Division of Labour: August 2011 Archives
August 31, 2011
More Evidence on the Relationship Between Council Size and Government Spending

As noted in a previous post, there is some evidence on both sides of this issue (known as the law of 1/n in the literature) including a couple of papers supporting the proposition co-authored by me and JC Bradbury. The latest edition of the American Economic Journal: Economic Policy has an article by Stephen Coate and Brian Knight that finds support for the law of 1/n (see their table 4).

Posted by E. Frank Stephenson at 10:18 PM in Economics

Voting With Their Feet

Indiana vouchers prompt thousands to change schools

Posted by E. Frank Stephenson at 08:46 PM

Grover Cleveland, The Last Libertarian President

That's the title of Larry Reed's piece in tomorrow's IBD.

Posted by E. Frank Stephenson at 08:25 PM

Irene as Stimulus

So says Fox News's Peter Barnes. At the 0:35-0:45 part he sounds almost giddy. Perhaps Don Boudreaux can extend his generous offer to Peter Morici to Mr. Barnes.

Posted by E. Frank Stephenson at 08:20 PM

CNN.com Headline Writers

"A Blood Test to Predict Death? It Could Be Possible"

I can predict it now even without a blood test


Posted by Tim Shaughnessy at 05:53 PM in Funny Stuff

Color Blind

The irony is just too good: The Davis-Bacon Act, designed to anti-Black (see here), turns out to be anti-Green (see here).

Posted by Wilson Mixon at 03:48 PM in Politics

South Carolina Woman Scammed Into Buying a Fake iPad Made of Wood

Wonder if the victim was this woman. Source.

Posted by E. Frank Stephenson at 09:29 AM

Sheryl Crow Is Not a Suspect

Warehouse Workers Charged with Stealing $60,000 of Toilet Paper, Utensils

Posted by E. Frank Stephenson at 09:21 AM

August 30, 2011
Snakes on a Plane in the Pants

And some tortoises too:

Miami International Airport has led the way in the latest technology for airport security. One airport passenger learned this the hard way when he was trying to sneak seven exotic snakes onto a plane…in his pants.

The incident happened on August 25th when security were screening passengers with a millimeter wave advanced imaging technology machine. It was there when the TSA officials noticed a little big extra in the passenger’s pants.

When taken for further screening, TSA officials discovered seven exotic snakes and three tortoises held in nylon bags that were concealed inside the man’s pants.

What is it with people stuffing things down their pants? And the worst part--the critters were detected by one of the TSA's porno scanners.

Posted by E. Frank Stephenson at 12:57 PM

The Real Scandal of Dead Peasant Insurance

The kerfuffle du jour is the accusation that Rick Perry sought to have Texas profit from a scheme known as dead peasants insurance. Under these plans people can be the life insurance beneficiaries of people they do not know (in Perry's case, Texas teachers). The programs do not cause investor/beneficiaries to kill random school teachers to up their payoffs. So what's the problem? I answered that question a few years ago in the Independent Review.

Posted by E. Frank Stephenson at 09:06 AM

August 29, 2011
Sex Offenders as Babysitters

So much for the protective state:

Cornelius Osborne may not seem like baby-sitting material.

He was convicted of raping two women. A succession of felonies, from robbery to failing to register as a sex offender, repeatedly sent him to prison, state records show.

But over more than two years, the state paid Osborne nearly $5,000 to baby-sit two children, before his latest conviction — for dealing drugs — put him back behind bars.

Osborne, of Chicago, wasn't the only sex offender paid by taxpayers to baby-sit, according to a Tribune investigation that found cases of convicted rapists, molesters and other violent felons given access to children over the past decade. The money comes from a $750 million-a-year program that subsidizes child care for more than 150,000 impoverished Illinois families.

Like other govt failures the answer will probably be to give the offending agency a larger budget.

Posted by E. Frank Stephenson at 10:02 AM

Fight of the Century, Part Deux

We've all seen Keynes and Hayek duke it out. So what comes next for John Papola and Russ Roberts?

My suggestion--a 10-rounder between Paul "broken windows" Krugman and Austan Goolsbee. Krugman's belief that events such as 9/11 or an alien invasion might be stimulative are well documented; he might even have said a bigger DC would have provided more stimulus. Goolsbee, by contrast, seems to think such events are disruptive; here's what he said on "Hannity" last week:

Now, at the beginning of this year, we get earthquakes, tsunamis, revolutions in the Middle East, European financial crises. Now we got earthquakes outside of Washington, D.C. I mean, we've got a series of things that have put some heavy blows and slowed the economy back down again.

Lace 'em up gents! (For the record, I think Goolsbee is correct except that in this context he is using the disasters as an excuse for harmful Obama admin policies.)

Posted by E. Frank Stephenson at 08:44 AM

"Price Gouging" at NJ Best Buy

Apparently a NJ Best Buy did a bit of dynamic pricing "price gouging" over the weekend by offering to sell cases of water for $40. (A case would sell for more than that at most ballparks--24 bottles at $3 per bottle.) I'm surprised to see it because the small gain in profit probably pales next to all of the bad publicity (e.g., here).

This seems like a good time to give another well-deserved plug to The Price of Everything by Russ Roberts.

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

August 25, 2011
What - or Who - Started the Great Depression?

Herbert Hoover.

Posted by Robert Lawson at 12:03 PM in Economics

Mises Academy course on Economic Freedom

Economic Freedom Around the World
Economic History EH690 — with Robert Lawson
Cost: $95 Length: 5 Weeks
Dates: October 18, 2011 - November 21, 2011

This course will consist of five lectures about the concept, measurement and consequences of economic freedom. The Economic Freedom of the World index, published by the Fraser Institute and co-authored by James Gwartney, Robert Lawson, and Joshua Hall, will be the focus of the course. Topics will include (1) the Concept and Measurement of Economic Freedom, (2) Economic Freedom and Growth, (3) Economic Freedom and Human Right Violations, (4) The Hayek-Friedman Hypothesis on Economic Freedom and Political Freedom, (5) The Freedom to Travel.

Posted by Robert Lawson at 11:59 AM in Economics

August 20, 2011
More Hooverite Nonsense

Just as Munger has a running "grand game" on KPC, I'm thinking of starting a "spot the idiot" meme. Today's winner--for spouting the usual nonsense about Hoover being a budget cutter--would be one David Osterberg who wrote that "Hoover’s mistake was to cut budgets in the face of terrible unemployment and poverty in America."

So here's the letter that I sent to the Des Moines Register:

In his column “Congress needs a Herbert Hoover reminder” (Aug. 16), David Osterberg states that Hoover “cut budgets in the face of terrible unemployment and poverty in America.” This claim is just plain wrong. A quick glance at Hoover’s actual record indicates that spending rose some 50%, from $3.1 billion in 1929 to $4.6 billion in 1932, during Hoover's term. (See Table 1.1 of this government document: (http://www.whitehouse.gov/sites/default/files/omb/budget/fy2008/pdf/hist.pdf.)

Hoover did do lots of things that were economically harmful—among them signing the Smoot-Hawley tariff and hiking taxes in 1932. However, in wrongly claiming that Pres. Hoover cut spending, it is Mr. Osterberg who reveals a need to become better acquainted with Pres. Hoover’s record.

Frank Stephenson
Rome, Ga.

While I'm riding my Hoover horse, Steve Horwitz's recent post on "Annie" and the origins of the Hoover myth is a must read.

Posted by E. Frank Stephenson at 05:12 PM in Economics

Reverse Rent Extraction: How Refreshing

Rent extraction is the idea that policymakers (regulators, legislators, etc.) can threaten the people they regulate into certain actions that benefit the policymakers. For example, "milker bills" get proposed routinely for the sole purpose of signalling to certain business or other interests that unless they provide certain favors like campaign contributions life will become more difficult. Fred McChesney is largely responsible for the idea, which is extended from Gordon Tullock's rent-seeking concept as developed in George Stigler's classic 1971 paper, "A Theory of Economic Regulation." There are good introductions to rent extraction here and Chapter 10 here. Lucian Bebchuck applies rent extraction to how CEOs bargain with Directorates.

So along comes the other day this funny little article that, at first, looks a little bit like rent-extraction. It has that same feel of extortion mixed with some vague implausibility. But on closer look, it's actually reverse rent-extraction. "Starbucks Claims Widespread Support for CEO's Call to Boycott Campaign Donations."

Starbucks claimed Wednesday that it has rallied “hundreds” of people in support of a call by CEO Howard Schultz to suspend campaign contributions to Congress and the president until Washington produces a long-term deficit reduction plan.

Never mind that the free rider problem of getting interest groups to stop contributing is worse than the free rider problem of getting interest groups to contribute. Still a neat idea.

Posted by Edward J. Lopez at 02:00 AM in Economics

August 18, 2011
Pa. lawmaker suggests spread of STDs 'amongst womenfolk' a side effect of natural gas drilling

Fracking causes clap--who knew! Them boys must be doing some kinky stuff with those drills.

Posted by E. Frank Stephenson at 11:54 AM

Demand curves slope downward. (A continuing series.)

Minimum Wages and Teen Employment: A Spatial Panel Approach
Charlene M. Kalenkoski and Donald J. Lacombe
Research Paper 2011-08
view paper (pp. 19, 514 KB)

Abstract: The authors employ spatial econometric techniques and Annual Averages data from the U.S. Bureau of Labor Statistics for 1990-2004 to examine how changes in the minimum wage affect teen employment. Spatial econometric techniques account for the fact that employment is correlated across states. Such correlation may exist if a change in the minimum wage in a state affects employment not only in its own state but also in other, neighboring states. The authors show that state minimum wages negatively affect teen employment to a larger degree than is found in studies that do not account for this correlation. Their results show a combined direct and indirect effect of minimum wages on teen employment to be -2.1% for a 10% increase in the real effective minimum wage. Ignoring spatial correlation underestimates the magnitude of the effect of minimum wages on teen employment.


Posted by Robert Lawson at 09:28 AM in Economics

August 16, 2011
Beam Me Up, Kruggy!

So Paul Krugman apparently thinks we need a bunch of free spending space aliens to jump start the economy (the only difference between said aliens is some Tang, a spacesuit for the president, and a nanoo-nanoo or two, but I digress).

For some sounder thinking try this response by Mary Theroux or the recent Reason post asking several prominent economists and writers what they would do to jump start growth.

Posted by E. Frank Stephenson at 08:13 AM in Economics

August 15, 2011
Better to Have No Jobs Than Low Paying Jobs?

Apparently CNN thinks so. Here's part of a piece called "Rick Perry's Texas jobs boom: The whole story":

But that doesn't mean that all is well with employment in the Lone Star State. Texas leads the nation in minimum-wage jobs, and many positions don't offer health benefits.

I have no particular affinity for Rick Perry--or any of the other 2012 Presidential candidates--but this just reads like lefty smear. Maybe I need to bump Tim Groseclose's new book a couple of notches up my reading list.

Posted by E. Frank Stephenson at 10:01 AM

August 13, 2011
Iowa Straw Poll: Dumbest Event in Politics

It's hard to imagine a dumber event in American politics than the Iowa Straw Poll. Or more precisely, it's hard to imagine anything dumber in American politics than the attention paid to the Iowa Straw Poll.

Read More »

Posted by Brad Smith at 08:28 PM in Politics

August 12, 2011
On Interstate Purchases of Medical Insurance

Allowing interstate purchases of medical insurance has been suggested as one way to make insurance less expensive. The findings of a recent paper (gated) in Applied Economics finds that "a 1 percentage point increase in the average market share of the largest five [medical insurance] carriers in a market leads to a 10% increase in [medical]expenditures." Since interstate purchases might reduce market shares, it stands to reason that this paper's findings imply that interstate competition would push down health insurance expenses.

Posted by E. Frank Stephenson at 02:44 PM

Public Choice Has A High R^2: Super Committee Edition

Fundraisers already planned for Super Committee members

Nothing like a bit of rent extraction eh?

Posted by E. Frank Stephenson at 09:12 AM

August 10, 2011
A Bank Goes Galt

Story here.

Posted by E. Frank Stephenson at 03:44 PM

Quick Hits

Some things that have caught my attention in the last day or two:

1. ‘Made in China’ Taking Over U.S.? Not By a Long Shot

2. Price controls are causing shortages of cancer drugs. (BTW, the piece was written by Rahm Emanuel's brother who presumably is not some free marketer.)

3. This NPR story attributes the London riots to "the most severe public spending cuts since the Second World War." Baloney. My guesses: It's just a form of stimulus because baseball bat sales are way up (or maybe cricket has fallen out of favor) or maybe the Brits are trying to be as happy as the car burning French.

Posted by E. Frank Stephenson at 11:55 AM

August 06, 2011
It's the Spending, Stupid.


Posted by Robert Lawson at 07:37 PM in Economics

August 04, 2011
Joey Ramone's "Maria Bartiromo"

Since Wall St is in the news today ...

Posted by E. Frank Stephenson at 08:20 PM

The Tax Hell That Is New York

This story about New Yorkers fleeing the state because of its high taxes reminded me that I had not blogged some related observations from a recent trip to the Empire State.

1. President Obama, who thinks ATMs cause unemployment, would be pleased that the NY State Thruway (aka I-90) has not used machines to replace people handing out tickets as one enters the road. Feeling a bit puckish at one entrance, I decided to tell the person handing me a ticket that I was surprised that I didn't just get the ticket from a machine. Her response: "I get it from the machine and then give it to you." Obama would be so proud.

2. My admittedly non-scientific comparison of NY hotel rates with those in PA and on the Canadian side of Niagara Falls indicates that NY rates are considerably higher. It's possible that the difference, if it in fact exists, is caused by demand side factors but my hypothesis is that it arises from some sort of business tax that NY hotels are passing along (at least in part) to travelers. There's a paper to be written in here somewhere.

3. NY's cigarette tax is nearly $3 more per pack than PA's ($4.35 vs. $1.60). So, kiddies, what do you think NY smokers do? Among other things, they drive to PA to buy cigarettes (they can buy gas too since PA's gas tax is $0.12 per gallon lower than NY's). I took the photo below at the last northbound exit on I-81 in PA. It's a mile or two south of the NY state line and maybe 10 miles from Binghamton. The car at the window has a NY license plate. (UPDATE: DOL friend Todd Nesbit co-authored a recent study of cigarette smuggling.)

PA-NY Smokeshop.jpg

Posted by E. Frank Stephenson at 09:24 AM

Andy Zimbalist Needs The Diff

Well not exactly--his mistake isn't subtraction per se--but his discussion of interleague play in the recent Freakonomics discussion of MLB realignment does have a math problem. Here's Zimbalist:

Then there’s the question of what to do about the fact that the NL has 16 teams and the AL has 14, and more unequal still, the NL Central has 6 teams, while the AL West has 4. [snip]

That said, why not move the Houston Astros from the NL Central to the AL West? That would make the leagues equal and create a strong, natural rivalry between the Astros and the Rangers.

To accommodate the scheduling, there will have to be at least one interleague series happening at all times – two at a time would probably be best, yielding 13.3% of all games being interleague.

Two interleague series happening at the same time doesn't solve the problem of having an odd number of teams in each league. If two teams from each 15 team league are playing in interleague series then that leaves 13 teams in each league to play intraleague. This doesn't work because there could be six intraleague series for each league but each league would then have one team left over. One must have an odd number of interleague series taking place at any time in order to solve the scheduling problem.

Background on The Diff reference is here.

Posted by E. Frank Stephenson at 08:54 AM

August 02, 2011
Competition and Teacher Pay

A couple of months back I had this letter run 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.

As if on cue, here's the abstract of a new NBER WP by C. Kirabo Jackson (emphasis added):

I analyze changes in teacher turnover, hiring, effectiveness, and salaries at traditional public schools after the opening of a nearby charter school. While I find small effects on turnover overall, difficult to staff schools (low-income, high-minority share) hired fewer new teachers and experienced small declines in teacher quality. I also find evidence of a demand side response where schools increased teacher compensation to better retain quality teachers. The results are robust across a variety of alternate specifications to account for non-random charter entry.
Posted by E. Frank Stephenson at 08:05 PM

Hippies for Sound Money, or Does Ron Paul Wear Tie Dye?

Looks like the Ben Bernank has lost the hippie crowd. (HT to a colleague who took this picture at Sunday's Furthur show in Atlanta.)

Furthur Van 3.jpg

Posted by E. Frank Stephenson at 10:19 AM

Woodpecker-Saving Daughter Costs Mom $500, Possible Jail Time

Wow--story here. The kid saves a baby bird from a cat and is slapped with a fine for endangering the bird. As Angus says, holy crap people!

Posted by E. Frank Stephenson at 10:10 AM

Yuppie Puppy 911

Remember Shawn Regan's Regulation piece on yuppies using locator devices to get helicopter rescues from the wilderness? Well here's a story of a dog being airlifted out of Angeles National Forest.

BTW, Shawn also has a nice piece in Grist on allowing enviromentalists to bid on federal land.

Posted by E. Frank Stephenson at 09:42 AM

August 01, 2011
About That "Balanced Approach"

This cartoon from the Rome News-Tribune's Mike Lester reminds me of Phil Gramm's admonition (during his 1996 presidential campaign) that there are too many people riding in the wagon and not enough pulling it. And now 15 years later ...


Posted by E. Frank Stephenson at 02:16 PM

Don't Bet on This

Durbin: Debt Deal Will Be The Death Of Keynesian Economics

Someone might want to check on Prof. Krugman, however, because he seems unwell.

Posted by E. Frank Stephenson at 01:39 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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