Division of Labour: September 2011 Archives
September 30, 2011
Another Winner in Our Spot The Idiot Contest

Today's prize goes to John Judis who writes in The New Republic (gated),

"You know, when Herbert Hoover had to face a financial crisis and then unemployment, his strategy was to balance the budget and cut spending ..."

A question for Mr. Judis: In what world, sir, does spending going from $3.1 billion to $4.6 billion (during a time of deflation no less) constitute a CUT in spending?

This is also a good time to plug Steve Horwitz's new Cato piece, "Herbert Hoover: Father of the New Deal."

Posted by E. Frank Stephenson at 09:01 AM

September 29, 2011
On Trade Imbalances and Jobs

C. Fred Bergsten writes in the NYT:

BY virtually ignoring trade, President Obama and Congressional Republicans are missing a major opportunity to create jobs. The United States runs an annual trade deficit of about $600 billion, or 4 percent of our entire economy. Eliminating that imbalance would create three million to four million jobs, according to Commerce Department estimates, at no cost to the budget.

Not so fast. There are (at least) two reasons why moving toward trade balance might not increase employment in the US. First, many imports are inputs to things that are produced here; making those imports more expensive might harm production of (and jobs making) the goods that use the imports as inputs. Second, the flip side of a trade deficit is net capital inflow which may create jobs by financing factories such as BMW in SC, Pirelli here in GA, etc. Hence, eliminating a trade deficit also means eliminating a net capital inflow and potentially harming job creation.

As an aside--I realize that statements about currencies being overvalued or undervalued may be based on PPP comparisons, but every time I read such a claim (such as Bergsten's "The artificially low value of the renminbi — it is 20 to 30 percent less than what it should be ..."), I mutter to myself "pretense of knowledge."

UPDATE: Don Boudreaux weighs in with one of his typically sharp letters to the editor.

Posted by E. Frank Stephenson at 02:58 PM

September 27, 2011

Changing layouts, sharing private information, meh. Didn't get my dander up. But I'm seriously considering typing a snarky status update to register my displeasure about the following:

Facebook to start a PAC

Facebook filed paperwork Monday to form a political action committee called "FB PAC," CNN has learned.

"FB PAC will give our employees a way to make their voice heard in the political process by supporting candidates who share our goals of promoting the value of innovation to our economy while giving people the power to share and make the world more open and connected," said Andrew Noyes, manager of public policy communications at Facebook.

The move comes on the same day the social networking giant sponsored an hourlong "Facebook Live" discussion with three top Republican House members: House Majority Leader Eric Cantor, House Majority Whip Kevin McCarthy and House Budget Committee Chairman Paul Ryan.

Event participants asked questions through Facebook, while the congressmen discussed the struggling economy and the role of technology in government.

Don't bother clicking the link; I copied the whole story.

If you or someone you know has been personally affected by the high prices due to influence peddling among special interest lobbyists, post this to your status for one hour.

Posted by Tim Shaughnessy at 11:44 AM in Politics

Minimum thought to the minimum wage

Okay, we're used to people pushing for increases in the minimum wage, using arguments such as those below. See if you can guess the occupation of the expert quoted:

Raising the minimum wage to get more cash to the working poor is just as crucial [to getting the economy going]...

[G]radually raising the federal minimum wage to something close to that level over the next few years would be an important first step to helping the working poor climb out of poverty, while injecting more money into the economy.

"If you give someone making $15,000 a year a $3,000 increase, that's going to make a tremendous difference in their life," he said.

With a greater percentage of the nation's income going to corporate profits than ever before...businesses can afford a higher minimum wage.

"There needs to be standards in the job market," he said. "If the object is simply to minimize costs, we can use slaves again."

Who said it? Paul Osterman, whom the CNN story identifies as "economics professor at MIT," but whose vita shows that he is actually "Professor of Human Resources and Management," though he was assistant and associate professor of econ at Boston University previously. There is also a greater percentage of the nation's income going to college tuitions than ever before, so Dr. Osterman can afford a higher give-Tim-Shaughnessy-a-bunch-of-money contribution. If he gave me a one-fifth increase in my salary, or even just $3000, that would make a tremendous difference in my life too.

Later in the CNN story,

Many economists and small business owners fear that increasing the minimum wage would end up hurting the working poor rather than helping them, because employers who couldn't afford to pay more would be forced to cut staff.

But there's little empirical evidence to suggest that raising the minimum wage causes companies to cut back on hiring, according to Heidi Shierholz, labor economist for the Economic Policy Institute, a liberal think tank.

In fact, one study conducted by Alan Krueger, President Obama's pick for his next chief economic adviser, found little difference in employment levels of fast food industries in Pennsylvania and New Jersey, which have different minimum wages.

One whole study? No wonder he is going to be the next CEA. Here's a review of more studies by Neumark.

None of the raising-the-minimum advocates ever do the reductio ad absurdem when discussing the minimum wage: why not raise it to $20 an hour? To $100 an hour? That would give even more money to the working poor.

Even when I played college soccer, we still had to practice the fundamentals, the drills we did when we were seven years old. Working at MIT doesn't absolve you from knowing correct principles of economics, like the effects of price floors set above market prices.

Posted by Tim Shaughnessy at 11:32 AM in Economics

September 26, 2011
A New Video on the Atlanta Government Schools Cheating Scandal

Posted by E. Frank Stephenson at 11:22 AM

September 21, 2011
Obama: Most economically ignorant president ever?

I've been saying for some time that Barack Obama is the most economically ignorant president since Zachary Taylor, but I increasingly fear I've been doing the general a disservice. It's not just erroneous economics, but sheer ignorance of markets and economics.

You see it in periodic comments of the President. Perhaps the most famous came when he said that ATMs and airport ticket kiosks lead to unemployment: “When you go to a bank you use the ATM, you don’t go to a bank teller. Or you go to the airport and you use a kiosk instead of checking in at the gate.” (An interesting tidbit - do a Google search for this - you'll see the comment was more or less uncommented upon in the "mainstream media.") He's used this a couple times, here also blaming internet travel sites.

But there have been numerous others, as when he explained that auto companies had to make more electric cars in order to satisfy the market. This showed a titanic ignorance of how markets work, the President apparently of the belief that "the market" was what a central planner decided was needed, not what consumers actually wanted. He shows know concept of consumer preference, the subjective value of goods and services, or even the role of prices in providing information to firms.

Now comes this quote from Ron Suskind's book, Confidence Men:

"Both [Chair of the Council of Economic Advisors Christina Roemer and National Economic Council Director Lawrence Summers] were concerned by something the President had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled.

“What was driving unemployment was clearly deficient aggregate demand,” Romer said. “We wondered where this could be coming from. We both tried to convince him otherwise. He wouldn’t budge.”

So our President really does think productivity is bad for the economy. As economist Scott Sumner says, "So for 200 years rapid productivity growth didn’t cause any serious unemployment problems in America, but now, right after NGDP collapses, we are to believe it is producing mass unemployment, even though recent productivity gains have been rather low. I’m at a loss for words. We elected a Luddite as President of the United States."

Posted by Brad Smith at 10:14 PM in Politics

Association is not causation, but...

From CNN.com:

While the earnings of middle-income Americans have barely budged since the mid 1970s, the new data showed that from 2000 to 2010, they actually regressed.

And from the new EFW report:

The world’s largest economy, the United States, has suffered one of the largest declines in economic freedom over the last 10 years, pushing it into tenth place. Much of this decline is a result of higher government spending and borrowing and lower scores for the legal structure and property rights components.

Haven't we known that economic freedom leads to growth for at least a couple of centuries? We don't put leeches on people to heal them anymore, but we still think we can put a leech on the economy to heal it.

As a bonus, one of the CNN subheads is "Why it sucks to be middle class." I imagine it sucked worse to be a king two hundred years ago than it is to be middle class, or even in poverty, today in the US. I'd also rather be in poverty in the US than be an average income earner in countless countries around the world. There is something to be said for absolute vs. relative standards of living.

Posted by Tim Shaughnessy at 12:59 PM in Economics

Surely It's Just a Coincidence That ...

... Hong Kong has a 3.2% unemployment rate and it ranks first, yet again, in the EFW index.

UPDATE: Here's the abstract of Horst Feldmann's 2007 Southern Economic Journal article examining the relationship between unemployment and economic freedom:

Using data from 87 countries and the years 1980–2003, this paper empirically analyzes whether and to what extent economic freedom affects unemployment. According to the regression results, economic freedom is likely to substantially reduce unemployment, especially among women and young people. A small government sector and a legal system characterized by an independent judiciary, impartial courts, and an effective protection of property rights most clearly seem to have beneficial effects. In addition, there are indications that freedom to trade across national boundaries and a light regulatory burden may also lower unemployment, though apparently in the long term only.
Posted by E. Frank Stephenson at 11:40 AM

Smart People Can Be Slow Learners

Yet another example of a failed open access bike program comes from Davidson College. Some key graphs:

Why was such a useful and popular program discontinued? Unfortunately, it appears that the strong Davidson sense of honor and responsibility wavered when it came to these bikes.

"They were stolen, damaged and some were even thrown off of buildings," Jeannie Kinnett '12 said. "Since there were no repercussions for damaging them, and no way to ensure their maintenance, the Activities Tax Council decided that funding them this year would not be worth it since they would be trashed anyway."

There were efforts by Davidson Outdoors and other organizations to improve student treatment of the bikes, but this was largely ineffective. They were being damaged and stolen faster than they could be repaired or replaced.

"I once found one on the side of the road on Main Street," Samanvitha Sridhar '14 said. "I tried to ride it, but the tires were completely deflated, so I fell. It was pretty awful, and after that, I avoided the bikes because they all seemed to be in bad condition or broken." One bike was even found in a drug bust.

Posted by E. Frank Stephenson at 09:08 AM

September 20, 2011
Equating MU/$

Only a few semesters of Principles Micro under my belt, but I love this clip as a way to demonstrate the relevance of marginal utility per dollar (first 40 seconds):

Posted by Tim Shaughnessy at 12:25 PM in Economics

Economic Freedom of the World

The new Economic Freedom of the World report, coauthored with Josh Hall and Jim Gwartney, is released today. The big news is the continuing decline of the United States. Since 2000, the overall rating (out of 10) has fallen from 8.45 to 7.58 in 2009. This decline is among the largest in the world during the period putting us in the company of countries like Venezuela and Argentina. The overall decline is accounted for by changes in three areas: Spending, Property Rights, and Regulations. Here are some of the specifics (all data are changes from 2000-2009):

-Component 1A (Government Consumption) fell from 6.59 to 6.02.
-Component 1B (Transfers) fell from 6.54 to 5.94.
-Component 1C (Government Investment) fell from 8.00 to 7.00.
-Component 5Aiii (Private Sector Credit/Deficit) fell from 9.43 to 0.00.

Property Rights
-Component 2A (Judicial Independence) fell from 8.02 to 6.62.
-Component 2B (Impartial Courst) fell from 9.02 to 5.70.
-Component 2C (Property Rights) fell from 9.10 to 6.83.

-Component 4Bi (Non-tariff Trade Barriers) fell from 8.12 to 6.03.
-Component 5Ci (Price controls) fell from 8.00 to 6.00.
-Component 5Cii (Administrative requirements) fell from 7.92 to 4.13.
-Component 5Ciii (Bureaucracy costs) fell from 8.15 to 2.58

Here's a little teaser video I did:

Press releases:
Fraser Institute
Cato Institute
SMU Cox School of Business.

Posted by Robert Lawson at 09:17 AM

Mr. EBT Eats Well

A few weeks ago a friend found the receipt below at the DeKalb Farmers Market (a grocery store in Atlanta) and thought it interesting that EBT was paying for snapper and crabs. I was reminded of this picture when I saw the Mr. EBT video embedded below the photo. (Note the vid has some NSFW language.)

(UPDATE 12/16: See also this photo.)

A side note--next time one hears about the obesity epidemic maybe Mr. EBT's government subsidized comsumption of candy and chips should come to mind as a contributing factor.


Posted by E. Frank Stephenson at 08:21 AM

September 14, 2011
Even P-Kroog Thinks It's a "Ponzi Game"

He writes,

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).

Source. HT: Instapundit

Posted by E. Frank Stephenson at 08:27 AM

September 13, 2011
More on tolerant conservatives

For a long time, I've noted that conservatives and libertarians live happier, more active lives than liberals, and are generally more tolerant. (Yes, that anonymous friend is me). I have also long noted that in my experience, conservatives are, on the whole, more tolerant than liberals.

These observations cut heavily against the typical liberal's sense of self, but it really makes sense, if you think about it. The core of conservatism, no less than Ronald Reagan used to say, is libertarianism - the live and let live philosophy. And equally at the core of libertarianism is a tolerance for lifestyle choices. Liberals and hippies and free love types and survivialists and all kinds of crazies can move to Vermont or New Hampshire or Idaho, and the flinty natives just accept them (with the immigrants gradually changing the political culture of the two former states to match their intolerant liberalism). Modern liberalism, by definition, seeks to impose its will on individuals, largely in the belief that it can perfect society through politics. This doesn't mean that they are bad people. And perhaps we should be more intolerant. (In fact, that's the argument that my liberal friends routinely give me when I point these things out, although they don't put it in those terms - instead the argue, for example, about the evils of smoking, or paying people less than the minimum wage, or making racist comments, or the dangers of owning a gun, etc. etc.). It's modern liberalism that imposes smoking bans, and mandates speech codes, and so on. I say "and so on" because I am off on a digression.

My point was simply to note that evidence continually trickles out for the proposition that I routinely observe - liberals are less tolerant of differing beliefs than conservatives.

The latest comes from Match.com, which has been running algorithms on their members in order to better match people. One result: says Amarnath Thombre, Match.com's lead researcher, "the politics one is quite interesting. Conservatives are far more open to reaching out to someone with a different point of view than a liberal is."

I leave it to the more highly trained economists here to explain the dynamics of dating and mate choice.

Posted by Brad Smith at 10:30 AM in Politics

Homeland Security: Just Another Part of the Rent-Seeking Society

Ex-Homeland Security officials score on K Street

Posted by E. Frank Stephenson at 09:13 AM

September 12, 2011
Proof by Exhaustion?

Al Gore in 24-hour broadcast to convert climate skeptics

Posted by E. Frank Stephenson at 02:17 PM

The Social Security Ponzi Scheme in Pictures

MR and Cafe Hayek both have posts about Social Security being a Ponzi scheme. It's actually worse because it is compulsory not voluntary. Mike Lester's cartoon from the Sept. 4 Rome News-Tribune illustrates this point:

Lester SocSec Ponzi.jpg

Posted by E. Frank Stephenson at 09:01 AM

September 09, 2011
Will the Real Paul Krugman Please Stand Up

Here's a letter from me that appears in tomorrow's WSJ:

Jonathan P. Williams's letter suggests that Alan Krueger's recognition that extending unemployment benefits increases the duration of unemployment spells is at odds with Paul Krugman's thinking on this question. Actually, Mr. Krugman seems to be of two minds on the issue. While he has called the notion "bizarre" in a column castigating Republicans for pointing out the effect that extending benefits has on joblessness, Mr. Krugman and his wife, Robin Wells, wrote the following in their textbook, "Macroeconomics" (p. 210): "Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job." Apparently Mr. Krugman thinks the existence of the effect depends on the party affiliation of the person mentioning it.

E. Frank Stephenson
Chair, Dept. of Economics
Berry College
Rome, Ga.

HT to Don Boudreaux for the Krugman quotes.

Posted by E. Frank Stephenson at 10:08 PM

September 08, 2011
Does the Lack of a Profit Motive Affect Hiring in Academe? Evidence from the Market for Lawyers

That's the title of a new paper by DOL friend Dan Sutter and his co-author Rex Pjesky. Here's the abstract (gated copy here):

The comparative performance of academic and economic markets continues to be debated. One factor potentially distinguishing academic markets is the profit motive. Profit and competition have been shown to curb discrimination in markets, and the absence of profit discipline could result in myriad forms of prejudice in academic hiring. We explore the role of the profit motive in the performance of academic markets by comparing the pedigree of employees of top law schools and top law firms. Top law schools are much more likely to employ graduates of top ranked law schools than elite law firms, and the difference exists at both the junior and senior levels. We find no evidence that the graduates of top 5 law schools outperform grads of less prestigious schools in publications or citations. In the absence of a profit motive, academic hiring appears more likely to indulge a preference for pedigree, and by implication, this may explain other scholarly prejudices in the academy.
Posted by E. Frank Stephenson at 08:27 AM

That Might Hurt
Police Chief Wayne Payne says 35-year-old Nathan Mark Hardy was arrested Saturday after allegedly being caught stuffing food into his cargo shorts — two bags of jumbo shrimp, a pork loin and two live lobsters.

Source. Live lobsters in one's pants just doesn't seem like a smart choice.

Posted by E. Frank Stephenson at 08:17 AM

September 07, 2011
An Unsung Hero of Capitalism
Nearly six decades ago, Keith W. Tantlinger built a box — or, more accurately, the corners of a box. It was a seemingly small invention, but a vital one: it set in motion a chain of events that changed the way people buy and sell things, transformed the means by which nations do business and ultimately gave rise to the present-day global economy.

Mr. Tantlinger’s box, large, heavy and metal, is known as the shipping container. Though he did not invent it (such containers had been in use at least since the 19th century to haul heavy cargo like coal), he is widely credited with having created, in the 1950s, the first commercially viable modern one.

The crucial refinements he made — including a corner mechanism that locks containers together — allowed them to be hefted by crane, stacked high in ships and transferred from shipboard to trucks and trains far more easily, and cheaply, than ever before.

Thus, without ever intending to, Mr. Tantlinger, an engineer who died at 92 on Aug. 27 and who had long worked out of the limelight, helped bring about the vast web of international trade that is a fact of 21st-century life. More than any other innovation, the modern shipping container — by turns venerated and castigated — is now acknowledged to have been the spark that touched off globalization.


Posted by E. Frank Stephenson at 02:20 PM

September 05, 2011
Speaking at UK on Wednesday

September 2, 2011
Contact: Michele Sparks, Director of Communications (859) 257-0040
For Immediate Release


"Economic Freedom and the Wealth and Health of Nations" is the topic of a talk to be delivered on the University of Kentucky campus by Southern Methodist University Professor Robert A. Lawson Wednesday, Sept. 7.

The lecture, which is free and open to the public, will begin at 4:30 p.m. in Room 110 of the White Hall Classroom Building. The talk is sponsored by the BB&T Learning Laboratory on Capitalism in the Gatton College of Business and Economics, the Economics Society, and UK Students for Liberty.

Lawson, co-author of the annual Economic Freedom of the World Report, holds the Jerome M. Fullinwider Chair at SMU's Cox School of Business. Widely published in economics literature, he is often cited as a major contributor to the measurement and analysis of economic freedom.

The event is supported by a gift to the Gatton College from the BB&T Corporation.

Posted by Robert Lawson at 03:39 PM

Going Galt?

Except not in the usual sense of the expression. Consider:

Electric motor made from a single molecule
Posted by E. Frank Stephenson at 08:58 AM

September 04, 2011
Some early electoral college math

In 2008, John McCain won 173 electoral college votes. It is very difficult to imagine any state that voted for McCain in 2008 not supporting the GOP candidate in 2012. So that means the GOP nominee has to swipe 97 votes from the Obama column to win in 2012. Where might they come from?

Read More »

Posted by Brad Smith at 10:42 PM in Politics  ·  Comments (0)

Idealism and Nihilism

Quoth P. J. O'Rourke: " The sensitive plant of idealism never grows without the nihilistic twining vine."

More excerpts from this sobering essay:

The mass murder of September 11, 2001, was an act of idealism. It was idealism in the worst sense, but is there another sense that can be given to what we commonly call idealism? The concept that mankind and society could and should be perfected depends, for its moral value, on the definition of perfect, and every definition of human perfectibility is evil. Ideals are not to be confused with principles, with the Golden Rule or the Ten Commandments. Idealism means that ideas are more important than people, which ordering of priorities means that people die.

Zealots have always existed. Sometimes they’ve done real damage, [...b]ut, historically, the threat of a utopia was held in check by simple lack of power to effect one.

Then came the rise of the great nation-states, great examples of how—with taxes, legal structures, and bureaucratic organization—power could be expanded to shape life. This coincided with the Enlightenment and its many ideas, too many of which seemed applicable to life-shaping. Maybe the thing could be done. Wispy thoughts about what might be ideal turned into hardened idealism as we know it. [...]

After the Terror, “idealist” should have become an epithet, but it didn’t. It’s a compliment for us to pay to our politicians, for teachers to pay to our children, for me to pay to myself when others aren’t seeking their own perfection as perfectly as I am.

The sensitive plant of idealism never grows without the nihilistic twining vine. Everything must be scratched to start from scratch. To begin time anew, clean the clock. It’s appropriate that the poetic political leveler Shelley had a wife, Mary Shelley, who wrote Frankenstein, a better prediction than Marx made about what the “New Man” does when re-creation of humanity is undertaken.

Nihilism and the ideals that feed it are as persistent as the sins they claim to excise. I was shaken out of my own 1960s idealism when the Weather Underground faction of the SDS turned to nihilism with an unpleasant self-righteous ease. On March 6, 1970, while trying to make bombs, they blew up a townhouse on West 11th Street in Greenwich Village, around the corner from where I’d been staying with my cousin. Three of them got killed. I got a haircut.

Posted by Wilson Mixon at 11:19 AM

September 03, 2011
Hoover Letter

Below is a short letter published in The Cap Times ("Your Progressive Voice" for Madison, WI):

Dear Editor:

In his Aug. 25 letter, Colin J.N. Chauret claims that “President Herbert Hoover’s solution was to cut budgets.” This is simply untrue. A quick glance at Hoover’s actual record indicates that spending rose some 50 percent, from $3.1 billion in 1929 to $4.6 billion in 1932, during Hoover’s term. See Table 1.1 on Page 25 of this federal government document. As the saying goes, folks are entitled to their own opinions but not their own facts.

Frank Stephenson
Rome, Ga.

Posted by E. Frank Stephenson at 10:01 AM


Local readers mark your calendars--Skip Sauer of Clemson will be giving a talk on Moneyball at Berry on Sept. 22. (I also expect to host Larry Reed for a talk later this semester--stay tuned for details.) Meanwhile, here's the trailer for the Moneyball movie that will be released on Sept. 23.

Posted by E. Frank Stephenson at 09:51 AM

September 02, 2011
Gary Becker on market vs. government failure

In my read of Gary Becker, he gets it 90% right 95% of the time. In today's Wall Street Journal, he ups his average, and he does it by forgetting he ever argued that interest group pressures cancel each other out to achieve democratic efficiency. Nicely representing the comparative institutional approach:

The traditional case for private competitive markets goes back to Adam Smith (and even earlier writers). It is mainly based on abundant evidence that most of the time competitive markets work quite well, usually much better than government alternatives. The main reason is not that individuals in the private sector are intrinsically better than government bureaucrats and politicians, but rather that competitive pressures discipline market behavior much more effectively than government actions.

The lesson is that it is crucial to consider whether government regulations and laws are likely to improve rather than worsen the performance of private markets. In an article "Competition and Democracy" published more than 50 years ago, I said "monopoly and other imperfections are at least as important, and perhaps substantially more so, in the political sector as in the marketplace. . . . Does the existence of market imperfections justify government intervention? The answer would be no, if the imperfections in government behavior were greater than those in the market."

On market vs. government failure in detail, I recommend Clifford Winston's concise book. And here is his Econ Talk interview with Russ Roberts.

Posted by Edward J. Lopez at 11:58 AM in Economics

Capes for the Unemployed

This one still leaves me slackjawed even though it's about 4 months old. Previous post here; thanks to Pete C for the vid pointer.

Posted by E. Frank Stephenson at 11:34 AM

White House-Backed Solar Energy Company Collapses*


*That's the title of this story on ABC.

Posted by E. Frank Stephenson at 08:48 AM

September 01, 2011
QOTD: grocery store crisis

From McKenzie and Lee, Microeconomics for MBAs:

Without question, if the grocery industry were operated over the past decades the way the healthcare industry has operated, then the nation would likely have a "crisis" in the grocery business. The reason is simple: People would pay a fixed sum each month (their grocery premium) through their employer that would entitle them to virtually unlimited access to the grocery store shelves (after they have covered the $200 annual deductible) at a small fraction of the actual cost. Under such an arrangement, we should not be surprised if people consumed significantly more and better food, some of which would have limited value. We should also not be surprised if the shoppers' grocery price premiums went through the roof as few consumers would have much incentive to moderate their purchases by considering the full cost of the food they are buying.
Posted by Tim Shaughnessy at 04:12 PM 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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