Division of Labour: October 2011 Archives
October 31, 2011
Adult Babies

Mark Steyn on a man who "receives Supplementary Security Income disability checks from the Social Security Administration in order to sit around the house all day wearing a giant diaper and a giant onesie, sucking on a giant pacifier and playing with a giant baby rattle."

Is there no limit to the welfare state?

Posted by E. Frank Stephenson at 10:04 AM

A Musical Review of Differentiation ...

... provided by one of my colleagues.

Posted by E. Frank Stephenson at 09:21 AM

Maybe They Should Call It Solyndra Theater

In 2005, Roanoke Rapids NC, close to where I grew up, backed $21.5 million in bonds for the Randy Parton (Dolly's brother) Theater. The theater was supposed to generate enough revenue to pay for itself and was supposed to anchor a large devlopment off of I-95 (maybe it could have become a cross between Dollywood and South of the Border). Alas, it turned out to be a bust and the town is now faced with a stiff property tax hike or with devoting more than 10% of its annual budget to paying for the bonds. Read more here.

As bad as this episode is, I think it is still topped by at least one other eastern NC boondoggle--the Global Transpark.

Posted by E. Frank Stephenson at 08:45 AM

October 26, 2011
Are Law Schools and Bar Exams Necessary?

That's the question posed by Clifford Winston in the NYT. Although it doesn't mean that the barriers to entry shouldn't be reduced, I hear the law school grad job market is dismal. Doctors, on the other hand, seem to have found a way to restrict entry sufficiently that there are lots of reports of doctor shortages and foreign born docs moving to the U.S. (nothing wrong with that but it raises the question of why domestic supply does not increase).

Posted by E. Frank Stephenson at 10:37 AM

October 22, 2011
So Much for Hurricanes as Stimulus, Part Deux

In a recent paper in REStat, Eric Strobl found that hurricanes did not increase economic growth in the U.S. Now he has a paper in the Journal of Development Economics that has similar findings for Latin American and Carribbean countries; the abstract:

In this paper we investigate the macroeconomic impact of natural disasters in developing countries by examining hurricane strikes in the Central American and Caribbean regions. Our innovation in this regard is to employ a wind field model on hurricane track data to arrive at a more scientifically based index of potential local destruction. This index allows us to identify damages at a detailed geographical level, compare hurricanes' destructiveness, as well as identify the countries that are most affected, without having to rely on potentially questionable monetary loss estimates. Combining our destruction index with macroeconomic data we show that the average hurricane strike caused output to fall by at least 0.83 percentage points in the region, although this depends on controlling for local economic characteristics of the country affected and what time of the year the storm strikes.

Of course, Strobl and others could publish 50 papers with similar conclusions and it wouldn't stop some doofus from proclaiming that the aftermath of some hurricane or other disaster will be greater prosperity.

Posted by E. Frank Stephenson at 01:36 PM

But I Bet It Benefits Trade Lawyers

The abstract of a paper in Economics Letters:

The WTO’s impact on bilateral trade remains puzzling due, in part, to previous studies’ failure to simultaneously address three issues: inclusion of zero trade, proper controls for multilateral resistance, and proper membership definition. Addressing all fails to suggest a positive effect.
Posted by E. Frank Stephenson at 12:46 PM

October 19, 2011
Medical ethics dilemma

I went and got a flu shot today. This got me to thinking about the H1N1 (swine) flu outbreak of a couple years ago.

It turns out that the swine flu may have actually saved lives. Although the swine flu tended to kill younger people more frequently than the regular seasonal (bird) flu, the overall mortality of the swine flu was considerably less than the regular flu. And, here's the good news, apparently if you got the swine flu you were immune to that season's regular flu. So the net impact of the swine flu was fewer lives lost when you factor in the immunity impact on the regular flu.

Now, there is some question about if this is true, and the swine flu did kill more young people so the number of lost years of life may have been worse. I don't know. But it does bring up a serious ethicial question for the public health folks.

Let's suppose it is unambiguously true that a swine flu outbreak would save net lives (or net years of life), would public health advocates support intentionally releasing the swine flu into the public? I'm serious. Public health advocates appear to have no problem using force to "save lives" so why wouldn't they support such a plan?

I suspect most people's ethical intuitions would recoil at the thought of the government releasing a potentially deadly virus only because it innoculated people from an even deadlier virus. But, but, but...we do this sort of thing all the time now.

To take just one example, CAFE standards on cars have killed people merely to save a few (ok a lot) gallons of gasoline. Yet there is no uproar about this.

I think the answer is that CAFE standards kill lives only in a statistical sense. When a lightweight car accident results in a death no one, except statisticians, connects that death with CAFE standards. In contrast, the swine flu kills people and we actually can see it and identify the cause.

Posted by Robert Lawson at 11:09 AM

October 17, 2011
Euvoluntary Exchange in NRO

Interesting NRO piece by Reihan Salam on Euvoluntary Exchange. Nice examples. And the question at the end is the right one. I just don't know the answer.

What are the sources of the disparities we care, or rather that we should care, about?

Posted by Michael Munger at 04:42 PM in Economics

October 16, 2011
Tournament Incentives Gone Bad

A quick thought about the death of the Indy driver who was racing for a $5m bonus--I wonder if this could be partly attributable to excessively aggressive driving in pursuit of the bonus. See the Sobel and Nesbit NASCAR paper.

Posted by E. Frank Stephenson at 07:22 PM

October 15, 2011
Date With Keynes

A new video from the maker of the "I'm in Love with Friedrich Hayek" video:

Posted by E. Frank Stephenson at 12:08 PM

October 14, 2011
Is Obama's new attack style working?

In a column today in the Washington Post, Charles Krauthammer excoriates President Obama's new style of more aggressively "scapegoating" Republicans and "the rich," and giving succor to the OWS crowd. But while Krauthammer calls it "dangerous," he concludes, "it's working."

Is it? In it's August monthly poll, Gallup showed the President leading a generic Republican by 45-39%. On September 8, the President kicked off his re-election campaign with his call for the "American Jobs Act," (the AJA) and spent the next several days pushing for it. Gallup conducted its September monthly from September 8 through the 11th. The result: Generic Republican led the President by 46% to 38%. In late September, Occupy Wall Street began to garner attention - it crowded the Brooklyn Bridge on the last weekend of the month and has been almost non-stop in the news since. But Gallup's October poll, released today, shows a generic Republican leading the President by 46-38% - exactly the same as a month before.

Amongst Independent voters, the generic Republican edge has grown from 40-35% in August to 43-30% in October (though down slightly from September).

When he gave his AJA speech in September, Obama's average approval was 43.8, per Real Clear Politics. Today it stands at 43.6, though with a slight uptick in the last week - almost entirely the result of a surprisingly strong (for the President) poll from Rasmussen, the pollster liberals love to hate. The most recent polls from other pollsters in the field since OWS briefly seized the Brooklyn Bridge, compared to their prior poll, show him down in Gallup, flat in Ipsos/Reuters, down in ABC/Washington Post, and down in Fox New.

Meanwhile, the old "right track/wrong track" numbers have reached a ridiculously (and historically) bad 17-76%. That's slightly worse than the 19-74% split at the time of his AJA speech, and down from 21-72% when OWS seized the Bridge. These small declines are probably just statistical noise, but they certainly don't show OWS or the President moving the needle.

The President's numbers against his specific possible Republican opponents, however, remain stable. In September, as in August, he was competitive, with slight leads or slightly behind, depending on the particular match-up. The latest round of such polling (by Gallup) should be out soon, and we'll see how he looks then. He'll also have a huge cash advantage over his GOP opposition, and by February if not sooner we should expect to see that money being deployed to bash Republicans.

So the President remains a formidable opponent. But that's because of his cash advantage, and the weakness of the GOP field. There's no sign - yet anyway - that his new style is moving things in his direction.

Posted by Brad Smith at 11:59 AM in Politics

October 13, 2011
In a nutshell

George Will provides this summation of the "message" (he dignifies it by calling it the meta-theory) of the Occupy Wall Street bunch: Washington is grotesquely corrupt and insufficiently powerful.

Posted by Wilson Mixon at 02:03 PM in Politics

October 12, 2011
Economic Freedom Video

Posted by E. Frank Stephenson at 03:06 PM

Senor Laffer, I Presume
The organization criticized the effects of [Mexico's] Special Tax on Production and Services, or IEPS, which was approved a year ago and raised the price of a pack of cigarettes by 7 pesos ($0.52).

The tax bolstered the illegal cigarette trade and caused the SAT tax agency's revenues from tobacco taxes to fall 29.2 percent in the first half of 2011 ...


Posted by E. Frank Stephenson at 08:42 AM

October 11, 2011
Movie name "Sue"

So, I had written about the decision by a young woman in Michigan to sue because she hated the movite "Drive."

But my effort was totally outclassed by Patrick. Well played, sir.

Posted by Michael Munger at 01:56 PM

Euvoluntary Exchange Blog

I'd like to ask a favor. Just started a new blog, whose goal it is to document resources and commentary regarding "euvoluntary exchange."

Started thinking about this problem when I was wondering why in the world these folks clapped. They were standing in line....but clapped when the sellers were arrested?

Read More »

Posted by Michael Munger at 01:45 PM

Letter to the Baltimore Sun

In response to this awful column by Peter Morici, I sent this letter to the editor:

Dear Editor,

Regarding Peter Morici’s column “China currency bill: America fights back”: It would be easy to point out the many economic flaws with Prof. Morici’s argument. To give just one example, it’s not clear that an increasing value of the yuan will lead to more U.S. jobs because a significant portion of U.S. imports from China are inputs for things that are produced here in the U.S. Making imported inputs from China more expensive might actually reduce employment here.

However, when Mr. Morici is not bemoaning the “surging subsidized imports from China,” he appears in television commercials for Kyocera copiers which are manufactured a plant in China and two in Japan (another country with which the U.S. runs one of those awful trade deficit thingies). So, whlle President Obama may typify “food co-op capitalism” and Speaker Boehner may exemplify “knickers era capitalism,” whatever they may be, Mr. Morici seems to practice “hypocrite capitalism.” Perhaps Mr. Morici’s next column can explain why pitching Chinese made copiers doesn’t contribute to “destroying more American jobs than the mortgage crisis, too much business regulation and high health care costs combined,” the ills that he claims result from Americans’ trade with China.

E. Frank Stephenson
Rome, Ga.

See also this response by Don Boudreaux.

UPDATE: See also this letter in the WSJ.

UPDATE (10/12): To my surprise (because I'm not in the Baltimore area), the Sun did run my letter.

Posted by E. Frank Stephenson at 11:10 AM

Incentives Matter: Taxes and Labor Supply Edition

The abstracts of two papers (gated) in the new edition of AEJ: Macro; first from the paper by L. Rachel Ngai and Christopher A. Pissarides:

We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but are treated differently by welfare policy. We attribute the disparities to the countries' tax and subsidy policies. High taxation substantially reduces hours in sectors that have close home substitutes but less so in other sectors. Subsidies increase hours in the subsidized sectors that have home substitutes.

Now the paper by Cara McDaniel:

The goal of this paper is to examine the role of taxes and productivity growth as forces influencing market hours. To achieve this goal, the paper considers a calibrated growth model extended to include home production and subsistence consumption, both of which are found to be key features influencing market hours. The model is simulated for 15 OECD countries. The primary force driving changes in market hours is found to be changing labor income tax rates. Productivity catch-up relative to the United States is found to be an important secondary force.
Posted by E. Frank Stephenson at 10:37 AM

October 09, 2011
Bleg: My First Coca-Cola

My wife and I are collecting stories from people who lived in Soviet and other Communist-bloc nations during the "Soviet times". Specifically, we want to hear about your first Coca-Cola. When and where did you have your first Coke? What did it mean to you? Did you like it? Tell us your story!

Is your story more about your first pair of Levi's or McDonald's burger? That's ok! We want to hear that story too.

Please email your story directly to us at tracy.s.lawson@gmail.com.

Please forward to all your friends who may have stories to share.

Posted by Robert Lawson at 06:28 AM

October 06, 2011
Two in Honor of Steve Jobs

Art Carden's Forbes piece contrasting Steve Jobs unveiling of the Ipad to the State of the Union address being delivered on the same day.

Steve Horwitz: Steve Jobs, Prince of Peace

Posted by E. Frank Stephenson at 08:18 AM

Occupy Wall Street = Obamaville

After all, Obama’s policies—increase spending, restrict trade, make labor markets less flexible, and increase marginal tax rates—bear a strong resemblance to Herbert Hoover’s.

Posted by E. Frank Stephenson at 08:07 AM

October 05, 2011
High School Football

More people get angry when you criticize football than if you criticize their religion or politics, and even though I've already posted on why I think football is deficient, I'll use it as a topic here.

It's fall, so the local news is full of high school football stories and scores. Uptown High School is playing Downtown High School in the biggest game of the year. The competition among these two teams is fierce, with winner getting bragging rights.

I find it odd that the benefits of competition among these two public high school football teams is widely known and supported by the administration, and yet the benefits of competition among these two public high school systems is disparaged. The coaches of the two schools should compete against each other for points on the scoreboard, but the teachers of the two schools should NOT compete against each other to attract students. We dislike this latter competition so much that we enact geographic monopolies.

If competition is good for school football teams, why is it not good for schools seeking students? It seems hypocritical for someone to cheer loudly at their local public school football game while attacking the idea of school choice.

Posted by Tim Shaughnessy at 08:58 PM in Economics

October 03, 2011
GDP Song

Limitations of GDP as a measure of well being are highlighted. Though not named, the broken windows fallacy appears. (HT: Lauren Heller)

Posted by E. Frank Stephenson at 03:45 PM

October 02, 2011
Undergraduate Business and Economics Research Journal Call for Papers

A great publsihing outlet for undergraduate research; details here.

Posted by E. Frank Stephenson at 01:44 PM

October 01, 2011
A Modest Proposal

Tim's post on the minimum wage reminds me of a proposal by Levis Kochin: Why not just set the minimum wage equal to the average wage? Think of the advantages of the reduced uncertainty.

Posted by Wilson Mixon at 07:54 PM in Funny Stuff

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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