Division of Labour: May 2011 Archives
May 28, 2011
Jonathan Chait Peddles Hooverite Nonsense

It's been awhile since I called out someone for being ignorant of Herbert Hoover's record in office. Jonathan Chait has piece about Republicans (supposed) opposition to government spending called "Herbert Hoover Called. He Wants His Fiscal Policy Back."

As anyone with an iota of knowledge about Hoover knows, Hoover didn't cut spending he increased it. Big time. Roughly 50% between 1929 and 1932 (and that's nominal terms--real would be even larger because that was a deflationary period). See Table 1.1 here.

Posted by E. Frank Stephenson at 01:19 PM in Economics

May 26, 2011
Holy Manipulated Currency Batman! Protectionist Economist Pitches Foreign Made Copiers

This is too rich: Peter Morici, Lou Dobbs's favorite China bashing economist and an advocate of taxing China to "bring back US jobs," has become a pitchman for Kyocera copiers. And guess where Kyocera copiers are made? The company has one plant in China and two in Japan.

What's Chinese for chutzpah?

UPDATE (5/27): One reader wrote to suggest that I should have considered Morici's apparent embrace of foreign made goods as an installment of my "incentives matter" posts. Indeed. Maybe Chinese money isn't so undervalued after all.

Posted by E. Frank Stephenson at 01:28 PM in Economics

May 23, 2011
"On the Relevance of Freedom and Entitlement in Development".

The World Bank's Jean-Pierre Chauffour has a nifty new working paper "On the Relevance of Freedom and Entitlement in Development".

Reviewing the economic performance—good and bad— of more than 100 countries over the past 30 years, this paper finds new empirical evidence supporting the idea that economic freedom and civil and political liberties are the root causes of why some countries achieve and sustain better economic outcomes. For instance, a one unit change in the initial level of economic freedom between two countries (on a scale of 1 to 10) is associated with an almost 1 percentage point differential in their average long-run economic growth rates. In the case of civil and political liberties, the long-term effect is also positive and significant with a differential of 0.3 percentage point. In addition to the initial conditions, the expansion of freedom conditions over time (economic, civil, and political) also positively influences long-run economic growth. In contrast, no evidence was found that the initial level of entitlement rights or their change over time had any significant effects on long-term per capita income, except for a negative effect in some specifications of the model. These results tend to support earlier findings that beyond core functions of government responsibility—including the protection of liberty itself—the expansion of the state to provide for various entitlements, including so-called economic, social, and cultural rights, may not make people richer in the long run and may even make them poorer.


Posted by Robert Lawson at 10:57 AM

May 20, 2011
Brian Wilson or Vilfredo Pareto?

Which name goes with which photos:

Brian Wilson or Vilfredo Pareto?



Posted by Edward J. Lopez at 08:07 PM in Economics

Has Birnam Wood Come to Dunsinane? RFK Jr. Endorses Free Market Capitalism
However, the rather unique pro-free market, yet pro-environment position came during Kennedy’s evening keynote address at the Sustainable Operations Summit, at The Langham Huntington in Pasadena, CA earlier this week. His position at first took the crowd by surprise, but was well received after Kennedy’s digression.

Kennedy differentiated the various flavors of capitalism. The one he favors for the environment is free market capitalism. The one he opposes is the sort of “capitalistic” system we have in place as we speak, crony capitalism.

“Show me a polluter, and I’ll show you a subsidy,” insisted Kennedy, implying that the biggest polluters in the environment are actually subsidized by the taxpayer. Crony capitalism is when the government and corporations collude to divert tax payer dollars (grants or subsidies) and/or create laws that benefit the given corporation. If free market capitalism is upheld, no such collusion between government and corporation is even possible.

Kennedy further elaborated that the current regime of crony capitalism, rather than a corporation investing money to better a given business, money is (unfortunately) better spent investing the political process, thus to dismantling the free marketplace while subverting environmental laws.

Source (HT: FB friend Amar B.) I'm not convinced, but perhaps it's a step in the right direction.

Posted by E. Frank Stephenson at 09:32 AM

Great Moments in Government Schooling

Riverdale cops: Teacher urinated in trash can during class

D.C. schools investigate security breaches in 2011 tests

Posted by E. Frank Stephenson at 09:03 AM

A Big Wet Kiss for Economics

From, of all people, the NYT's Nicholas Kristof:

When I was in college, I majored in political science. But if I were going through college today, I’d major in economics. It possesses a rigor that other fields in the social sciences don’t — and often greater relevance as well. That’s why economists are shaping national debates about everything from health care to poverty, while political scientists often seem increasingly theoretical and irrelevant.

Economists are successful imperialists of other disciplines because they have better tools. Educators know far more about schools, but economists have used rigorous statistical methods to answer basic questions: Does having a graduate degree make one a better teacher? (Probably not.) Is money better spent on smaller classes or on better teachers? (Probably better teachers.)

Posted by E. Frank Stephenson at 08:53 AM

Circumcision Ban to Appear on San Francisco Ballot

Story here. Circumcision just doesn't seem like something that should be decided by 50%+1 of the subset of the population that will go to the polls on the election day. So much for the so-called right of privacy, eh?

Posted by E. Frank Stephenson at 08:38 AM

May 18, 2011
The Grandma Test

David Henderson points to Steve Levitt's "'Daughter Test' of Government Prohibitions":

It wasn't until the U.S. government's crackdown on internet poker last week that I came to realize that the primary determinant of where I stand with respect to government interference in activities comes down to the answer to a simple question: How would I feel if my daughter were engaged in that activity?

If the answer is that I wouldn't want my daughter to do it, then I don't mind the government passing a law against it.

David's rebuttal is good and I have nothing to add. But I have a test of my own.

The Grandma Test: If the government wants to do something, but the price was that I had punch my grandma in the face, would I want it?

I love my grandma dearly. But I don't love her unconditionally. If Canadian tanks were attacking us and rolling down College Avenue and I could stop them by punching grandma in the face, then you betcha I'd do it. (Sorry grandma.)

Building a nice air-conditioned stadium to watch the Dallas Cowboys play? Subsidizing rice farmers? Deposing Saddam Hussein? Stopping Steve Levitt from playing poker? Giving the richest poor people on earth free health care? Nope, granmpa you're safe on those counts.

I'm sure there are some gray areas in the middle, but there you have it: The Bob Lawson 'Grandma Test' of Government.

UPDATE: I'm told that I "borrowed" this from P.J. O'Rourke. Sorry P.J. I must've read this, absorbed it, and forgotten the source.

Posted by Robert Lawson at 12:45 PM

Institutions Matter: The Effect of Land Tenure on Investment

The abstract of a new paper (gated) in the Journal of Development Economics:

This article develops a theoretical framework to examine the relationship between land tenure arrangements and households' investment in soil-improving and conservation measures. It then analyzes this relationship with a multivariate probit model based on detailed plot-level data from villages in the Brong Ahafo region of Ghana. A major hypothesis tested is that investment in productivity-enhancing and conservation techniques are influenced by land tenure arrangements. The theoretical analysis and empirical results generally reveal that land tenure differences significantly influence farmers' decisions to invest in land-improving and conservation measures. The findings also show that tenure security does affect farm productivity.
Posted by E. Frank Stephenson at 08:44 AM in Economics

May 17, 2011
A Question for Randi Weingarten

With the end of semester crunch, I forgot to post this letter I had printed in the WSJ:

Why does Randi Weingarten (“Markets Aren't the Education Solution” April 25) assume that educational choice—markets—amounts to demonizing teachers? Currently, teacher pay largely depends on the number of years of experience and educational credentials obtained, factors that may not be strongly correlated with student achievement. Instead of a one scale fits all pay approach, teachers, at least the good ones, should benefit from a more competitive labor market in which school administrators could offer salaries commensurate with expected student performance rather than being determined by an arbitrary salary scale.

Weingarten's column is here (it's probably gated but you could read it by emailing it to yourself).

Posted by E. Frank Stephenson at 04:17 PM

So Much for Hurricanes as Stimulus

The abstract of a new REStat paper (gated; earlier ungated version here) by Eric Strobl:

I estimate the impact of hurricane strikes on local economic growth rates. To this end, I assemble a panel data set of U.S. coastal counties' growth rates and construct a novel hurricane destruction index that is based on a monetary loss equation, local wind speed estimates derived from a physical wind field model, and local exposure characteristics. The econometric results suggest that a county's annual economic growth rate falls on average by 0.45 percentage points, 28% of it due to richer individuals moving away from affected counties. I also find that the impact of hurricanes is netted out in annual terms at the state level and does not affect national economic growth rates at all.
Posted by E. Frank Stephenson at 04:10 PM

May 16, 2011
The Culture That Is Georgia

Police: Ford vs. Chevrolet argument leads to stabbing

Posted by E. Frank Stephenson at 04:32 PM

May 13, 2011
Incentives Matter: New Yorkers Voting With Their Feet Edition

A news item:

A new Marist College poll shows that 36% of New Yorkers under the age of 30 are planning to leave New York within the next five years - and more than a quarter of all adults are planning to bolt the Empire State.

The New York City suburbs, with their high property values and taxes, are leading the exodus, the poll found.

Of those preparing to leave, 62% cite economic reasons like cost of living, taxes - and a lack of jobs.

Posted by E. Frank Stephenson at 04:27 PM

And on the Topic of Political Bias in Academia ...

Bob's post yesterday about Koch and FSU's economics department reminded me of a recent episode involving DOL co-blogger Brad Smith. Case Western Reserve law professor George W. Dent explains. (HT: George Leef.) What Smith's case has in common with the Koch/FSU kerfuffle is that statists' need to resort to smears rather engaging in principled discourse indicates the power of the ideas of liberty. Instead of having effective rebuttals, academic lefties can only stammer about bias while ignoring their own biased perspectives.

I'm sorry for Brad to have to deal with this garbage, but, as I tell my junior colleagues about interpreting their student evaluations, if you tick off the right people for the right reasons you're doing your job well.

Posted by E. Frank Stephenson at 09:07 AM

You Are So Money, Honey

DOL friend Sarah Skwire offers the top 10 lines for hitting on an economist:

1. You’ve got the curves to supply my demand!

2. Let’s go to bed and try to disprove the law of diminishing marginal utility.

3. You’re my very favorite kind of moral hazard.

4. I have a feeling you really understand the “nature of the firm.”

5. Baby, I love you so much I’m willing to forgo my exit option.

6. Wanna talk about our private goods?

7. You’re an economist. I’m an economist. How about a little horizontal integration?

8. Now those are some tangible assets!

9. I’ll reveal my preferences if you will.

And the very best pick up line to catch your own economist, as well as the filthiest thing ever said in public by an economist (and I include various jokes I’ve heard at cocktail parties) is brought to us by the dynamic duo of Roberts and Papola, and comes straight from their new Hayek/Keynes rap video.

10. Bottom up or top down?

Posted by E. Frank Stephenson at 08:50 AM in Economics

May 12, 2011
FSU gets "Koched"*

Well, another muckraking journalist attacks the Charles G. Koch (CGK) Foundation, this time for its support of FSU's economics department.**

Here are the facts of the matter stripped down to the basics:

(1) FSU wants to hire new faculty in an area in which they have built up a 20+ year international reputation with Gwartney, Benson, and Holcombe et al., but resources do not exist to do this.
(2) FSU says to CGK, "Hey if we find people we want to hire in this area, will you fund them?"
(3) CGK says to FSU, "Sure, if you find people you like who we also like, we will fund them."

Oooooooo. Yeah, sure "smells" to me. It smells about as much as when I was at Capital University and some donor gave us money for "service learning" and all of a sudden we were told we had to hire faculty in that area and approve new courses and curricular changes to accommodate this donation. Funny, I don't remember the outcry about academic freedom there.

Pay attention the next time a foundation offers a university money for (say) lung cancer research. I guarantee you won't see a story about how THAT violates academic freedom. Why not though? How dare the donor "dictate" that we study lung cancer instead of breast cancer! Nope, you won't see that story.

The ONLY reason this is a story is because the left doesn't like the ideas that Koch supports (and much of the FSU econ department supports). It is increasingly obvious to me that these tiresome stories are part of a well-planned effort on the part of the left. I guess it is easier to yell corruption than it is to actually engage the ideas.

The only test for whether a university should accept a donation is (1) if the faculty in the area support the idea and (2) if the donation supports the teaching/research mission. The CGK gift to FSU passes both tests. If some people don't like it, then that's just tough. Telling the economics department that they can't raise funds to support programs that they want? Now that would violate academic freedom!

* Title reference here.

**Full disclosure: I have been a direct and indirect recipient of CGK Foundation funding, and am a graduate of FSU's economics program.

Posted by Robert Lawson at 10:34 AM in Politics

May 10, 2011
Hong Kong Jobless Increase Thanks To Minimum Wage Law

From a news item:

Hong Kong’s US$3.61 minimum wage bill was passed amid growing concerns over the income gap – and is now being blamed for job losses among thousands of low-paid workers.

Labor demand curves slope downward in Hong Kong too--who knew?

Posted by E. Frank Stephenson at 04:43 PM

The Decline of Studying

The abstract of a paper by Philip Babcock and Mindy Marks in the recent issue of REStat (ungated version--might not be exactly the same--here):

Using multiple data sets from different time periods, we document declines in academic time investment by full-time college students in the United States between 1961 and 2003. Full-time students allocated 40 hours per week toward class and studying in 1961, whereas by 2003, they were investing about 27 hours per week. Declines were extremely broad based and are not easily accounted for by framing effects, work or major choices, or compositional changes in students or schools. We conclude that there have been substantial changes over time in the quantity or manner of human capital production on college campuses.

Actually, I'm surprised the decline isn't even more pronounced.

Posted by E. Frank Stephenson at 04:40 PM

Meet the New Boss, Same as the Old Boss

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


Posted by E. Frank Stephenson at 08:49 AM

May 05, 2011
The perfect way to observe Marx's birthday (today)

Listen to this lecture by Alan Charles Kors, titled "Can There Be an 'After-Socialism'?"

Update: Professor Kors gave substantially the same lecture at Clemson this semester, which can be viewed here. (Thanks to Eric Daniels, of the Clemson Institute for the Study of Capitalism, for pointing this out.)

Posted by Mike DeBow at 01:43 PM in Politics

May 04, 2011
Incentives Matter: Bin Laden Compound Edition

From a NYT story on the compound where Osama bin Laden had been hiding:

When children playing in the fields let a ball fly into the compound by mistake, the owners never let them retrieve it but gave them 50 rupees to buy a new one, said one of the neighbors, a woman with a small boy on her hip who gave her name only as Bibi. When the children began to throw balls into the compound on purpose to get more money, the owners kept paying, she said, laughing.
Posted by E. Frank Stephenson at 08:09 AM in Economics

May 03, 2011
On Compensating Differentials c. 1911

From the May 3, 1911 NYT:

ST. LOUIS, Mo - Because he likes the brand of baseball put up in Detroit better than the quality of the sport in St. Louis, the Rev. Dr. Homer B. Henderson, an ardent fan, announced his resignation today from the pastorate of the Wagoner Place United Presbyterian Church, to accept a call extended to him by the First United Presbyterian Church of the Michigan city. The Rev. Dr. Henderson will go to Detroit on June 1.

I'll assume that the Reverend favors the American League, and thus by extension the St. Louis Browns, although the article does not specify the Reverend's preference.

Detroit finished the 1911 campaign in second place, 12.5 games behind the Philadelphia Athletics. The St. Louis Browns finished the 1911 campaign in last place, 56.5 games back. Head-to-head, Detroit won 14 of 22 games between the two teams, outscoring the Browns by only three runs, 115 to 112.

If the good reverend happened to be a St. Louis Cardinals fan he would have fared a bit better. While Detroit finished the 1911 campaign with an 89-65 (0.578) record, the Cardinals finished the 1911 season with a 75-74 (0.503) record and 22 games behind the first place New York Giants (who lost the World Series to the Athletics that year). Of course, Bud Selig hadn't been born yet and therefore interleague play had not been implemented, so there is really no way to compare the AL Detroit and the NL St. Louis teams.

There are those who suggest that sports can offer sufficient amenities to attract workers from other cities/regions - see, for example, the new book by Mark Rosentraub "Major League Winners" - and this little ditty offers one anecdotal data point in support of that claim.

Posted by Craig Depken at 01:14 PM

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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