Division of Labour: January 2012 Archives
January 31, 2012
If It Keeps Them Busy: Kansas State Dog Edition
Much better than thinking up new ways to tax and spend ...
Posted by E. Frank Stephenson at 09:53 AM
January 30, 2012
We're From the Guvmint and We're Here to Help
The punchlines from two new NBER Working Papers:
1. From Valerie Ramey (WP #17787): "Using a variety of identification methods and samples, I find that in most cases private spending falls significantly in response to an increase in government spending. These results imply that the average GDP multiplier lies below unity."
2. From Nathan Nunn and Nancy Qian (WP #17794): "Our estimates show that an increase in U.S. food aid increases the incidence, onset and duration of civil conflicts in recipient countries."
Posted by E. Frank Stephenson at 08:27 AM
A Lawsuit Related to My Favorite Chinese Copier Salesman
Ben Stein, alleging breach of contract, has sued Kyocera over backing out of hiring him to be the pitchman for its copiers. After passing on Stein, the company turned to a mercantilist to be the mouthpiece for its foreign made copiers. Details here.
Thanks to Mike H. for the pointer.
Posted by E. Frank Stephenson at 08:13 AM
January 24, 2012
Economic Freedom and Income Inequality
Starring our own Bob Lawson.
Posted by E. Frank Stephenson at 08:07 PM
As someone who picked up a couple dozen 100 watt incandescent bulbs in December, I particularly enjoyed this offering from Reason.tv.
Posted by E. Frank Stephenson at 07:47 PM
January 18, 2012
Private Equity and Employment
Instead of the political kerfuffle about Bain in SC, how about some real analysis? Well, here's the abstract of a recent NBER WP by Steven Davis et al.:
Private equity critics claim that leveraged buyouts bring huge job losses. To investigate this claim, we construct and analyze a new dataset that covers U.S. private equity transactions from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing outcomes to controls similar in terms of industry, size, age, and prior growth. Relative to controls, employment at target establishments declines 3 percent over two years post buyout and 6 percent over five years. The job losses are concentrated among public-to-private buyouts, and transactions involving firms in the service and retail sectors. But target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. When we consider these additional adjustment margins, net relative job losses at target firms are less than 1 percent of initial employment. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 13 percent of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms.
So private equity enhances efficiency with minimal effect on employment. Yet another reason Professor Cornpone Gingrich is a just another slimy politician.
January 15, 2012
The Long-Run Effects of the Scramble for Africa
That's the title of recent NBER WP by Stelios Michalopoulos and Elias Papaioannou. Here's the abstract:
We examine the long-run consequences of the scramble for Africa among European powers in the late 19th century and uncover the following empirical regularities. First, using information on the spatial distribution of African ethnicities before colonization, we show that borders were arbitrarily drawn. Apart from the land mass and water area of an ethnicity's historical homeland, no other geographic, ecological, historical, and ethnic-specific traits predict which ethnic groups have been partitioned by the national border. Second, using data on the location of civil conflicts after independence, we show that partitioned ethnic groups have suffered significantly more warfare; moreover, partitioned ethnicities have experienced more prolonged and more devastating civil wars. Third, we identify sizeable spillovers; civil conflict spreads from the homeland of partitioned ethnicities to nearby ethnic regions. These results are robust to a rich set of controls at a fine level and the inclusion of country fixed effects and ethnic-family fixed effects. The uncovered evidence thus identifies a sizable causal impact of the scramble for Africa on warfare.
Posted by E. Frank Stephenson at 06:05 PM
Art Carden Responds to the Story of Broke
Posted by E. Frank Stephenson at 02:31 PM
More on Price Controls and Drug Shortages
In a recent post I suggested that drug shortages are the result of market interference. Many thanks to a reader who sent along the following snips and their sources:
1. The driving force behind the shortage [of ADHD drugs] is a U.S. Drug Enforcement Administration (DEA) policy that sets limits on the manufacturing of ADHD drugs, to limit the supply of these drugs to people who might use them illegally, according to a report by The New York Times. Source.
2. About half of the shortages of injectable drugs are due to production problems. The FDA has stepped up its efforts to ensure that drug manufacturing processes and facilities meet its quality standards by instituting a "zero tolerance" policy. As a result, if a shortage develops because the FDA shuts down a competitor's plant, a manufacturer must seek FDA approval to increase output and alter its production timetable, slowing down production. Source.
3. At least one former Obama administration official also believes Medicare price controls may be a big factor in drug shortages. Ezekiel Emanuel, MD, PhD, an oncologist, bioethicist and former health care adviser to President Obama, said no one has confirmed all the reasons behind drug shortages. But he said Medicare price limits are one of three likely main culprits. The others are slow FDA approval of new or upgraded drug manufacturing facilities and consolidation in the drug industry, said Dr. Emanuel... Source.
Posted by E. Frank Stephenson at 02:19 PM
David Theroux on Secular Theocracy
The President of the Independent Institute offers his take here.
Posted by E. Frank Stephenson at 02:11 PM
January 11, 2012
More on Santorum and Trade
A follow up to my recent post pointing out the similar positions of Santorum and Bernie Sanders.
Scott Lincicome offers more detail in this IBD piece. I particularly liked this paragraph:
Yes, that's right: the same guy who supported consumer-battering import restrictions on steel and other goods fought for their elimination when the direct beneficiaries resided in his state. Such inconsistency reveals a cynical politician who understands the benefits of free trade, yet eschews them when doing so suits his political ambitions.
Good to see the folks in New Hampshire relegate Santorum to fifth place. I hope the SC voters do the same.
Posted by E. Frank Stephenson at 08:52 AM
January 09, 2012
If It Keeps Them Busy ...
Georgia's legislature at its finest!
Posted by E. Frank Stephenson at 12:12 PM
Maybe Ron Paul Is Onto Something About the Fed
Posted by E. Frank Stephenson at 08:48 AM
January 08, 2012
The Curious Task of Economics ...: Norwegian Corporate Boards Edition
The abstract of a paper by Kenneth R. Ahern and Amy K. Dittmar
In 2003, a new law required that 40% of Norwegian firms' directors be women—at the time only 9% of directors were women. We use the prequota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin's Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance.
January 06, 2012
Vid on Regulatory Capture
Posted by E. Frank Stephenson at 03:16 PM
Santorum and Sanders--Like Minds on Trade
In a letter not yet posted on Cafe Hayek, Don Boudreaux takes Vermont Sen. Bernie Sanders to task for asserting that America has "lost millions of well-paying manufacturing jobs as a result of unfettered free trade."
Coming from Sanders, this sort of stuff is routine. But is might surprise many to learn that GOP Presidential canidate Rick Santorum has remarkably similar thoughts. Here's Cato's Michael Tanner's description of Santorum's position on trade:
He voted against NAFTA and has long opposed free trade. He backed higher tariffs on everything from steel to honey. He still supports an industrial policy with the government tilting the playing field toward manufacturing industries and picking winners and losers.
The Club for Growth's Santorum white paper noted that Santorum has a "penchant for trade protectionism" and that "some of Santorum’s most anti-growth votes have come on trade issues."
So, at least on trade policy, many in the GOP might as well vote for a Vermont socialist.
Posted by E. Frank Stephenson at 03:01 PM
January 05, 2012
Will Global Warming Make Them Stop Voting?
That's the hopeful question that came to mind when reading the abstract of a new paper:
Several recent studies noted systematic links between weather conditions and voting turnout amid the mass public. This article extends this logic to the elite level by exploring the relationship between summer heat and abstentions in the US House of Representatives. In controlled multivariate regressions, heat is a significant predictor of abstentions across all votes held between 1991 and 2000. This finding provides new insight into legislative behavior as well as the motivation behind some abstentions, which could inform the understanding of the literature on legislative shirking.
Posted by E. Frank Stephenson at 02:35 PM
Perennial Gales of Creative Destruction
Two particularly interesing snips:
The company, for instance, invented the digital camera—in 1975—but never managed to capitalize on the new technology.
Posted by E. Frank Stephenson at 02:10 PM
Finland's School Success
This article is getting a lot of attention.
The subtitle says, "The Scandinavian country is an education superpower because it values equality more than excellence."
Farther down is a statement that is much more consistent with a large body of research: "... [W]hat matters is that in Finland all teachers and administrators are given prestige, decent pay, and a lot of responsibility. A master's degree is required to enter the profession, and teacher training programs are among the most selective professional schools in the country. If a teacher is bad, it is the principal's responsibility to notice and deal with it."
The importance of highly qualified teachers is ignored throughout most of the article. I don't know what "deal with it" means, but I'll bet most American principals have very limited ability or incentive to "deal with" bad teachers (or even to note the existence of such an entity).
The reference to prestige (rather than the American "them as can, do ... ") calls to mind Bourgeois Dignity.
Posted by Wilson Mixon at 09:47 AM
"... the state is as prudent as it can possibly be with taxpayer money"
So says Alison Tyrer, spokeswoman for the Georgia Department of Economic Development, explaining the state's loss of $6.8m in a failed ethanol producer. Nothing like spending other people's money on dubious schemes, especially when they can be used, as this one was by former governor Sonny Perdue, to garner some publicity.
BTW, it should come as no surprise that the master of green pork Vinod Khosla is the beneficiary of this boondoggle.
Posted by E. Frank Stephenson at 09:34 AM
January 04, 2012
APEE Young Scholars Program
ANNOUNCING THE 2012 YOUNG SCHOLARS PROGRAM
APEE has received a grant to help young faculty and graduate students attend our annual meeting April 1-3, 2012 in Las Vegas, Nevada. Successful applicants will have their registration fees reduced to $80 (normally $421) and be eligible for a stipend to help offset travel expenses. These funds are designed to encourage younger scholars to consider the advantages of APEE membership. Funds are limited, and a strong preference will be given to first time attendees who are on the program. While second time recipients will remain eligible, limited funding dictates that recipients of more than one past award under the program should not expect to receive funding.
To apply, please supply the following: (1) a short essay (250-300 words) explaining why the applicant wishes to attend the meeting; (2) a short letter of reference, preferably from an APEE member or someone known to APEE, indicating why support should be provided to the nominee, and (3) a brief note from the applicant's department chair or graduate director indicating the level of departmental support that the applicant can expect for this trip. The deadline for applying is January 31, 2012. Those selected will be notified within two weeks of that date. Successful applicants will be required to register for the conference (at the reduced rate of $80) by February 21, 2012.
Please send applications to Dr. Frank Stephenson at email@example.com. If you have questions, you may email him or call him at (706) 238-7878.
Posted by E. Frank Stephenson at 05:13 PM
I'm back from some holiday time with family. Here are some things that caught my eye over the past couple of weeks:
1. (Via Instapundit) Daron Acemoglu on why nations fail.
2. A (gated) NBER Working Paper by David Autor on the unsustainability of the Social Security Disability program. Two recent WSJ articles, here and here, might shed some light on the unsustainability.
3. James Pethokoukis has 7 illuminating economics charts, including an updated version of the infamous unemployment with and without the stimulus bill.
5. ABC: U.S. Facing Largest Hospital Drug Shortage in Decades--there must be a price ceiling or other harmful regulation in here somewhere.
Posted by E. Frank Stephenson at 05:02 PM
The Real Economic Power Is In The Hands Of Congress
By ROBERT LAWSON AND RICHARD ALM
The consistent theme of the Occupy Wall Street movement has been outrage over the concentration of income in the hands of America's rich.
In cities all over the country, protesters are drawing the battle line between the top 1% and the rest of us in the bottom 99%. Too much economic power is in too few hands.
It's unfortunate indeed that the Occupiers have so far ignored the country's most egregious concentration of economic power.
In 2010, a tiny cabal of 535 individuals — just 0.00017% of the population — spent $3.5 trillion, or about 23% of the $14.5 trillion U.S. economy. That leaves 77% for the other 99.99983% of us.
The group is the U.S. Congress — whose members have enormous powers to tax and spend. And they've used them to grab economic power well beyond anything found in the private sector.
If we look at the richest 535 private citizens, measured by the Forbes 400 list combined with estimates for the nation's next 135 wealthiest people, we estimate these rich people probably have about $166 billion in spendable income each year.
Internal Revenue Service data from the 535 highest tax returns give a somewhat lower figure of $135 billion.
Thus, the members of Congress wield 20 to 25 times more economic power than the same number of richest private citizens in the country.
The lawmakers even put the richest 1% to shame. The Occupiers' bogeymen earn a combined $1.3 trillion a year in income, or less than 40% of what Congress spends each year.
Most private individuals become wealthy by providing valuable goods and services to consumers who have a choice of whether or not to buy. Bill Gates, for example, reached the top of the Forbes 400 by providing computer software to millions of people around the world.
If rich people invest in producing products no one wants, they lose money and find themselves replaced in the economic pecking order by people who made wiser choices.
In the past year alone, 18 new members climbed into the Forbes 400, nearly all of them self-made entrepreneurs.
In contrast, Congress takes its money from taxpayers by force and meets regularly to conspire on how to spend these immense sums of money.
Yet there is little guarantee that they will create value with their spending. If their politically motivated "investments" fail, as with Solyndra or the various "bridges to nowhere," taxpayers lose but politicians suffer no consequences. Members of Congress keep their jobs and move on to spend trillions more.
But it gets even worse. In addition to commanding vast sums of money, members of Congress also claim the power to regulate everything — our light bulbs, our showerheads, the price we pay for sugar, our health care choices, and on and on and on.
Rich people can't force anybody to stop buying 100-watt incandescent light bulbs but Congress sure can.
If concentrated income in the hands of a few elites is really a problem, we should direct our ire toward the U.S. Capitol, not Wall Street.
• Lawson holds the Jerome M. Fullinwider Chair in Economic Freedom. Alm is writer in residence in the O'Neil Center for Global Markets and Freedom in the SMU Cox School of Business.
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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