Division of Labour: November 2010 Archives
November 30, 2010
Battles Among Licensed Occupations
Part of the abstract of a new NBER WP from Morris M. Kleiner and Kyoung Won Park:
In this study, we examine dentists and dental hygienists, who are both universally licensed and provide complementary services to patients, but may also be substitutes as service providers. We focus on the labor market implications of governmental requirements on permissible tasks and the supervision of hygienists’ activities by dentists. Since there are elements of monopsony in the market we examine, we use the model as a guide for our analysis. We find that states that allow hygienists to be self-employed have about 10 percent higher earnings, and that dentists in those states have lower earnings and slower employment growth. Several sensitivity and falsification tests using other regulated and partially regulated occupations show that our licensing measures are generally robust to alternative specifications. Our estimates are consistent with the view that winning the policy and legal battle in the legislature and courts on the independence of work rules matters in the labor market for these occupations.
Property Rights and Financial Development: The Legacy of Japanese Colonial Institutions
Several studies link modern economic performance to institutions transplanted by European colonizers and here we extend this line of research to Asia. Japan imposed its system of well-defined property rights in land on some of its Asian colonies, including Korea, Taiwan and Palau. In 1939 Japan began to survey and register private land in its island colonies, an effort that was completed in Palau but interrupted elsewhere by World War II. Within Micronesia robust economic development followed only in Palau where individual property rights were well defined. Second, we show that well-defined property rights in Korea and Taiwan secured land taxation and enabled farmers to obtain bank loans for capital improvements, principally irrigation systems. Our analytical model predicts that high costs of creating an ownership updating system and a citizen identity system discourage a short-sighted government from implementing these crucial components, the absence of which gradually makes land registration obsolete. Third, considering all of Japan’s colonies, we use the presence or absence of a land survey as an instrument to identify the causal impact of new institutions. Our estimates show that property-defining institutions were important for economic development, results that are confirmed when using a similar approach with British Colonies in Asia.
Yoo has a couple of other interesting looking papers on property rights here.
November 29, 2010
Hayek on Inflation
I'm prepping some macro notes right now, and I'm listening to this interview with Friedrich Hayek on "Meet the Press" in the 1970s. Some of the questions are just silly, honestly, and it is interesting to hear how Hayek answers them.
November 24, 2010
In Which an Anonymous Commenter Wishes Death for Me, My Friends, and My Family
This morning, I wrote a fourth TSA piece for Forbes (http://blogs.Forbes.com/artcarden for the whole set). Be sure to check out the comments; one of the commenters essentially expresses the hope that I, my family, and my friends die in a terrorist attack. And yet I spent most of the day on a Greyhound bus with no security screening. I wasn't worried, and I don't think my fellow passengers were, either.
Posted by Art Carden at 07:37 PM
Hot Stove Economics
I've been meaning to give JC Bradbury's book a plug. I bought it in early October and read it over fall break. It's terrific and timely as baseball's hot stove league is warming up with the trade of Dan Uggla and the signing of Victor Martinez. I particularly like JC's finding that there is a range of wins (roughly 60-80--diagram here) over which improvement yields little extra revenue and, consequently, gives teams little incentive to hire additional talent. My only major quibble is the copyediting--I found about a dozen typos etc. that should have been caught by a decent proofreader. A great holiday gift choice for the baseball-loving econ geek in your life!
Many thanks to Knowledge Problem's Lynne Kiesling for visiting Berry and giving two talks earlier this week. Who knew that one could have so much fun discussing the Black Death or electricity pricing?
Posted by E. Frank Stephenson at 01:08 PM
Manufacturing a Problem
This column (which ran in the deadtree version of the local fishwrap) prompted me to go Boudreaux:
If recent columnist John Steel (“We need ‘Made in America’ label,” Nov. 19) truly wants to “stop the nonsense” he should take a few moments for research before making baseless claims. To wit, he states that “we don’t make much in this country anymore” resulting in a “near total reliance on, and addiction to, foreign manufacturing.”
The TSA Trilogy, With More at Mises.org
My third (and final?) Forbes piece on the TSA went live last night. It should be good reading for while you're passing time in the security line today.
November 23, 2010
Government job training programs for (wait for it) . . . ex-pirates
How is it possible that I'm the first DOL blogger to notice this story from today's Journal?
Building Brand Equity: More on the TSA
Here's this week's Forbes column.
Posted by Art Carden at 02:49 PM
November 22, 2010
Libertarian Party Founder David Nolan Dead at 66
David Nolan, a founder (arguably the founder) of the Libertarian Party passed away yesterday at age 66. The Libertarian Party was founded in Nolan's Colorado home in December, 1971. Although the Party has never made a breakthrough in American politics - it's high point probably came in 1980, when presidential candidate Ed Clark received 1.1 percent of the national vote and two Libertarians were elected to the Alaska state legislature - most libertarians have, at some point, had contact with the Party, and many have voted for or more actively supported its candidates.
Nolan's other claim to fame may be his invention of the "Nolan Chart," now, in somewhat revised form, frequently referred to as the "World's Smallest Political Quiz." Nolan developed the chart to better capture electoral/political philosophies than the traditional "left/right" paradigm used by most commentators.
One can read more on Nolan here. R.I.P.
November 19, 2010
Make Good On Tea Party Rhetoric By Selling Federal Lands
So say my former student Shawn Regan and his PERC colleague Holly Fretwell in this Forbes piece.
Posted by E. Frank Stephenson at 11:25 AM
November 18, 2010
How to avoid a TSA pat down
Gary Clement on TSA.
What is seen and what is not seen
Inflation 'R Us!
"[F]ar from achieving long-run price stability, it [the Fed] has allowed the purchasing power of the U.S. dollar, which was hardly different on the eve of the Fed‘s creation from what it had been at the time of the dollar‘s establishment as the official U.S. monetary unit, to fall dramatically. A consumer basket selling for $100 in 1790 cost only slightly more, at $108, than its (admittedly very rough) equivalent in 1913. But thereafter the price soared, reaching $2422 in 2008."
November 17, 2010
Penn Gillette's latest on TSA
Last year's co-recipient of APEE's Thomas Jefferson Award, Penn Gillette, recounts a recent experience with TSA that we should all take as seriously as he does.
(How to become a) Federal V.I.P.
I'm boarding a flight in a few hours (in Guatemala) and will be mindful of Penn's example when going through TSA security on my connection in Houston.
HT: Jen Thompson
November 16, 2010
Because, Not Despite
A letter I sent to the WSJ earlier today in response to this article:
Today’s front page story (“Bond Market Defies Fed” Nov. 16) is subtitled “Interest Rates Rise Despite Launch of Treasury Buying ….” Since an important part of nominal interest rates is inflationary expectations (the so-called Fisher effect), it’s much more likely that interest rates are rising because of the Fed’s bond purchases rather than despite the expansion of the money supply.
November 15, 2010
Alan Blinder is outraged. Outraged!
Choice tidbits from Alan Blinder in the WSJ today:
For months, we have witnessed the spectacle of people arguing that Keynes was wrong.
Spectacle indeed! Don't they know how gauche that is?
Somehow, additional government spending actually reduces employment—even when the economy has huge amounts of spare capacity and unused labor desperate for work; even when the central bank will prevent interest rates from rising to "crowd out" private spending. Really?
Imagine! They must somehow think that piling up debt to finance current government spending, with future tax hikes or inflation implied but not spelled out, can discourage investment!
The anti-Keynesian revival has been disheartening enough. But now the economic equivalent of the Flat Earth Society is turning its fury on Ben Bernanke and the Federal Reserve. Critics ranging from German Finance Minister Wolfgang Schauble to tea party favorite Sarah Palin—which is quite a range—have spoken as if Bernanke & Co. have lost their marbles and are embarking on a wild policy misadventure. All in all, it looks like the nation and the world need an Economics 101 refresher.
When the Finance Minister of Germany rejects Keynesian economics this is equivalent to his rejecting the spherical shape of the Earth! Criticisms of Ben Bernanke for mistaken policies, even from a Finance Minister, cannot rest on economically literate arguments but only on fury! What is the world coming to?
To create the fearsome inflation rates envisioned by the more extreme critics, the Fed would have to be incredibly incompetent, which it is not.
After all, we have never had double-digit inflation under the Fed's watch. 1979-1981 never happened.
But calling QE2 "currency manipulation" is a grotesque abuse of language. ... the Fed will not intervene to push the dollar down.
When the Fed announces its intention to expand its liabilities (the monetary base) by 25%, and in so doing predictably drives up the expected dollar price level, and that in turn predictably pushes down the dollar on foreign exchange markets, that is a far cry from intervening to push down the dollar!
An independent central bank doesn't even consult with its own government.
Have you ever seen Ben Bernanke in a joint press conference with the Treasury Secretary? I didn't think so.
Critics tell us that QE2 won't give the U.S. economy much of a boost but will lead to rampant inflation. Both? How does that work?
It is inconceivable that nominal income Py could rise without real income y rising, but only P rising. Inconceivable!
November 13, 2010
PR Department: Vend It Like Beckham Edition
The paper on David Beckham's attendance effect that co-blogger Bob, his former student Kate Sheehan, and I published in the IJSF (available here) is blurbed in today's WSJ. Our paper is also cited in this book on celebrities.
November 12, 2010
The Emergence of Institutions
New paper by two scholars I don't know, but I probably should.
Abstract: This paper analyses how institutions aimed at coordinating economic interactions may emerge. Starting from a hypothetical state of nature, agents can delegate the task of enforcing cooperation to one of them in exchange for a proper compensation. Both individual and collective commitment problems stand in the way of institution formation. These problems imply first that a potentially efficient institution may fail to emerge and also that if it emerges, it may do so inefficiently. We show that big and untrustworthy societies are more likely to support institutions whereas their emergence is more difficult in small and trusting societies, but if institutions do emerge, they tend to be more inefficient in the former type of societies. Finally, we show that the threat of secession by a subset of agents may alleviate the latter problem.
Building Brand Equity: Courtemanche and Carden, J. Urban Econ
Our paper on Walmart Supercenters and Obesity is in press and available online.
Posted by Art Carden at 02:15 PM
What passes for "debate" on the gold standard at The New York Times
On November 9-11, the question for discussion on the online New York Times' "Room for Debate" feature was "Back to a Gold Standard?". Prompted by World Bank chief Robert Zoellick's remarks (previously noted here) suggesting that the price of gold be used "as a reference point for inflation and currency values", The Times invited six economists to comment on the following questions:
"Would moving to a modified gold standard make sense in this global economic climate? Or would it make recovery more difficult? How might this work?"
All six invitees rejected any type of gold standard. (My colleague Russ Roberts did at least defend the idea of constraining monetary policy in some other way.) Several invoked the common but mistaken notion that "the gold standard" was responsible for the Great Depression. None distinguished between the robust classical gold standard and the fragile jerry-rigged central-bank-mismanaged gold-exchange system that failed in the interwar period.
Sigh. That's not exactly my idea of finding "room for debate". Academic defenders of the gold standard are not that difficult to find (cough, cough).
More federal workers' pay tops $150,000
From USA Today (via the Atlantic Wire and Instapundit):
The news story brings to mind this recent cartoon from the Rome News-Tribune's Mike Lester:
November 11, 2010
New paper on effects of post-Kelo state laws
"How did Kelo Affect Business Formation?"
On June 23, 2005, the U.S. Supreme Court ruled in Kelo v. City of New London, 505 U.S. 469 (2005) that the Public Use Clause allows overnments to take private property for transfer to new private owners for the purpose of promoting “economic development.” We show theoretically that this reduces the value of businesses. We argue that this in turn reduces the incentives to start new businesses, particularly in states that did not enact legislation to restore property rights at the state level. Our preliminary empirical work supports this. The point estimate implies that passing a state-level law restricting eminent domain taking is associated with an increase in the rate of business formation of about 10 percent. Our results show that policy makers may enact state-level eminent domain restrictions to protect property rights without fear of retarding business formation. Business formation may even benefit.
November 10, 2010
Krugman on Social Security
Paul Krugman notes that the deficit commission is "talking about raising the retirement age, because people live longer — except that the people who really depend on Social Security, those in the bottom half of the distribution, aren’t living much longer. So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever."
That's an excellent point. Social Security has always been a bad deal for people with shorter-than-retirement-age life expectancies. It would be much better for janitors and others in that position to have personally owned retirement accounts instead. Right, Paul?
Making Enemies with Monetary Policy
It seems that there is no number of boneheaded moves you can make that will win the affection of TROTW (the rest of the world). During W's tenure, TROTW hated us (rightfully, IMO) for military expansion. Now, apparently, during Obama's (and Bernanke's and Paulson's and Geithner's) tenure, TROTW hates us (again, rightfully, IMO) for monetary expansion:
Was ist das?! Clueless? Whyever would you think that?
Posted by E. Frank Stephenson at 11:11 AM
November 09, 2010
Words of wisdom: Follow through
Useful in almost all settings - politics, economics, friendships, love, and, of course, sport:
Some of what is wrong with economics
I accidently deleted my first post:
On page 1313 (actual page 14) of the current issue of the American Economic Review has this very intuitive and, of course, easy to implement statement:
The optimal donation aj by a citizen satisfies the first-order condition, which in a symmetric equilibrium is
Does the author really think that individuals behave according to this equation? If not, then why should we? If so, then what?
Posted by Craig Depken at 01:56 PM
November 08, 2010
India and Democracy
From the teleprompter reader in chief's address to India's parliament:
This year, as India marks 60 years with a strong and democratic constitution, the lesson is clear: India has succeeded, not in spite of democracy; India has succeeded because of democracy.
Well then what took it so long? One can quibble with what it means for a nation to be successful (one can even think the notion is meaningless) but economic success didn't really come to India until the last 20 years or so. If this economic improvement is what Obama means by success then his this democracy thing sure is slow acting. After all, it was only some 40 years after India became a democracy for the improved economic conditions to arrive. Of course the real answer lies in improved economic liberty not with democracy.
Posted by E. Frank Stephenson at 09:02 PM
In The Reading Pile
1. Benjamin Rogge, A Maverick's Defense of Freedom.
QOTD: Kenneth Elzinga on the Market Process
From his essay on the relevance of Human Action to Industrial Organization, p. 241:
"Mises cogently explains in Human Action that markets do not equilibrate and then stop."
The War on Drugs + Occupational Licensing = ...
As many as 14 armed Orange County deputies, including narcotics agents, stormed Strictly Skillz barbershop during business hours on a Saturday in August, handcuffing barbers in front of customers during a busy back-to-school weekend.
Posted by E. Frank Stephenson at 11:45 AM
World Bank Chief suggests a monetary role for gold
Well, this is interesting.
Not exactly a call for restoring the classical gold standard. But more respect than gold usually receives from the World Bank or IMF.
November 06, 2010
One vote making a difference, 2010 edition
From north Alabama. Wonder if this is the only such example in the entire country?
Gave me a laugh
Awesomness from a reader of Greg Mankiw's blog.
Posted by Noel Campbell at 10:33 AM
November 05, 2010
Myth of the Rational Voter: Georgia Supreme Court Edition
A divorce lawyer who raised no campaign cash and did little public campaigning to support her own bid for the Georgia Supreme Court has forced Justice David Nahmias into a Nov. 30 runoff.
Source. Various commenters attribute Adkins's success to her appearing first on the ballot (alphabetical ordering), her being female, or her not being an incumbent. None, however, attribute her success to voter knowledge about the candidates' qualifications or stances on the issues.
Posted by E. Frank Stephenson at 04:06 PM
Incentives Matter: Afghan Girls Disguised as Boys Edition
From today's NYT (HT: Jayme):
Six-year-old Mehran Rafaat is like many girls her age. She likes to be the center of attention. She is often frustrated when things do not go her way. Like her three older sisters, she is eager to discover the world outside the family’s apartment in their middle-class neighborhood of Kabul.
Posted by E. Frank Stephenson at 11:14 AM
November 04, 2010
A Coke for You, Prof. Peltzman?
From the abstract of a new paper in the Journal of Public Economics:
Our results, based on state soft drink sales and excise tax information between 1989 and 2006 and the National Health Examination and Nutrition Survey, suggest that soft drink taxation, as currently practiced in the United States, leads to a moderate reduction in soft drink consumption by children and adolescents. However, we show that this reduction in soda consumption is completely offset by increases in consumption of other high-calorie drinks.
November 03, 2010
Election Wrap Up: What Happened in the States
[Note: federal results are reviewed here].
*[This post was updated on November 6.]
In addition to a very good night in federal races, including the best Republican showing in the U.S. House since the election of 1946, Republicans did very well in the states on Tuesday, picking up hundreds of state legislative seats and gaining control in numerous state legislative chambers. This will not only influence policy, but also will strengthen Republicans in redistricting, and provide a larger "farm team" of candidates down the road. The run down - including such important but under reported races such as Attorney General and Secretary of State, is below the fold. We'll have one more long post, on state ballot initiatives, later in the week.
Read More »
Entering this election, Democrats held a 26-24 advantage in governorships, although Republican held the office in 3 of the 4 largest states (California, Texas, and Florida). With 2 races still undecided, it appears that Republicans will pick up six net governorships. Democrats managed to minimize losses with close victories in Vermont, Illinois and Oregon, and narrow leads heading into a recount in Minnesota and a possible recount in Connecticut.
Independent Pick-up: In Rhode Island, former liberal Republican Lincoln Chafee, now running as an indepent, appears to have narrowly won the Governorship over Republican John Robataille, thus ending 16 years of Republican governors, while still denying the office to Democrats in one of the nation's most Democratic states. Democrat Frank Caprio finished third, falling rapidly in the polls after saying President Obama could "shove his endorsement," went to Chafee.
Republicans picked up a number of big state governorships, particularly around the Great Lakes.
- Pennsylvania: Pennsylvania's governorship reliably swings back and forth between the parties every eight years. This time it was the GOP's turn, and Republican Attorney General Tom Corbett easily defeated Dan Onorato.
Too Close to Call:
Two gubernatorial races remain too close to call, but Democrats are favored in each.
Other races of interest:
- In Illinois, Democratic incumbent Pat Quinn defeated Bill Brady by about 19,500 votes out of some 3.2 million cast, or 49.6% to 49.1%.
Republicans had a huge night in state legislators, and now has more state legislators than at any time since the election of 1928. Not one body shifted from GOP to Democratic Control. The following state legislative chambers switched from Democratic to Republican majorities:
The Republicans won control of the Minnesota Senate for the first time ever, and the Alabama legislature and North Carolina assembly for the first time since reconstruction.
Republicans also showed that they are not yet dead in New England, taking control of both houses of the legislature in Maine and New Hampshire. Although reduced to just one New England Governorship, in Maine, were very competitive this year in all six New England states. Republicans also made double digit gains in the state legislatures in both Connecticut and Massachusetts, and also gained in Rhode Island.
The other thing you can see, especially in conjunction with the results in governors' races, is that the GOP has gained power throughout the old industrial Great Lakes region.
But the Republican gains were sweeping. They gained net legislative seats in 42 of the 45 states that had partisan elections this year, the exceptions being Delaware, where they lost one seat net, Vermont (broke even), and California (lost 3 net). While a few races are undecided, overall, Republicans appear to have gained at least 514 seats in state houses of representatives, and 119 state Senate seats.
Republicans gained at least 5 AG offices on Tuesday, with the most important being Ohio. In that race, former U.S. Senator Mike DeWine defeated incumbent Richard Cordray, a smart, talented man many thought would be the party's next nominee for Governor. Policywise, DeWine has promised to join Ohio to the suit challening the constitutionality of Obamacare. The Republicans also gained AG offices in Arizona, Kansas, Georgia, and Oklahoma. No offices flipped from Republican to Democrat.
One office remained up for grabs, and it's a big one: California. Approximately one million absentee ballots need to be counted that will decide the race. As of mid-morning Pacific time on Nov. 6, Republican Steve Cooley had retaken the lead from Democrat Kamala Harris, leading by 46.0% to 45.7%, or a bit over 23,000 votes out of more than 7.6 million cast. If Kamala wins, Republicans will be left without a statewide officeholder in California.
Depending on the results of that race, Democrats will be left in control of either 26 or 27 of the nation's AG offices. Of the 43 elected Attorneys General, the division will be 22-21, with the party winning California holding the majority. Despite the gains, it was a somewhat disappointing night for the GOP in AG races. The party had hoped to pick up between 6 and 13 seats, so it comes in at the very low end of expectations.
Secretaries of State :
Perhaps the most important pickup for the GOP was the Secretary of State office in Ohio, which has been the site of a great deal of litigation in every election since 2000. There, Jennifer Brunner, a nice woman very popular with the "black box voter fraud" left, gave up the office for a failed run for U.S. Senate. John Husted, a state Senator, wins the office. Together with John Kasich's win in the Ohio Governor's race and a gain in the State Auditor's race, this also gives Republicans control of redistricting in Ohio.
In Kansas, Republican Kris Kobach, a rising star, gained a seat for the GOP. More importantly, libertarian-Republican Scott Gessler (a personal friend) captured the Secretary of State office in Colorado, an important swing state with a relatively powerful SecState. Republicans also won the office in Iowa, New Mexico, and Arkansas. Additionally, after the first of the year the Republicans likely gain appointed Secretary of State seats in Oklahoma, Maine, and Pennsylvania. Only in Oklahoma is the Secretary of State not the state's chief election official. Republicans also will gain the opportunity to appoint the Secretary of State in New Hampshire, although both Democratic and Republican controlled legislatures have kept Bill Gardner in the office since 1976.
Most states have non-partisan judicial elections or retention elections. Across the country, few incumbents were defeated in non-partisan or retention races.
In Ohio, Republican Associate Justice Maureen O'Connor defeated Eric Brown in a race for the Chief Justice slot. Brown was appointed by Governor Ted Strickland earlier in the year, after the death of long-time Chief Tom Moyer. O'Connor's victory means that all members of the Court are again Republican. Incumbent Judith Lanzinger easily retained her seat. Because O'Connor will vacate her current associate justice seat, newly elected Republican Governor John Kasich will appoint a successor. O'Connor becomes the first woman to serve as Ohio's Chief Justice.
In Michigan, conservative Republican Robert Young easily won re-election, and Republican Mary Beth Kelly trounced appointed incumbent Democrat Alton Davis, winning 62% of the vote. Her win gives Republicans a narrow 4-3 majority on the Court.
Perhaps the nation's most libertarian state Supreme Court Justice, Richard Sanders, was re-elected in Washington state, along with another justice with libertarian leanings, James Johnson.
Republicans held their seats in competitive elections Alabama, Minnesota, and Texas. In West Virginia, incumbent Democrat Tom McHugh narrowly defeated Republican John Yoder, 50.7% to 49.3%.
In Iowa, three Justices who held that the state constitution protects same sex marriage were rare losers in retention elections. Justices David Baker, Marcia Ternus, and Michael Streit were defeated by margins of 54%, 55%, and 54%. Their successor will be chosen by incoming Republican Governor Terry Branstad from a list provided by a nominating commission.
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Election Wrap-up, Federal Races.
Well, it was a big night for political junkies. Soon enough we should worry about what it means for policy, but first, let's find out who, and what, won. In this post we'll review the federal races. A later post will cover what's happened in the states, which may be more interesting because it's harder to find! Go below the fold for more.
Read More »
A few races worth noting:
It should be noted that many of the Democrats to lose, such as Ohio's Zach Space, Texas's Edwards, Mississippi's Gene Taylor and Georgia's Jim Marshall, just to name a few, were among the more moderate Democrats in the House. And where Republicans were replacing Republicans in open seats, the newer batch of congressmen is generally more conservative than its predecessors. As a result of the latter trend, the House has both moved further right even more than the raw numbers suggest; as a result of the former, it will probably be more polarized ideologically, although without Nancy Pelosi's highly partisan, ideological approach to governing, it may yet be a more harmonious place. Most of these new Republicans seem more interested in addressing tough economic issues than so-called "social issues," but we will have to see if that lasts - it is often easier politically to take largely symbolic votes on social issues than to actually cut government spending.
But Republican efforts to take Senate control stalled, with the GOP picking up a healthy 6 to 8 seats, but never really threatening to gain the 10 they needed for control. Connecticut's long-time Democratic Attorney General Richard Blumenthal, a sort of boring Elliot Spitzer, defeated WWE founder Linda McMahon, a sort of really colorful Carly Fiorina, by 10 points in Connecticut. Governor Joe Manchin - who is really good - held West Virginia in the Democratic camp despite the President's unpopularity in the state. In Delaware, the colorless Chris Coons, designated months ago to be the Democrats' sacrificial lamb against then-popular congressman Mike Castle, crushed tea party lightweight Christine O'Donnell, who had stunned Castle in the primary, by a 56-40 margin. And in a result that I'll admit surprised me, Majority Leader Harry Reid held on to defeat another weak candidate but tea party favorite, Sharron Angle (by the way, I met Angle a few weeks ago and was surprised how much I liked her). Fiorina's loss to the odious Barbara Boxer in California was very disappointing. You have to wonder, if Jerry Brown and Barbara Boxer can handily defeat a pair of accomlished, well-financed GOP women in a strong Republican year, is California now hopelessly in the grips of the Democrats left-wing? How much economic destruction is needed in that state?
Furthermore, several of the GOP victories were suprisingly close. Moderate, pro-gay rights Republican Mark Kirk won a narrow victory in Illinois, which may show the party's weakness in Illinois - his opponent, Alex Giannoulis, is from a family that owns a bank that has been tied to the mob, and if you can only win that race by two points, you've got some problems. Another surprisingly close race came in Pennsylvania, where Club for Growth hero Pat Toomey finally pulled out a 51-49 victory over Joe Sestak. Look for Toomey to be a powerful voice for free markets in the Senate.
In fact, some races remain too close to call, most notably Colorado, where incumbent Democrat Michael Bennett clings to a 7600 vote lead over Tea Party endorsed Ken Buck - who, unlike O'Donnell and Angle, is a very strong candidate, a handsome, articulate, Princeton grad with a record as a sucessful prosecutor in one of the state's largest counties. About 88% of the vote has been counted. [Update, 11/3, 10:40 p.m.: this race has now been called for Bennett]. Also hanging in balance is Washington, where voting takes place by mail. There Patty Murray, an undistinguished Senator who has nevertheless held on for three terms, leads Republican Dino Rossi by about 14,000 votes, with about 62% counted. Because of the state's mail-in system, we may not know the winner in this race for a while. More votes have been counted from Republican, rural eastern Washington, which would indicate Murray is favored, but as the votes have been coming in, Rossi has been running better than expected in Spokane, keeping the final result up in the air.
The Republicans also gained easy pick-ups in North Dakota, Indiana, and Arkansas (where incumbent Blanche Lincoln was crushed by an embarrassing 21 point margin, with her vote for Obamacare a major problem for her). I have personal reasons for being pleased to see Russ Feingold lose in Wisconsin, although I have to say he is probably one of the smarter, more principled, and more courteous men in the Senate. The winner of that race, tea-party endorsed businessman Ron Johnson, will hopefully take a pro-markets view to D.C.
It's also worth noting that write-in candidate Lisa Murkowski appears to have defeated Sarah Palin endorsed Joe Miller in Alaska. Murkowski, who lost to Miller in the primary, says she will still caucus with Republicans. An old-school Alaska Republican in the mold of her father, former Senator Senator Frank Murkowski, and former Senator Ted Stevens, she will be more moderate on social issues, but not nearly as good as Miller on issues such as repealing Obamacare or watching the budget. We won't know the formal results for a while, because they'll have to go through all the write ins. But unless there are a lot of sloppy write in ballots, she should be good to go.
Most disappointing for libertarians should be the fact that Jim Huffman, the Republican nominee in Oregon, could never get traction against incumbent Ron Wyden. Huffman is the libertarian former dean of Lewis & Clark Law School, and early in the cycle was considered a possible upset, but never was able to close Wyden's early lead.
So Republicans will end up with a 6 to 8 seat pickup, depending on the Colorado and Washington races. That may be slightly disappointing to the GOP, but it really shouldn't be. Together with the House results, it means Obama's agenda is stopped, and compared to what things looked like eighteen months ago, the Republicans are sitting 15 to 20 seats better than many were predicting.
Two of the most intriguing new Senators will be two of the most libertarian: Kentucky's Rand Paul, son of libertarian Republican Congressman Ron Paul, and Florida's Marco Rubio, the Republican party's rising star. Both were tea party favorites who blasted Republican party establishment candidates in the primaries, then romped to general election wins. Paul should be the firebrand, but Rubio will be the more influential. For a taste of Rubio, watch this ad.
Note that as in the House, the Senate will move a bit further right than the mere partisan numbers suggest. For example, Manchin, of West Virginia, ran a campaign ad in which he literally shot a copy of the Cap & Trade bill. He'll be pro-union but also well to the right of the late Robert Byrd, whose term he will complete. And given that he's got to run again in two years in a state in which the President is deeply unpopular and which is drifting right, Manchin may be as staunch an opponent as the President will have. Rubio will be more libertarian, and a much more powerful voice, than his Republican predecessor George Lemioux. In Missouri, Roy Blunt is probably to the right of the Republican he replaces, Kit Bond, at least on budgetary matters, and Utah's Michael Lee replacing Robert Bennett will also move the Senate right without a party change. (Bennett was a personal favorite for his outspoken defense of free speech against campaign finance laws, so I'm sad to lose him - but Lee should be good).
While I have no doubt that Republican leader Mitch McConnell would rather be the Majority than the Minority Leader in the next Congress, Republican senators are left in a sweet spot. They'll have six to 8 votes to spare to maintain filibusters and a GOP House to make sure they won't have much to filibuster other than the ocassional unacceptable nominee. Oddly, while the Democrats will have the majority, I think that Harry Reid will usually feel that he is playing defense, as McConnell can look for votes among moderate Democratic Senators such as Manchin, Ben Nelson of Nebraska, Bill Nelson of Florida, Bob Casey of Pennsylvania, Jon Tester of Montana, and Jim Webb of Virginia, all of whom face reelection in 2012 in Republican leaning states.
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November 02, 2010
Divided We Vote
"Divided We Vote"
Abstract: Previous research has shown that divided government correlates with more constrained government, but less is understood about the empirical conditions that lead to divided government. This paper treats divided government as the dependent variable in an empirical macro political economy model estimated on 30 years (1976-2005) of panel data for the American states. Using both continuous and categorical measures of divided government, results indicate that voters support more divided government after periods of increased government spending per dollar of tax revenues, which suggests that voters attempt to utilize divided government for its constraining effects. On the other hand, voters generate more unified government after incomes have decreased and (to a lesser extent) after unemployment rates have increased, which suggests that voters seek to empower government in response to periods of economic distress. Only conditional support is found for the strategic-moderating theory (Alesina and Rosenthal 1996) that focuses purely on midterm cycles and split-ticket voting absent economic conditions.
Keywords: divided government, limited government, midterm cycles, split ticket voting, American states
JEL Classifications: D72; E62; H71
Election Day 2010: Read, Watch, Listen
On this election day, here's something to...
1. Read. My paper with Mike Hammock in which we apply some of the insights of Bryan Caplan's The Myth of the Rational Voter to environmental issues.
2. Watch. The Public Choice Society Symposium in Caplan's book from 2008.
3. Listen to. An EconTalk podcast with Caplan in which he discusses the book.
November 01, 2010
Rapping Keynes v. Hayek v2.0
Live rhyming on stage, followed by panel with Russ Roberts and John Papola. As discussed, they manage to preserve great accuracy with the innovative delivery.
Building Brand Equity: Speaking at CSU-East Bay, Taxes and Tea Parties
I'm speaking at the Smith Center for Private Enterprise Studies at CSU-East Bay on Wednesday, November 10. The lecture is $0 and open to the public, and I'm speaking at 2:00 PM. More information can be found here.
Also, Steve Horwitz and I are working on a trilogy about the Tea Parties. Here's installment #2.
What the Government Purchases Multiplier Actually Multiplied in the 2009 Stimulus Package
Not much according to John Cogan and John Taylor:
Much of the recent economic debate about the impact of stimulus packages has focused on the size of the crucial government purchases multiplier. But equally crucial is the size of the government purchases multiplicand—the change in government purchases of goods and services that the multiplier actually multiplies. Using new data from the Bureau of Economic Analysis and considering developments at both the federal and the state and local level, we find that the government purchases multiplicand through the 2nd quarter of 2010 has been only 2 percent of the $862 billion American Recovery and Reinvestment Act (ARRA) of 2009. This increase in government purchases has occurred mainly at the federal level. While states and localities received substantial grants under ARRA, state and local governments have not increased their purchases of goods and services. Instead they reduced borrowing and increased transfer payments. These findings explain why, regardless of the size of a government purchases multiplier, changes in government purchases have had no material effect on the growth of GDP since the time ARRA was enacted. The implication is not that ARRA has been too small, but rather that it failed to increase government consumption expenditures and infrastructure spending as many had predicted from such a large package.
Now we know the answer to the burning question--how does one spend over $800B and have little to show for it?
Incentives Matter: Death Tax Edition
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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