Division of Labour: November 2013 Archives
November 21, 2013
Getting a Supersized Diva to Sing?
Posted by E. Frank Stephenson at 02:07 PM
On Climate Change Damages for Bangladesh
Yesterday's "All Things Considered" on NPR included an interview with Munjurul Hannan Khan who is a Bangladeshi negotiator at the U.N. climate talks. Mr. Khan blames global warming for raising sea levels and making some coastal regions of Bangladesh no longer suitable for farming. He seeks $100 billion per year in compensation from rich countries to offset the damage.
I doubt the damage is $100 billion per year--the CIA factbook puts the country's total gdp at about $300 billion and indicates that only 17% of gdp comes from agriculture. I'm not even sure there are any damages; maybe, maybe not.
What I am fairly sure about, however, is that bad policies in Bangladesh have inflicted great harm--probably more than whatever might have been caused by global warming--on the people of that country. Bangladesh consistently ranks in the bottom third of countries in the Economic Freedom of the World Index, though its absolute score has improved a bit in recent years. Perhaps Mr. Khan should also be seeking compensation for Bangladesh's people from its politicians.
Posted by E. Frank Stephenson at 10:32 AM
November 19, 2013
Hey Kiddies I Bet You Didn't Know That Today Is ...
World Toilet Day! You are encouraged to celebrate appropriately.
Posted by E. Frank Stephenson at 01:54 PM
Quick Hits on the Minimum Wage
1. In Bloomberg Businessweek: Three (Cynical) Explanations for the Minimum Wage Groundswell
2. A related item in USA Today: Democrats say minimum-wage battles to help 2014 turnout
3. George Leef's latest Forbes offering concludes thusly, "The minimum wage – not just economically bad, but philosophically cancerous." Spot on.
Posted by E. Frank Stephenson at 01:19 PM
This is Disturbing
In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.
Source. It's like we're living in a banana republic or something.
2. This is another instance of behavior that if done by a private sector person would result in government prosecution. Consider, for example, the prosecution of the folks who rigged the Libor.
Posted by E. Frank Stephenson at 11:09 AM
November 18, 2013
Boudreaux on Blinder in the WSJ
Here's part of Don Boudreaux's WSJ letter responding to a recent column by Alan Blinder:
In the 18th century, economics began as a discipline when Adam Smith explained that intentions are not results, and that the complexity of a real-world economy nearly always overwhelms and confounds the hubris-intoxicated "man of system" who aims to improve matters through government intervention.
BTW, Prof. Blinder should know that policies can have unintended outcomes. On p. 506 of his principles text (11th ed., co-authored with William Baumol) he points out that subjecting nominal (rather than real) capital gains to taxation can leave people with negative real returns in a high inflation environment. He calls this "presumably unintended" effect a "pervasive and serious problem" that can "impoverish savers [and] inhibit borrowing and lending." Perhaps he should view Obamacare through the same lens as he views taxing nominal capital gains.
Posted by E. Frank Stephenson at 09:09 AM
Incentives Matter: Obamacare's Marriage Penalty
Any married couple that earns more than 400 percent of the federal poverty level—that is $62,040—for a family of two earns too much for subsidies under Obamacare. "If you're over 400 percent of poverty, you're never eligible for premium" support, explains Gary Claxton, director of the Health Care Marketplace Project at the Kaiser Family Foundation.
Source. Normally I'd say that I look forward to seeing some economist's paper showing a decline in marriage and an increase in shacking up among people subject to the penalty, but at the rate the Ocare website is going ...
P.S. Those income thresholds seem fairly high to be 400% of poverty; maybe they're adjusted to reflect NYC's cost of living?
Posted by E. Frank Stephenson at 08:27 AM
November 16, 2013
Bootleggers, Baptists, and Porn Star Condoms?
The number of permits pulled to make porn films in Los Angeles County has declined an estimated 95 percent — from about 480 issued in 2012 to only 24 through the first nine months of this year — since a law requiring adult film actors to use condoms took effect, officials said Friday.
It's unclear if "the measure" in the last sentence is the condom requirement, the permit requirement, or both. But either way, it looks like L.A.'s law is a competition prophylactic because it exempts larger producers from requrements imposed on smaller producers.
Posted by E. Frank Stephenson at 03:20 PM
Property Rights and Investment by Chinese Firms
The abstract of a new paper by Zhiyong An in Economics & Politics:
The right to private property was first written into the Constitution of the People's Republic of China in March 2004. This study takes advantage of the 2004 amendment and uses a difference-in-differences approach to empirically test the impact of private property rights security on investment patterns and thereby on asset structure. Employing the Chinese Industrial Enterprises Database from 2000 to 2007 to implement the analysis, we find that private property rights security has not only led enterprises to boost investment in both fixed assets and intangible assets but also induced them to allocate available resources more towards intangible assets. We address two potential concerns about our empirical design.
Posted by E. Frank Stephenson at 01:53 PM
Something Else Caused by
Scientists say that solar activity is stranger than in a century or more, with the sun producing barely half the number of sunspots as expected and its magnetic poles oddly out of sync.
Source. The CNN anchor in the clip below probably thinks climate change is dampening sunspots, after all she thinks climate change affects asteroid behavior.
Posted by E. Frank Stephenson at 01:39 PM
Economics is not ethics.
Mungowitz points to this bit of "remarkably dumb economics".
Leaving aside the other issues in the post, the author cites "the discredited marginal productivity ethics of the 19th century".
Can you spot the error there?
Marginal productivity theory (MP) is NOT an ethic. It is a purely positive description of how the world works. It is no more an ethic than gravity is an ethic. Like, gravity, MP simply is.
Ethics, as I understand them, are human creations -- these are our rules about right and wrong. There may be certain core objective principles in ethics, but at root, they are human creations. Hitting someone is wrong in some contexts (in a bar fight) but ok in others (a boxing ring). These rules are at some level subjective; we get to decide on them.
But the idea that a thing's value (a wage or a price for example) is determined by marginal productivities (or rather marginal benefits) -- and it should be mentioned in conjunction with marginal costs -- is simply true. It is not up to us at all.
Even the example he cites to "refute" MP theory is wrong. DeBeers raises the price of diamonds by restricting their supply, thus driving up the benefit (and price) of the marginal diamond. If MP theory was wrong, DeBeers's strategy would not work.
Seriously, if Brad DeLong and Alex Tabarrok both agree on something, it's probably right.
Posted by Robert Lawson at 10:45 AM
November 14, 2013
A new report out from the Friedman Foundation, co-authored by my friend Ben Scafidi, examines reasons parents in Georgia's GOAL scholarship program choose particular schools for their children. Fairly interesting stuff, but what caught my eye was this quote from Racine Unified School District Superintendent Ann Laing (on p. 3 of the report):
African-American families are the ones who (were) most prone to enroll their kids in the fly-by-night schools that cropped up after vouchers existed…. [African-American families] don’t know how to make good choices for their children. They really don’t. They didn’t have parents who made good choices for them or helped them learn how to make good choices, so they don’t know how to do that.
Posted by E. Frank Stephenson at 04:07 PM
Some Giggles Courtesy of The Smoking Gun
Posted by E. Frank Stephenson at 03:59 PM
November 13, 2013
Paging Elizabeth Warren
Yours truly in today's WSJ (in response to this article):
Mr. Schramm writes about a "deceptive ripoff" that tries to get young adults to "pay through the nose" for a financial product that is "unnecessary" and will be of little benefit to them. Isn't this the sort of predatory financial product that the Consumer Financial Protection Bureau was supposed to guard against?
Check out this letter too:
The administration's claim that these people are in fact winners with "better" policies falls flat on at least two counts: President Obama is defining "better" for that individual, and more coverage isn't necessarily better coverage, as in the cost of maternity and pediatric coverage forced on those with no intent or possibility of giving birth to a child. If ObamaCare had its equivalent in the housing market, we'd be pushing the elderly and young, single men into five-bedroom homes with three-car garages, telling them they shouldn't be upset by the price difference compared with the smaller homes they were forced out of, because they are getting so much more house. It is no matter that they can't afford to furnish it and have no use for it. Gee, thanks, Mr. President.
Posted by E. Frank Stephenson at 08:39 AM
November 12, 2013
Bolivarian Paradise Update
Maybe this is why Venezuela needs a happiness bureau:
But, hey, what's seizing a few retailers compared to moving Christmas? (It's a vote buying scheme--remember, public choice has a high R^2.)
Posted by E. Frank Stephenson at 09:04 AM
November 07, 2013
"If you like your plan, you can keep your plan:" Marketing flaw, or design flaw?
President Obama's political support is plunging, due to the Affordable Care Act, aka "ACA" or "Obamacare" - both because of a stumbling rollout demonstrating substantial managerial incompetence, and also a sense among a large percentage of the population that the President was dishonest about how the plan would work - specifically, his promise that "if you like your plan, you can keep your plan. Period."
Leaving aside the President's promise, and whether he merely "misspoke" or outright lied, many supporters of the President and/or the Affordable Care Act have claimed that this is not a flaw in the plan, merely in the way it was sold to the public.
Bloomberg's Clive Crooks, for example, makes that case here. Crooks argues that even though millions are being forced out of plans that they liked, "the fault isn’t with the [ACA] -- it’s with the way the plan was sold. Obama’s promise was either an audacious oversimplification (if you’re feeling generous) or a bald-faced lie (if you aren’t). Even so, the cancellations don’t point to fatal defects in the design." He continues, "[t]he Patient Protection and Affordable Care Act was always intended to disrupt the individual health-insurance market" (and he adds, group markets too). And he concludes that the Administration's repeated promise, "made no sense, but they said it anyway to get the law passed."
The President's supporters shouldn't find much comfort in this claim, of course, since it essentially takes the view that the President was fundamentally dishonest with the American people.The response then becomes that politicians often lie, and bigger lies have been told. But Obama's lie - and if Crooks is right about the purpose of the act, then "lie" is the "generous" phrasing, and "damned lie" the less generous one - is different.
Some things that are called "lies" aren't - such as the left's ongoing claim that "Bush lied" about the Iraq war and Iraq's possession of weapons. But this wasn't a lie - it was a colossal blunder. There really is no dispute that all western intelligence agencies believed that Saddam Hussein had chemical weapon stockpiles, and based on this intelligence, so did the Bush administration and most Democrats in the Congress, such as John Kerry, Hillary Clinton, etc. Then there are the actual lies presidents say for honest national security purposes, as when, for example, President Eisenhower denied knowledge of American U2 spying on Russia. There are the lies of desperate self-preservation - think Richard Nixon and Watergate. And then there is puffery, which we have all the time. People might be scoff at Obama, but not accuse him of lying, should he say "this plan will make sure every American gets the best possible treatment for every illness," or even "every American will benefit from this plan." The President would not be accused of lying simply because some people lost their plans for reasons unrelated to Obamacare, although one could fashion such a claim from a dullardly literal reading of his comments.
Nor was the President's pledge a rosy description of a disputed point, such as on the question of whether the ACA will add to the national debt. The President's "if you like it you can keep it" pledge, was not puffery or an optimistic, even incredibly optimistic, projection, but indeed was scripted and stated repeatedly in such as way as to make clear that it was not puffery or point of dispute, but a direct and sincere pledge and fact. It was not based on an incorrect reading of facts on the ground (as in Bush's rationale for invading Iraq), or to protect national security. It is not even a tendentious or unusual characterization of a plan (such as FDR describing social security as an insurance plan).
Rather, if Crooks is right, the President deliberately and intentionally lied to the public in order to pass a domestic policy initiative that he believed could not be passed even with the usual puffery, optimistic projections, and salesmanship of politics. And that is something I've not seen in my lifetime, nor am aware of in U.S. history.
But this is a digression, albeit probably a necessary one. What I want to suggest is that while Crooks is right that the President lied, and that this is damaging to public perception of the ACA and the President, he is wrong in suggesting that this is not a "design flaw" in the plan. (Crooks, by the way, agrees that there are many other actual design flaws in the ACA, though he believes that overall the ACA is worth it).
For what is a design flaw? A design flaw is something that means a product won't work as intended. Crooks defines the intent as "disrupt[ing] the individual health-insurance market [and] forcing insurers to meet new standards." But this is, I think, too technocratic a view of politics and policy. In a representative democracy, programs must have a reasonable level of public support to succeed. The ACA was ultimately designed to be popular - to be a new entitlement that Americans would like. The ACA was designed to create a popular program for which Americans would reward Democrats with political victories, and which could pave the way for further growth of government both in health care (including the holy grail of "single payer," or what used to be called "socialized" medicine) and in other fields. To do this, the program had to be designed to assure that consumers, the substantial majority of whom who already benefitted from outstanding care with unparalleled choice and access, would not find their existing plans and choice of physician disrupted. On this view, the ACA is indeed horribly designed.
Crooks and others who make the claim that this is not a "design flaw" my be correct that the design was intentional, but an intentional design can still be badly flawed. Crooks and other ACA defenders making the argument essentially are saying, "well, Americans were lied to to get them to buy the ACA, but the plan works as intended and soon enough they will realize that it is a good product - at least better than what they had before." This is, in essence, a variation of the Democratic theme from the fall of 2009 and the spring of 2010 - the idea that the law will become more popular over time. It has not proven true. Why not? Because the product is a stinker. It is a bad design. It is flawed.
If I ask my staff to design something that does X, and they design something that does Y, that IS a design flaw, even if it does Y really well, and even if that's what my staff wanted to do. That they try to pawn it off on me by claiming it does X may exacerbate my anger when I discover their product is flawed, but the true flaw is still in the design.
The design flaw in the ACA is based on a conceptual error, a misdiagnosis of the problem. Liberals have acted for 60 years on the idea that American health care delivery must be remade from top to bottom. Most Americans don't really believe that, which is why Democratic proposals for a government run system such as the ACA have long been popular in the abstract but deadly poison to the Democrat party when actually drafted as specific language and proposed for public consumption. Most Americans understand that they have superb health care coverage. They'd like the minority who don't to have the same thing. But they don't want their coverage changed.
Thus, the ACA is a flawed design because it offers the customer something that doesn't meet the customer's specifications. The lying is a problem on its own, and it may be that that's what convinced the consumer - in this case, the voters - to buy the product, but that is not what makes the ACA so unpopular. The failure is indeed in the design.
November 06, 2013
Spousal Tasing Prompted By Gridiron Bet
A Wisconsin man was arrested early today after zapping his wife with a stun gun after winning a bet with her on last night’s "Monday Night Football" contest, police report. According to a criminal complaint, John Grant, a 42-year-old Chicago Bears fan, and his wife Nicole, a Green Bay Packers backer, made a taser wager on the game at Lambeau Field. If the visiting Bears won, the couple agreed, John would be able to tase Nicole for three seconds.
Those are some serious family values! Source
Posted by E. Frank Stephenson at 10:34 AM
November 04, 2013
Hiring at SMU
I'm in the market for a Research Assistant to work with me in the
Please forward to anyone you know who might be interested!
Here's the link to the full job ad.
Posted by Robert Lawson at 02:18 PM
If Looks Could Kill
I saw this on Instapundit--apparently she was handed the book by a state senator.
Posted by E. Frank Stephenson at 09:36 AM
Skipping on Down Ye Old Road to Serfdom
Posted by E. Frank Stephenson at 09:24 AM
A Headline for My Lefty Friends
Posted by E. Frank Stephenson at 09:21 AM
November 01, 2013
Competition Saves Lives--Who Knew?
Part of the abstract of a paper by Martin Gaynor, Rodrigo Moreno-Serra, and Carol Propper in the new issue of the AEJ: Economic Policy:
The English government introduced a policy in 2006 to promote competition between hospitals. Using this policy to implement a difference-in-differences research design, we estimate the impact of the introduction of competition on not only clinical outcomes but also productivity and expenditure. We find that the effect of competition is to save lives without raising costs.
UPDATE: Speaking of competition, George Leef's latest Forbes column argues that competition in teacher preparation (i.e., dropping state licensing requirements) would lead to better teachers.
Posted by E. Frank Stephenson at 06:51 PM
A few things that have caught my eye over the past few days:
1. Markets in everything: Poo-pourri
2. Incentives Matter--Teacher Performance edition
3. You decide, vandalism or civil disobedience? Vandals spray paint over lenses of three speed cameras
4. Good stuff here on the ACA trainwreck:
Posted by E. Frank Stephenson at 02:27 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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