Division of Labour: August 2012 Archives
August 31, 2012
Do Charter Schools Crowd Out Private Schools?
Apparently so. The result could be more government spending on education as well as fewer private school options, particularly Catholic schools.
Posted by E. Frank Stephenson at 01:35 PM
August 28, 2012
No Such Thing as Free Health Care
From the Rome News-Tribune (emphasis added):
HAVANA (AP) — Cuba's system of free medical care, long considered a birthright by its citizens and trumpeted as one of the communist government's great successes, is not immune to cutbacks under Raul Castro's drive for efficiency.
Posted by E. Frank Stephenson at 02:10 PM
Carden Award Speech
As the 2012 winner of Berry's Carden Award, I had the *opportunity* to give a speech at the College's opening convocation. My short talk, The Noble Origin of Dismal Science, is pasted below the fold. It is based, in part, on the Levy & Peart work on how the dismal science got its name.
Special thanks to my colleagues and/or students who nominated me.
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The Noble Origin of “Dismal Science”
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Posted by E. Frank Stephenson at 02:05 PM
August 27, 2012
Deadweight Loss Ahoy!
The summer’s blitz has brought a sharp fall in business in Italian marinas. According to Roberto Fusco, chairman of Marina di Punta Ala, 20% of the boats have not been used this year and sales of fuel have fallen by 40%. The economic crisis has played a part but frequent checks, in port and at sea, have also deterred owners from manning their yachts. Some carry annual tax returns to show nosy policemen that their declared income is enough to justify ownership of a boat. Others at Punta Ala park their SUVs away from the marina and arrive on battered scooters.
Posted by E. Frank Stephenson at 10:12 AM
August 25, 2012
More of Those Chicago Values ...
I'll probably let this be the last of the Chicago values posts unless I see something particularly good (e.g., something involving the mayor himself).
Posted by E. Frank Stephenson at 10:11 AM
Cartoon of the Day
A friend sent this along--it's a few years old but unfortunately it remains just as relevant today.
Posted by E. Frank Stephenson at 10:08 AM
August 22, 2012
No Such Thing As a Free Lunch--Health Insurance Mandates Edition
Part of the abstract of a recent NBER Working Paper:
We model the labor market impact of the three key provisions of the recent Massachusetts and national “mandate-based" health reforms: individual and employer mandates and expansions in publicly-subsidized coverage. Using our model, we characterize the compensating differential for employer-sponsored health insurance (ESHI) -- the causal change in wages associated with gaining ESHI. Relying on the reform implemented in Massachusetts in 2006, we estimate the empirical analog of our model. We find that jobs with ESHI pay wages that are lower by an average of $6,058 annually, indicating that the compensating differential for ESHI is only slightly smaller in magnitude than the average cost of ESHI to employers.
Wages decreasing in response to health insurance mandates might explain why bankruptcy increased in Massachusetts following the passage of Romneycare.
Posted by E. Frank Stephenson at 02:23 PM
August 21, 2012
Posted by E. Frank Stephenson at 01:07 PM
Up Next, Bra Control?
Maybe Victoria's Secret will play the role of the NRA.
UPDATE: August 26 Is National Go Topless Day--I wonder if there will be a spike in the murder rate ...
Posted by E. Frank Stephenson at 09:14 AM
August 20, 2012
The Health Effects of Plastic Grocery Bags
Posted by E. Frank Stephenson at 01:34 PM
The Curious Task of Economics ... : Class Size Reduction Edition
Florida spent some $20 billion on a mandate to reduce class sizes in its schools. The payoff? Not much--here's the abstract of a new paper in Economics of Education Review:
Class-size reduction (CSR) mandates presuppose that resources provided to reduce class size will have a larger impact on student outcomes than resources that districts can spend as they see fit. I estimate the impact of Florida's statewide CSR policy by comparing the deviations from prior achievement trends in districts that were required to reduce class size to deviations from prior trends in districts that received equivalent resources but were not required to reduce class size. I use the same comparative interrupted time series design to compare schools that were differentially affected by the policy (in terms of whether they had to reduce class size) but that did not receive equal additional resources. The results from both the district- and school-level analyses indicate that mandated CSR in Florida had little, if any, effect on student achievement.
Posted by E. Frank Stephenson at 12:13 PM
August 17, 2012
More "Chicago Values" Mr. Mayor?
Posted by E. Frank Stephenson at 03:27 PM
What to Make of This Factoid
Apparently the U.S. has more professional tax preparers than police and firefighters combined.
Maybe it indicates an advanced state of division of labor and specialization--we have some folks who specialize in preparing taxes just as we have farmers specialize in growing food.
Maybe--regarding police not firefighters--it means that there is at least some restraint on the number of people we pay to throw other people in jail.
Or maybe it's yet another sign that the tax code is a disgrace. I think I'll go with this one.
Posted by E. Frank Stephenson at 08:52 AM
Mercantilists of the World Unite!
What do you get when you combine our favorite Chinese copier pitchman with a peddler of beggar thyself fallacies about trade with China?
A movie! Variety reports that Peter Navarro has produced and directed a film called "Death by China" and that Peter Morici makes an appearance in the film. Wonder if Morici is angling for a star on the Hollywood Walk of Fame.
Posted by E. Frank Stephenson at 08:38 AM
"Public Servant" Update
Posted by E. Frank Stephenson at 08:19 AM
August 16, 2012
Something to keep in mind during your faculty retreat/meeting, etc.
Yes, it's that time of year once again. Today's inspirational text is from James Buchanan, Better than Plowing 3-4 (1992):
". . . I worked throughout the war at Pearl Harbor and at Guam, at fleet headquarters control deep in the bowels of the earth. I enjoyed the military, the colleagues, the work, and the setting; and I was good at the job. For the first and only time in my life, I worked closely with men who were important in shaping the lives and destinies of many others. I saw these military leaders as ordinary mortals, trying to do their job within the constraints they faced, and burdened with their own prejudices like everyone else. This experience has helped me throughout my academic career; I have been able to relegate to the third order of smalls the sometime petty quarrels that seem to motivate professors everywhere, in their roles both as instructors and as research scholars."
August 15, 2012
Stocking Up for Climate Change Deniers and Ponzi Schemers?
Posted by E. Frank Stephenson at 02:43 PM
The Greedy Hand: Pet Edition
As for living pets, Italy considered, but has abandoned (at least for now) a tax on pets. I guess it's better to tax the critters than to eat them or drive them around on top of the car.
Posted by E. Frank Stephenson at 11:50 AM
Regulations have unintended consequences as people try to figure ways around them or figure out how to game them for their benefit. A great example is this NYT article on how payments to reduce greenhouse gases have actually spurred production in these gases (HT--Alex at MR).
So the next step is to ramp up regs to try to reduce the unintended consequences. And right on cue we have an example--new regs require stations selling E15 gas (gas diluted with 15% ethanol) and E10 gas must require customers to purchase a minimum of four gallons because the E15 is harmful for lawn mowers and the like. Maybe it'd be simpler not to mandate ethanol in gas in the first place.
And for everything you want to know about regulation (maybe more), here's a primer on regulation from Susan Dudley and Jerry Brito.
Posted by E. Frank Stephenson at 11:17 AM
George Leef on For-Profit Colleges
I think George has it right--the problem is government student aid more than for-profit/non-profit status. Plenty of non-profit colleges are also essentially nothing more than student aid vacuums even if their daily practices are not as overtly akin to sleazy salesmen as some of the activities of the for-profits.
Posted by E. Frank Stephenson at 11:04 AM
August 14, 2012
Hey Sarkozy--How's That Happiness Adjusted GDP Working Out?
M. Sarkozy has departed but it seems the French are still trying to boost their happiness adjusted GDP. Here's a headline from the BBC:
Backstory on the snark about Sarkozy and happiness adjusted GDP is here.
Posted by E. Frank Stephenson at 09:43 AM
Good News on the Home Front
I was happy to see the story in yesterday's WSJ about a paper mill re-opening in Franklin VA. I grew up near there; my dad worked at the mill for a year or two in the 1950s before going to college. The mill's closure hurt an already fairly poor area. Of course, I'm glad to see the mill re-open because market conditions justify its operation (it will make fluff pulp which is used in diapers) rather than a bailout a la GM.
Posted by E. Frank Stephenson at 09:14 AM
The Greedy Hand--Inflation Tax Edition
Yesterday's WSJ had an article on several African countries that now require use of the local currency rather than the U.S. dollar. A snip:
African countries are trying to shoo the U.S. dollar away, even if it means threatening to throw people who use greenbacks in jail.
Thinly traded currencies, blah, blah, blah. My guess is this move is about seignorage, though the article overlooks this point except for a brief bit toward the end about "Ghana's nearly double-digit inflation."
Posted by E. Frank Stephenson at 09:05 AM
August 13, 2012
Another Victory for Economic Liberty
The folks at IJ have nailed another scalp to their wall--this time it is Utah's application of cosmetology licensing rules to hair braiders. From the IJ press release on the decision:
The Honorable David Sam of U.S District Court for the District of Utah held, consistent with decades of U.S. Supreme Court precedent, that “The right to work for a living in the common occupations of the community is of the very essence of the personal freedom and opportunity that the Constitution was designed to protect.”
Posted by E. Frank Stephenson at 08:41 AM
More on the London Olympics
With the London Olympics set to wrap up Sunday, analysts said Britain's recession-hit economy was unlikely to have won a major boost from the Games that have been a triumph for the nation's athletes.
Source. Sports economists can feel free to mutter "I told you so." (Thanks to LH for bringing the article to my attention.
Posted by E. Frank Stephenson at 08:28 AM
August 11, 2012
Olympic Crowd Out
London's sports venues, with a few exceptions, have been packed during the 2012 Olympic Games.
This illustrates one of the pitfalls of the economic impact analyses that boosters throw around in support of sporting events or venues. The analyses often do not account for the crowding out of locals, that is for economic activity that would take place even if an event such as the Olympics does not come to the host city.
August 10, 2012
The chart below is from a new Senate Budget Committee Report. A couple of notes: (1) Social Security, Medicare, and various tax credits (most notably the EITC) are not included thereby understating the people receiving government checks. (2) The report apparently counts everyone in a household as a recipient; depending on the circumstances of the household this may lead the chart to overstate the number of folks receiving government checks.
With so many folks on some sort of dole, it is easy to see why Elizabeth Warren (actually, her daughter) is apparently trying to turnout welfare voters. There are an awful lot of folks who can vote themselves a raise.
Posted by E. Frank Stephenson at 03:02 PM
The abstract of a new paper in the Journal of Development of Economics:
We estimate the wage premium associated with having a cadre parent in China using a recent survey of college graduates carried out by the authors. The wage premium of having a cadre parent is 15%, and this premium cannot be explained by other observables such as college entrance exam scores, quality of colleges and majors, a full set of college human capital attributes, and job characteristics. These results suggest that the remaining premium could be the true wage premium of having a cadre parent.
Posted by E. Frank Stephenson at 10:10 AM
August 09, 2012
Is Harry Reid a Liar?
Is Harry Reid a liar? Well, I'm not saying so, but as Senator Reid might say, "it's out there."
Senate Majority Leader Harry Reid (D. Nev.) is catching a lot of well-deserved flack these days for his shameless, unsupported (that seems like too kind a word - perhaps "apparently made up out of thin air" would be more realistic) accusations about Mitt Romney's taxes, but in some ways, that is the least of Harry's offenses. After all, there are lots of shills out there who can flack nasty, unsupported (that seems like too kind a word - perhaps "apparently made up out of thin air" would be more realistic) accusations at Mitt Romney. But there is only one Senate Majority Leader, who has now refused, for over three years, to even allow the Senate to consider a budget, let alone pass one as required by law.
And because Harry Reid is arguably the nation's most important single legislator, his role as a legislator and his statements on legislation are of even greater consequence than his unsupported (that seems like too kind a word - perhaps "apparently made up out of thin air" would be more realistic) attacks on Romney.
So today I want to highlight Reid's misleading (well, "false" is a better word) comments about the "Affordable Care Act," aka "Obamacare." A recent study by the Congressional Budget Office concludes that repealing Obamacare would increase the deficit by a total of approximately $109 billion over the next 10 years. So, says Reid, "This confirms what we've been saying all along: the Affordable Care Act saves lots of money."
In reality, it does nothing of the kind. The CBO is an estimate of the effect of repeal on the deficit, not on "saving money." The CBO figures that Obamacare will cut Medicare spending by roughly $500 billion to help pay for Obamacare, and will increase taxes by another $500 billion or so, and that Obamacare will only cost about $900 billion, so, voila, repeal would increase the deficit. But a quick look at those numbers by any third grader tells us that it doesn't "save money." Rather, assuming all the cuts in Medicare spending actually take place, it still increases net spending by roughly $400 billion dollars, but results in a lower deficit because it raises taxes by roughly $500 billion dollars.
So, raise spending by $400 billion, raise taxes by $500 billion, and Harry Reid calls this the government "saving lots of money." Well, hey, let's "save" even more, by raising spending by $4 trillion and taxes by $5 trillion. (Actually, I guess that is pretty much the Obama plan, on paper).
Of course, note that even this idea of "deficit reduction" through higher spending only makes sense because the CBO was required to assume various optimistic projections of cost savings in the legislation, and because the tax increases kick in before the spending increases. If we would go out beyond 10 years, therefore, we would quickly find an increasing deficit because of Obamacare.
And all of that is assuming that spending on Obamacare stays within target. In 1967, the House Ways and Means Committee estimated that Medicare would cost $12 billion by 1990. In reality, it cost $120 billion by 1990 - the government estimate was off by a factor of 10. Over and over, Congress has underestimated the cost of new health care entitlements by 100% or more.
In short, let's ignore Reid's irresponsible statements about Mitt Romney, and focus on his irresponsible statements about the cost of the Affordable Care Act, and his irresponsible failure to get his Chamber to even consider a federal budget.
August 08, 2012
Being Free Market Is Not The Same As Being Pro-Business
Steve Horwitz explains.
Posted by E. Frank Stephenson at 02:56 PM
August 07, 2012
About Those "Chicago Values" Mr. Mayor
Chicago Mayor Rahm Emanuel recently proclaimed “Chick-Fil-A values are not Chicago values." Well, let's take a peek at some of those "Chicago values."
Chicago had more than 250 murders in the first six months of this year. This prominent Chicagoan sits in federal prison for corruption. This prominent Chicagoan is noted for his anti-Semitic rants. This prominent Chicagoan is a terrorist. This prominent Chicago father and son have cheated on their wives.
It's perfectly fine to disagree with Dan Cathy's views on marriage (but not to threaten to withhold business licenses based on those views), but thank goodness he does not share some of these "Chicago values."
Posted by E. Frank Stephenson at 11:14 AM
August 03, 2012
A Zombie Automaker?
Older readers might remember the S&L crisis of the 1980s. One of the features of this episode was regulatory forbearance that allowed many insolvent S&Ls to continue operating. Regulatory forbearance led many insolvent institutions would undertake highly risky projects ("hail marys") in hope that they would pay off and return the S&L to solvency.
The chart below (from IBD) makes me wonder if GM is behaving like a zombie S&L--extending credit to riskier customers in a desperate attempt to prop itself up (at least until after the election).
Posted by E. Frank Stephenson at 02:31 PM
The White House is really getting specific when it comes to the unemployment rate.
Source. This just reeks of desperation even though both intrade and the Iowa market have Obama'odds of winning about 15 percentage points greater than Romney's.
As for the real unemployment rate--a broader measure that includes people who are working fewer hours than they would like continues to hover around 15%. With nearly one out of six people in some sense underemployed, Krueger's quibbling over rounding invites political ridicule.
Posted by E. Frank Stephenson at 02:17 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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