Division of Labour: August 2013 Archives
August 29, 2013
The Woman of the School Lunch System

Kentucky students to first lady Michelle Obama: Your food ‘tastes like vomit’

(NB--The title is a riff on this quote from Adam Smith.)

Posted by E. Frank Stephenson at 11:36 AM

Stop Us Before We Drink Tax Again

August 23: France cannot take any more taxes, government admits

August 28: Government Aims to Fill Pension Gap With Tax Rise

France's tax grabs bring to mind Margaret Thatcher's famous quote: "The problem with socialism is that you eventually run out of other people's money.”

Posted by E. Frank Stephenson at 09:57 AM

Archers of Pot

Sheriff: Man shoots arrow wrapped with marijuana at Whatcom County Jail

Posted by E. Frank Stephenson at 09:45 AM

August 28, 2013
Should College Be Free

George Leef takes apart a new book that claims it should be.

Posted by E. Frank Stephenson at 03:40 PM

August 26, 2013
So Maybe Them Dang Foreigners ...

... aren't taking our jobs after all. To wit--the abstract of a new paper by Dennis Coates and T.H. Gindling:

In the 1990s, rural counties in the United States, which had been losing population, became the destinations for an increasing number of Hispanics, slowing and in some cases reversing population declines. In this paper, we examine whether faster growth in the Hispanic population is linked to faster growth in income per capita in rural counties. Our results indicate strong support for the hypothesis that population growth caused by the increase in Hispanics, whether from international immigrants, migrants from within the United States, or from natural growth in families, has fueled increased economic growth in those small, rural communities whose populations had been in decline during the 1970s or the 1980s.
Posted by E. Frank Stephenson at 01:30 PM

Just an observation...

In test banks for principles economics textbooks, there are always questions about opportunity cost that ask students to determine the largest cost of attending college. The choices are usually things like:

a) tuition
b) the cost of room and board
c) the cost of textbooks, notepads, etc.
d) the opportunity cost of forgoing full-time earnings while attending college full-time

The usual correct answer is D but it seems like, if current trends continue, the correct answer may change sometime soon. Given 1) the skyrocketing costs of tuition, and 2) the terrible job (and wage) prospects of less-than-college (or even college-degree-holding) students, the correct answer may become A; e.g., my private-school tuition is $40,000 per year but I could only make $30,000 at a job.

Just something for textbook authors and test bank makers to keep in mind. The "foregone income" answer soon may not be so obvious.

Posted by Tim Shaughnessy at 12:55 PM in Economics

August 20, 2013
I Think We May Now Know Why Plants Crave Electrolytes

A news headline:

Finally...a beer that won't give you a hangover! Researchers create brew which contains electrolytes to ensure drinkers do not become dehydrated

P.S. This movie clip will explain the title of the post.

Posted by E. Frank Stephenson at 02:20 PM

August 19, 2013
One reason college costs may be rising

"Maryland university buying bulletproof whiteboards"

[A] Maryland company that makes bulletproof whiteboards has contracted with a university seeking to offer its professors greater protection in the event of a school shooting.

At first, I thought this was stupid because I immediately think of a whiteboard as a chalkboard replacement, something a few feet high and ten feet long that is mounted on the wall. Not sure why studs need to be protected from bullets (I mean the vertical beams in the wall, not we professors).

But no, the whiteboards are only 18x20 inches, and the video shows a dummy (I mean a mannequin, not we professors) holding one at its chest and taking a bullet unscathed. Pretty cool!

In the name of protecting professors from possible school shootings, though, few things seem more ridiculous. An 18x20 board still leaves open this possibility:

Worse, it's not a vest so you'd have to either hold it up or do some sort of sandwich board thing with a strap around your neck.

When it's not being a bulletproof vest, it's other function is as a whiteboard so that you can, you know, teach class and stuff. How big of a class will an 18x20 inch whiteboard still be considered useful? I wonder if the university grant used to purchase these also included funding for binoculars which everyone beyond the third row would need.

Oh yeah, the grant. The University of Maryland-Eastern Shore is buying 200 of these for $60,000. The guy selling $300 tiny whiteboards is probably doing even better than the guy selling blank-inside cards:

Posted by Tim Shaughnessy at 10:54 AM in Economics

August 15, 2013
Compare and Contrast

A news headline: Obama wants to tack on $5-a-year phone tax ...

A campaign promise (albeit one that's been broken several times already):

Posted by E. Frank Stephenson at 01:34 PM

"I don't want to be loved by an economics major"

That's a line in one of the winners in Fayetteville State U's music video contest. The video comes from a student at my alma mater Washington and Lee. I took calculus as a freshman in the room where it was filmed; I'm glad to see the room being put to a better use. Several other vids are at the same site.

Posted by E. Frank Stephenson at 10:36 AM

August 14, 2013
"Your raisins or your money"

NPR's Planet Money on a farmer being sued by the feds for selling too many raisins (thereby violating the government's raisin cartel marketing order). The Raisin Administrative Committee sounds like something out of a Rand novel.

Posted by E. Frank Stephenson at 08:54 AM

“Capitalism takes more people out of poverty than aid”

So says Bono in a speech at Georgetown U. (For an explanation of why aid doesn't work well, see Chris Coyne's new book.) Here's the clip (HT: David Theroux):

Posted by E. Frank Stephenson at 08:18 AM

August 13, 2013
What Kind of Thieves?

Quiche thieves in five-hour police seige

Posted by E. Frank Stephenson at 04:31 PM

August 11, 2013
Read the Fine Print

I have to admit, I rather enjoy this idea.

Now, I am second to none in my respect for the sanctity of contracts.

But it's perfectly true that banks do invoke their "rights" of contract rather freely.

Sauce for the goose, guys....

Read More »

Posted by Michael Munger at 11:39 AM

August 09, 2013
French Happiness Update: Smashed Egg Edition

This doesn't bode well for that happiness adjusted GDP:

French poultry farmers have smashed 100,000 eggs outside a tax office in Brittany in a protest over low prices.

The farmers in north-western France threatened to continue smashing 100,000 eggs daily. They say that equates to 5% of Brittany's daily egg production.

The farmers' costs have risen partly because EU animal welfare rules require bigger cages for hens. The protest took place in Carhaix-Plouguer.

An EU directive that took effect on 1 January 2012 requires that all laying hens must be kept in "enriched cages" with extra space to nest, scratch and roost.

Source. Previous DOL posts on French happiness are here.

Posted by E. Frank Stephenson at 08:28 AM

August 08, 2013
Incentives Matter: Disability Benefits Edition

The abstract of Nicole Maestas, Kathleen J. Mullen, and Alexander Strand's new AER paper "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt":

We present the first causal estimates of the effect of Social Security Disability Insurance benefit receipt on labor supply using all program applicants. We use administrative data to match applications to disability examiners and exploit variation in examiners' allowance rates as an instrument for benefit receipt. We find that among the estimated 23 percent of applicants on the margin of program entry, employment would have been 28 percentage points higher had they not received benefits. The effect is heterogeneous, ranging from no effect for those with more severe impairments to 50 percentage points for entrants with relatively less severe impairments.
Posted by E. Frank Stephenson at 11:12 AM

Incentives Matter: European Footballer Edition

The abstract of Henrik Jacobsen Kleven, Camille Landais, and Emmanuel Saez's new AER paper "Taxation and International Migration of Superstars: Evidence from the European Football Market":

We analyze the effects of top tax rates on international migration of football players in 14 European countries since 1985. Both country case studies and multinomial regressions show evidence of strong mobility responses to tax rates, with an elasticity of the number of foreign (domestic) players to the net-of-tax rate around one (around 0.15). We also find evidence of sorting effects (low taxes attract highability players who displace low-ability players) and displacement effects (low taxes on foreigners displace domestic players). Those results can be rationalized in a simple model of migration and taxation with rigid labor demand.
Posted by E. Frank Stephenson at 11:09 AM

August 07, 2013
The Effect of the Minimum Wage on Employment Growth

The abstract of a new NBER WP by Jonathan Meer and Jeremy West:

The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. For both theoretical and econometric reasons, we argue that the effect of the minimum wage should be more apparent in new employment growth than in employment levels. In addition, we conduct a simulation showing that the common practice of including state-specific time trends will attenuate the measured effects of the minimum wage on employment if the true effect is in fact on the rate of job growth. Using a long state-year panel on the population of private-sector employers in the United States, we find that the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments.
Posted by E. Frank Stephenson at 09:34 AM

Now Batting .125, Paul Buchheit

A former student sent me a piece by Paul Buchheit called "8 Ways Privatization Has Failed America." For the most part I think he's way off base--there's been no privatization in medical care (ever heard of Medicare and Medicaid, dude?), much of the behavior of large financal firms was motivated by misguided regulations, and many public schools perform terribly. However, I will give him a bit of credit on one point--privatizing prisons has created a constituency for longer sentences and prison companies have opposed sentencing reforms such as prison alternatives.

So 1 for 8 gives Mr. Buchheit a .125 batting average. Not exactly a heavy hitter.

Posted by E. Frank Stephenson at 09:18 AM

August 06, 2013
On The Individual Mandate and Personal Responsibility

A snip from a recent op-ed by William Rice that ran in the local fishwrapper:

For a law whose admirable goal is to ensure better health care at lower cost for all Americans, the Affordable Care Act has come under remarkably varied and persistent attack.

The latest volley concerns the obscure issue of how to apply a penalty on individuals and businesses that fail to obtain health insurance, and who thereby put all the rest of us on the hook for big medical bills.

This penalty — which is intended to encourage the classic conservative value of personal responsibility — will be collected as part of annual tax filings, ...

Nice try, but no. There are folks, not that many perhaps, who could readily pay out of pocket for their medical needs but they are not exemept from the mandate. There are folks who would prefer to pair a high deductible policy with paying for many routine expenses out of pocket, but this choice is not allowed under Obamacare. If the underlying principle was personal responsibility then these options would be allowed. Moreover, Obamacare involves significant cross-subsidization from young to old and only allows policies that include several mandated benefits. It seems that the personal mandate is a redistributionist scheme combined with a healthy dose of rent seeking (the coverage mandates) than a measure of personal responsibility.

Posted by E. Frank Stephenson at 03:11 PM

August 05, 2013
On Bookstores and The Long Tail

Ann Patchett, a Nashville bookstore owner, had a piece in the WSJ last week saying that she wished President Obama had visited her shop rather than the Amazon warehouse in Chattanooga.

I like bookstores--I spent a few hours earlier this summer wandering in Powell's in Portland--and I hope they continue to exist in their brick and mortar form. That said, I disagree with a couple of her claims:

First up is the benefit of having her "store staffed by readers." This may benefit some customers but is of little use for my reading tastes. Amazon's recommendations are only somewhat helpful, but for me they are more helpful than anyone who might work at my local bookshop.

Second up is her claim that Amazon makes it so "fewer and fewer new voices [authors] break through." Chris Anderson's book "The Long Tail" is now somewhat dated, but it reports (p.23) that Amazon carries about 3.7 million titles where as a typical Borders stocked about 100,000 titles. It seems that a new author would have a much greater chance of being stocked by Amazon than by a brick and mortar store.

Posted by E. Frank Stephenson at 03:43 PM

August 02, 2013
Markets in Everything: Bird Poop Facials

Clients drop $180 for bird poop facials at NYC spa

Posted by E. Frank Stephenson at 05:24 PM

August 01, 2013
Money for nothing, and Big Macs for just 68 cents more!

I'll huff, and I'll puff, and I'll make up some stuff! This would be embarrassing for HuffPo, if the "economics writers" there were capable of embarrassment.

On Monday, The Huffington Post published a story entitled "Doubling McDonald's Salaries Would Cause Your Big Mac To Cost Just 68˘ More." HuffPost has since learned that the research used as the basis of the story contains significant errors that cast doubts on its claims. This story has replaced the one originally published in this space.

The story drew on data presented by Arnobio Morelix, an undergraduate student from The University Of Kansas who identified himself as a researcher for the school. In an interview, Morelix told the HuffPost that only 17.1 percent of McDonald's revenue goes toward salaries and benefits, meaning that for every dollar McDonald's earns, a little more than 17 cents goes toward the income and benefits of its employees.

Posted by Michael Munger at 03:55 PM in Economics

Confusing Costs With Benefits

A few weeks back the WSJ ran a piece by Rachel Bachman on schools that are allowed to award fewer football scholarships than normal because of NCAA sanctions. Penn State, for example, has lost the right to award 90 football scholarships (spread over several years). Bachman multiplies each school's average tuition to obtain a cost of the NCAA sanctions. PSU's cost is supposedly $3.15 million (90 scholarships @ $35,000).

Bachman has it all wrong. Not being allowed to award scholarships actually saves the institutions the expense associated with the scholarships. The true cost to the schools is the lost rents they obtain from players. By having to limit their scholarships, the schools lose the revenues they obtain over and above the cost of the scholarships they award. These revenues are substantial--estimated to be more than $1 million for a premium college player.

UPDATE: Forgot to link the story; link now added. Sorry. BTW, this isn't the first instance of a WSJ writer making this mistake--here's another from Mark Yost:

While the penalties against Mr. Bush and USC are a nice gesture, they're indicative of the problem with the penalties typically handed out by the NCAA. Namely, they're never enough to deter future bad behavior. The school lost 30 scholarships, valued at about $50,000 each. That's $1.5 million. Last year, the participating teams in the five BCS bowl games—Fiesta, Orange, Rose, Sugar and BCS National Championship Game—each received $18 million. If you were a coach or athletic director, would you risk a $1.5 million fine in a loosely enforced system to look the other way on illicit contacts with an agent, fudge a transcript or pressure a professor to change a grade in exchange for a payday that's 12 times what the penalty would be?

The "fine" isn't the $50k per scholarship--it's the rent that could be extracted from players that would hold those scholarship slots in the absence of NCAA sanctions.

Posted by E. Frank Stephenson at 02:45 PM in Sports

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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