Division of Labour: October 2013 Archives
October 30, 2013
Berry College Wins Billboard Dispute with Tennessee

Tennessee folded:

Berry College has settled its legal dispute with the Tennessee Higher Education Commission over its right to advertise in that state.

THEC had sought to make Berry pay large fees not charged to Tennessee private colleges in order to advertise in Tennessee.

THEC officials had asserted that placing the billboards in Tennessee constituted conducting educational activity in that state. Berry has no campuses in Tennessee and does not offer distance or online education.

The settlement provides a waiver of the THEC rules for advertising and solicitation because Berry meets the same standards required of Tennessee colleges.

After being threatened with fines, Berry sued THEC in May, alleging discriminatory treatment that violated the college’s constitutional rights under the Commerce Clause and its rights of commercial free speech.

Posted by E. Frank Stephenson at 02:56 PM

Joe Stiglitz's Cognitive Dissonance

A complimentary copy of Joe Stiglitz's "The Price of Inequality" recently appeared in my mailbox. I'm no big fan of Stiglitz's work, but in skimming the table of contents I noticed a chapter on rent-seeking and decided to read it.

On p. 45, Stiglitz writes:

Three factors contributed to the increased monopolization of markets. First, there was a battle over ideas about the role that government should take in ensuring competition. Chicago school economists (like Milton Friedman and George Stigler) who believe in free and unfettered markets argued that markets are naturally competitive ...

Just a few pages later (p.62) he writes:

In the Clinton administration, we tried to make the mining companies pay more for the resources they take out of public lands .... [The companies] argued that the policy would impeded growth. But the fact of the matter is that, with an auction, companies will bid to get the mining rights .... Modern auction theory has shown how changing the design of the auction can generate much more revenue for the government. These theories were tested out in the auction of spectrum used for telecommunications beginning in the 1990s ....

Wonder where Uncle Sam got the idea of auctioning off spectrum rights ... oh yeah, from one of those free market fundamentalist Chicago schoolers named Ronald Coase.

Like a blind squirrel finding a few acorns, Stiglitz's rent seeking chapter does hit a few worthy targets (import restrictions, ethanol, Wall St). However, in addition to the cognitive dissonance over the Chicago school and spectrum auctions, the chapter suffers from a macro case of cognitive dissonance in that Stiglitz advocates more government involvement while failing to realize that it is a large and active government that provides the rents he bemoans.

Posted by E. Frank Stephenson at 02:50 PM

October 29, 2013
People Respond to Perverse Incentives: Beijing Divorce Edition
Beijing's divorce rate has soared as couples seek to avoid a property tax imposed earlier this year by using a loophole for those whose marriages end, state media reported Tuesday.

Nearly 40,000 couples divorced in the Chinese capital in the first nine months of this year, up 41 percent on the same period in 2012, the Beijing Youth Daily said, citing official figures.

In March China introduced a nationwide capital gains tax of 20 percent on the profits owners make from selling residential property.

But the terms allow couples with two properties who divorce and put each house into one person's name to then sell them tax-free under certain conditions -- after which they can remarry.


Posted by E. Frank Stephenson at 01:55 PM

Nattering Nabobs of Ignorance and Crackpot Theories

CBS, when interviewing the author a new book on the Kennedy assassination, apparently doesn't know the difference between J. Edgar Hoover and Herbert Hoover--see this Ann Althouse post for the details.

Also on the Kennedy assassination, see this post in which Russ Roberts knocks down the crackpot theory that the Kennedy killing was caused by a poisonous right-wing atmosphere then present in the city. Here's what Bill Minutaglio, the co-author of the book behind the "Dallas made Oswald do it" notion, said on NPR:

Oswald was living in this hothouse environment, this overheated, increasingly vitriolic environment. Most people who have studied Oswald have suggested he was somewhat of a malleable figure and an impressionable figure, and someone who wanted to make a statement. He wanted to be taken seriously in some way.

I believe now, as we look at him, that he had to be shaped by his environment, had to be shaped by this almost civic hysteria in Dallas. It was just perfect for someone like Lee Harvey Oswald to well up and become, as he perceived himself, an agent of change.

Posted by E. Frank Stephenson at 11:21 AM

Mike Lester on Healthcare.gov

From the Rome News-Tribune:

Lester Healthcare.gov.jpg

Posted by E. Frank Stephenson at 11:00 AM

October 26, 2013
Don Boudreaux and Art Carden to Speak at Berry

I'm thrilled that this semester Berry will be hosting talks by Don Boudreaux and Art Carden. Don will be here Monday Oct. 28 and Art on Tuesday Nov. 5. Drop me a note if you'd like info on time, location, topics, etc.

Posted by E. Frank Stephenson at 02:33 PM

Minimum Wage Nonsense

It's been awhile since I blogged on minimum wage nonsense--doing so would unfortunately be a full time job--but this letter to the editor by Patrick J. Russell in the Seattle Times caught my eye:

The headline of Bruce Ramsey’s opinion piece, “A $15 minimum wage won’t help you land your first job” [Opinion, Oct. 23] sums up his position.

And if it is restricted to SeaTac, he is right. But he is extrapolating to the broader market, so I am going to do the same and assume that $15 is widely adopted as the minimum wage.

He is probably right that some kids would get fired. But a lot of people would be kept on at the higher salary. This would put a lot of money in their pockets. And unlike “job creators,” people on the lower rungs of the economic ladder spend what they make immediately and locally. This would result in more business at Mexican restaurants, Target, car dealerships and a lot of other places.

That means more employment at car businesses, retailers and Mexican restaurants. He was canned because there was not enough business to justify his cost. And that’s the point.

No, sir, that's exactly the fallacy. Any additional spending by minimum wage workers must be offset by less spending from people who lose jobs, firms with lower profits, etc. So those new jobs at Mexican restaurants etc. come at the expense of other jobs.

I will give Mr. Russell credit for one point--he did acknowledge that minimum wage hikes have disemployment effects. Speaking of disemployment effects:

Condé Nast shutters its internship program in the face of minimum wage lawsuits

Posted by E. Frank Stephenson at 02:00 PM

A Happiness Bureau for the Bolivarian Paradise!

Such an agency would seem unnecessary, but ...

President Nicolas Maduro says the new Vice Ministry of Supreme Social Happiness will coordinate all the "mission" programs created by the late President Hugo Chavez to alleviate poverty.

Oil-rich Venezuela is chronically short of basic goods and medical supplies. Annual inflation is running officially at near 50 percent and the U.S. dollar now fetches more than seven times the official rate on the black market.

In downtown Caracas, fruit vendor Victor Rey said he's now waiting for Maduro to create a vice ministry of beer.

Housewife Liliana Alfonzo, 31, said that instead of a Supreme Happiness agency she'd prefer being able to get milk and toilet paper, which disappear off store shelves minutes after arriving at stores.

Happiness is being able to wipe one's @$$ ...

Posted by E. Frank Stephenson at 01:44 PM

October 24, 2013
Vetoing With Their Feet?

Another helping of French happiness ...

French footballers will go out on strike for the first time in more than 40 years next month in protest at a government plans to tax top earners 75 percent, the clubs announced on Thursday.


Posted by E. Frank Stephenson at 10:01 AM

Your Daily Dose of Eminent Domain Abuse

Seattle uses eminent domain to turn a parking lot into a parking lot

Posted by E. Frank Stephenson at 09:55 AM

October 22, 2013
George Leef Now Writing for Forbes

His first two articles are on college rankings and why the conventional wisdom about higher ed is wrong. Check them out.

Posted by E. Frank Stephenson at 01:46 PM

October 21, 2013
Happiness Adjusted GDP Update

Down and out: the French flee a nation in despair

(Previous posts on this topic are here.)

Posted by E. Frank Stephenson at 09:40 AM

October 17, 2013
Quick Hits

Markets in everything: Want a Piece of a Star Athlete? Now, You Really Can Buy One

When you gotta go you gotta go: Motorcyclist arrested for going 140 mph tells cops he needed bathroom break.

The Repubs are the Washington Generals of politics: There's a little pork in that bill: The 5 most surprising provisions in the debt deal

Posted by E. Frank Stephenson at 02:25 PM

October 16, 2013
Might Obamacare Be Like the Wal-Mart Run?

A news item:

Wal-Mart Stores Inc. and Xerox Corp. blamed each other yesterday after Louisiana food-stamp recipients stripped bare the shelves of some Walmart stores when a computer glitch left their debit cards with no limits.

Managers of Walmart stores in the small, northern Louisiana towns of Springhill and Mansfield alerted police on Saturday night that throngs of shoppers had flooded the stores and were buying groceries using electronic benefit cards that contained no credit limits.

“Some people had eight or 10 shopping carts full of groceries,” Springhill Police Chief Will Lynd said yesterday.

I doubt there will be an Obamacare stampede--it'd be pretty difficult given the balky websites--but, as Avik Roy explains, the Feds are deliberately avoiding income verification as a condition for Obamacare enrollment and there are expected to be billions of dollars of fraud and abuse. Of course, this is a feature not a bug for folks who want to make it difficult for Ocare to be repealed--more recipients equal more votes.

Posted by E. Frank Stephenson at 08:39 AM

October 15, 2013
How does employment protection legislation influence hiring and firing decisions by the smallest firms?

The abstract of a new paper in Economics Letters:

This paper examines the impact of employment protection legislation (EPL) on hiring decisions by own-account workers and firing decisions by very small firms (1-4 employees). Using data from the EU-15 countries, our results show that the strictness of employment protection legislation is negatively related to both these types of decisions, and hence, to labour mobility among the smallest firms. This new evidence may be useful for governments aiming to create a more enabling macro-environment for employment and productivity growth.

So making it harder to fire workers makes firms less likely to hire them. Who knew?

Posted by E. Frank Stephenson at 12:58 PM

October 14, 2013
Got a Light, Dr. Laffer?

Looks like Minnesota's cigarette tax hike is coming up a bit short on revenue generation:

After a hefty cigarette tax increase took effect July 1, tobacco tax revenues dropped $29 million or 21 percent short of projections, accounting for almost half of the shortfall in other taxes.

The update is the first look at tax collections since the 2013 Legislature enacted significant changes in state income, corporate, sales and tobacco taxes. As expected, those tax increases generated about $240 million in new revenue during the three-month period that started July 1.

Posted by E. Frank Stephenson at 11:17 AM

Unemployment Benefits and Unemployment in the Great Recession

The abstract of a new NBER WP by Marcus Hagedorn, Fatih Karahan, Iourii Manovskii, and Kurt Mitman:

We exploit a policy discontinuity at U.S. state borders to identify the effects of unemployment insurance policies on unemployment. Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility. In contrast to the existing recent literature that mainly focused on estimating the effects of benefit duration on job search and acceptance strategies of the unemployed -- the micro effect -- we focus on measuring the general equilibrium macro effect that operates primarily through the response of job creation to unemployment benefit extensions. We find that it is the latter effect that is very important quantitatively.

Policies matter ... who knew?

Posted by E. Frank Stephenson at 10:31 AM

The War on Coal Is Punishing Indian Country

That's the title of a WSJ op-ed by my former student Shawn Regan and Terry Anderson; the first paragraph:

To judge by the headlines and media chatter, the only important issue involving American Indians in Washington these days has to do with changing the name of the local pro football team. Those who care about real-world Indians might want to focus instead on how the Obama administration's hostility to the coal industry does more harm to Native Americans than any NFL franchise ever will.
Posted by E. Frank Stephenson at 10:24 AM

October 11, 2013
On McAuliffe and "Dead Peasant" Insurance

The WaPo has an article claiming that Virginia gubernatorial candidate Terry McAuliffe was part of a dead janitor/peasant insurance investment pool. There's some sleazy behavior here--stolen ids of terminally ill people, insurance fraud, etc. See my 2004 Independent Review article for some background on this sort of insurance.

Posted by E. Frank Stephenson at 09:26 AM

Maybe He Should Have Started with Remedial Anger Management

Man accused of attacking anger-management classmate

Posted by E. Frank Stephenson at 09:06 AM

October 09, 2013
The Problem with the Holdout Problem

That's the title of a new paper by Edward J. López and J.R. Clark (available via SSRN). Here's the abstract:

Recent theoretical work has investigated the exact mechanism(s) by which the holdout problem creates inefficiency and thereby justifies eminent domain. In parallel, recent empirical work has demonstrated that state courts and legislatures either grant discretion to, or prohibit, local authorities from using eminent domain for economic development. This article extends Miceli’s (2011) strategic holdout model to incorporate political inefficiencies that may emerge when granting discretionary powers. Using eminent domain for non-efficiency-enhancing purposes substitutes for voluntary exchange, which is optimal, and attracts rent seeking by developers. Therefore, the efficiency justification for eminent domain is conditional. It depends on the relative magnitudes of the market and political sources of inefficiency. This analysis informs the efficiency consequences of court rulings, most notably Kelo v. City of New London, and the various changes in states’ laws that followed.
Posted by E. Frank Stephenson at 08:25 AM

October 08, 2013
Jimmy Carter on Middle Class Stagnation

Here's ole Jimmy on the middle class today compared to the 1970s:

"The disparity between rich people and poor people in America has increased dramatically since when we started," he said. "The middle class has become more like poor people than they were 30 years ago. So I don't think it's getting any better."

Note that Carter does not seem to realize that everyone's standard of living could increase even if inequality was also increasing.

Earlier this year Don Boudreaux--who will be speaking on this very topic later this month at Berry--compiled a list of 25 ways that life is better today than in the 1970s; I've pasted five of them below but click through for the entire list (I'm about 10 years younger than Don but several ring true to me--see also this post):

(1) Automobiles broke down much more frequently than they break down today, hence, leaving motorists stranded, sometimes for hours, more often than is the case today.

(2) Automobiles rusted faster and more thoroughly than they do today.

(3) Someone in his or her early 70s was widely regarded as being quite old.

(4) “Old” people back then were much more likely to wear dentures than are “old” people today.

(5) Frozen foods in supermarkets were gawdawful by the standards of today – in terms both of quality and of selection.

Posted by E. Frank Stephenson at 08:27 AM

October 07, 2013
Involuntary volunteering: The impact of mandated service in public schools

That's the title of an Economics of Educatin Review paper by Sara Helms of Samford; the abstract:

In 1992, Maryland became the first—and only—state to require service activity of all public high school graduates. Proponents of mandates note that since individual volunteer activity is correlated over time, mandates will create lifetime volunteers. Prior studies demonstrate differences in the observed characteristics of volunteers and nonvolunteers which could drive the correlation in service over time. Using restricted-access data from the Monitoring the Future project, I find the mandate increased volunteering among eighth-grade students. However, the mandate likely reduced volunteering among twelfth-grade students. In contrast to creating lifelong volunteers, my results suggest that the mandate changed the timing of volunteering.

So making folks volunteer doesn't make them more likely to volunteer. Who knew?

Posted by E. Frank Stephenson at 02:34 PM

October 04, 2013
Voluntary Disclosure and the Strategic Behavior of Colleges

The abstract of a forthcoming JEBO paper by Michael Conlin, Stacy Dickert-Conlin, and Gabrielle Chapman:

This paper investigates how outside ranking organizations such as U.S. News and World Report affect colleges’ admission decisions. To do this, we focus on a policy that has received criticism for being motivated by ranking concerns: optional reporting of SAT I scores. This policy allows colleges to report an average SAT I score based on those applicants who chose to submit their scores which may not be reflective of actual student body quality. We use proprietary data from two liberal arts colleges to address how the optional reporting policy affects the colleges’ admission decisions as well as how applicants’ SAT I scores influence their decision to submit these scores to the colleges. The data suggest that college admission departments are behaving strategically by rewarding applicants who do submit their SAT I scores when their scores will raise the college's average SAT I score reported to U.S. News and World Report and rewarding applicants who do not submit when their SAT I scores will lower the college's reported score. The data also suggest that applicants are behaving strategically by choosing not to reveal their SAT I scores if they are below a value one might predict based on their other observable characteristics.

Systems are meant to be gamed, right?

BTW, I've mentioned before that I use the term "paper envy" for papers that I think are especially clever. The Conlins' paper (along with John Pepper) on the unintended consequences of deer hunting regulations is one such paper.

Posted by E. Frank Stephenson at 03:57 PM

The Effect of Employment Protection Legislation On Hiring

The abstract of a new paper in Economics Letters:

This paper examines the impact of employment protection legislation (EPL) on hiring decisions by own-account workers and firing decisions by very small firms (1-4 employees). Using data from the EU-15 countries, our results show that the strictness of employment protection legislation is negatively related to both these types of decisions, and hence, to labour mobility among the smallest firms. This new evidence may be useful for governments aiming to create a more enabling macro-environment for employment and productivity growth.
Posted by E. Frank Stephenson at 03:29 PM

October 03, 2013
Casey Mulligan on Obamacare's Tax Incentives

From today's WSJ. This is important work; see also Mulligan's book The Redistribution Recession.


Posted by E. Frank Stephenson at 08:29 AM

October 02, 2013
EFW Index Media Report

We did have a fair number of media hits this year for the Economic Freedom of the World report.

362 hits from Google News

Daily Caller
Birmingham News

CBS News Radio; (National)
The Roger Hedgecock Show (KOGO-AM; (San Diego, CA)
Morning News (WSBA-AM); (York, PA)
Live and Local with Raeford Brown and Bill Hitchcock (WRHT-FM); (Morehead Jacksonville, NC)
Viewpoints with Lockwood Phillips (WKTF-FM); (Newport, NC)
The Fred Holland Show (1490 AM and 94.7 FM WTKI); (Decatur, AL)
Straight Talk (WGOL-AM); (Russellville, AL)
The Alice Stewart Show (96.5 FM);(Little Rock, AR)
Talk of the Town with Dick Antoine (KZNG-AM); (Hot Springs, AR)
Talk with Ron Williams (WCIT 940 AM); (Lima, OH)
Dial & Speak With Adam Mackey (WBTC AM); (Uhrichsville, OH)
Common Sense with Larry Downes (WIBC-FM); (Indianapolis, IN)
Fort Wayne's Morning News (WOWO-AM); (Fort Wayne, IN)
Mike Devine Show (KVFD-AM); (Fort Dodge, IA)
Bob Harden Show (internet radio); (Naples, FL)
The Chuck and Colleen Show (WZNZ-AM); (Jacksonville, FL)
Joe Thomas "In the Morning" (WCHV-AM); (Charlottesville, VA)
Roanoke Valley Morning News (WFIR-AM); (Roanoke, VA)
Richmond's Morning News (WRVA-AM); (Richmond, VA)
Eastern Panhandle Talk (WRNR-AM); (Martinsburg, WV)
Radio Active (WHIS-AM); (Bluefield, WV)
Price of Business (WNTH-AM); (Houston, TX)

Posted by Robert Lawson at 11:08 AM

EFW Index

The new Economic Freedom of the World Report (co-authored with Josh) was released on 18 September. The entire report including the dataset can be downloaded here. The press release can be found here (.pdf).

Not much "new" to report this year. We added a few countries (but dropped Syria temporarily) so we have 152 now. The U.S. ranking (undadjusted) dropped a spot from 16th to 17th. Some of the U.S.'s individual components, particularly those based on the World Economic Forum's data, have dropped precipitously (see page 172).

We have two interesting theme chapters this year (also available for download at the link above):

Institutions and Economic, Political, and Civil Liberty in Africa
by Alice M. Crisp and James Gwartney

Economic Freedom, Democracy, and Life Satisfaction
by Martin Rode, Bodo Knoll, and Hans Pitlik

Posted by Robert Lawson at 10:19 AM

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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