Division of Labour: July 2012 Archives
July 31, 2012
100th Anniversary of Milton Friedman's Birth

Don Boudreaux and Stephen Moore have good pieces on Friedman. See also Andrei Shleifer's "The Age of Milton Friedman."

Posted by E. Frank Stephenson at 12:40 PM

July 30, 2012
The Effect of Corporate Income Taxation on Wages--Half of the Tax is Shifted to Workers

From the abstract of a new paper by Wiji Arulampalam, Michael P. Devereux, Giorgia Maffinic:

Using data on 55,082 companies located in nine European countries over the period 1996–2003, we estimate the long run elasticity of the wage bill with respect to [corporate income] taxation to be −0.093. Evaluated at the mean, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 49 cents.
Posted by E. Frank Stephenson at 02:42 PM

Cronyism Video

Posted by E. Frank Stephenson at 11:52 AM

On (the Lack of) Persistent Employment Effects from the Olympics

The abstract of a new paper by Arne Feddersen and Wolfgang Maennig:

Using the data of the 1996 Olympic Games, this paper analyzes the economic impact of a mega-sporting event. Earlier studies are extended in several ways. First, monthly rather than quarterly data are employed. Second, the impact is analyzed for 16 different sectors. Third, we use a nonparametric approach to flexibly isolate employment effects. Hardly any evidence for a persistent shift in the aftermath of or the preparation for the Olympic Games is supported. We find significant positive employment effects exclusively during the Olympic Games. These short-term effects are concentrated in the sectors of “retail trade,”“accommodation and food services,” and “arts, entertainment, and recreation.
Posted by E. Frank Stephenson at 11:04 AM in Sports

The Public Choice Society at Fifty Years: 2013 Call for Conference Papers

The Public Choice Society at Fifty Years
March 7-10, 2013
Hotel Monteleone
New Orleans, La.

Dear Friends and Members of The Public Choice Society:

I am pleased to invite you to the 50th Anniversary Conference of The Public Choice Society, to be held March 7-10, 2013, at the historic Hotel Monteleone in New Orleans. This traditional setting provides the ideal backdrop for commemorating the deep intellectual traditions of The Public Choice Society. The conference program will devote a plenary session to each of four main pillars in public choice scholarship, including Virginia Political Economy, Social Choice, the Bloomington School, and Experimental Economics. Each of these plenary sessions will feature four papers celebrating the intellectual heritage of these schools while drawing attention to state-of-the art research in those lines. In addition, the program will feature a special session dedicated to the 20th Anniversary of Geoffrey Brennan and Loren Lomasky’s Democracy and Decision: The Pure Theory of Electoral Preference. We encourage you to submit your best work for inclusion on the program. While the plenary sessions are an important anchor to the history of public choice ideas, the heart of the conference will be its 64 concurrent sessions where cutting edge papers are presented and discussed. Therefore, the 2013 conference will be both a commemoration of the Society’s first fifty years and also a platform toward the next fifty and beyond.

The conference will be held at the Hotel Monteleone, 214 Royal Street, in the heart of the French Quarter. The conference room rate is $189, which is good until February 3, 2013, or until the room block is reached. Conference registration will start on the afternoon of Thursday, March 7, and sessions will run from 8:00 a.m. Friday, March 8, to noon Sunday, March 10, 2013. Registration fees will be approximately $210 for members staying at the Monteleone at least two nights. We will have a number of publishers attending as book exhibitors, including Springer, Emerald, Cambridge University Press, Edward Elgar, and Liberty Fund. In addition, we will also be discussing with members a new and expanded organizational structure for the Society. An open-bar reception will anchor and facilitate socializing on Friday night. And two common luncheons will give the opportunity for informal discussions.

So come have a good time, catch up with old friends, and discover new lines of research at the 50th Anniversary Conference of The Public Choice Society. We especially encourage you to share this with your graduate students, who will benefit from an invigorating atmosphere and good discussion of their papers at the 2013 conference.

Coming this fall, we will open the Society’s new, user-friendly website for paper submissions. Look for complete details in a second call for papers to follow soon before then. In the meantime, we encourage you to consider organizing complete sessions and submitting your proposals to the President via email.

On behalf of the Executive Committee, I look forward to seeing you in New Orleans next March, and I thank you for participating in The Public Choice Society.

Sincerely yours,

Edward J. Lopez
President, 2012-2014

Posted by Edward J. Lopez at 10:27 AM in Economics

Economics of Cronyism

That's the topic of a timely and timeless new paper by David Henderson. I'm pleased that David will be speaking at Berry this fall.

Posted by E. Frank Stephenson at 09:48 AM

July 27, 2012
"You didn't build that" - Stop digging, Democrats

Kim Strassel has a solid column at the WSJ on the continuing problems the President's "you didn't build your business" speech is causing his campaign.

First, a few quotes from Kim:

"You didn't build that" is swelling to such heights that it has the president somewhere unprecedented: on defense. Mr. Obama has felt compelled—for the first time in this campaign—to cut an ad in which he directly responds to the criticisms of his now-infamous speech, complaining his opponents took his words "out of context."

That ad follows two separate ones from his campaign attempting damage control. His campaign appearances are now about backpedaling and proclaiming his love for small business. And the Democratic National Committee produced its own panicked memo, which vowed to 'turn the page' on Mr. Romney's 'out of context . . . BS'—thereby acknowledging that Chicago has lost control of the message.

"The Obama campaign has elevated poll-testing and focus-grouping to near-clinical heights, and the results drive the president's every action: his policies, his campaign venues, his targeted demographics, his messaging. That Mr. Obama felt required—teeth-gritted—to address the "you didn't build that" meme means his vaunted focus groups are sounding alarms.

Republicans are doing their own voter surveys, and they note that Mr. Obama's problem is that his words cause an emotional response, and that they disturb voters in nearly every demographic.

I've enjoyed the Democratic response to this. First it was "context." Then it was "ignore broad context. Focus on that one sentence: 'that' clearly means 'roads and bridges.'" (we might call this the "Obama is no more ungrammatical than Bush who was stupid and ignorant" defense). Then it was back to "context," because if you say something was taken out of context, people who haven't seen the context might be inclined to think that must be true, because why else would someone say something so stupid as "If you've got a business, you didn't build that. Somebody else made that happen"?

The argument in Obama's latest ad is "I was saying we need to get behind small business," which of course is clearly not what he was saying. Watch the speech here, and the ad here. Liberal apologists don't make that preposterous claim, but instead say that Obama was just stating the obvious (as the center point of his speech, apparently) that we all benefit from society. Of course, the problem is not that - everyone knows that and that would be unexceptional. Indeed, that's at the core of the libertarian message that government must not substitute itself for civil society. If that were it, the left wouldn't have been buzzing about this "you didn't build that" theme ever since Liz Warren tested it out in Massachusetts a few months ago. Why the left thought this was such a great riff is because of the purpose for which they would use that otherwise banal observation - to downplay the role of individual initiative and ability, to try to single out a group for higher taxes, to promote bigger government as the primary source of societal advancement, and to insinuate that their political opponents are opposed to - well, opposed to building roads and bridges and maintaining fire departments, even while falsely suggesting that these are big responsibilities of the federal government (as opposed to state and local government).

The increasingly ridiculous Ezra Klein was out on MSNBC the other night playing a speech from Romney opening the 2002 Olympics, in which he says:

"You Olympians, however, know you didn't get here solely on your own power. For most of you, loving parents, sisters or brothers, encouraged your hopes, coaches guided, communities built venues in order to organize competitions. All Olympians stand on the shoulders of those who lifted them. We’ve already cheered the Olympians, let’s also cheer the parents, coaches, and communities. All right!”

This well illustrates exactly the difference between Obama and Romney. In the U.S. we have a time honored tradition when someone is recognized for his achievements, whether an Oscar, a Pulitzer, and Nobel, or as local Kiwanis Club Man of the Year: The recipient is introduced with praise for his work, and then the recipient starts his speech by saying, "I want to thank all the people who have helped me ..." then naming many. Even young men being awarded Eagle Scout know the drill. Romney is making that speech on behalf of the Olympians, who don't all get to speak at the ceremony because there are simply too many of them. Unlike Obama, he doesn't denigrate them and their hard work, dedication, or physical ability (he doesn't, for example, say - as Obama did about being smart - "there's lots of athletic people out there."). Romney's speech is the graciousness of the recognized: "Thank you all who helped me." Obama's is the meanness of the heckler: "Hey, you're to so great, pal." And of course Romney centers his praise around civil society - family members, coaches, small town communities - not big government. He praises these supporters - he doesn't use society to petulantly demand more of the athletes.

This would be Obama's speech, translated to the Olympians:

Look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so physically fit. There are a lot of physically fit people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there.

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’re an olympian — you didn’t do that. Somebody else made that happen. Body hugging nylon snow suits didn't get invented on its own. Government research created that so that you athletes could gain recognition here at the Olympics.

Or something like that.

As the President's hard core supporters go to the mat to defend their man, they do him no favors, because they are isolating themselves from the bulk of the people. Most people quite easily see the difference between Obama's approach and the time-honored American tradition of celebrating achievement by sharing it, through recognition and thanking other individuals who have helped us. By insisting that their is no difference, Obama and his defenders emphasize the extent to which they view individual achievement, and society, differently than most Americans.

Posted by Brad Smith at 08:35 AM in Politics

July 25, 2012
While Obama keeps trying to get the poop off his shoes, Mitt finds his raison de etre

Watch this new Obama ad: http://www.youtube.com/watch?v=Z0yK5NakN2o. Now compare it to what Obama actually said:

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.

So we say to ourselves, ever since the founding of this country, you know what, there are some things we do better together. That’s how we funded the G.I. Bill. That’s how we created the middle class. That’s how we built the Golden Gate Bridge or the Hoover Dam. That’s how we invented the Internet. That’s how we sent a man to the moon. We rise or fall together as one nation and as one people.

In the speech, Obama's message is, I think, pretty clear: "you owe us, and we're going to take from you once we banish these tea parties crackers in the fall." In the ad now disavowing the speech, Obama claims he was saying "we owe small business."

That Obama feels a need to make this ad demonstrates, I think, how much these comments have hurt him. I think that they've hurt him because 1) people already suspect that Obama is a big government guy who doesn't appreciate the private sector; and 2) the remarks are so, at their heart, nasty - vaguely accusatory, misleading, manipulative, and using a longstanding American tradition of recognizing our communal links (mainly the voluntary links of private, civil society) as a justification for singling out one group of people for higher taxes.

The Obama people don't quite know how to respond. First they said the most repeated sentences ("If you’ve got a business — you didn’t build that. Somebody else made that happen.") were taken out of context, but others (myself included), noted that the context really made them worse- the full context makes clear his disdain for private initiative and his apparent belief that government is the source of progress.

Then the mantra became "no, don't focus on context, focus on that one sentence. Clearly 'that' meant 'roads and bridges.'" Now they are back to arguing "context," because the isolated sentences are so explicitly damning there's no fooling anyone - better to go with context, which at least spreads some fog (though not wealth) around.

These recent comments really seem to have fired Romney up. Romney is no libertarian - he's a traditional, 1960s style American business man. He runs a successful business and generally believes in "capitalism" "free enterprise" and "the American Way" without being dogmatic or giving much thought to Hayek, Mises, and Friedman. He does things to make his community better, and when he can he takes action to help others, as Gerhaghty makes clear. He doesn't brag a lot about what he does. He's almost a Jimmy Stewart type, just getting' it done. Until now, in many ways he has seemed a fellow running for president because, well, because successful people give back to their communities, and volunteer their talents to those communities. He wanted to be president because it was a way to use his talents to help others.

But Obama's latest comments seem to strike at the core of Romney as a person. They attack his father's accomplishments in business as well as his own. He sees in them a clear attack on the "American Way," on "Free Enterprise." He hasn't become a libertarian, and many libertarians will still excoriate him for that. But within the broad context in which most Americans define the boundaries between government and the private sector, and still see the private sector as the expected norm and government action as the exception that exists to assure individual freedom and initiative can flourish, he seems to have suddenly grasped exactly why it is that Obama is a threat to his vision of America. The man is motivated and on fire.

The choice is becoming clearer.

Posted by Brad Smith at 11:03 AM in Politics

July 22, 2012
GW and OH Bailout

Gretchen Morgenson reviews "Bailout," written by Neil Barofsky. "Bailout" details his travails as an inspector general appointed to police TARP. Barofsky was apparently surprised, it appears, to encounter regulatory capture: "Government officials, he says, eagerly served Wall Street interests at the public’s expense, and regulators were captured by the very industry they were supposed to be regulating. He says he was warned about being too aggressive in his work, lest he jeopardize his future career."

So what lesson does he learn?

“We need to re-educate our regulators that it’s O.K. to be adversarial, that it’s not going to hurt your career advancement to be more skeptical and more challenging,” he said. “It’s implicit in so much of the regulatory structure that if you don’t make too many waves there will be a job for you elsewhere. So we have to limit those job opportunities and develop a more professional path for regulators as a career. That way, they won’t always have that siren call of Wall Street.”

Yeah, right. And when that fails, then what? Get angry:

Meaningful changes to our broken system may finally come about, he writes, if enough people get angry. His conclusion is this: “Only with this appropriate and justified rage can we sow the seeds for the types of reform that will one day break our system free from the corrupting grasp of the megabanks.”

Mortenson's take on all of this is at least half right. She concludes,"That’s not much of a silver lining. But I guess it’s better than none." The first half is right.

Posted by Wilson Mixon at 03:26 PM in Economics

July 20, 2012
Prof. Krugman's neighborhood

Virginia Postrel on land-use restrictions and inequality:

[T]here are two competing models of successful American cities. One encourages a growing population, fosters a middle-class, family-centered lifestyle, and liberally permits new housing. It used to be the norm nationally, and it still predominates in the South and Southwest. The other favors long-term residents, attracts highly productive, work-driven people, focuses on aesthetic amenities, and makes it difficult to build. It prevails on the West Coast, in the Northeast and in picturesque cities such as Boulder, Colorado and Santa Fe, New Mexico. The first model spurs income convergence, the second spurs economic segregation. Both create cities that people find desirable to live in, but they attract different sorts of residents.

Postrel cites and summarizes the research of Shoag and Ganong, including their thoughts on what motivates the changes. She adds one more suggestion:

Finally, there’s the never-mentioned possibility: that the best-educated, most-affluent, most politically influential Americans like this result. They may wring their hands over inequality, but in everyday life they see segregation as a feature, not a bug. It keeps out fat people with bad taste. Paul Krugman may wax nostalgic about a childhood spent in the suburbs where plumbers and middle managers lived side by side. But I doubt that many of his fervent fans would really want to live there. If so, they might try Texas.
Posted by Wilson Mixon at 10:34 AM in Economics

July 18, 2012
Obama's cramped vision of society

Following a bit on yesterday's post about Obama's "You didn't build that speech," it occurred to me that a key factor that is so irritating about Obama's speech - and many other comments he has made over the years - is his insistence that government is the source of our greatness and his inability to see the value of civil society.

A friend of mine keeps arguing at me that Obama is just stating the old theme, "no man is an island." OK, fine, I'm not sure why such banality needed to be the central topic of a full speech, but sure, OK, no man is an island.

But what does Obama think keeps us from being an island? Government. Look at all of his examples: a teacher, paid for by government (he doesn't seem to have any interest in private education); a firefighter, paid for by government (he never talks about volunteer fire departments); roads and bridges built by government; government support for scientific research (but no mention of private R&D).

Of course no man is an island, but except for the most hard core anarchy-capitalists, even most libertarians accept some need for government to establish a rule of law (including courts and some police presence), national defense, and a few other "public goods." But more importantly, everybody recognizes the importance of civil society and those who help us along, and most of the time it is not government. Almost every small business owner and successful professional will remember and be grateful to those who helped out along the way: the established professional - your competitor - who nonetheless gave you tips for your business to succeed (and therefore be in competition with his); the vendor who gave a cash-strapped start-up an extra month to pay; the venture capitalist or bank officer who took a risk because he believed in your personal qualities; the pastor or speaker who inspired; the customer who offered tips on improving service; the grizzled vet who simply served as a role model; the friends who bucked you up when things looked bad, and so on and on.

As is so often the case, many of these people were not working from pure altruism, but simply for profit or perhaps for some mixture of the two. Adam Smith's invisible hand is broad indeed. The experienced lawyer who helps the rookie may feel good about doing so, but he also has the self interest of knowing that he may need a favor some day; that a reputation as a good person is good for business; that the young man he helps out today may send him a million dollar case down the road. The established vendor may feel good about giving you more time to pay, about helping you out, but he also wants a good, long-term, prosperous customer.

Obama seems incapable of envisioning people working together or helping each other out other than through government. Hand in hand with that, Obama seems incapable of envisioning government - at least excessive government - hindering rather than helping. He seems incapable of recognizing the cost of a higher tax burden on the small business owner routinely working - as in my experience most do- 60 to 70 hours per week. It seems beyond him to consider that government regulation might make it harder to start or build a business.

Further, even if we accept all that Obama says, about how individual success depends on government, as David French points out, by the most liberal interpretation possible, all the stuff Obama points to amounts to no more than 30% of federal spending (in fact, it is really much less). Do we really need higher taxes and bigger government to handle that 30%?

Of course, as government grows, it actually displaces true, voluntary association and mutual aid. Americans give far more to charity than people in developed nations with a larger state sector; and moreover, surveys have long shown that Americans happier, more optimistic, and more apt to feel in control of their lives. It is important that government not crowd out the private sector or take over functions that we can perform as individuals. The Small Business Administration can never truly replace the service club as a source of advice and support. Teachers - and I'm one, so I like teachers - will never be as important as parents and family, neighbors, pastors, informal mentors, colleagues and community.

Finally, Obama seems unable to recognize that ultimately, it is what you do with the help you get from civil society that matters. There is a reason that most of us have government provided fire protection, but most of us don't build an Apple or a Microsoft. There is a reason most of us have teachers, but most of us don't make the automobile accessible to the common man. There is a reason we all have roads, but few of us develop ways to bring fresh produce to market and keep it fresh so that people can have produce of all types all year round. We do have different levels of ability, and also different levels of drive, ambition, vision, and willingness to make sacrifices.

It has often been noted by economists that the fortunes amassed by people such as Bill Gates and Henry Ford are peanuts compared to the benefits gained by society from their products. But Obama's message is not to celebrate achievement, but to denigrate it. Having no real first term record of achievement to run on, and still believing that government must grow bigger, Obama seeks to minimize the role of individual success. The message behind the words is this: those of you who are most successful actually owe the rest of us. It is only justice for us to redistribute your property to others. That's a very bad message.

Posted by Brad Smith at 11:10 AM in Politics

July 17, 2012
Obama reveals self in comments about small business

Permit me, today, a bit of armchair psychoanalysis about our president, and the controversy he set off this week with his comments about entrepreneurial success.

If you missed it, here's what Obama told an audience in Roanoke:

There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there. (Applause.)

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.

National Review's Rich Lowry has a good takedown at National Review, to which I'd like to add a few thoughts.

It's not surprising that Obama thinks this way. He's an arrogant man who thinks he's owed a great deal, and entitled to run the lives of others. Yet he must be frightened deep down to realize how little he's actually accomplished in life. He's held offices, but there are no accomplishments that come out of them. He was a community organizer? So? What did he actually accomplish? He was editor in chief of the Harvard Law Review, but how did he improve it? He was a part time instructor at University of Chicago Law, and offered a tenure track slot but he turned it down. Quite likely he just wanted the added power of politics. But somewhere, deep down, he must have realized that he had never then, and to this day still hasn't, written anything that would get him promotion to Associate Professor at Capital Law, where I teach, let alone get him tenured at Chicago. He was a state Senator - does he have any meaningful legislative accomplishment you've ever heard of? He was a U.S. Senator - same question, same answer. Now, as President, he's gotten legislation through, but mainly by turning it all over to Nancy Pelosi. And, worse, it hasn't really worked. At best he's left to say, effectively, "without me, it would have been worse." But he's smart enough to know that that is a hollow and unprovable assertion.

Contrast this with, say, Thomas Jefferson, a man who was a state legislator, congressional delegate, Governor, Secretary of State, Vice President, and President. Oh, he held offices. None of them are listed on his tombstone, at his request, because he didn't think holding office was important. It was doing things. So his tombstone notes that he founded the University of Virginia, wrote the Declaration of Independence, and wrote the Virginia statutes on religious liberty. Or Ben Franklin. Everyone knows him for his experiments with electricity, for inventing the rocking chair and hundreds of other gadgets, for his wit and wisdom. Most Americans would be hard pressed to say what public offices he ever held, though he held many. Obama has held offices. Nothing more.

So when Obama says "I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there," isn't he talking about himself? He's smart, no doubt, at least in a way. But he's built nothing. No accomplishments. At each phase of his life, others have pushed him forward simply on potential. And he knows that there are lots of smart people - many much smarter than him.

So Obama goes on, putting words in the mouth of his fictional entrepreneur, "'It must be because I worked harder than everybody else.' Let me tell you something -- there are a whole bunch of hardworking people out there," Obama must know that he's never really worked that hard. Of all the great adjectives people throw out about Obama, have you ever heard "hard worker"? So Obama knows deep down that he's smart, but also that he hasn't really done much with his smarts - rather, others have promoted him on that basis. And Obama knows that he's not really worked very hard, yet has eclipsed in wealth and fame most people who work much harder.* Why wouldn't he think, deep down, that he's not really entitled to his success? And why wouldn't he rationalize that perhaps no one else is, either?

*And note that this applies to Michelle, too, given a high paying, apparently do-nothing job because she was married to a rising political star. It sums up Obama's home deal with Tony Rezko, whose purchase of an adjacent lot from the same owner on the same day for full asking price may have helped Obama get his home for $300,000 below asking price.

Posted by Brad Smith at 08:57 AM in Politics

July 14, 2012
Uniforms, teen wellness, and endowment

Where is Diane Sawyer when we really need her? Surely some American condom maker can supply this much-needed component of a teen wellness kit as cheaply an Indian firm.

Worst lead sentence of the week: "Anthony Weiner is still one of the most well-endowed politicians in the city." It introduces this story about $4.5 million that Weiner still controls.

Posted by Wilson Mixon at 11:09 AM in Funny Stuff

July 12, 2012
Outsourcing's bad rap

Question posed by Michael Kinsley: Who said this — "I don't want the next generation of manufacturing jobs taking root in countries like China or Germany" —Romney or Obama?

Unfortunately, the answer could be either.

Posted by Wilson Mixon at 10:32 AM in Economics

July 11, 2012
Markets in Everything: Cuddling

With a nine-month-old (and three-year-old) at home, with his one or two times per night wakeups, I don't have a heck of a lot of trouble sleeping these days. But, in case you do, why not hire a cuddler?

$60 per hour for a snuggling session, but the pricing list only goes up to a 90-minute session so all-nighters may be out of the question.

I would imagine a more extensive price list would arise eventually, with a sliding scale based on the cuddlees attractiveness (body odor, snoring, etc.) or time of day (after-hours snuggles are more expensive).

If you fancy yourself a good cuddler too, the best part is that the industry is apparently unlicensed, so you can entrepreneurially cuddle yourself into big bucks!

P.S. I'm not sure how to interpret this, but she's apparently a college graduate. Not sure if they offer cuddling as a major.

Posted by Tim Shaughnessy at 02:11 PM in Economics

July 05, 2012
Incentives Matter: GEDs and Dropouts Edition

The abstract from a new paper by James Heckman et al. in the Journal of Labor Economics:

The option to obtain a General Educational Development (GED) certificate changes the incentives facing high school students. This article evaluates the effect of three different GED policy innovations on high school graduation rates. A 6-point decrease in the GED pass rate produced a 1.3-point decline in high school dropout rates. The introduction of a GED certification program in high schools in Oregon produced a 4% decrease in high school graduation rates. Introduction of GED certificates for civilians in California increased the dropout rate by 3 points. The GED program induces students to drop out of high school.
Posted by E. Frank Stephenson at 03:30 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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