Mitchell, State University pitcher, who has just agreed to a trial offered by the Chicago Nationals, says baseball is a "cold-blooded money-making business nowadays, and that no element of sport lies in the game of to-day." For that reason he will forbid his son to enter the professional field. "Bob" is touring with the Varsity squad, and it is not known whether he will abide by his father's decision. He is over 21 years old.
Money-making indeed. Given this attitude, poor Dr. Mitchell would be apoplectic today.

Posted by Craig Depken at 09:47 AM in Culture

April 29, 2010
Sports and Politics Paper Idea

People have said before that politics and sports are different flavors of the same phenomenon (tribalism). I largely agree, and I think this is clear in the role-reversals that occurred after Barack Obama was elected. Here's an idea for a paper inspired by a comment Steve Horwitz made a few weeks ago: compare the tone and style of comments on internet stories about politics to the tone and style of comments on internet stories about sports. I've seen some work before in which people code passages of text based on different themes, and I'm sure there are methods of pattern recognition within text that would highlights the similarities and differences. The patterns would probably also apply to stories about music, the arts, and what have you.

Posted by Art Carden at 02:49 PM in Economics

Sound Money, Free Banking, Rule of Law

In the future, everyone will have 15 YouTube videos. Here are two of mine. The first is a talk on "Sound Money and Free Banking" that I gave at George Mason U last week, under the sponsorship of the Atlas Economic Research Foundation's sound money project. Thanks to the GMU Econ Society for hosting.

Lawrence H. White on Sound Money from Atlas Network on Vimeo.

The second is a keynote address on "Avoiding and Resolving Financial Crises:
The Rule of Law or the Rule of Central Bankers?" that I gave in October 2009 at the annual conference of the Economic Freedom Network - Asia, held in Siem Reap, Cambodia. It's a rather low-rez video -- might have been shot on a cell phone. Cambodia's finance minister takes the stage after me.

Finally, here's a link to audio of my chat with talk radio host Jeffrey Lloyd on Star FM 106.5, Nassau, The Bahamas. I stopped by Jeffrey's studio when I was down there last month to give a talk for the Nassau Institute. Thanks to Damien Forsythe for arranging it all. Btw, Lloyd was well prepared. This is the only time an interviewer has wanted to talk about methodological individualism!

Posted by Lawrence H. White at 02:46 PM in Economics

April 28, 2010
Economic Calculation in the Militarist Commonwealth

The military's clever homage to Jackson Pollock Afghanistan Stability/COIN Dynamics diagram has been making the rounds again, this time in discussions of Powerpoint. A lot of conservatives realize, to their credit, that socialism is either impossible* or at least a very bad idea. And yet a lot of those same conservatives can look at the Powerpoint slide below and maintain a steadfast belief that with sufficient willpower, we can reshape an entire society in Afghanistan (HT: Cafe Hayek, Kids Prefer Cheese, and a bunch of other places that have blogged about this picture). Couldn't we have saved taxpayers a lot of money with a spirograph and a random word generator?


*--"Impossible" in the Mises/Hayek sense: socialism is doomed to failure because rational economic calculation is impossible without secure private property rights.

Posted by Art Carden at 09:56 PM in Economics

Best Recent Addition to My Google Reader Feed

The I Love Memphis Blog (HT: Doctor J). First, it's a great source of information about our adopted home. Second, the daily updates really contribute to our assessment of the Bluff City's sense of place. My contribution to the "I Love Memphis" photo album is below the fold.

Read More »

Posted by Art Carden at 09:28 PM in Culture

The Greedy Hand: Michigan Speedtrap Edition
Metro Detroit motorists who exceed posted speed limits may not be breaking the law, because in many cases the limits themselves are unlawful, according to one of the state's top traffic cops.

Four years after the passage of Public Act 85, which requires municipalities in Michigan to conduct studies to set proper speed limits, most cities, villages and townships have not complied, according to Lt. Gary Megge, head of the Michigan State Police Traffic Services Section.

One likely reason, said Megge, whose section advises communities on how to set proper speed limits, is that communities want speeding ticket revenue, and failing to conduct the required speed studies allows them to keep enforcing their speed limits that Megge calls "artificially low."

This comes as absolutely no surprise to anyone who's seen Garrett and Wagner's paper on the countercylical nature of speeding tickets. Source; pointer from Instapundit.

Posted by E. Frank Stephenson at 03:24 PM in Economics

Another Helping of Hooverite Nonsense

Time to whack another mole--we have another generous helping of nonsense about Herbert Hoover being a practioner of laissez-faire. Today's offering comes from someone posting as "madamab" at the Widdershins blog:

You know who else focused on the deficit and cutting spending during a time of deep recession/depression? Herbert Hoover.

Once again, let's take a look at old Herbie's record. Table 1.1 of this handy document on federal budget history reveals the following numbers for government spending and budget surpluses (figures in billions; negatives mean deficits of course):

1928 spending 2.961; surplus 0.939
1929 3.127; 0.734
1930 3.32; 0.738
1931 3.577; -0.462
1932 4.659; -2.735
1933 4,598; -2.602

Some fiscal austerity going on there--a 50% increase in spending and a shift from surpluses approaching $1B to deficits of 2.5B.

BTW, The Whiddershins post linked above is promoting some sort of fiscal sustainability counter conference because the White House's deficit commission is too restrained for madamab's taste.

Posted by E. Frank Stephenson at 02:47 PM in Economics

Toward Understanding Ideological Polarization in the Blogosphere

Three internet law scholars affiliated with Yale's Infomation Society Project have analyzed ideological and technological patterns among political blogs.

[P]revious empirical studies of the United States political blogosphere have found evidence that the left and right are relatively symmetric in terms of various forms of linking behavior despite their ideological polarization... In this paper, we revisit these findings by comparing the practices of discursive production and participation among top U.S. political blogs on the left, right, and center during Summer, 2008. Based on qualitative coding of the top 155 political blogs, our results reveal significant cross-ideological variations along several important dimensions. Notably, we find evidence of an association between ideological affiliation and the technologies, institutions, and practices of participation across political blogs. Sites on the left adopt more participatory technical platforms; are comprised of significantly fewer sole-authored sites; include user blogs; maintain more fluid boundaries between secondary and primary content; include longer narrative and discussion posts; and (among the top half of the blogs in our sample) more often use blogs as platforms for mobilization as well as discursive production.

Here is a slanted write up in The Nation. Are we to be surprised by these findings? I don't think so. This fits with the populist and Progressive traditions that are strong in the American left, and the monarchical tradition that is stronger on the right. The paper is more about advancing the tools with which we analyze the Internet especially the blogosphere. By the way, a quick glance at the appendix reveals no economics blogs are in the study.

Posted by Edward J. Lopez at 12:55 PM in Misc.

April 26, 2010
Not All Employment Declines Are Bad

Yours truly in today's WSJ:

William P. Suliburk (Letters, April 21) calls the decline in manufacturing employment "disconcerting" and considers the growth in teachers and health-care workers to be indicative of "misallocation in the employment of our labor force."

Bloated government spending has indeed led to misallocations, such as that outlined in your editorial "Fewer Students, More Teachers" (April 12). However, the decline in manufacturing employment, much like the dramatic decrease in agricultural employment in the 20th century, reflects a long-term trend driven primarily by rapid productivity growth. Surely, Mr. Suliburk does not pine for the days in which one-third or more of the U.S. labor force toiled at subsistence farming; nor should he fret about productivity-driven declines in manufacturing employment.

The letter generated several kind emails (thanks folks) and one that called me "unbelievably naive and ignorant."

One from the dead letter office is below the fold.

Read More »

Posted by E. Frank Stephenson at 10:19 PM in Economics

Lessons from The Lorax

That's the title of the 2000 Journal of Private Enterprise article written by Berry grad Mike Hammock and my former Berry colleagues Wilson Mixon and Mike Patrono. The recent Earth Day brought the article to mind.

ADDENDUM: Also see DOL friend Paul Rubin's (gated) WSJ piece on environmentalism as religion.

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

Euvoluntary Exchange is Always Just

Is exchange just? Does it matter if exchange is "euvoluntary"? I try to answer these and other questions, here.

Read More »

Posted by Michael Munger at 06:34 PM in Economics

"Broken Windows" and "The Godfather"

When Bob Lawson watched a NOVA program on PBS (see his blog entry below), he commented on the show's statement, "the...slight increase in the cost of energy will actually stimulate a lot of innovation... the Bay Area sees this as an incredible orld-wide business opportunity." Bob immediately thought of the broken window fallacy and thought it might make a catchy and perhaps educational board game.

As they say on my favorite BBC television show, Top Gear: "Spot on, that."

But when I read the rest of the PBS transcript that Bob included, I saw, "The U.S. should realize this is a credible business opportunity...Why don't we say, with some regulations that will prompt us to say, 'We can find the solutions. And not only that, we can export it to the rest of the world."

I immediately envisioned another potential board game, but one that would include, as a video component, various scenes from the Godfather movies. The idea is for each player to make up a fictional threat to the welfare of aspiring developing countries around the world, then sell them high technology solutions as "insurance" that they are compelled to buy at a dear price... or else.

Cue title sequence music:
Enter Clemenza: "Leave the gun; take the canollis."

Posted by Mike Stroup at 06:09 PM

Sustaining poverty

Robert Paarlberg on sustainable agriculture:

Influential food writers, advocates, and celebrity restaurant owners are repeating the mantra that "sustainable food" in the future must be organic, local, and slow. But guess what: Rural Africa already has such a system, and it doesn't work. Few smallholder farmers in Africa use any synthetic chemicals, so their food is de facto organic. High transportation costs force them to purchase and sell almost all of their food locally. And food preparation is painfully slow. The result is nothing to celebrate: average income levels of only $1 a day and a one-in-three chance of being malnourished.

If we are going to get serious about solving global hunger, we need to de-romanticize our view of preindustrial food and farming. And that means learning to appreciate the modern, science-intensive, and highly capitalized agricultural system we've developed in the West. Without it, our food would be more expensive and less safe. In other words, a lot like the hunger-plagued rest of the world.

Posted by Wilson Mixon at 02:19 PM in Economics

April 25, 2010
Which is it?

Is the Goldman-Sacs case/action by the SEC closer in spirit/reality to

a) Howard Roark's trial in The Fountainhead?

b) Hank Rearden's trial in Atlas Shrugged?

Comments open.

Posted by Craig Depken at 05:28 PM in Economics  ·  Comments (3)

Revitalizing Memphis!

The Pyramid in Memphis (our other state-of-the-art basketball arena) has been sitting empty for years. Now, apparently, Bass Pro Shops is (finally) slated to open a store in the arena. This will re-vitalize the surrounding area, which wasn't successfully revitalized when the Pyramid was originally built.

Ultimate lesson: let's drop the "revitalization" plans for these areas and instead drop the policies that de-vitalized them in the first place.

Posted by Art Carden at 08:47 AM in Economics

Denmark Dispatch: Education is Too Important Not to Be Left to the Market

Here are a couple of links based on the discussions we're having at the "In Defense of Capitalism" Conference:

1.E.G. West explains how markets have provided education historically.

2. James Otteson explains the Great Mind Fallacy: to borrow from Hayek, you know very little about what you imagine you can design.

Posted by Art Carden at 07:05 AM in Economics

In Defense of Capitalism

I'm in Copenhagen, Denmark for a two-day conference entitled "In Defense of Capitalism" (here's the official website). The coordinators are to be congratulated for putting on an amazing event that blends comments from economists, political scientists, and business people. Turnout has been great even though the conference of the Danish Liberal Alliance is also taking place this weekend.

Today features talks by Peter Klein, Thorsten Polleit, and Patri Friedman. Video from both days will be on the web at some point.

Now here's a challenge for students. The organizers of this conference basically decided one day that, in light of ongoing conversations about the financial crisis, they wanted to put together an international conference about capitalism. Then they went out and did it. Go thou and do likewise.

Fun facts:

1. Fellow speaker Indra de Soysa is an Alabama poli sci PhD. Roll Tide.

2. Fellow speaker Phillip Bagus and I were roommates at the Mises Institute's Mises University Summer Seminar in 2002.

Posted by Art Carden at 01:45 AM in Economics

April 22, 2010
Best Sentence I've Read So Far Today

Comes in an email from Don Boudreaux:

The 'Progressive' view of ordinary men and women is that we are forever making poor, irrational, and self-destructive choices - EXCEPT when in voting booths (and, even there, only when we vote for 'Progressive' candidates).
Posted by E. Frank Stephenson at 01:39 PM

Correlation vs. Causation c. 1910

From a letter to the editor printed in the April 22, 1910 NYT:

Mr. Schaefer of the New York Brewers' Association states that "insanity has not diminished where the liquor traffic is supposed to be driven to the wall."

[the letter goes on to list several states and the number of liquor dealers and "insane" - see below]


Mr Schaefer refers to the relation of intemperance to to pauperism. May we point out that in a book called "Text Book of True Temperance," compiled, published, and distributed in great numbers by the United States Brewers' Association, it is admitted that an examination of over 80,000 cases of pauperism showed 87.95[?] per cent. caused by drink?

The temperance movement, at this time, has been making considerable progress around the country. One argument offered for banning alcohol was the reduction in "mental disease" - however roughly that was defined in 1910. This letter tries to show that where the liquor traffic still persists that there is "more insane" individuals.

The letter writer relies upon the reader to do some mental computations to determine the correlation between the number of liquor dealers per capita and the number of "insane" per capita. Luckily, I have Stata.

Assuming the letter-writer's data are correct, the correlation between the number of liquor dealers per-capita and the number of "insane" per capita comes out to be 0.88. Here's a scatter plot of the data:

Of course, one has to ask whether this is causation or correlation.

Posted by Craig Depken at 11:14 AM in Culture

SDAE: Carl Menger Undergraduate Essay Contest

By email from Steve Horwitz, long-time Secretary of the SDAE.

The Society for the Development of Austrian Economics is pleased to announce the inaugural Carl Menger Essay Contest. The purpose of the contest is to recognize and encourage undergraduate scholarship in the Austrian tradition and the broadly catallactic approach to social science which it represents, an approach common also to the Scottish Enlightenment of Smith and Hume, the French Liberal School of Say and Bastiat, the Virginia School of Buchanan and Tullock, the UCLA price theory of Alchian and Demsetz, and the Bloomington School of Vincent and Elinor Ostrom, among others. We invite essays that explore, advance, challenge, or apply the ideas of these and related schools of thought.

The contest is open to undergraduate students and recent graduates from any discipline. Entrants must be enrolled in undergraduate coursework at some point during the 2010 calendar year, and must not hold a Bachelor’s or equivalent degree as of January 31, 2010. Those graduating at the end of the spring or summer are eligible.

Three winners will receive $1,000 each conditional on attending and presenting their essays at the Society’s annual meeting at the Southern Economic Association conference (southerneconomic.org). The conference takes place on November 20-22, 2010 at the Sheraton Atlanta in Atlanta, Georgia.

PDF with full details here.

Posted by Edward J. Lopez at 10:45 AM in Misc.

Ghate on Rand and Smith

The APEE meetings featured an excellent debate between Yaron Brook and James Otteson on the defenses of capitalism offered by Ayn Rand and Adam Smith. Dan Klein asked me to pass this question to Yaron Brook and then post his response:

"Take Smith's famous thought experiment about -- by some fantastic unstated mechanism -- you ("a man of humanity in Europe", in 1759) could prevent an earthquake in China by cutting off your pinky. Smith says that of course you would do so, and then addresses why. Yorum, would you cut off your pinky? Assume that knowledge of the whole affair would necessarily remain entire personal. If yes, and you claim to square that with "selfishness," aren't you using words in an opportunistic and unmanageable way?"

A response from the Ayn Rand Institute's Onkar Ghate is below the fold. Comments are open.

Read More »

Posted by Art Carden at 08:24 AM  ·  Comments (53)

April 21, 2010
We should make up a new game called "Spot the Broken Window!"

On last night PBS show NOVA about California's energy policies, U.S. Secretary of Energy Stephen Chu:

Q: So you don't think that higher energy costs will cripple businesses?

Chu: I think the cost of energy will not cripple business. I think the cost of energy, slight increase in the cost of energy, will actually stimulate a lot of innovation. Quite frankly, the Bay area sees this as an incredible worldwide business opportunity. Just as it led in the computer industry, in the biotech industry, now we believe we can lead in the green-tech industries that could help save the world.

The United States should realize this as a credible business opportunity. We have incredible intellectual capital in the United States. Why should we drag our feet and say, "We don't wanna do this." Why don't we say, with some regulations that will prompt us to say, "We can go find the solutions. And not only that, we can export it to the rest of the world."

Posted by Robert Lawson at 04:50 PM in Economics

Writing in Books

Tyler Cowen doesn't. I do. Here's why:

1. I'm a compulsive note-taker, and margin notes are one way of wrestling with ideas in real time. This is especially true when I'm reviewing a book or when I don't have a notepad or computer handy.

2. It adds value when I give books to libraries or lend them to people. Used and marked-up copies of older books brings me into conversation (albeit faintly) not only with the author, but with a previous reader. Reading th rough Murray Rothbard's personal copy of Douglass North's Structure and Change in Economic History, for example, made an impression on me when I was at the Mises Institute in 2002 and 2003.

3. Assuming the books aren't destroyed, my marginal notes will bring me into conversation with future readers. Just as when I read marked-up copies of old books I can see what someone, somewhere thought was important, I can be that someone, somewhere to future readers.

Posted by Art Carden at 03:43 PM in Economics

On the Pervasiveness of Rent Seeking

Even salt producers have a trade association, the Salt Institute.

Posted by E. Frank Stephenson at 12:50 PM in Economics

Gaia's Wrath and Frederic Bastiat

1. Brendan O'Neill offers us "Sinners in the Hands of an Angry Gaia." While reading and reviewing Robert Nelson's The New Holy Wars, I downloaded "Sinners in the Hands of an Angry God" and did a find-and-replace where "God" was replaced with "Earth" to see how it reads (not well enough for illustrative purposes).

2. Steve Horwitz tells us how the Iceland Volcano will create economic progress. After all, hiring window washers will create jobs.

Posted by Art Carden at 12:22 PM in Economics

Economics and Ethics (Updated)

My latest Mises.org piece is here. I argue that the economic way of thinking is an input into good ethics. I also discuss this in my review of Paul Heyne's "Are Economists Basically Immoral?", which is forthcoming in the QJAE.

I was going to write a standalone post on this, but David Henderson's post about competing visions fits perfectly: there's a yawning gap between visions. One says "I have a problem; how can I solve it?" The other says "The world is broken; give me power and I will fix it."

Posted by Art Carden at 09:44 AM in Economics

April 20, 2010
Evening Links

1. We just had milkshakes from Sweden Kream on National. Believe the hype (HT: I Love Memphis).

2. Mike Hammock looks at Economic Freedom and Google Information Requests. He's right: there's a paper there. Someday, when the US government decides it's time to round up dissidents, they're going to go to Facebook and Google.

3. This weekend's In Defense of Capitalism conference in Copenhagen is threatened by the Iceland volcano, but Danish airports are supposed to open at 2:00 AM local time tomorrow. We find out in the morning. I'm praying.

Posted by Art Carden at 07:41 PM in Economics

Interview with George Selgin

He talks about how he became an economist, his approach to economics (you can call him an Austrian, but he doesn't label himself), and his work on free banking.

Posted by Lawrence H. White at 05:40 PM in Economics

New working paper

Open Market Valuation of Player Performance in Cricket: Evidence from the Indian Premier League

with Ramakrishna Rajasekhar

This paper investigates the final bid prices for players during the first three seasons of the Indian Premier League (IPL). Although the IPL imposes a salary cap and other labor-market restrictions, it is anticipated that final bid prices reflect the aggregate value of player productivity statistics, potential leadership skills, and auction characteristics. The empirical analysis follows the methodology used to investigate wage determination in other professional sports. We find that cricketer salaries are influenced by player characteristics and that the marginal values have not been changing during the first three years of the league. We find little evidence for systematic wage discrimination against players who are not Indian nationals. We also find little evidence for systematic differences in average salaries paid across the eight franchises in the league.

Available at SSRN

Posted by Craig Depken at 03:00 PM in Sports

Quote of the Day: Otteson on Rights and Duties

Jim Otteson asks about rights and duties with respect to health care. A choice line:

"What is not the test for having a right to something is that one really, really wants it."

From the perspective of economics, there's a subsidiary question: if I have a duty to provide others' health care, what, then, do I have a duty to forgo in order to provide it? How are these obligatory costs identified, and by whom? Right now, I'm blogging about rights and duties, watching Sesame Street clips with Jacob, and intermittently talking to the plumber who is fixing some of our faucets. Is this OK? What should I be doing instead? Whose blessing do I require?

The comments on Jim's post are interesting. Common apologetics for universal health coverage ("Europe does it," "we have Social Security," etc.) are canards because these are all financially unsustainable. Welfare state public finance is an exercise in (presumably well-intentioned) institutional prodigality. We could probably throw a heck of a party if we cashed in all of our assets and spent everything on booze, but the money and the liquor would run out eventually.

For more, here's Bryan Caplan's resource page from a recent debate in which he participated.

Cross-posted at the Mises Blog.

Posted by Art Carden at 10:11 AM in Politics

What I've Been Writing Lately

1. Improve Your Writing With Word Limits, for Lifehack.org.

2. Barbecue Defined in the Process of Its Emergence, for Mises.org.

Posted by Art Carden at 09:45 AM in Misc.

April 19, 2010
Podcast: For Love or Money?

Podcast, in which Russ and I more or less reverse roles and I ask him questions, about love, money, and non-profits.

Posted by Michael Munger at 06:19 PM in Economics

One Flew atop the cuckoo's nest

Via Mark Brady, here the IEA Blog on the late British philosopher Antony Flew (1923-2010):

Several newspapers (e.g. the Guardian and the Telegraph) have recently carried obituaries of the English philosopher Antony Flew. These obituaries have emphasized the remarkable change of mind by which Flew, for most of his life an internationally renowned atheist, became convinced at the age of 81 of deism. What this emphasis has overshadowed - and what some readers of this blog may not know - is that Flew was for several decades a heroic defender of classically liberal political philosophy and indeed by far the best known professional philosopher in Britain over that period to champion classical liberalism. His heroism lay in the fact that, in challenging the spirit of the age as sharply and as unapologetically as he did, he was, and must have known that he was, irreparably damaging his reputation among his overwhelmingly left-leaning professional peers. That reputation – sufficient for his appointment to a chair at the University of Keele at the age of 31 - rested on a prolific output of books and of papers in the most prestigious philosophical journals. His work ranged widely, and especially in the philosophy of religion and the interpretation of David Hume had a major international impact.

To me this says: Do excellent work in order to advance good ideas.

Posted by Edward J. Lopez at 06:10 PM in Politics

Environmental Colonialism

I'm reviewing Robert H. Nelson's The New Holy Wars for The Freeman. Chapter 11, entitled "Environmental Colonialism: 'Saving' Africa from Africans" is gripping, informative, and depressing. Consider the following passage from p. 266, which occurs shortly after a brief history of European settlement and "conservation" efforts:

The creation of national parks in eastern and southern Africa thus typically served to prevent ordinary Africans from reoccupying areas from with (sic) they had been expelled by European military force and disease within the previous half century. The "true Africa" seen by tourists visiting the parks--popularly imagined to be unchanged since the creation--was in fact the product of the decimation of traditional African life as experienced in the aftermath of European settlement.
Posted by Art Carden at 03:49 PM in Economics

File Under Markets I Don't "Get"

De gustibus non est disputandum, however, ....


Posted by Joshua Hall at 02:15 PM in Economics

Playing Into the Hands of the Money Sharks

Words of wisdom from William Graham Sumner, in an 1896 essay by the above title, worth keeping in mind when reading about Sentator Dodd's bill for new financial restrictions or the charges against Goldman Sachs:

We hear fierce denunciations of what is called the “money power.” It is spoken of as mighty, demoniacal, dangerous, and schemes are proposed for mastering it which are futile and ridiculous, if it is what it is said to be. Every one of these schemes only opens chances for money-jobbers and financial wreckers to operate upon brokerages and differences while making legitimate finance hazardous and expensive, thereby adding to the cost of commercial operations. The parasites on the industrial system flourish whenever the system is complicated. Confusion, disorder, irregularity, uncertainty are the conditions of their growth. The surest means to kill them is to make the currency absolutely simple and absolutely sound. Is it not childish for simple, honest people to set up a currency system which is full of subtleties and mysteries, and then to suppose that they, and not the men of craft and guile, will get the profits of it?
Posted by Lawrence H. White at 12:38 PM in Economics

Capitalist Power and Consumer Sovereignty
Dear Sellers,

All your gains from trade are belong to us.



I've had conversations this morning with two customer service representatives. One was from Travelocity, the other was from my Sam's Club Discover Card. The first case concerned a refund, and it was the second different refund I've had to get from Travelocity in the last couple of months. It was quick, it was easy, it was painless. The second concerned fraud detection: they needed to verify some recent transactions. If they're so powerful and if the legal system is in their pocket, why would they bother providing me with such exemplary service?

Are they constrained by the fact that they're nice people who genuinely wish me well? I doubt it, because the people to whom I spoke were apparently calling from India, and my guess is that all else equal, they have more important things to worry about than processing refunds and verifying credit transactions for some guy in Memphis that they've never met.

Are they constrained by wise and benevolent rulers who are looking out for my interests? It's plausible, but I doubt it because the literature on rent-seeking suggests that government services are generally going to be auctioned off to the highest bidder. I'm not going to go to the trouble and expense of suing Travelocity or Discover over small sums of money, and even if I did they probably have an army of lawyers who can make quick work of my claims.

Or are they constrained by competition? if Travelocity wrongs me, I can take my business elsewhere. If I'm ill-used by Sam's Club and Discover, I have a lot of different options for how I can pay for things.

It isn't perfect. I have some horror stories from when I was in grad school, but these involve companies with which I no longer do business. If only I had that option with the DMV and Social Security.

Posted by Art Carden at 12:04 PM in Economics

McCloskey on the Economics of Advertising

I love economics. It's a set of tools that helps us discover truth. With a couple of simple and non-controversial assumptions--people try to make themselves as well off as possible however they choose to define it, they respond to incentives, and every action has a cost--we can trace out and understand the implications of different claims. A lot of the criticisms of capitalism, if they were true, would result in opportunities for the critics to earn unlimited profits by taking advantage of these imperfections. Discrimination is one example, and I'll have more to say about that later. Here's Deirdre McCloskey on advertising, from The Bourgeois Virtues, p. 452:

The peculiarly American attribution of gigantic power to thirty-second television spots is puzzling to an economist. If advertising has the powers attributed to it by the clerisy, then unlimited fortunes could be had for the writing.


The American clerisy's hostility to advertising is puzzling to a rhetoritician. Why would a country adoring free speech in its higehr intellectual circles have such a distaste for commercial free speech? Perhaps the distaste is merely a branch of that great river of antirhetoric rhetoric in the West since Bacon. But anyway if hoi polloi were as rhetorically stupid as most of the clerisy seems to believe, then as I say any reasonably clever ad writer could "manipulate" them with ease. But it ain't so. The TV generation can see through advertising directed at children by age eight, and by age eighteen it bases its humor--see Saturday Night Live--on parodies of attempted manipulation.

I put this challenge to a student at an IHS "Exploring Liberty" Summer Seminar during summer 2008: let's suppose that people are very easily manipulated by advertising and can be duped into buying anything by slick marketing. If this is true, then he should be able to hire a few marketers and bankrupt me by addicting me to whatever he has to sell. I don't think he has taken up the challenge.

Posted by Art Carden at 10:45 AM in Economics

Against Prohibition

There's a debate tomorrow evening at Rhodes between the former editor of High Times and a retired DEA agent on whether marijuana should be legalized. I won't be able to make it, unfortunately, but it looks interesting. In my stead, here's a summary of my argument for legalizing all drugs, which I delivered to a very receptive audience at Idlewild Presbyterian Church a few months ago. Here's the latest offering from Reason.tv, which argues for the legalization of marijuana.

Posted by Art Carden at 09:51 AM in Economics

April 17, 2010
Could Ron Paul Beat Obama?

I guess pollsters have lots of empty time on their hands, because to recent polls are out that make one wonder, "who paid for that?"

Rasmussen Reports has polled on a hypothetical presidential matchup of Ron Paul vs. President Obama. Obama wins 42-41. Which probably means that if the election really were held today, Ron Paul wins - you know how undecideds break agains the incumbent!

Meanwhile, Public Policy Polling, another reputable outfit, polls Obama vs. George W. Bush, with Obama again eeking out a victory with less than 50% - in this case, 48-46% over the man whose unpopularity as President has so much to do with the Democratic victories of 2006 and 2008.

How can it be the unpopular ex-president and Ron Paul, a guy who got about 0 percent of the vote in the 2008 Republican primaries, should be neck and neck in hypothetical matchups with the sitting President? What does it mean?

First, it means that Obama has totally lost GOP moderates and dissenters (except, perhaps, for David Brooks and Christopher Buckley). In the PPP poll, 87 percent of Republicans favored Bush, quite a bit higher than his ratings with the party at the end of his term. From mid-2008 through the end of his term, Bush's approval rating among Republicans stood at roughly 60 percent; it was 18 percent among independents and 10 percent among Democrats at the end of his term,according to Pew. While a plurality of Independents still favor Obama over Bush, the margin is just 49-37, down from the 52 percent Obama won over McCain, who was much more popular with Independents than Bush.

Rasmussen's poll similarly shows that Obama has simply lost Republicans. Republicans scarcely gave Ron Paul the time of day in last year's primary. That he polls even with Obama is substantially a sign that Republicans will support any Republican over Obama - 66 percent support Paul in this poll, better than the much more traditional Republican Bush was doing a year ago. (Indeed, if you look at the Rasmussen link above, you'll see that Paul is actually quite unpopular in the GOP. That he draws more party support against Obama than Bush did a year ago suggests the degree of GOP disillusionment with the President. And in a Paul-Obama match up, independents break decisively for Ron Paul, 47 to 28 percent.

While many Democrats have been trying to convince themselves that you just can't deal with Republicans and to convince the nation that Republicans are "the party of 'no,'" the reality is that the President has squandered a remarkable opportunity to create a true realignment favoring the Democrats. A year into his presidency, Republicans have regained basically all the ground they lost from 2005 to 2008. That George Bush and Ron Paul can poll even with the President (as one with some real affection for Ron Paul - I have even represented him in my legal practice - I can still say that it would be hard to imagine two weaker Republican candidates, if the election were really held today, than Congressman Paul and President Bush) is indicative of the opportunity that Obama has lost. He hoped to create "Obama Republicans," as Reagan created "Reagan Democrats." He has failed. And he has sent independents flocking back to Republicans as well.

Obama's numbers could recover some. While he is doing great long term damage to the economy, he could look pretty good for a while. The huge influx of money from the Fed and the stimulus should have some effect, and the economy has a natural resiliency. There are some signs that recovery may be underway and that it could be strong, but also signs that it could be truly "jobless." But whatever happens with the economy, I think it unlikely that the President will have any chance to truly set off a major realignment. Republicans and Independents are returning to their pre-2006/2008 voting patterns, and indeed if any major realignment is on the horizon, it could be one that would benefit a new, can-do Republican Party epitomized by New Jersey Governor Chris Christie.

Posted by Brad Smith at 08:54 PM in Politics

On Barbed Wire and Property Rights

The abstract of a paper by Richard Hornbeck in the current QJE:

This paper examines the impact on agricultural development from the introduction of barbed wire fencing to the American Plains in the late 19th century. Without a fence, farmers risked uncompensated damage by others’ livestock. From 1880 to 1900, the introduction and near universal adoption of barbed wire greatly reduced the cost of fences, relative to predominant wooden fences, most in counties with the least woodland. Over that period, counties with the least woodland experienced substantial relative increases in settlement, land improvement, land values, and the productivity and production share of crops most in need of protection. This increase in agricultural development appears partly to reflect farmers’ increased ability to protect their land from encroachment. States’ inability to protect this full bundle of property rights on the frontier, beyond providing formal land titles, might have otherwise restricted agricultural development.
Posted by E. Frank Stephenson at 02:27 PM in Economics

"Freedom means freedom to be stupid"

So says Penn Jillette in his excellent essay, "An Homage to the Hummer," in today's WSJ. A snip:

Hummers are stupid and wasteful and if they go away because no one wants to buy one, that'll be just a little sad. It's always a little sad to lose some stupid. I love people doing stupid things that I'd never do—different stupid things than all the stupid things I do. It reminds me that although all over the world we humans have so much in common, so much love, and need, and desire, and compassion and loneliness, some of us still want to do things that the rest of us think are bug-nutty. Some of us want to drive a Hummer, some of us want to eat sheep's heart, liver and lungs simmered in an animal's stomach for three hours, some us want to play poker with professionals and some of us want a Broadway musical based on the music of ABBA. I love people doing things I can't understand. It's heartbreaking to me when people stop doing things that I can't see any reason for them to be doing in the first place. I like people watching curling while eating pork rinds.

But if any part of the Hummer going belly-up are those government rules we're putting in on miles per gallon, or us taking over of GM, then I'm not just sad, I'm also angry. Lack of freedom can be measured directly by lack of stupid. Freedom means freedom to be stupid. We never need freedom to do the smart thing. You don't need any freedom to go with majority opinion. There was no freedom required to drive a Prius before the recall. We don't need freedom to recycle, reuse and reduce. We don't need freedom to listen to classic rock, classic classical, classic anything or Terry Gross. We exercise our freedom to its fullest when we are at our stupidest.

Posted by E. Frank Stephenson at 11:04 AM in Culture

April 16, 2010
The Anti-Economics of Socialism with Heterogeneous Preferences

I'm reading the essays in a 1988 issue of Critical Review on Marx. It leaves me wondering how disagreements will be resolved when the means of production are owned by the state and when production is planned. I'm reminded of a joke about socialism and communism.

A communist revolutionary is giving a speech.

Communist Revolutionary: "After the revolution, the land will flow with milk and honey!"

Audience Member: "But I don't like milk and honey."

Communist Revolutionary: (pause) "Comrade, after the revolution, you will like milk and honey!"

Posted by Art Carden at 03:06 PM in Economics

"Opportunities for Students" Bleg

I maintain an "Opportunities for Students" page on my website. Am I missing anything? If so, please let me know.

Posted by Art Carden at 11:53 AM in Misc.

Taxes and Spending

Russ Roberts embeds an "unintentionally entertaining video" from the Democratic Policy Committee. After you watch it, read this essay by fellow Wash U PhD Morgan Rose on tax v. debt financing.

Posted by Art Carden at 10:17 AM in Economics

Protests and Counter-Protests on Tax Day

I think the complete role reversal that took place when Obama took office is one of the most interesting stories in the short history of the 21st century. This was especially evident in some of the coverage of yesterday's Tax Day Tea Parties. The Right has adopted the "dissent is the highest form of patriotism" stance while The Left has adopted the "love it or leave it stance." See, for example, protest signs advising tea partiers to move to Somalia if they hate government so much. Speaking of Somalia, here's an article and a lecture by Benjamin Powell making the case that establishing a state in Somalia would probably make matters worse.

But why does public discourse have to be so vitriolic? Can't we go back to the days of more temperate discourse, when it was left-wing protesters comparing Bush to Hitler rather than right-wing protesters comparing Obama to Hitler? Anthony Gregory offers us a fascinating trip down memory lane, complete with video.

As long as we're discussing ideas, here's an interesting commentary on "Dirt-Cheap Ideas" from Doctor J. Here's Anthony Gregory (again) on "How the Left Learned to Stop Worrying and Love the FBI." Emily Schaeffer from San Jose State and the Independent Institute was at a San Jose Tea Party to fight the good fight for free trade and open borders.

Posted by Art Carden at 10:00 AM in Economics

April 15, 2010
Melissa Yeoh Owes Me $20

It appears that I have won the modern-day version of the Ehrlich-Simon Bet.

At the APEE opening dinner, I got into an animated conversation with Frank's colleague Melissa Yeoh about the physical composition of peanut butter (we were discussing a project in which Charles Courtemanche and I are looking at the effects of warehouse club entry on grocery prices). I maintained that the physical composition of store-brand peanut butter differs from the physical composition of name-brand peanut butter. Melissa maintained that they are the same. Given that we were in Vegas and that I was pretty sure I was right, I offered to bet her $100 that the ingredient lists would differ. We ultimately settled on a $20 bet that the ingredient list on store-brand peanut butter would differ from the ingredient list on name-brand peanut butter. After careful investigation, it turns out that the Kroger brand uses a different combination of fully and partially hydrogenated oils. The calorie counts and protein counts differ, as well, and I would also suspect that the Kroger brand uses lower quality peanuts. It appears, then, that choosy moms choose Jif not because they have been duped by slick advertising, but because it is a better product.

I've asked Melissa to donate my winnings to the APEE Young Scholars Program. If you're a graduate student or junior faculty member and you like good scholarship, good company, and wagers about the physical composition of foodstuffs that emerge from discussions about the margins on which firms compete with one another, you should apply for a Young Scholars Grant and join us for APEE in the Bahamas next year.

Posted by Art Carden at 09:25 PM in Economics

Ross on Otteson and Brook on Smith and Rand

Justin Ross offers his take on the Otteson-Brook debate at APEE. That reminded me of the question I was going to ask but didn't because time ran out:

"Jim says that we should proceed by going for a stroll with those who share our goals. Yaron proposes a shock-and-awe approach in which we extol the virtue of selfishness and question others' moral assumptions. Can't both approaches work in different settings? In trying to decide which approach is objectively better in all circumstances, might we be making a mistake by trying to centrally plan the rhetorical strategy for liberty?"

Posted by Art Carden at 12:41 PM in Economics

Public Choice Panel on The Myth of the Rational Voter

Zac Gochenour has posted videos of the 2008 panel at the Public Choice Society meetings in which Mike Munger, Geoffrey Brennan, and I commented on Bryan Caplan's The Myth of the Rational Voter. My comments were based on Mike Hammock's and my paper "The Truthiness Hurts," which is forthcoming in Economic Affairs. Mike has embedded the videos on his blog, and you can download the working paper version of our paper here. Unfortunately, I didn't have time to give Mike's wife Liz credit for naming what we call "stick-it-to-the-man bias," but she graciously provided us with the term.

Posted by Art Carden at 10:45 AM in Economics

The Association of Private Enterprise Education is Decadent and Depraved: 2010 Edition

The APEE meetings in Las Vegas were excellent, and everyone responsible is to be congratulated for a job very well done. The opening dinner set the tone with the presentation of the Thomas Jefferson Award to Penn & Teller and the presentation of the Adam Smith Award to Pete Boettke (Pete's remarks are here, and Steve Horwitz's take on Pete's intellectual legacy is here). Plenary talks by Tyler Cowen and Loren Lomasky discussed the present troubles, and a plenary debate between Jim Otteson and Yaron Brook over the defenses of capitalism offered by Ayn Rand and Adam Smith was one of the best conference sessions I've ever been to. I (and others) suggested that Jim and Yaron should take the show on the road or, in the spirit of the meeting's location, get a theater in Las Vegas. Rhodes students Allyson Pellissier, Ryne Marksteiner, and Libby Feaster also gave fantastic presentations--Allyson and Ryne told us about their senior honors projects, and Libby discussed the paper she wrote for my economic history class. A good time was had by all.

Posted by Art Carden at 10:39 AM

On the first pitch c. 1910

From the April 15, 1910 NYT:

The opening of the American League season in Washington to-day between the local and Philadelphia clubs was a most auspicious one, President and Mrs. Taft, Vice President Sherman, and many other notables being present, and the Nationals won by the shut-oue (sic) score of 3 to 0. For the first time on record, a President of the United States tossed out the first ball, and what was more he sat through the entire nine innings and seemed greatly to enjoy the contest. The attendance broke all records, 12,226 paying admission, while fully a thousand more were invited guests of the club.

Taft didn't throw from the mound, but if he had I wonder if he would have thrown more like Vice-president Biden:

Vice-president Cheney:

President Bush:

or President Obama?

Posted by Craig Depken at 10:08 AM in Sports

April 13, 2010
Final call for papers

I am organizing the sports economics sessions sponsored by the North American Association of Sports Economics at the November 2010 Southern Economic Association meetings.

It is not a requirement to be a member of NAASE to be included in our sessions, however you do need to register for the conference to present.

I invite anyone who wishes to present during the conference to send me a title/abstract and contact information at cdepken-at-uncc-dot-edu in the next couple of days.

Posted by Craig Depken at 01:18 PM in Economics

Best line of the day

From the comments section of a blog entry showing projections for Medicare and Social Security:

The average reporter has the observational skills of a yam.

More here

Posted by Craig Depken at 09:43 AM in Funny Stuff

Tween pregnancy crisis c. 1910

From the April 13, 1910 NYT:

Officers of the Juvenile Court to-day began an investigation of the case of Annie Epps, 10 years old, who gave girth (sic) to a girl baby at the County Hospital several days ago. It was reported to-night that the young mother and her child were doing well.

From the February 3, 2010 Daily Mail:

A nine-year-old Chinese schoolgirl has become one of the world's youngest mothers after giving birth to a healthy boy.

The unnamed girl was brought to a hospital in Changchun, which lies in the north-east of the country, when she was eight and a half months pregnant.

Two days later, she gave birth to the 6lb boy by Cesarean section, a Chinese newspaper has reported.

Posted by Craig Depken at 09:29 AM in Culture

April 11, 2010
What Is A Libertarian?

Allan Handleman talks to John Stossel and me about "What is a Libertarian?"

Link to show.

Link to WZTK web site.

Posted by Michael Munger at 02:50 PM in Politics

An interesting essay, sent to me by R.W. Fulmer. The essay uses Adam Smith's pin factory to illustrate the concept of organizational capital, and walks the reader through incremental improvements to pin production.

With Robert Bradley, Jr., Mr. Fulmer co-authored the book Energy: The Master Resource, a free market oriented energy primer that drew some kind words from Milton Friedman. His articles pop up from time to time in The Freeman.

Organizational Capital, by Richard W. Fulmer

It is axiomatic that injections of additional capital or labor are required to increase production. When we think of capital in this context, we usually think in terms of tangible assets such as factory expansions and more and better tools and machinery. Yet significant gains can also be made simply by improving processes - that is, by increasing “organizational capital.” Organizational capital can be thought of as any procedures according to which cooperating individuals perform tasks; it can include work techniques, accounting practices, and management procedures.

Rest of essay below the fold....

Read More »

Posted by Michael Munger at 09:28 AM

April 10, 2010
State Law Suits: False Hope

Can the states win their law suits, on Obamacare?

I have a guest op-ed in today's Durham Herald Sun, with my answer.

To summarize: No, the states cannot win.

Posted by Michael Munger at 04:55 PM in Politics

April 09, 2010
I'm takin' it on tour....

The link is here.

If you’re in the Austin area next week, then make plans to attend AFP’s Policy Matters Forum, co-hosted by the Lone Star Foundation.

Date: Tuesday, April 13, 1-3 pm
Location: Texas Capitol Extension, E2.012

You’ll have the opportunity to hear from economist Dr. Noel Campbell, who will discuss his paper on Texas’ economy and how legislative actions impact economy and prosperity. Dr. Campbell is from Houston and is now the Associate Professor of Economics at the University of Central Arkansas.

You’ll also hear from David Hartman and Will Lutz of The Lone Star Foundation. They will discuss the Foundation’s updated report: Rx for Painful Property Taxes.

The event is free - you don’t want to miss it!
Click Here for more information and to RSVP.

Posted by Noel Campbell at 05:11 PM

APEE 2010: Penn and Teller

I should have mentioned earlier that the APEE program is amazing; it features addresses from Peter Boettke, Tyler Cowen, and Loren Lomasky in addition to a plenary panel featuring Yaron Brook, James Otteson, and Peter Boettke on "Ayn Rand Versus Adam Smith in Defense of Capitalism." As if that weren't enough, Penn and Teller will receive the Thomas Jefferson Award. Here's a clip from The West Wing that illustrates why--in my opinion--they deserve the award:

Posted by Art Carden at 10:55 AM in Funny Stuff

APEE 2010: What Happens in Vegas...

...will be blogged and tweeted.

Division of Labour will be well-represented at the APEE meetings. So will Rhodes: student Elizabeth Feaster is presenting her paper "A Mixed Blessing: The Roman Catholic Church as a Monopoly and Its Effects on European Economic Growth" in the "Economic Growth and Well-being" session on Monday at 4:25. On Tuesday morning at 7:40, Marshall Gramm, Nick McKinney, and students Ryne Marksteiner and Allyson Pellissier will present papers in the "Studies in Risk and Outcomes" session. Ryne's paper is "Power and Influence in the United Nations General Assembly" and Allyson's paper is "The Effectiveness of the Ballot Box."

Addendum: as you make your slides, dwell on this for a little bit (HT: Peter Klein).

Posted by Art Carden at 10:15 AM in Economics

Chronicle Articles

I have written a number of "advice" articles, in the Chronicle of Higher Ed. Anyone who knows me knows that my abilities as a leader are quite limited, so the merit of these articles, if they have any, is more on the "Here are some mistakes to avoid!" front.

And, the Jan 2010 piece does have a rather funny story in it....

April 2010: 10 Suggestions for a New Department Chair


Nov 2009: SORRY I'M LATE


Aug 2008: "A" HIRE VS "THE" HIRE

Posted by Michael Munger at 08:09 AM in Misc.

April 08, 2010
Yuppie 911/Berry Economics Awards

That's the title of my student Shawn Regan's article in the current issue of Regulation. (Co-blogger Craig also has a paper in the issue.)

Shawn is also the inaugural winner of my department's Sockwell Prize, created in honor of my retiring colleague Bo Sockwell and awarded to the student who has written the best economics paper in the past year.

This year's Wilson Mixon Outstanding Senior in Economics Award is shared by Marcy Peterson and Erin Wendt.

Congratulations to Shawn, Marcy, and Erin, and thanks to all of this year's seniors for being such a great class.

Posted by E. Frank Stephenson at 11:50 PM in Economics

Bootleggers and Food Inspections

From the WSJ:

The Senate version of a food-safety bill has attracted broad bipartisan support and is expected to pass easily soon after Congress returns from recess next week. Iowa Democratic Sen. Tom Harkin, a co-sponsor, predicted it would be "on the president's desk by May." But small farmers worry the measure's fees and inspection requirements would be ruinously expensive and are pushing for exemptions.

"I know people who have been small farmers for 25 to 30 years who are looking to get out of the business because food safety is becoming so alarmist," said Mary Alionis, whose eight-acre Whistling Duck Farm in Grants Pass, Ore., sells produce to farmers markets and restaurants.

Big food companies generally support the bill, judging the added expenses it would bring to be small compared with the potential financial damage of a vast product recall. But smaller producers say the bill's stepped-up inspection requirements and provisions allowing the FDA to issue preventive recalls would put too big a financial burden on them.

"Small farm groups seriously have problems with this bill," said Deborah Stockton, executive director of the National Independent Consumers and Farmers Association, a coalition of small farmers. "We are not afraid to stand up to it."

Posted by E. Frank Stephenson at 11:23 PM in Economics

The Other Shoe Drops

With Obamacare* and its phony budget numbers now passed, we hear:

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Just another example of the maxim that dogs bark, cats meow, and Democrats tax. Not that Republicans are much better.

*Speaking of Obamacare, the Massachusetts version of it (cooked up by then GOP Gov. Romney) provides a nifty example for teaching adverse selection:

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company’s data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

Posted by E. Frank Stephenson at 08:56 AM

April 07, 2010
Quote of the Day: Economics and the Environment

From Robert H. Nelson's The New Holy Wars, p. 12:

“In environmental religion, global warming is a sin against God, not an issue to be resolved by economic calculations of possible future benefits and costs to human beings.”

Posted by Art Carden at 02:14 PM

State-level taxation data in search of hypotheses

From the Show-Me Institute and Art Laffer, a new open-access repository of state-level tax data.

...an online tool that helps people explore and compare tax rates across all states over time... ...a large comprehensive dataset that includes roughly 50 variables per state, over a span of decades. The data are divided into three main categories: economic aggregates, fiscal policy measures, and demographics. This database includes an archive of additional information that includes specific selective tax rates, public employee information, and overall tax burdens.
Posted by Edward J. Lopez at 11:27 AM in Economics


Good stuff from Google Reader this morning:

1. Hanson on Yglesias on markets. This reaffirms my belief that politics has more in common with team sports than principles.

2. Bryan Caplan comments on this essay by David Boaz. Boaz warns against libertarians viewing the past with rose-colored glasses.

Posted by Art Carden at 09:43 AM in Misc.

April 06, 2010

Re: Intrusive government. See this pre-Patriot Act article by Charlotte Twight, "Watching You: Systematic Federal Surveillance of Ordinary Americans."

Posted by Wilson Mixon at 10:46 AM in Politics

Books on the Review Pile

1. Emily Chamlee-Wright, The Cultural and Political Economy of Recovery: Social learning in a post-disaster environment.

2. George A. Akerlof and Rachel E. Kranton, Identity Economics: How Our Identities Shape our Work, Wages, and Well-Being.

3. Bethany Moreton, To Serve God and Wal-Mart: The Making of Christian Free Enterprise.

4. Thomas Sowell, Intellectuals and Society.

I'm a chapter or so into Chamlee-Wright's book. It raises an interesting question: who are the relevant stakeholders in well-defined post-disaster reconstruction efforts, where are the veto points, and how do people invest resources in blocking reconstruction efforts they don't like? What would an analysis of (say) the World Trade Center Reconstruction effort in the light of Emily's work, Chris Coyne's After War, and the Mercatus project on the Katrina recovery look like?

Posted by Art Carden at 10:24 AM in Economics

Intrusive Government

On the presumptuousness of, and the presumption of, increasingly intrusive government.

On presumptuousness: From a scary article in The Weekly Standard:

The American Community Survey wasn't around when Ronald Reagan declared that the nine most terrifying words in the English language are: "I'm from the government and I'm here to help." If it was, he'd probably agree that having a government representative knock on your door, try to threaten their way into your home, and demand that you give them very personal information is far more terrifying.
The ACS [American Community Survey} is an extension of the U.S. Census that all households receive. While the U.S. Census form contains 10 questions and is sent out every 10 years, the ACS form contains 48 questions and is sent to 250,000 households each month on a rolling basis.
What's especially problematic about the ACS are the answers it demands from citizens. The least threatening of them are just strange -- such as asking whether your home has a flush toilet and whether "there is a business (such as a store or barber shop) or a medical practice" on your property. Then there are the financial questions. The ACS asks everything from your sources of income (in dollar amounts) to how much you spend on gas, electricity, and water. The IRS just asks what you earn; the Commerce Department wants to know how you spend your money as well.

Even more invasive are the personal questions. The questionnaire asks how many people live with you and their relationship to you, along with their names, ages, gender, and race. Most creepy of all are the questions about your daily routine. The ACS wants to know where you work, what time you leave for work, how you get to work, how long it takes you to get to work, and how many people travel with you
[T]oday's government and its workers have forgotten is that government is accountable to the people, not the reverse. It is "government of the people, by the people, for the people," in Abraham Lincoln's immortal words.

On presumption: About those "immortal words," Alfred J. Nock says this:

Spencer does not discuss what he calls "the perennial faith of mankind" in State action, but contents himself with elaborating the sententious observation of Guizot, that "a belief in the sovereign power of political machinery" is nothing less than "a gross delusion." This faith is chiefly an effect of the immense prestige which the State has diligently built up for itself in the century or more since the doctrine of jure divino rulership gave way. We need not consider the various instruments that the State employs in building up its prestige; most of them are well known, and their uses well understood. There is one, however, which is in a sense peculiar to the republican State. Republicanism permits the individual to persuade himself that the State is his creation, that State action is his action, that when it expresses itself it expresses him, and when it is glorified he is glorified. The republican State encourages this persuasion with all its power, aware that it is the most efficient instrument for enhancing its own prestige. Lincoln's phrase, "of the people, by the people, for the people" was probably the most effective single stroke of propaganda ever made in behalf of republican State prestige.

Thus the individual's sense of his own importance inclines him strongly to resent the suggestion that the State is by nature anti-social. He looks on its failures and misfeasances with somewhat the eye of a parent, giving it the benefit of a special code of ethics. Moreover, he has always the expectation that the State will learn by its mistakes, and do better. Granting that its technique with social purposes is blundering, wasteful and vicious - even admitting, with the public official whom Spencer cites, that wherever the State is, there is villainy - he sees no reason why, with an increase of experience and responsibility, the State should not improve.

Posted by Wilson Mixon at 10:22 AM in Politics

April 05, 2010
Americana the Beautiful: "Memphis IS Music"

I'm working on our taxes, and I was looking for a soundtrack when Doctor J's latest post came across my Google Reader feed. She hosted a radio show a couple of years ago called "Americana the Beautiful," and apparently the shows are now online; I'm listening to "Memphis IS Music," which is all songs about or featuring Memphis.

If you're looking for good music at a price of $0, here's a post from the vault with a couple of links.

Posted by Art Carden at 01:13 PM in Culture

A tax by any other name c. 1910

An interesting letter to the editor suggests that (individual) demand curves are downward sloping:

I have subscribed to the same seats [of the Metropolitan Opera House] as far back as the M. Grau management; without my consent I was some years ago instructed by the management to renew my subscription through agents, the circular stating that no change in price would obtain, &c.

Although not understanding the object of turning seats already sold to an agent, I followed instructions on the same terms until this year, when I am notified by the agents that to meet their commission an advance of 20 per cent. would be charged. Why a commission?

The opera management will certainly lose many subscribers if it insists on its present scheme.

For my part, I have decided to give up my subscription rather than submit to a patent injustice, and I hope this will be read by many old subscribers and be the means of suggesting a way of remedying that abuse.


Posted by Craig Depken at 10:35 AM in Economics

Technology in sports c. 1910

The April 5, 1910 NYT reports on a meeting held by the National League's President Lynch for the umpires of that league. During the meeting, evidently, a number of rules were discussed and Lynch urged the strict application of several. One, of which I was unaware, is rule 75,:

which says that the diamond shall be cleared of everybody except the players taking part in the games. This will bar the energetic photographers who swarm on the field to snap pictures of exciting plays. The umpires have always been afraid that the photographers would get in the way and cause a mix-up, so they have decided not to take any chances with them.
Today, of course, we have television technology that allows us to zoom in from on-high to the play which removes the need for the photographer on the field of play. Moreover, the still photographers have similar zoom technology that allows them to do wonderful shots from the edges of the field of play.

How crazy must that have been - having a photographer, or perhaps several, trying to catch the very moment the ball hit the first-baseman's mitt.

Posted by Craig Depken at 10:30 AM in Sports

April 03, 2010
Against Looters, At the Margin

This note in The New Republic sites research suggesting that the supply curve of pediatricians slopes upward (big surprise there) and that Medicaid payments are now low enough to increase the amount of leisure for which some (mostly female) pediatricians will opt. (Many work part-time.) The note also cites an AER piece linking low Medicaid rates to higher infant mortality.

Posted by Wilson Mixon at 01:06 PM in Economics

But it's universal

At a party last night, one of the guests said that he'd read that America's literacy rate was only about 80 percent. I was tempted to (but didn't) say that this was impossible because we have universal access to schooling and spend more per student than almost any place in the world. (OECD Data )

Maybe this Conference Board report relates to my friend's concern. We come in 11th out of 14 countries as regards "Adult Literacy Rate -- High-Level Skills" with a rate of just under 20 percent.

Posted by Wilson Mixon at 12:13 PM

April 02, 2010
Pushing Back Against the Looters
A doctor who considers the national health-care overhaul to be bad medicine for the country posted a sign on his office door telling patients who voted for President Barack Obama to seek care "elsewhere."

"I'm not turning anybody away — that would be unethical," Dr. Jack Cassell, 56, a Mount Dora urologist and a registered Republican opposed to the health plan, told the Orlando Sentinel on Thursday. "But if they read the sign and turn the other way, so be it."

The sign reads: "If you voted for Obama … seek urologic care elsewhere. Changes to your healthcare begin right now, not in four years."

Source (includes a photo of the sign).

Posted by E. Frank Stephenson at 03:39 PM

Incentives Matter: Kidney Donation Edition

From USA Today:

Paying people for living kidney donations would increase the supply of the organs and would not result in a disproportionate number of poor donors, a study by researchers from the University of Pennsylvania and the Philadelphia Veterans Affairs Medical Center concludes. The study, published this month in the Annals of Internal Medicine, asked 342 participants whether they would donate a kidney with varying payments of $0, $10,000 and $100,000. The study called for a real-world test of a regulated payment system.

The possibility of payments nearly doubled the number of participants in the study who said they would donate a kidney to a stranger, but it did not influence those with lower income levels more than those with higher incomes, according to Scott Halpern, one of the study's authors and senior fellow at the University of Pennsylvania's Center for Bioethics.

Just a reminder (with a HT to Mark Perry) as to why such incentives are important:


Posted by E. Frank Stephenson at 03:01 PM in Economics

Most interesting thing I read this week

Is by Michael Woodford, and can be found here.

Convergence in Macroeconomics: Elements of the New Synthesis

The central division among macroeconomists ceased to be about whether one should try to precisely model short-run dynamics, and came instead to be about whether it was more important to insist upon theoretical coherence in one’s models, even if this meant doing without econometric validation (the position of the New Classical economists and real business cycle theorists), or to insist upon econometric testing, even if this meant using specifications little constrained by theory (the position of the Keynesian macroeconometric modelers).

While the problems of the field have hardly all been resolved, there are no longer such fundamental disagreements among leading macroeconomists about what kind of questions one might reasonably seek to answer or what kinds of theoretical analyses or empirical studies should even be admitted as contributions to knowledge.

The cessation of methodological struggle within macroeconomics is largely due to the development of a new synthesis --- called by Marvin Goodfriend and Robert G. King (1997) “the New Neoclassical Synthesis” --- that incorporates important elements of each of the apparently irreconcilable traditions of macroeconomic thought.

Posted by Noel Campbell at 02:34 PM in Economics

"Profit and Production" available for Download

The published version of my paper "Profit and Production" is available here.

Posted by Art Carden at 02:30 PM in Economics

Say What?

Yet another reason not to have 535 geniuses deciding health care or anything else on my behalf. The jaw dropping brilliance begins at 1:15. (He now says he was kidding--judge for yourself.) This seat used to be held by Cynthia McKinney so, kidding or not, Johnson is probably an improvement.

Posted by E. Frank Stephenson at 11:03 AM

The Stand-Up Economist In Nashville and Birmingham

Here are Yoram Bauman's tour dates. If I could make it, I would go.

Posted by Art Carden at 09:59 AM in Funny Stuff

April 01, 2010
Tantrums as credible commitments

As Lorenzo turns 20 months old, and as we are having company for Sunday's Easter feast, I am reminded of a passage from David Friedman's Law's Order.

Every parent is familiar with [an] example of the [bilateral monopoly] game. A small child wants to get her way and will throw a tantrum if she doesn't. The tantrum itself does her no good, since if she throws it you will refuse to do what she wants and send her to bed without dessert. But since the tantrum imposes substantial costs on you as well as on her, especially if it happens in the middle of your dinner party, it may be a sufficiently effective threat to get her at least part of what she wants.

Prosepective parents resolve never to give in to such threats and think they will succeed. They are wrong. You may have thought out the logic of bilateral monopoly better than your child, but she has hundreds of millions of years of evolution on her side, during which offspring who succeeded in making parents do what they want, and thus getting a larger share of parental resources devoted to them, were more likely to survive to pass on their genes to the next generation of offspring. Her commitment strategy is hardwired into her; if you call her bluff, you will frequently find that it is not a bluff. If you win more than half the games and only rarely end up with a bargaining breakdown and a tantrum, consider yourself lucky.

I said "reminded," not "comforted."

Still, when it is a bluff and Lorenzo manages to sneak a hopeful eye in my direction ("Is Papi looking?"), while seeming to writhe in anguish on the living room floor, oh what a delight! Happy Easter all.

Posted by Edward J. Lopez at 08:09 PM in Economics

What I've Been Re-Writing Lately: Decisions and Revisions Which a Minute Will Reverse

1. When is Corruption a Substitute for Economic Freedom? (with Lisa Verdon). Forthcoming, Law and Development Review. Old title: "Corruption Creates Growth When People Aren't Free."

2. Human Rights and Economic Liberalization (with Robert A. Lawson). Resubmitted to Business and Politics.

3. The Southern Economy. Prepared for The Oxford Handbook of Southern Politics. Enormous thanks to Price Fishback and co-blogger Mike DeBow for comments and suggestions that made me re-think a number of issues in Southern history.

4. A Pile of Krusty Burgers Embiggens the Fattest Man: Obesity, Incentives and Unintended Consequences in "King Size Homer." This is a very rough draft of a chapter for a book on economics in The Simpsons that co-blogger Josh Hall is editing. Comments welcome.

5. Cartoon Economic Policy (with Steven Horwitz). This is the latest installment of Steve's column "The Calling," a regular feature at The Freeman Online.

Posted by Art Carden at 12:19 PM in Economics

Phonecall for Mr. Orwell. Is there a Mr. Orwell in the house?

In India the "Right of Children to Free and Compulsory Education Act" comes into force today.

Gor that? Free and Compulsory.

Posted by Robert Lawson at 09:52 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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