Division of Labour: July 2011 Archives
July 29, 2011
Too Much Safety Could Make Drivers Less Safe

So says this story in Wired. Paging Dr. Peltzman ...

Posted by E. Frank Stephenson at 06:29 PM

July 25, 2011
Microcredit--We'll Lend You Money So You Can Put Your Kids to Work

The abstract of a paper forthcoming in Ecnomic Inquiry (emphasis added):

Microcredit has been shown to be effective in reducing poverty in many developing countries. However, less is known about its effect on human capital formation. In this article, we examine the impact of access to microcredit on children's education and child labor using a new and large data set from rural Bangladesh. The results show that household participation in a microcredit program may increase child labor and reduce school enrollment. The adverse effects are more pronounced for girls than boys. Younger children are more adversely affected than their older siblings and the children of poorer and less educated households are affected most adversely. Our findings remain robust to different specifications and methods, and when corrected for various sources of selection bias.

Darn those unintended consequences! A caveat to my snark: Kids working more might not always make them worse off. (An ungated copy is here though it might not be the final version.)

Posted by E. Frank Stephenson at 07:35 PM

July 19, 2011
One more reason to hate Woodrow Wilson

As if there weren't enough reasons to view Woodrow Wilson as the worst of American presidents, I chanced to stumble across this March 4, 1906 New York Times piece.

The lead: "The newest charge to be made against automobilists is brought by President Woodrow Wilson of Princeton University, who accuses them of encouraging the spread of Socialism."

Posted by Brad Smith at 07:25 PM

Apology accepted, Mr. Murdoch. Now how about Bush and Obama?

Lopez: "A professional clown sneaks in and throws a pie in Rupert Murdoch's face. He'll go to jail and have a record. And he'll be immortalized among that wacky society known as comedians. Surprised no one's done it before. I abhor it, of course."

Lawson: "I just don't understand our world. Our government, complete with guns, electric chairs, and prisons, can snoop, hack, bug, and pry with impunity and NO ONE CARES. A few reporters, armed with mere pens, do it and it's apparently the moral crisis of our age?"

Lopez: "I'm reminded of George W. Bush's insistence, to unseemly lengths, in 2004 that he had the right to listen to anyone's conversations. And he got re-elected for it. Below is a paste of a Glen Greenwald piece in Salon from last month. It's got to be one of the most vivid examples of lawyers upholding the rule of law, and shows where the line is drawn for giving impunity to people acting in their official capacity. It's just drawn way too far out. The Murdoch situation shows us that.

These lawyers, evidently despite political loyalties, were keeping the President from abusing his powers. “Comey explained that, in 2004, shortly after he became Deputy AG, he reviewed the NSA eavesdropping program Bush had ordered back in 2001 and concluded it was illegal. Other top administration lawyers -- including Attorney General John Ashcroft and OLC Chief Jack Goldsmith -- agreed with Comey, and told the White House they would no longer certify the program's legality. It was then that Bush dispatched Gonzales and Andy Card to Ashcroft's hospital room to try to extract an approval from the very sick Attorney General, but, from his sickbed, Ashcroft refused to overrule Comey. Bush decided to reject the legal conclusions of his top lawyers and ordered the NSA eavesdropping program to continue anyway, even though he had been told it was illegal (like Obama now, Bush pointed to the fact that his own White House counsel (Gonzales), along with Dick Cheney's top lawyer, David Addington, agreed the NSA program was legal). In response, Ashcroft, Comey, Goldsmith, and FBI Director Robert Mueller all threatened to resign en masse if Bush continued with this illegal spying, and Bush -- wanting to avoid that kind of scandal in an election year -- agreed to "re-fashion" the program into something those DOJ lawyers could approve (the "re-fashioned" program was the still-illegal NSA program revealed in 2005 by The New York Times; to date, we still do not know what Bush was doing before that that was so illegal as to prompt resignation threats from these right-wing lawyers).”
Posted by Edward J. Lopez at 12:48 PM in Politics

Public Choice at the Box Office

Dirk Mateer of Penn State and I have a new paper on using film clips to teach public choice in the current issue of the Journal of Economics and Finance Education.

Posted by E. Frank Stephenson at 09:39 AM in Economics

July 15, 2011
85% of Statistics Are Made Up
President Obama on Friday kept up the pressure on Republicans to agree to revenue increases in a deal to raise the debt ceiling, claiming 80 percent of the public supports Democrats' demand for tax increases.


Posted by E. Frank Stephenson at 03:49 PM

Geez, I Dunno Why The Call Was Not Immediately Returned

One of the most memorable events of my childhood was NC State winning the NCAA title in 1983 on Lorenzo Charles's dunk. I was saddened to hear a few weeks ago that Charles had died in a bus accident. The last line of the this AJC article on the accident caught my eye:

A message left on a phone listed to Lorenzo Charles wasn't immediately returned Monday night.

Surprise, surprise--a reporter leaves a message on a dead person's phone and doesn't have the call returned. Who'd have thunk it? (Yes, yes, I know the call could be returned by family members.)

Posted by E. Frank Stephenson at 01:58 PM

Update from the Bolivarian Paradise

Venezuela's Chavez to boost prison construction

Posted by E. Frank Stephenson at 09:47 AM

On My Dean and 3-D Printers

The video below on 3-D printers has been making the rounds of FB and blogs. My dean has one and has designed an iPhone hook for airplanes that can be seen here on Thingiverse.

Posted by E. Frank Stephenson at 09:43 AM

Mike Lester on Raising the Debt Limit

From yesterday's RN-T:

Lester Govt Shutdown.jpg

Posted by E. Frank Stephenson at 08:39 AM

Is Bill Gates Trying to Impress Sheryl Crow?

Why Bill Gates Wants to Reinvent the Toilet

Posted by E. Frank Stephenson at 08:34 AM

July 13, 2011
Consumers under monopolistic competition

This whole scene happened within about a half second:

I'm grading assignments when my iPhone beeps from a new email. It's Netflix asking me when I mailed the DVD back to them. Normally I don't mind spending the three seconds to reply, but in the past day I've been reading the news stories about Netflix raising its prices.

I enjoy Netflix enough that I don't mind paying the higher price for the DVD-and-streaming combination (in fact, earlier in the hour I streamed the Brian Regan clip about husbands always being protrayed as idiots on commercials). So in that sense I view Netflix as a monopolistically competitive company where I'm willing to pay a somewhat higher price for their product vs. switching to Redbox or whatever.

But, out of spite for their slightly higher rates I'm not willing to reply to their email. Consumers do have ways of registering their (petty) displeasure besides outright refusing to buy, even against firms with market power. Which makes you wonder how all-encompassing that power is (since most people think that "market power" means a company can do whatever the heck it wants).

Posted by Tim Shaughnessy at 02:29 PM in Economics

Letter on Right-to-Work Laws

Here's a recent submission to the WSJ--since it was responding to a letter published in May, I suspect I sent it in too late for it to be published.

In his May 25 letter (“Right to Work Doesn’t Drive Growth”), Gordon Lafer argues that confounding factors such as climate make it difficult to isolate the effect that right-to-work laws have on economic activity.

Fortunately a paper by economist Thomas J. Holmes published in the prestigious Journal of Political Economy examines the effect of right-to-work laws on economic activity by comparing counties lying on the boundary between states with compulsory unionization (e.g., Kentucky) and those with right-to-work laws (e.g., Tennessee). Climate and other geographically determined factors should not cause abrupt changes in economic activity at state borders; thus, observed changes in would point toward right-to-work laws or other policies as the crucial differences in economic activity.

In his paper Prof. Holmes finds large differences in manufacturing employment on opposite sides of state borders. Manufacturing’s share of employment falls by 5.8 percentage points when going from a right-to-work state to a compulsory unionization state. Moreover, manufacturing employment growth over the 1947-1992 period was 27 percentage points higher in right-to-work states than in compulsory unionization states. So, contra Mr. Lafers’s assertion, right-to-work laws are associated with large differences in economic activity.

E. Frank Stephenson
Professor of Economics
Berry College
Mount Berry, Ga.

An ungated version of the Holmes paper is here; a shorter version was also published in Regulation.

Randy Holcombe and Don Lacombe use a similar technique to find that state income taxes are harmful to economic growth (gated paper here).

Posted by E. Frank Stephenson at 10:27 AM in Economics

Paging Dr. Becker
San Jose budget cuts aren’t hurting all businesses, and in fact, one group in particular seems to be cashing in on the city’s economic woes: prostitutes.

Prostitution has made a rapid comeback to San Jose street corners in the past few weeks, according to NBC Bay Area sources.

After police budgets were slashed July 1, San Jose PD’s Vice Unit was disbanded, said San Jose Police Department spokesman Jose Garcia.

Two police sources told NBC Bay Area that prostitutes have even been traveling from as far as Oakland and Fresno to take advantage of San Jose’s less scrutinized street corners.

Source. Perhaps we can get some field reports from DOL's SJ correspondent.

Posted by E. Frank Stephenson at 08:42 AM in Economics

On Netflix's Price Increase

From the WSJ:

Netflix Inc. boosted by 60% the price of its cheapest movie-rental plan that includes streaming and DVD rentals, triggering an outcry among customers who still use the disc format despite the growing popularity of online movies.

The Los Gatos, Calif., company said it will no longer offer a $9.99-a-month plan that allows members to stream an unlimited number of movies over the Internet and to rent one DVD at a time. In its place, Netflix subscribers will have to pay $15.98 a month for a plan that combines an existing $7.99-a-month streaming-only movie service with a new $7.99-a-month DVD-only rental ....

This isn't much of a suprise when one thinks about MR and MC. Under the existing pricing scheme the MR Netflix obtains from a customer who adds the DVD by mail component is $2. For many families, mine included, it's doubtful that the $2 in additional revenue covered the MC of mailing 6 or more discs to us each month.

Posted by E. Frank Stephenson at 08:19 AM in Economics

July 12, 2011
An illuminating post

Shouldn't we all save energy? Energy is scarce so conserving it is good. Therefore, it makes perfect sense that Congress pass a law mandating the use of compact flourescent bulbs and/or making traditional bulbs illegal.

Well, it makes perfect sense if you a) don't know economics or b) don't really care enough about the environment to see if your policies have their desired effect.

I'm not "green" or "anti-green," and I imagine most DoLers would say the same about themselves. We would be perfectly happy to recycle if the total energy and resource usage of recycling was less than that required to produce new products (which it often isn't).

Likewise, I'm perfectly willing to use CF bulbs if they have a lower cost than traditional bulbs. In some cases, they do: in my home office where I work for an hour or more at a time, I've had CF bulbs last several years, much longer than traditional ones and still worth their higher relative price. In other cases, they don't: in our bathroom which we enter and exit frequently during a given day and only need the light on for a few minutes, I've had CF bulbs die within months, much shorter than traditional bulbs lasted.

So even though a law forcing CF bulbs might give us all the green goosebumps, it would seem to result in more waste as bathroom CF bulbs are thrown away (along with their toxic innards) at a faster rate than traditional bulbs would be.

Luckily, there is a House vote to overturn this traditional bulb ban. We'll see what happens.

Incidentally, this topic seemed to have been addressed in an objective fashion (i.e. on Mythbusters), but they didn't account for the wear associated with frequent turning of lights on and off.

Posted by Tim Shaughnessy at 12:16 PM in Economics

July 07, 2011
Economic Freedom Video

Nicely done--highly recommended.

Posted by E. Frank Stephenson at 10:23 AM

July 05, 2011
Do As I Say, Not As I Do

A few weeks ago much was made about President Obama's ridulous comment about ATMs being responsible for slow job growth. Not long after that comment, I visited the Philadelphia Mint (disappointing) which has signs on the wall extolling the Mint's automation of the production process. The signs explained that thousands of coins per minute could be produced by the machines in the production process. (I would have taken a picture of a sign but photography was prohibited.)

So, a modest suggestion. If President Obama believes that the increasing use of capital has stunted employment growth perhaps he should order the Mint to mothball the automated machines and get the old fashioned manual presses out of the display case.

Posted by E. Frank Stephenson at 05:36 PM

Vote Buying--It Works!

From the abstract of a paper in the AEJ: Applied:

This paper estimates the impact of a large anti-poverty cash transfer program, the Uruguayan PANES, on political support for the government that implemented it. Using the discontinuity in program assignment based on a pretreatment eligibility score, we find that beneficiary households are 11 to 13 percentage points more likely to favor the current government relative to the previous government. Political support effects persist after the program ends.

Ungated version of the paper here.

Posted by E. Frank Stephenson at 01:33 PM

Sheryl Crow's Favorite Beach

NYC rationing toilet paper at Coney Island (By the way, can't one buy a lot of toilet paper with the funds it takes to pay attendants to be on hand full time to ration the toilet paper?)

For the Crow reference see the 4th paragraph here.

UPDATE: A co-blogger pointed me to Jay Leno's take: "One square of toilet paper? Thank you, I'm not going to be shaking hands anymore."

Also, it's not likely that Ms. Crow will be the celebrity spokesperson for this product.

Posted by E. Frank Stephenson at 10:53 AM

July 02, 2011
Greenspan 2011 on Greenspan 2008

From this Bloomberg report of an interview of Alan Greenspan by Charlie Rose:

Q. Do you think any of the decisions you made as Chairman of the Federal Reserve contributed to the financial crisis?

A. The '08 crisis? The answer is no. And I wrote a long part of a paper for the Brookings Institution [on this]. If anybody wants to take the paper and tell me where I am wrong, I will listen.

Well, okay then.

Posted by Craig Depken at 12:54 PM in Economics

Correlation or Causation: Episode #78787

From this past week's Bloomberg is this graphic depicting the correlation between corn prices and the amount of corn going into ethanol (vs. feed).

Posted by Craig Depken at 12:51 PM in Economics

Interesting history of thought items

While poking around in some old debates, I started to get curious about George Stigler's early work. His first publication (1937 J.P.E.) was a 21-page review of Carl Menger's economic theory. Stigler read Menger in German, and the article shows detailed familiarity with, and approval of, the early Austrian school.

I thought it was pretty interesting that Stigler, *the* face of the Chicago school for so long alongside Friedman, would have such roots to the Austrians. As best i can tell, he was reading a version of Menger that Hayek edited as a part of a series that the L.S.E. published in the 1930s. Lionel Robbins joined LSE in 1929, and was strongly influenced by Menger and the early Austrians. It doesn't surprise me that LSE would be the ones publishing Menger's collected works. I guess Menger wasn't translated into English until much later. Most proper Austrians out there probably know this story inside out. Again, I thought these were interesting connections to make.

I originally posted a version of the first paragraph above on my Facebook page. I got some interesting comments that I thought were bloggable (anybody still out here?). A few highlights:

Many ph.d. programs in economics and other disciplines required foreign language proficiency until relatively recently. For example:
- Craig Depken's father took German as an Engineering PHD at Ga Tech in the late 1960s;
- NYU's ph.d. program had a foreign-language requirement in the late 80s, and two languages just a few years before;
- Chicago had a foreign language requirement in the late 80s but allowed math proficiency to substitute;
- Carolina Chapel Hill still has a language requirement that math can sub for.

On a related note, when reviewing Samuelson's Foundations in the 1949 Journal of American Statistical Association, Stigler holds the line:

[Samuelson] dismisses translations into words as ‘mental gymnastics of a peculiarly depraved type.’ I disagree. There is no depravity, nor is there virtue, in telling other competent economists things in a language they all can understand—there is simply responsibility to the canons of scholarship.
Posted by Edward J. Lopez at 12:47 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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