Division of Labour: January 2013 Archives
January 29, 2013
An easy fact to find, less easy to understand

If you're like me, you've gnashed more than a few teeth trying to get data from the Census Bureau's redesigned American Fact Finder. The old version was such a piece of cake to use; now I want to find the % African-American and the % Hispanic in each state for the past few decades, and I think it would be quicker to turn lead into gold.

A data-savvy friend pointed me to a story describing the cost of redoing the AFF:

How much did the government spend -- and to whom did the money go -- building the American FactFinder tool on the U.S. Census Bureau's website? ... The answer? $33.3 million, which went to IBM.

I guess since I get 3,000 different tables when I ask for race by state, on a per-table basis that's not a bad deal.

Posted by Tim Shaughnessy at 03:32 PM in Economics

January 28, 2013
Wrong, Wrong, and Wrong Again

A Mr. Jonathon Welch has a letter in the Buffalo News that cries out for a fisking so here goes:

"... there is a broad consensus among honest and respected economists that a higher minimum wage, one that more realistically reflects the cost of living, will strengthen the economy, particularly the local economy, by increasing consumer demand."

Here's Greg Mankiw's take on a survey of AEA members: "One issue that fails to generate consensus is the minimum wage: 37.7 percent want it increased, while 46.8 percent want it eliminated." Not much of a consensus there--perhaps Mr. Welch thinks the 62.3% of economists who did not favor increasing the minimum wage are either dishonest or not respected.

Then there's the bit about an increasing minimum wage increasing consumer demand--he must think that employers who don't have to pay another, say, dollar per hour burn the dollars they save rather than spending them themselves.

So now to another part of the letter:

"Contrary to the popular perception that small businesses favor a low minimum wage, many small business owners support raising the minimum wage because we understand that lower employee turnover decreases the costs of constantly training new workers, ..."

Businesses that think it to their benefit to pay more than the minimum wage are certainly free to do so. In fact the vast majority of employers do--how many nurses do you think would accept jobs at the local hospital if they would only be paid the minimum wage?


Repressed minimum wages typically benefit large corporations more than small local businesses ..."

Wrong again. Wal-Mart has supported increasing the minimum wage. It has also supported the employer mandate in Obama care, support that seems designed to tilt the playing field toward Wal-Mart and away from small businesses that would have a more difficult time offering medical benefits.

For being so thoroughly incorrect, Mr. Welch's letter deserves a special place in the pantheon of economic illiteracy. Congratulations sir.

Posted by E. Frank Stephenson at 01:27 PM

Why, Yes, Police Can Deter Crime

A NYT headline:

Prison Population Can Shrink When Police Crowd Streets

Maybe tomorrow we'll see the grey lady tell us water runs downhill ...

Snark aside, see this cool paper by Klick and Tabarrok on police and crime deterrence. See also this paper.

Posted by E. Frank Stephenson at 09:33 AM

January 27, 2013
Lessons in Tax Shifting
The community-based, pediatric and academic hospitals served by Novation are reporting that many are being directly billed by at least one medical device manufacturer to cover the costs associated with the Affordable Care Act’s medical device tax. But Novation ... is taking a firm stance with suppliers who are trying to pass their medical device excise tax obligations on to hospitals.

While the administration of the Medical Device Excise Tax is complex and still evolving, it is clear that Congress did not intend to impose this tax on hospitals.

Source. I suppose they think that Congress didn't intend for motorists to pay the gas tax. The only surprise is that the manufacturers are apparently itemizing the tax as a surcharge instead of simply embedding it in the price of medical devices.

Posted by E. Frank Stephenson at 04:47 PM

An Open Letter to Charles Rangel

The lifting of the ban on women in combat has prompted Rep. Charlie Rangel to reiterate his support for "reinstatement of the military draft to ensure a more equitable representation of people making sacrifices in wars." (Thanks to Volokh and Instapundit for the pointer.) So it seems like a great time to reprint an open letter to him that a student and I penned back in 2004.

Dear Representative Rangel:

We noticed that you recently proposed that the draft be reinstated so that all races and income groups in society bear the military burden of defending our country.

Your proposal has been criticized on several fronts. Both USA Today and The Wall Street Journal questioned your underlying premise that blacks, Hispanics, and low-income whites are all present in larger percentages in the current all-voluntary military than they are in the population as a whole.

Criticism of your proposal has also come from those economists and others who recognize that the draft is essentially an “inequitable and arbitrary” tax on those individuals who are unfortunate enough to be drafted. This perspective, dating at least from Milton Friedman’s Capitalism and Freedom (the source of the above quotation), also incorporates the loss to society that arises from distorting workers’ choices between the military and civilian sectors.

Yet another attack on your proposal has come from those who consider the performance of our all volunteer military of the last quarter century to be superior to the conscription-based military we relied on prior to that time. Witness Secretary of Defense Rumsfeld’s recent remark that the draft added “no value, no advantage, really, to the United States armed services over any sustained period of time.”

While all of these criticisms have merit, we write to draw your attention to a more promising application of your shared sacrifice principle: extending the income tax to all adult members of society (except perhaps the severely disabled) so they better understand the cost of new federal programs.

Although it is certainly true that everyone does pay taxes either explicitly (e.g., the Social Security payroll tax) or implicitly (e.g., the increased price of gasoline resulting from the gas tax), the top 50% of income earners pay some 95% of income taxes. Consequently, the increasing concentration of income tax liability on high income taxpayers leads a significant and growing share of our population to regard new government programs (e.g., a prescription drug benefit for the aged) as a “free lunch.”

Enacting a nominal income tax of, say, $25 per person (and requiring that it be increased any time that anyone’s income taxes are increased), would make it clearer that the resources to fund new government programs must come from taxpayers. Such a levy would not require a significant reduction in the progressivity of the income tax or an elimination of the assorted welfare programs and social engineering schemes (i.e., “tax credits”) that are currently part of the tax code. But the increased awareness that government programs are not funded by manna from Heaven should make both your colleagues in the Congress and our fellow citizens think more carefully about the merits of proposed increases in government spending. In this respect, our proposal is entirely consistent with your idea of reinstating the draft to make politicians less inclined to use the military.

What about the increased burden on the IRS and possibility of people simply ignoring the $25 tax? We think the former would be minimal because there would be no complicated forms to process. As for the latter, we don’t envision the IRS actively prosecuting deadbeats. Instead, we’d simply link the eligibility for future government goodies (e.g., Social Security) to the payment of one’s taxes just as eligibility for benefits such as Pell Grants is linked to Selective Service registration.

Rep. Rangel, you are uniquely positioned to champion our proposal. Not only have you advocated the notion of shared sacrifice in your call for reinstating the draft, but you are also a senior member of the tax-writing House Ways and Means Committee. We hope you have enough faith in your principle to call for its consistent application to such an obvious facet of government policy.


John W. Coleman
E. Frank Stephenson

Of course a more ambitious proposal would be for all taxpayers to face the same marginal tax rate.

Posted by E. Frank Stephenson at 02:08 PM

January 26, 2013
Motel Caswell is Safe from Federal Seizure

Another win for the folks at IJ!

It's good to see some pushback against the civil forfeiture racket.

Posted by E. Frank Stephenson at 12:22 PM

More On Japan's Supposed Austerity

In a recent post, I took issue with a claim that Japan's spending under new Prime Minister Abe is a turn away from a recent policy of austerity. As the chart below from The Economist shows, Japan has tripled its budget deficit as a share of GDP over the past five years. Japan's policy is to austerity what downing a 12-pack of beer is to sobriety. (The chart also shows that Britain, another country often cited for unwisely following an austerity policy has reduced its budget deficit, but only by ~2% of GDP.)

Of course, there are folks who never let a bit of data get in the way taking a swipe at austerity. Paul Krugman says Japan is "breaking ranks" with countries who want to pursue "ever harsher austerity." Robert Reich recently tweeted: "Austerity fails: Japan still basket case." Gregory Clark adds that "Japan has long been a victim of the fiscal austerity disease now afflicting Europe ...." These folks seem to have run the definition of austerity through one of those funhouse mirrors.


Posted by E. Frank Stephenson at 12:14 PM

January 24, 2013
80 Year Old Priest Goes Mike Tyson ...

Australian Priest, 80, Bites off Fellow Clergyman’s Ear in Parking Row

Yeah, it seems like something Munger would post on KPC.

Posted by E. Frank Stephenson at 08:55 AM

The Never Ending Evils of Ethanol

Elevated Corn Prices Lead To Slashed Super Bowl Chicken Wing Supply

Then there's the hunger among poor Guatemalans that is coming from ethanol induced corn price increases.

Posted by E. Frank Stephenson at 08:44 AM

January 23, 2013
Blame Technology

Yet another story that blames technological advancement for the loss of jobs and general economic crappiness:

Most of the jobs never will return, and millions more are likely to vanish, say experts who study the labor market. What's more, these jobs aren't just being lost to China and other developing countries.

And they aren't just factory work. Increasingly, jobs are disappearing in the service sector, home to two-thirds of all workers. They're being obliterated by technology.

Year after year, the software that runs computers and an array of other machines and devices becomes more sophisticated and powerful and capable of doing more efficiently tasks humans always have done.

Just imagine if China and other developing countries starts to use technology! Talk about a double-whammy.

You'd think an editor would have caught the logical inconsistency of describing machines that are "more sophisticated and powerful and ... efficient" as a bad thing. So the solution is to use weak, inefficient, and less sophisticated things? (Actually, that's a pretty good description of me...)

Posted by Tim Shaughnessy at 04:43 PM in Economics

On Austerity in Japan

Chico Harlan in the WaPo:

Under Prime Minister Shinzo Abe, elected last month, Japan has turned away from the well-worn practices followed by economies under duress — conventions that call for austerity and debt reduction. Japan, instead, is trying to spend its way out of a recession rather than cutting back.

Mr. Harlan has a rather odd notion of austerity. The red bars in the chart below (source) show that Japan's debt to GDP ratio increased from about 80% to more than 120% from 2007-2011 (here's a longer view). Perhaps Mr. Harlan should "turn away" from the austerity bogeyman in favor of actually examining the data.

Italy Japan Net Debt to GDP.png

Posted by E. Frank Stephenson at 10:02 AM

January 22, 2013
Lefty Shrugs
Speaking after Sunday's Humana Challenge, Mickelson hinted at what could be a "drastic" change for the world of golf, and himself in particular. Thanks to his substantial earnings and his residency in California, Mickelson now falls into two sets of laws that substantially increase his taxes ... and he's not pleased.

"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent," he said. "So I've got to make some decisions on what I'm going to do."

He acknowledged that he could end up leaving his home state of California. And he further agreed that the financial issues were the reason why he pulled out of an ownership team that purchased the San Diego Padres back in August.


UPDATE: Len Berman sticks up for confiscatory taxation, telling Mickelson to:

Please stop whining and give thanks for being able to earn a fabulous living playing a game and selling golf clubs (even after tax). 99.999% of people would never have that option, no matter how hard they worked on their swing.

The key word here is EARN.

Posted by E. Frank Stephenson at 05:10 PM

High Tax Rates Make M. Sarkozy Unhappy

Sarkozy's plans 'to dodge new 75% French tax rate by moving to London

Posted by E. Frank Stephenson at 05:07 PM

January 20, 2013
"I will fly around the world doing good for the environment''

So sayeth one Leonardo DiCaprio. I wonder if he flies an emission-free plane ...

Posted by E. Frank Stephenson at 02:56 PM

The Stench of Rent-Seeking Is In The Air

Today's AJC has an article about Georgia's local governments use of lobbyists at the state legislature. A snip:

Communities large and small get involved in the Statehouse influence game. In 2011, the small north Georgia communities of Helen, Lula and Cumming hired lobbyist Mike Evans, a former state lawmaker, to pursue funding for projects benefiting pedestrians, including sidewalks and biking trails. Evans, a former member of the State Board of Transportation, now focuses mostly on transportation lobbying.

The article also mentions that "Most of that [lobbyist] spending is clustered around metro Atlanta ...," an observation consistent with the findings of Sobel and Garrett and Hall and Ross.

Posted by E. Frank Stephenson at 02:51 PM

January 18, 2013
IJ Victorious Over the IRS

Congratulations to my former student Dan Alban and his IJ colleagues for their court victory over the IRS.

irs ij.jpg

Posted by E. Frank Stephenson at 10:18 PM

Manti Imitates "The Simpsons"

Armin Rosen in The Atlantic (thanks to LRH for the pointer):

The episode begins at the end of a typical day at Springfield Elementary School, where the recently divorced Ms. Krabappel's fourth-grade class is watching a movie about zinc ("Thank goodness I still live in a world of telephones, car batteries, handguns [gunshot sound] and many things made of zinc!"). The bell rings, and Ms. Krabappel's pupils rush for the exits. Part of the genius of The Simpsons is (well, was) its almost Dickensian ability to impart humanity and psychological depth to what lesser shows would have treated as throwaway characters. The next two minutes or so, a darkly comic glimpse into Ms. Krabappel's lost and lonely soul, is a master class. "If anyone wants to learn more about zinc, they're welcome to stay," she says to an empty hallway. "We can talk about anything. I'll do your homework for ya?" She drives home alone, in the rain. She buys a scratch-off ticket at the Kwick-E-Mart. "Still teaching?" Apu asks her. The ticket yields two dollar signs and a cherry. "For one more day, at least." Her apartment is a spinster's walkup. She isn't someone who just needs a man--she's someone who needs anyone. She takes out a personals ad in Springfield Magazine.

Enter Bart Simpson, who earns a month of detention after accidentally--though remorselessly--killing the class goldfish in a yoyo-related mishap. This isn't even close to the darkest thing Bart will do this episode. Bart finds the ad in his teacher's desk, and for reasons no more (or less) complex than boredom or petty revenge, he decides to answer it. An elaborate fiction ensues: The man's name is Woodrow. He has the soul of a poet ("truly yours is a butt that won't quit") and the face of Gordie Howe. And he has inside information: Bart overhears Ms. Krappabel saying she wants a man who can fix her car. One letter later: "I put your picture up in my garage to inspire me while I gapped my spark plugs."

Of course, I still don't get all the publicity about a 20ish year old guy having a fake girlfriend. A fake harem, now that might be newsworthy ...

Posted by E. Frank Stephenson at 08:27 AM

January 16, 2013
Liberty's Library

Interested in learning more about liberty. Check out Liberty's Library. It guides you to a book that you might be interested in based on your responses to a series of questions.

Posted by Joshua Hall at 10:01 PM in Economics

Time for Thinking Past Stage One

A news headline:

Carmakers Steering Away From Steel in Order to Meet Fuel Economy Standards

A few possible results ... wonder how many will occur ...
1. Car prices will increase because carmakers are having to use costlier materials.
2. Auto crash deaths will increase. (If you have JSTOR, see this paper by Crandall and Graham.)
3. The reduced demand for steel will have steelmakers pleading for compense from the federal trough.

Posted by E. Frank Stephenson at 02:35 PM

January 15, 2013
Demand Curves Are Downward-Sloping: Albuquerque Minimum Wage Edition
In November, Albuquerque voters said yes to raising the city's minimum wage from $7.50 to $8.50 an hour, and just 13 days into the increase, historic city restaurant is already feeling the pinch.


To stay afloat El Charritos is cutting back too. They have slashed hours now closing at 2 p.m. on Mondays and Tuesdays to cut back on operating costs. El Charritos has also chosen not to fill six positions and say things could get worse.


Posted by E. Frank Stephenson at 11:44 AM

January 10, 2013
Incentives Matter: Obamacare and Full-time Employment Edition

Wendy’s Franchisee Owner Blames ‘Obamacare’ For Cutting Back Employees’ Hours

Other restaurants are making similar cuts.

Posted by E. Frank Stephenson at 09:39 AM

January 04, 2013
An Open Letter to Brian Shactman

Dear Mr. Shactman,

Based on reports that restaurants near hockey arenas experiencing a decrease in traffic during the NHL lockout, you claim that if the NHL season is canceled then “billions—yes billions--of dollars won’t be spent.” I have a few questions about your claim.

What do you think the people who would have eaten at, say, the Eagle Street Grille in St. Paul are doing with their dollars in lieu of attending hockey games and eating at nearby establishments? Do you think displaced NHL fans are fasting instead of eating elsewhere? Do you think that displaced NHL fans are destroying the dollars they would have spent on NHL entertainment and dining instead of spending them elsewhere? Unless your answer the last two questions is "yes," then your claim that the NHL lockout will lead to billions of dollars of lost spending is likely meritless.

Here's a suggestion to enhance your reporting: You might want to visit some minor league hockey arenas and restaurants located nearby. Economists Jason Winfree and Rodney Fort, in an analysis published in the August 2008 issue of the Journal of Sports Economics, found that fans substituted toward minor league and junior hockey during the 2004-2005 NHL lockout. Perhaps some of your billions of dollars of lost NHL spending are being redirected toward other levels of hockey entertainment.

Frank Stephenson

UPDATE: I could have also mentioned that at least two papers (here and here) have looked at strikes/lockouts and found no economic harm in host cities. Seems like the hockey cliff is mostly horse hockey.

Posted by E. Frank Stephenson at 12:27 PM

January 03, 2013
The folks at Learn Liberty (first and foremost the lovely Elisabeth McCaffrey, among others), are really good at taking a bland idea and doing something wonderful with it.  This turned out WAY better than I had any right to expect. .

Posted by Michael Munger at 03:45 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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