I finally figured out some of the problems I've had with uploading papers to SSRN. It works in Internet Explorer; I haven't been able to do it with Firefox. In any event, I've uploaded two papers about Hurricane Katrina, one under review, the other forthcoming. Finally, with the gracious permission of the journal editors, I have uploaded my review of Benjamin Powell's edited volume Making Poor Nations Rich, forthcoming in the Review of Austrian Economics.

"Sound and Fury: Rhetoric and Results After Hurricane Katrina"
Under Review, Journal of Business Valuation and Economic Loss Analysis

Abstract:

Free markets in capital and labor are essential to rapid recovery from natural disaster. Political and rhetorical responses to Hurricane Katrina included denunciation of “price gougers” in the market for gasoline; the arbitrariness associated with anti-price gouging legislation may create uncertainty that reduces the attractiveness of the investment climate.

"Beliefs, Bias, and Regime Uncertainty after Hurricane Katrina"
Forthcoming, International Journal of Social Economics

Abstract:

This essay explores the relationship between beliefs and economic policy in the context of gasoline prices Hurricane Katrina. Evidence of anti-market bias is identified in polling data, press releases, and legislation, and it is argued that the uncertainty emanating from statutes restricting price gouging may reduce investment in the provision of necessary goods and services after natural disasters.

Greg Mankiw discusses reasons to veto the Farm Bill. Here are two posts from Mike on the biases discussed by Caplan and a debate about agricultural subsidies featured in an issue of the Costco newsletter about a year ago.

Thomas Sowell gets in touch with his inner Bryan Caplan. My favorite passage:

The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains.

Oil companies enjoying record or even obscene profits while we watch the price of gas go up and up and up and up makes for a great morality tale. But Sowell asks an important question about the supposed obscenity of those profits: compared to what? Sure, $40 billion is an enormous chunk of money relative to most sums with which I deal on a daily basis, but Exxon/Mobil's profit margin is 10.82%, which compares favorably with long-run average market returns. By comparison, Google's profit margin is on the order of 25%. Exxon's profit margins are higher than profit margins for most of the firms I looked at on the Business Ethics 100 Best Corporate Citizens 2007 List, but profits as such are nothing to get upset about; if anything, they should be celebrated because they show that the profitable firm is using resources to create something people value.

This comes with obvious caveats about the political economy and public choice considerations in oil markets. However, I'm skeptical of the view that oil companies are manipulating the marketplace. In its "Investigation of Gasoline Price Manipulation and Post-Katrina Gasoline Price Increases," the FTC found that firms up and down the gasoline supply chain are price-takers rather than market manipulators. Conspiracy theories can be fun and international political instability definitely plays a role in determining oil market conditions, but I'm not convinced that there's anything more fundamentally nefarious than the normal operations of supply and demand driving up oil prices, all other things equal.

HT: Greg Mankiw.

Re Bob's recent post, here are the abstracts of two papers on payday or predatory lending. Banning such lending looks like a typical case of government busybodies wanting to feel good rather than actually doing good.

Paper 1:

We define predatory lending as a welfare-reducing provision of credit. Using a textbook model, we show that lenders profit if they can tempt households into debt traps, that is, overborrowing and delinquency. We then test whether payday lending fits our definition of predatory. We find that in states with higher payday loan limits, less educated households and households with uncertain income are less likely to be denied credit, but are not more likely to miss a debt payment. Absent higher delinquency, the extra credit from payday lenders does not fit our definition of predatory. Nevertheless, it is expensive. On that point, we find somewhat lower payday prices in cities with more payday stores per capita, consistent with the hypothesis that competition limits payday loan prices.

Paper 2:

Payday loans are widely condemned as a predatory debt trap. We test that claim by researching how households in Georgia and North Carolina have fared since those states banned payday loans in May 2004 and December 2005. Compared with households in all other states, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same. This negative correlation-reduced payday credit supply, increased credit problems contradicts the debt trap critique of payday lending, but is consistent with the hypothesis that payday credit is preferable to substitutes such as the bounced-check protection sold by credit unions and banks or loans from pawnshops.

I've uploaded a very preliminary version of a paper entitled "Economic Growth and the Entrepreneurial Environment" (co-authored with Lisa Verdon, Florida State University) to SSRN. Comments and suggestions welcome. My co-author will present this paper at George Mason in September and at the Southern Economic Association meetings in November. Here's the abstract:

Corruption supposedly reduces economic development by creating an uncertain contracting environment and by preventing the state from efficiently providing public goods and correcting externalities. However, corruption can be efficiency-enhancing in countries with relatively little economic freedom. Corruption in the military appears to reduce economic growth, while corruption in the educational environment appears to increase economic growth.

I've done some sniffing around about the clothes hanger antidumping tariff. (Previous posts here and here.)

The dumping complaint that led to the tariff was filed by M&B Metal Products Company of Leeds, Al. Here are the thoughts of M&B's president Milton Magnus on the Chinese firms accused of dumping:

"The price they pay for wire is about 30 percent less than what we pay," he said. "They're paying workers 83 cents an hour. Ours, with benefits, are getting $15 to $20 (an hour)."

Ah, yes, the cheap foreign labor bit--of course, lower costs abroad make it unlikely that the Chinese firms have truly dumped (i.e., sold their product below cost). But that's not the real point of this post.

Instead, here's the kicker--M&B has a plant in Mexico. Maybe M&B's plant is located in Mexico for the sunny weather or easier access to tequila, but my guess is that it has something to do with cheap labor. On the one hand, M&B whines about cheap labor in China; on the other hand, it locates a plant in Mexico. That takes Big Onions!

Greg Mankiw writes:

A key question in the design of the system is how those carbon allowances are allocated. Are they given out for free to power companies and other established carbon emitters? Or are they sold at auction so the revenue can be used to reduce government debt, fund public programs, or reduce distortionary taxation? If the allowances are sold, their price resembles a Pigovian tax, which readers of this blog will recognize as the optimal policy response.

I beg to differ. As the Coase Theorem suggests, the method of initial allocation of the carbon allowances should make little difference to the real economic outcome. Even if the allowances are given out for free, they immediately would command a price on the carbon allowance market, and thus any firm that used its carbon allowance would incur a current opportunity cost for doing so. The incentive to reduce the firm's use of carbon would be in place -- just like a Pigouvian tax.

If you gave me the choice, I'd rather give the damned things away because if the government sells off the allowances (or uses Mankiw's Pigouvian tax instead) it will only feed the rent seekers in Washington. Does he really think the new revenue would be used to pay down the debt or reduce distortionary taxes or even fund (useful) government programs? As John Stossel would say: Gimme a break!

In his New York Times Economic View column of 11 May, “When Should the Fed Crash the Party?,” Peter L. Bernstein unfortunately perpetuates a myth based on an almost certainly spurious quotation. He puts in Treasury Secretary Andrew W. Mellon’s mouth, using quotation marks, the declaration that the proper response to the crash of 1929 was: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” We do not, however, have any good reason to believe that Mellon ever spoke those words, or the other words Bernstein attributes to him. The sole and original source of these phrases is The Memoirs of Herbert Hoover (1952), which introduces them with the preamble “Mr. Mellon had only one formula: ”. The sentences in question appear in a passage where Hoover depicts himself as an enlightened economic policy activist in 1929, in contrast to Mellon, whom he depicts as leader of “the leave-it-alone liquidationists”. One must strongly suspect that Hoover was caricaturing Mellon to make himself look good.

Mellon’s public statements, writings, and a recent biography drawing on his papers all belie the caricature. His speeches contain no statement of liquidationist views; rather they urge that the Federal Reserve System should counter crises and “promote stabilization”. Mellon’s views on anti-Depression policy were less activist than Hoover’s. For example, Mellon was understandably not keen on Hoover’s policy of summoning businessmen to the White House to urge them not to cut wages even as product sales and prices collapsed. But Mellon’s views were not those of a one-formula liquidationist. As an ex-officio member of the Federal Reserve Board, he successfully urged the central bank to cut its discount rate after the stock market crash in October 1929, and supported subsequent rate cuts. In November 1929 he recommended tax cuts to stimulate the economy. He supported Hoover’s proposal to increase federal construction spending. Most damaging to Bernstein’s use of (Hoover’s caricature of) Mellon to disparage current-day non-interventionists, Mellon – wisely or not – supported the Administration’s initiative to create a National Credit Corporation, and its successor the Reconstruction Finance Corporation, to lend billions to illiquid banks.

Many well-known economists have perpetuated the myth by treating Hoover's "quotation" of Mellon as authentic. For details see my forthcoming JMCB paper.

As night follows day, it was inevitable that the Commerce Department's preliminary finding of dumping in the market for hangers had disrupted dry cleaners and led to higher prices for consumers. From today's RN-T:

Food prices are rising. Rice is rationed. Politicians are pointing fingers. (OK, that’s not news).

What’s next, you wonder?

Have you looked in your closet?

Clothes hangers are costing more and are in diminishing supply, and Rome cleaners are asking customers to recycle.

The sudden shortage is a direct result of an “anti-dumping” tariff imposed by the U.S. Department of Commerce in March on hangers imported from China.

The tariff, according to Phenix Supply Co, a laundry and dry-cleaning supplier, was imposed “in order to allow United States manufacturing to return to an environment that will allow them to compete and return jobs to this country.”

Marie Sledge, co-owner of Rome Cleaners with husband Shayne, shared a letter from one of the business’s suppliers, Morris & Eckels. It states: “We strongly recommend that our customers implement an aggressive hanger recycling program to supplement the shortage of hangers.”

“Hangers last year at this time were $28 a box, where now they are $56,” Marie Sledge said.

There are 500 hangers per box, she said.

It will take a while for American manufacturers to step up production, Patel said, and there’s no guessing where the price of hangers will land.

Officials at First Baptist Church of Snellville want to pay for your gas and maybe even give your teenager a car.

Actually, they want to entice newcomers and backsliders to their May crusade and they're using ever-rising gas pump prices as a clever draw. And one blessed teenager will drive away with a 2000 Ford Explorer.

From Sunday morning through Wednesday night, each time regulars or religious freshman stroll through the doors to attend a revival, they'll get another chance to win one of two $500 gas cards.

Teenagers will qualify for a drawing Tuesday night for one of 10 car keys. Then, one-by-one those fortunate few will take turns starting the SUV's engine to learn who gets to keep it.

"A lot of folks have gotten excited about this opportunity," head pastor Rusty Newman said.

For decades, churches have tried to entice wayward residents through their doors through spaghetti supers, revivals and summer camps. This a new twist was thought up by James Lee, the church's pastor for senior adults.

Source.

Greg Mankiw has an intriguing post about whether Harvard could or should leave Massachusetts in response to a proposed MA plan to tax large university and college endowments. Mankiw wonders specifically whether the University should create "Harvard South" in another state. I would think Rhode Island would be a natural choice; according to Google Maps, Providence is only about an hour south of Cambridge, and though I've never been there I've heard it's very nice. That raises another interesting question: would colleges and universities be able to shake down state and local governments for subsidies the way pro sports franchises have been able to do? How would Division I sports factor into the bargaining? Given that private schools would have more mobility than public schools--I doubt my alma mater could credibly threaten to move to Atlanta, Seattle, or Los Angeles--how would this change the distribution of resources going into higher education? Perhaps most importantly, how would donors respond? Comments are open if anyone has any ideas (or offers for mortgage refinancing or no-limit Texas Hold 'em).

I gave a speech last night to the Phi Beta Kappa Association of the Mid-South on "Lessons from the Great Depression" and promised my hosts that I would post links to my sources and other resources on DOL. I summarized the received wisdom on the Depression (inept monetary policy) and then we talked briefly about credit expansion during the Q&A. Resources are below. NB: right after I saved this entry the first time, I saw James Hamilton's post from this morning asking "what if we'd been on the gold standard" today. It's now included among the links.

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Matt Ryan explains.

NB--One of the commenters on Matt's post points out that the time people were willing to stand in line for a cheap pizza indicates they value their time at $3-4 per hour. Something to keep in mind next time someone whines that raising the minimum wage is necessary to avoid exploiting workers. Maybe minimum wage advocates should advocate price floors for pizzas.

In the same vein as Art's recent post on cross-price elasticity of demand:

Howard Gendron stopped driving his 28-foot cabin cruiser on Rhode Island's Narragansett Bay two years ago because gas prices were up and his waterborne gas hog sent his fuel costs "out of sight," he says.

But the mechanic had to satisfy his love of water, he says, so he bought a 21-foot Sea Ray with better mileage. "We downsized," says Gendron, 44, of Warwick, R.I.

Even so, the smaller boat was no match for recent gas prices. "We're not even putting it in this year because of the cost of fuel," he says.

Boaters and jet-ski owners are feeling the pinch of rising gas prices. Some are trying to sell their boats. Others are changing their habits. Instead of gunning their engines at high speeds, they're slowing down or drifting.

They're shortening trips or just hanging out in marinas, says Scott Croft, spokesman for the 650,000-member Boat Owners Association of the United States. He calls himself the "poster child" for boaters' reaction to gas prices.

MarineMax, which calls itself the country's largest recreational boat retailer, saw same-store sales fall 28% in the quarter ending in March compared with the same quarter last year. Glenn Sandridge, vice president for marketing, says gas prices don't affect consumer decisions as much as concerns about the overall economy.

Gendron, who has been trying unsuccessfully to sell his cabin cruiser, says both of his boats will sit in his backyard this year. "You cannot give a boat away up here."

I learned from the comments in Steve Horwitz's post on Hayek that today is also the birthday of University of Missouri economist Peter G. Klein. From the Mises Institute's excellent repository of online media, here's Peter speaking on a bunch of topics (scroll down a bit for his talk on "The Economics of F.A. Hayek"). Here are some of his articles published or distributed by the Mises Institute. Here is his website at the University of Missouri, with a link to his work on institutions, entrepreneurship, and the firm. Peter was kind enough to arrange for me to give a talk at CORI in Fall 2005; that led to a fruitful collaboration with Harvey James.

Chicago's city fathers (stepfathers?) have stepped up to save South Side denizens from the obloquy that might attach to buying precription drugs for $4, according to this report.

Wal-Mart got the word from city officials last month that Mayor Richard Daley doesn't want to risk a messy showdown with unions over Wal-Mart—like the big-box store battle of 2006—while Chicago is still in the running as a host city for the 2016 Olympics, according to people familiar with the matter. The International Olympic Committee is slated to make that decision in October 2009.

On this, F.A. Hayek's 109th birthday, Steve Horwitz offers his favorite Hayek quote:

The curious taxsk of economics is to demonstrate to men how little they really know about what they imagine they can design.--The Fatal Conceit, p. 76

Steve offers further comments. I'm giving a talk this evening entitled "Lessons from the Great Depression," and I think I'll make use of Steve's favorite quote.

1. I've really come to enjoy Jill Sobule's performances on TED (probably my favorite website). Last night, I downloaded her "Live at Joe's Pub" show, attractively priced to move at $0.00. The sound quality is great, and it's been a fun listen so far.

2. I took another step toward getting in touch with my inner Tyler Cowen today. Mike and I went to A-Tan's for lunch. I'm certainly no food expert, but we enjoyed it and will probably be back. The wonton soup was especially good, and Mike reported that the hot & sour soup was also excellent. Mike got right to the heart of the my failure to recognize the relevant conditional probabilities in our end-of-meal exchange over fortune cookies:

Me: (reading Mike's fortune) "A shooting star tonight brings good luck tomorrow." So does this mean that a shooting star will certainly appear tonight and then bring you good luck tomorrow, or is it conditional, saying that you will have good luck tomorrow if there's a shooting star tonight?

Mike: It's conditional. It's also conditional on fortune cookies not being a load of crap.

Justin Ross channels David Ricardo re: Chrysler's idea to cap gas prices at $2.99 for three years for anyone buying one of its cars.

Lets say you believe the weighted average of gas prices over the next 36,000 miles of 3 years to remain at $3.61 and you get that $355 in savings for each of the next 3 years. At a 5% discount rate, that is $967 in net present value. We can safely assume then that demand will push the price of a Chrysler buy or lease up around $1,000. However, applying the Winner's Curse from game theory, those who most overestimate the price of future gas prices will be the ones making the actual purchases by out-bidding all others, meaning they will likely pay more up-front than those who would just pay the market gas prices over the next 3 years.

By Mario Rizzo and Glen Whitman, the cleverly-titled "Little Brother is Watching You: New Paternalism on the Slippery Slopes."

Their abstract:

The new paternalism claims that careful policy interventions can help people make better decisions in terms of their own welfare, with only mild or nonexistent infringement of personal autonomy and choice. This claim to moderation is not sustainable. Applying the insights of the modern literature on slippery slopes to new paternalist policies suggests that such policies are particularly vulnerable to expansion. This is true even if policymakers are fully rational. More importantly, the slippery-slope potential is especially great if policymakers are not fully rational, but instead share the behavioral and cognitive biases attributed to the people their policies are supposed to help. Accepting the new paternalist approach creates a risk of accepting, in the long run, greater restrictions on individual autonomy than have been heretofore acknowledged.

I'm listening to Nine Inch Nails' Ghosts I, which they offered for free on their website a few months ago (the rest of the album, Ghosts II-IV, costs money). I was getting ready to write a short post on NIN's price discrimination scheme when I came across this article pointing out that their next album will also be available online for a price of $0.00. It's available now. I'd speculate on the economics of it all but Tyler Cowen already did it last year when Radiohead offered an album online for free. Cowen points out that free music online is a good strategy for artists that get a large share of their income from live performances--Wikipedia says that "on stage, NIN often employs spectacular visual elements to accompany its performances, which frequently culminate with the band destroying their instruments"--and for artists that want to expand their fan bases. I for one have never really been an NIN fan, but I will certainly take them up on their offer of free stuff, and the probability with which I will buy some of their earlier material is now substantially higher.

Afternoon Update: I downloaded "The Slip" (NIN's new album). After one listen, it's certainly worth the price. I enjoyed it, but I think "Ghosts I" is better with a probability of about 0.6 or 0.7, if for no other reason than that it's instrumental and provides decent background music for writing.

If I may....a new essay on externalities.

It may be of interest to some readers here at DoL.

Volvo Promises an Injury-Proof Car by 2020. Yikes! In this driver's personal opinion, most Volvo drivers are already menaces on the road. I hate to imagine what they'll be like when they can drive without risking personal injury!

Personally, I'd reduce accidents (and injuries and deaths) this way:

Related issues:

[1] This idea that increasing safety will cause us to behave more recklessly is generally attributed to Sam Peltzman. Here's a study on safety/accidents/deaths in NASCAR.

[2] Here's a short story about how people would drive if they could do so without risking injury, which was the inspiration for my favorite Rush song Red Barchetta.

[3] Most people I know attribute the steering wheel idea to Gordon Tullock though I've heard also that it came from Armen Alchian. The idea of increasing overall safety by making things more risky is getting some traction. I was just reading a book by a mountaineer in which the author (Joe Simpson of Thouching the Void fame) mentioned the steering wheel concept.

[4] For an application of this idea to mountaineering, see this paper by Clark and Lee.

HT: Dave Reed

On Wednesday the Federal Reserve reduced its target for the fed funds rate to 2.00%, the latest in a series of reductions that started from 5.25% in September 2007. In its April 28 editorial entitled “The Fed’s Bender” (also linked to by Frank Stephenson below) the Wall St. Journal refers these target rate reductions as “easy money,” “easier money,” and “the Fed's decision to open the general monetary spigots”. Normally rate-cutting and monetary expansion do go hand in hand. An injection of new base money shifts the supply curve for fed funds rightward and, given a constant demand curve, drives down the price.

But in the present case, the Fed is not vigorously expanding the monetary base. Here, courtesy the St. Louis Fed, are the data for the adjusted monetary base:

2007-03-01 813.857
2007-09-01 820.020
2008-03-01 825.613

The base is up only 1.4% over the last twelve months, only 0.6% over the last six months. (Above figures are the Board of Governors adjusted base; the St. Louis adjusted base tells the same story.) These numbers suggest that the Fed’s rate adjustments are not driving the market’s fed funds rate down by injecting base money, but have largely been following the market rate down. The demand curve for fed funds must be shifting inward, because the supply curve is hardly shifting outward.

Some of the broader monetary aggregates are growing. M1 is flat. But M2, which has shown a fairly stable velocity in recent years, is up about 7 percent over a year ago. This is consistent with market forecasts of higher price inflation. (MZM is up about 15 percent, but its velocity has been dropping.) Why the M2 money multiplier (M2/base) should be rising in this way is unclear, but the current growth of M2 (or MZM) is not due to Fed injections of base money.

Standard monetary policy rules seem to give a mixed picture. McCallum’s Rule for base money growth, as tracked by the St. Louis Fed, indicates that recent Fed policy has not been very expansionary: recent base growth has been consistent with a price inflation rate of only 1%. On the other hand the Taylor Rule for the fed funds target, with PCE inflation currently running above 3%, indicates that the current fed funds target is much too low to be consistent with 1% inflation, and even too low to be consistent with 4% inflation. But the Taylor Rule, at least in the form tracked by the St. Louis Fed does not incorporate any adjustment for shocks to the demand for fed funds (independent of inflation and real GDP). This may explain why it seems a poor guide at present to inferring the degree of monetary ease.

This example has "Fall 2008 exam question" written all over it.

NB: The "cross-price elasticity of demand" meme in the blogosphere is from Pigou Club founder and Harvard economist Greg Mankiw, who periodically posts on news stories about how people change their consumption in the face of changing gas prices.

Thailand, the world's biggest rice exporter, said it wants to form an OPEC-style cartel with Laos, Myanmar, Cambodia and Vietnam to give them more control over international rice prices.

"Though we are the food center of the world, we have had little influence on the price," Thai government spokesman Vichienchot Sukchokrat said. "With the oil price rising so much, we import expensive oil but sell rice very cheaply, and that's unfair to us and hurts our trade balance."

Laos Foreign Ministry spokesman Yong Chanthalansy said Friday his country would "seriously consider" the idea, saying a cartel would give the five countries "bargaining power."

The hike in rice prices has come amid global food inflation, poor weather in some rice-producing nations and demand that has outstripped supply. Some Asian countries, including India and Vietnam, have contributed to the problem by curbing rice exports to guarantee their own supplies.

Cambodia, which in the past has championed the rice cartel idea, also welcomed the latest proposal and said it was a "necessity" given the current global food crisis.

"By forming an association, we can help prevent a price war and exchange information about food security," Cambodia's chief government spokesman Khieu Kanharith said.

But the rice institute's Zeigler said it would be difficult to apply the OPEC model to rice.

"Rice is grown by millions of farmers in one, two, three hectares (acres) of land. Oil is produced by a few multinational companies in a few countries," Zeigler said. "So I think the differences are so large as to make any comparison between the two wild fantasies."

Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said any rice cartel would have little impact because it would exclude big producers like India and Pakistan.

Source.

From the AJC (emphasis added):

In March, a federal tariff was placed on wire hangers imported from China after the U.S. Department of Commerce found evidence of dumping.

Dumping is illegal and occurs when a foreign company floods the U.S. market with products sold at cheaper prices to try to drive American competitors out of business.

The federal tariff caused Chinese suppliers to reduce their exports, creating hanger shortages and causing prices to rise.

"We preliminarily found dumping," said Brittany Eck, a spokeswoman for the Commerce Department's Import Administration.

When told of the tariff's impact on dry cleaners, Eck said, "We do accept comments from all interested parties." The department will issue its final ruling in June, Eck said.

In the meantime, that global trade drama now reaches into the clothes bins and cash registers of America's dry cleaners.

Won now pays twice as much for hangers than he did last July. Dry cleaners use thousands of hangers, and thousands more end up being tossed out by customers.

The shortage prompted Patel to post a sign in his Marietta business asking customers to return hangers.

Won recently wrote Commerce officials protesting the higher hanger costs. He asked the agency to "lift the taxes on the Chinese hangers," saying they were hurting American dry cleaners.

More importantly, Won said, "This impacts consumers' pockets."

Co-blogger Wilson forwarded me the photo below. I'd suggest a couple of improvments--carve out 50 cents or so for taxes and a dollar or so for Ben Bernanke's debasing the dollar (see the 8th and 9th paragraphs of this WSJ editorial and the accompanying graph).

From CEI's Eli Lehrer:

Sometime before Memorial Day, the United States Senate will consider several proposals to put taxpayers on the hook for "national catastrophe insurance" liabilities that could easily top $100 billion. The proposed legislation, intended mostly to reduce soaring homeowners insurance premiums along the Atlantic seaboard, would damage the environment while likely failing to keep consumers' insurance costs down. It's a terrible idea.

Government-backed catastrophe insurance, also known as "backstopping," would transform the U.S. Treasury into the insurer of last resort for nearly every disaster-prone home in the country.

Thomas Friedman gets off to a good start, in characterizing the McCain-Clinton tax rebate suggestion:

This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

It's downhill thereafter. The rest of the article consists of (1) being shocked that politicians act like politicians, and (2) insisting that we need an "energy policy" that consists of taxpayers dumping loads of money into wind and solar power.

Thanks to the Institute of Economic Affairs. Download it here.

In this groundbreaking work, first published in 1976, Friedrich von Hayek argues that the government monopoly of money must be abolished to stop recurring bouts of inflation and deflation. Abolition is also the cure for the more deep-seated disease of the recurring waves of depression and unemployment attributed to 'capitalism'.

Investor’s Business Daily offers a nice profile of the remarkable economist Ludwig von Mises in their “Leaders and Success” series. Previous honorees in the series include Evel Knievel. One risked his life ... and the other rode motorcycles off ramps.

HT: Steve Hanke

Ohio is about to legislate some 1600 so-called Payday lenders, employing some 6000 workers, out of business.

Highlights of House Bill 545, which passed the Ohio House yesterday and now moves to the Senate:

• The annual interest rate would be capped at 28 percent (down from current 391 percent). Additional fees would be prohibited.

• A person could not borrow more than $500, or 25 percent of the customer's base monthly income. The current rate is $800, with no income check.

• Loan terms would have to run at least 31 days. Current loans are usually two weeks.

• A borrower would be allowed four payday loans per year. There's no current loan limit.

• Internet payday lending would be banned, and illegal out-of-state lenders would have no access to Ohio small-claims courts.

Meanwhile, for local loan sharks in the 'hood, good times they are a comin'!

The local fishwrapper reports that a left-wing think tank in Cleveland wants Ohio to raise taxes:

If the state's economy and budget woes continue to worsen, the group proposes restoring the income-tax rates that were in effect in 2007 across the board. That would raise everyone's taxes and generate an additional $1.164 billion in 2009, the group said.

Keynes is dead my friends.

I've been revising a paper today, and in the process I came across a quote from Tyler Cowen's In Praise of Commerical Culture:

“Books were prohibitively expensive in the so-called ‘good old days.’ In colonial America, in 1760, a cheap schoolbook cost twice as much as a good pair of leather shoes; Smollett’s Complete History of England cost as much as eighty pairs of shoes, six head of cattle, or thirty hogs. An ordinary laborer had to work two days to earn enough money to buy the cheap schoolbook, or 144 days to buy the Smollett. The modern innovations of mass production and marketing have brought down the cost of a paperback to only slightly more than the American minimum wage.”

--Tyler Cowen, In Praise of Commercial Culture, p. 52

This got me thinking about the ongoing debate about the high cost of textbooks. Discussion below the fold. Update of discussion also below the fold.

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I kept warning my students that, despite what they hear, we don't officially know if we're in a recession until the BEA tells us GDP is shrinking. Of course, all that they have heard since January was how horrible the economy is, that we're definitely in a recession, if not poised on the brink of another Depression, that today's generation will live worse than the previous one, etc.

But, ta-da! much like my waistline, the economy isn't shrinking. The 0.6% growth matched Q4's 0.6% growth. The eternal optimist in me remembers that, typically, Q4s are seasonally high while Q1s are usually low, so the fact that 08's Q1 is the same as 07's Q4 implies we're doing better than we thought.

But, leave it to the media to be the eternal pessimist. "Economy still sputtering," says the CNN.com headline. We grew 0.6%, when "Economists surveyed by Briefing.com had forecast a 0.5% gain for the first quarter." So we did 0.1% better than expected, huzzah! I guess doing better than expected is still a bad thing for CNN.

Froma Harrop on smoking in casinos:

Loath to tax the citizenry based on income, many states have increasingly turned to cigarette smokers and gamblers for revenues. Gamblers are often smokers, and both groups tend to be of modest or low income.

So after taxing the daylights out of the working class's cigarettes, states can go for a second helping from the quarters the little people dump into the slot machines. This raises revenues that, in the old days, their better-heeled residents might have had to pay. And the fleeced masses don't know to complain. Bingo, as they say.

And when states ban smoking in all entertainment venues but the casino, they end up securing an especially dependable revenue stream. As public policy goes, this means of taxation is highly unattractive. After all, they are funneling their smoker population into another highly taxed and unhealthy activity. As an added anti-social bonus, they discriminate against other businesses in search of the same entertainment dollar.

[...]

It's so silly that it's almost funny, but many states discriminate among gambling ventures in deciding where people may smoke. They allow smoking at the big casinos while prohibiting it at what's called "little gaming" places that offer bingo (for example, churches or American Legion posts), video lottery terminals, keno or pari-mutuel gambling. Charities that depend on money from bingo nights complain that these smoking bans have sent their customers to the big casinos.

Which sounds right if, as the casino industry says, 70 percent of gamblers also smoke. Hand them a drink (big taxes on alcohol, too), and what do you have? Your tax base.

I am happy to announce that Unleashing Capitalism (edited by Russ Sobel with help from Matt Ryan and yours truly), has won a 2008 Sir Antony Fisher International Memorial Award.

From the announcement:

Covering a broad range of issues – revamping the tax code, judicial selection, strategy for economic growth, education, property rights, eliminating government waste and burdensome regulatory system – author Russell Sobel demonstrates that free market solutions can make West Virginia more
dynamic and prosperous.

A Fisher Award judge remarked, “This book outlines the theoretical basis for a free market economy and to an unusually high degree succeeds in showing how these principles can be employed to explain the West Virginian predicament, as well as pointing to the concrete reform proposals in the book.”

My one complaint is they make it seem like it was not an edited volume. Thanks to Bill Shughart, Justin Ross, Ed Lopez, and all the other contributors for their excellent work.

Some musings from today's crop of stories on CNN.com...

A new justification for our "stimulus checks" is to "offset the high prices we're seeing at the gas pump and at the grocery store," so says W. Funny, but I teach my class that when consumers have more income they buy more, increasing demand, which pushes prices up. I'd be curious to see how increasing demand will offset or solve high prices.

This link to a story on high gas prices and their effect on college student provides some head-scratchers. 1) Count of how many trucks you see in the video. Count how many hybrids you see in the video. Compare. 2) At 0:22 of the story, check out the guy studying in his car. Who studies in their car? I'm sure there is a library nearby or, I don't know, an air-conditioned building with a chair inside. 3) The students complain that they are on "limited budgets" and can't afford gas. I'm betting 95% of them have cell phones. 4) Students can now use the "expensive gas" excuse to cut class. At least that sounds somewhat legitimate compared to other excuses I've heard ("Didn't your aunt already die, on the day of the previous test? Oh, this is ANOTHER aunt").

The best $4 sandwich in Bowling Green, OH is the gyro from a take-out place called South Side Six. On Thursdays the price is $2. This is public information, so it was clearly a lapse in my thinking that led me there yesterday evening expecting a bargain. The little place was packed, and the excess demand for $2 gyros was predictably rationed by waiting. A hungry student can eat two gyros for dinner, so that’s a $4 saving. Guess how long the marginal BGSU student (hourly after-tax wage $8) will wait to save $4 and you have a fairly accurate estimate of how long I had to wait.

BTW, today at 4pm in Student Union 316 on the BGSU campus I'll be giving the annual Stranahan Lecture. Topic: The Intellectual Origins of the New Deal, chapter 4 of a book I'm writing on the history of economics as told through the great policy debates of the 20th century. Come one, come all. Refreshments will be served!

Here's a hint from Mike Lester of the Rome News-Tribune:

The abstract of a paper (ungated verson here) by Jonathan Gruber and Kosali Simon in the Journal of Health Economics:

Ten years ago, Cutler and Gruber [Cutler, D., Gruber, J., 1996. Does public health insurance crowdout private insurance? Quarterly Journal of Economics 111, 391–430] suggested that crowd-out might be quite large, but much subsequent research has questioned this conclusion. Our results using improved data and methods clearly show that crowd-out is still significant in the 1996–2002 period. This finding emerges most strongly when we consider family level measures of public insurance eligibility. We also find that recent anti-crowd-out provisions in public expansions may have had the opposite effect, lowering take-up by the uninsured faster than they lower crowd-out of private insurance.

Something to keep in mind when candidates prattle on about universal coverage--what they really mean is universal government coverage.

I think we all use co-blogger Frank's example about the "free bikes" at Berry College in our classroom discussions on private property. An interesting project would be for students to compare the predicted results of a Berry Bike experiment with this:

"TH!NK about is a separately franchised car sharing entity and a sustainable alternative to personal car ownership. TH!NK about will provide a fleet of TH!NK citys, centrally placed at a number of unmanned stations around the city. The vehicles will be available for rental on an hourly basis. Customers book online, via their mobile phones or simply pick up a TH!NK city at the nearest station. A personal membership card, equipped with cordless technology (RFID) will provide access to the vehicles. Drivers return their TH!NK citys at the agreed time and receive a bill at the end of the month."

I've been on the lookout for itty-bitty cars since seeing the smart fortwo in Germany last year. Of course, the TH!NK about campaign does try to infuse property rights, since the cars won't be free. Still, it will be interesting to see the results.

Until recently I spent a week each spring lecturing at Queen’s University in Belfast. Northern Ireland, charmingly, is one of the last jursidictions (Scotland and Hong Kong are the others) that still allow private commercial banks to issue notes. Even more charmingly, the Lanyon building at QUB where I lectured (among other things, on the benefits of private note issue) was pictured on the back of the local notes of the Bank of Ireland.

Not for long, today’s news reveals:

On the 400th anniversary of the original licence to distil whiskey granted to the Bushmills area in 1608, the Bank of Ireland today marked the moment with the launch of new banknotes that honour the brand's heritage by featuring the famous Old Bushmills Distillery in Co Antrim. …

The new notes will replace the existing series which came into circulation in 1990 and feature an image of Queen’s University, Belfast. The old series will gradually be withdrawn but will continue to circulate alongside the new notes until that is completed.

On one of my trips I visited the Old Bushmills Distillery -- and participated in a whisky taste-test. It was an educational experience. (Good thing someone else was driving that day.) If the Lanyon building has to disappear from BOI notes, I can’t think of a more suitable replacement.

Here's Yochai Benkler discussing mass collaboration on the web. One thing I find interesting is that the gains from mass collaboration appear to be primarily gains accruing to leisure. Comments are open.

This past weekend I gave 2 talks at George Mason University at the invitation of FEE and the GMU Econ Society. I had a great time talking about my papers "Freedom, Entrepreneurship, and Growth" (with Russ Sobel) and "Good for the Goose, Bad for the Gander: International Labor Standards and Comparative Development" (with Pete Leeson). Many thanks to Geoffrey Lea of FEE and Astrid Leigh of GMU for inviting me and for the 50 plus students who came out on a Saturday afternoon to hear six hours of lectures.

My colleague Emily Chamlee-Wright recently was awarded the Hayek prize from The Fund for the Study of Spontaneous Orders. From the press release:

The Fund for the Study of Spontaneous Orders at the Atlas Economic Research Foundation announces that Professor Emily Chamlee-Wright, the Elbert H. Neese Professor of Economics at Beloit College and an Affiliated Senior Scholar at the Mercatus Center, George Mason University is the recipient of its fourteenth Hayek Prize. These $10,000 prizes are awarded on an occasional basis to scholars whose work, informed by the Austrian perspective of methodological individualism, has pursued in significant ways areas outside the normal fields of academic economics. In Chamlee-Wright’s case the Fund cites in particular her work at the intersection of studies of entrepreneurship, philanthropy, the civil society, and market activities through her work on female entrepreneurs in local markets in Zimbabwe and Ghana and on voluntary disaster relief and reconstruction efforts after the devastation of hurricanes Katrina and Rita. This latter project she is currently pursuing as principal investigator at the Katrina project of The Mercatus Center.

Chamlee-Wright did both her undergraduate and graduate studies at George Mason University where she worked closely with the late Don Lavoie, professor of economics and friend of liberty. Chamlee-Wright credits Lavoie with inspiring in her the central question that guides her scholarship: How do societies achieve a level of complexity, coordination, and social intelligence that far surpasses the capacity of individual human intelligence? She has been a Claude Lambe Fellow, an Earhart Fellow, and a Kellogg National Leadership Fellow. She is the author of two books and is working on a third, The Learning Society: Social Coordination in Post-Katrina New Orleans. Among her many articles (some available for study on her web home page), and ones of particular interest to the Fund that convey the general approach of her work, include: “Local Knowledge and the Philanthropic Process: Comment on Boettke and Prychitko (Conversations on Philanthropy, 2004), “Indigenous African Institutions and Economic Development” (Cato Journal, 1993), “Savings and Accumulation Strategies in Urban Market Women in Harare Zimbabwe” (Economic Development and Cultural Change, 2002), “Church Provision of Club Goods and Community Development in New Orleans East” (a Mercatus Center Working Paper), and “Signaling Effects of Commercial and Civil Society in Post Katrina Reconstruction.” (forthcoming, International Journal of Social Economics, 2008).

In this last article she writes, “Though most post-Katrina redevelopment plans assume that a large scale government response is the only way to overcome the collective action problem, qualitative analysis presented here suggests that the resources found within and signals emanating from commercial and civil society represent an alternative paradigm for how communities can rebound in the wake of disaster.” From her work we can see that a similar argument can be made about economic development in non western cultures and in the effectiveness of private philanthropy.

An interesting letter to the editor in the April 21, 1908 NYT offers advice that would have been useful for many people, say, about five years ago:

This craze of home owning is widespread, and is especially rampant among naturalized Americans. It is one of the first impulses that they get after reaching this country. The reason is clear. The possibilities of home owning on the Continent are remote, with the result that the ownership of a home is a cherished longing....the children of many a family have grown up in want owing to the insatiable longing of the parents to own the home that they live in. They save nothing by it, but on the other hand run the risk of incumbering themselves with unsalable property. They have the delusion that they are not paying rent; but they are paying rent and probably more than they can afford.

The advice that I would give is to select a house or flat well within one's means and put the balance of the savings regularly in the bank. If an opportunity in another part of the country then comes one will not find his movements hampered by the necessity of maintaining an unprofitable investment. The American people are essentially nomadic. They cannot be otherwise, with new regions to exploit, new towns to found, and new opportunities to grasp.

It is my firm conviction that no man should own his own home until he has prosperously passed the age of sixty years.

The last statement I would not agree with, but the "advice" paragraph is spot on.

That's the title of the superb talk IJ's Valerie Bayham gave today at Berry. Lots of good stuff about absurd licensing laws on florists, hairbraiders, and casket sellers. Thanks Valerie!

Faithful readers of DoL know that most of the folks who post here also attend the annual meeting of the Association of Private Enterprise Education ("APEE"). Also in attendance this year was Peter Wood, the anthropologist who is also the Executive Director of the National Association of Scholars. Earlier this week he posted his impressions of this year's meeting on NAS's recently redesigned website. (For additional info on APEE, click here.)

A Swiss watch maker has hired a modern banknote designer and a passport printer to engineer anti-counterfeiting features for its luxury watches. Features for the watch dials will include engraving only visible under UV light, micro-text only visible under magnification, and security films.

The Swiss watch industry federation “estimates that about 40 million counterfeit Swiss watches are produced around the world annually, almost twice as much as the number of orignals produced in Switzerland.”

Enthusiasts for forcing the replacement of our US dollar bill with a dollar coin should consider Montreal Gazette columnist Jay Bryan’s plea to the Canadian government, which already issues C$1 and C$2 coins (nicknamed the “loonie” and the “toonie”) and is currently considering a C$5 coin.

What's really important is for the government of Canada to keep in mind - as it so obviously forgot with the introduction of the $1 and $2 coins - that a change like this should only come about when it's clear that it will be beneficial to most Canadians. Governments exist to make life better for citizens, not vice versa.

The loonie and toonie were unpopular when they were imposed, and many Canadians still resent their weight and bulk. Rightly so, since the replacement of lightweight, convenient banknotes with heavy coins actually represented a big step backward for users.

… the widespread acceptance of paper money over the past three centuries was motivated largely by the convenience it offered. Now much of that convenience is being taken away, not because citizens will receive some significant offsetting benefit, but mostly for the convenience of the federal government.

After all, the alleged savings represent such an infinitesimal smidgen of federal revenues that it’s unlikely any Canadian will notice any benefit from them.

On the other hand, the inconvenience of lugging around a heavy lump of change represents a very tangible cost to Canadians, one that never goes away. Strangely, our government seems to have ignored this in its calculations.

… As any Canadian tourist can attest, it's a pleasure to walk around in the U.S. with less metal in your pocket.

As I’ve said before, if we would leave the issue of both coins and notes to the private marketplace, as Scotland and Northern Ireland today do for notes, we could have a genuine market test as to whether the convenience benefits of $1 notes (lesser pocket weight) justify their higher production costs as compared with more durable but bulkier coins. As long as we leave the note-coin decision to government, the best we can hope for are dubious cost-benefit studies.

Although the blog The Perfect Substitute has been mentioned on DOL before, I wanted to draw your attention to it again. Good friend and co-author Justin Ross * has recently joined the blog, resulting in a flurry of interesting posts by all members of the blog. See, for example, the posts on "Which Economic Theory is the Most Underappreciated?", "What is the Optimal Level of Gold-Digging?," and "Campus Shootings and Corner Solutions."

* A January 2008 WVU economics Ph.D., Justin starts as an Assistant Professor of Public Finance in the School of Public and Environmental Affairs at Indiana University-Bloomington - a top 3 Public Affairs program according to U.S. News and World Report. I mention this not only to congratulate Justin, but to point out the types of jobs one can get with a WVU Ph.D. and an active research program. Students, take note!

I just can't shake my distaste for this entire "how happy are you?" literature. It just seems so metaphysical to me. Some of this stems from my economist bias in favor of revealed preference instead of survey responses, but it goes deeper than that. (After all I use survey data a lot in the EFW index.)

I think one of the basic problems in this literature is that it treats happiness as some kind of stock of wealth that once created can be stored for the future. But I think of happiness as a flow not a stock, and I think of it being a flow like electricity in that it can be created but (for all intents and purposes) not stored. Seriously, how much electricity does America have? This is a silly question at a fundamental level. We can talk about how much electricity we can generate over time t, but how much we have? Well it just doesn't make any sense to ask that question. Electricity is a flow not a stock.

I think happiness, whatever that is, is like this. I create happiness in my live in a myriad of ways, but like electricity, the feeling goes away very soon after I create it. I don't know how to save the feeling for later. So I have to create more happiness all the time. I do think that if I'm rich I can create many more such moments than if I'm poor. But at any point in time, such as when I'm filling out a silly survey asking my how happy I am, there is no reason why I should be happier as a rich person than as a poor person.

Btw, the same might be said of hunger. In the U.S. at least, I'm sure poor people would report to being hungry no more often than rich people. We all get hungry, and we all satisfy that hunger by eating food. Then darn it, we get hungry again, and have to eat again, and so on. Poor people may satisfy their hunger at McDonalds and rich people may do so at the local bistro. But they both satisfy the hunger, but most poor people would prefer the bistro over McDonalds.

I'm rambling now, but something about the whole happiness business just doesn't sit right with me.

Yesterday Tyler linked to this article about the Easterlin paradox (that money doesn't make people happier) that is being seriously challenged by more recent research. Here's my take:

Maybe Easterlin is correct (and I don't necessarily think he is) that relative income determines happiness more than absolute income. But in earlier decades when people were all so much more parochial in their outlook, people tended to compare themselves to people in their own country. Rich Japanese or Americans in the 1960s didn’t feel unusually happy because they compared themselves against other mostly similarly rich Japanese or Americans. But in recent decades our frame of comparison has shifted to a more cosmopolitan outlook. More and more people compare their status against people around the world and here Japanese and Americans look great relatively speaking. Conversely, poor Africans might not have been too unhappy in the old days because they didn’t know or think much about the rich west. But now they see satellite images of us and feel relatively poorer even though they are absolutely richer…oh and less happy. So basically, the changing evidence on the Easterlin paradox is picking up the impact of globalization on people’s frame of reference.

Just a thought...comments are open.

... inflation is always and everywhere a monetary phenomenon. Michael Pettis, writing in the WSJ Asia, explains why it is wrong to attribute inflation to rising prices for a specific good such as food or gas. My principles classes will be seeing this article next semester. Perhaps someone should forward a copy to Ben Bernanke.

In this month's Atlantic, Lisa Margonelli writes:

The U.S. economy wastes 55 percent of the energy it consumes, and while American companies have ruthlessly wrung out other forms of inefficiency, that figure hasn’t changed much in recent decades. The amount lost by electric utilities alone could power all of Japan.

A 2005 report by the Lawrence Berkeley National Laboratory found that U.S. industry could profitably recycle enough waste energy—including steam, furnace gases, heat, and pressure—to reduce the country’s fossil-fuel use (and greenhouse-gas emissions) by nearly a fifth. A 2007 study by the Mc­Kinsey Global Institute sounded largely the same note; it concluded that domestic industry could use 19 percent less energy than it does today—and make more money as a result.

Economists like to say that rational markets don’t “leave $100 bills on the ground,” but according to McKinsey’s figures, more than $50 billion floats into the air each year, unclaimed by American businesses. What’s more, the technologies required to save that money are, for the most part, not new or unproven or even particularly expensive.

When I hear about $100 bills left on the ground, I think "regulation." Bingo:

The Clean Air Act has succeeded spectacularly in reducing some forms of air pollution, but perversely, it has chilled efforts to reuse energy: because many of these efforts involve tinkering with industrial exhaust systems, they can trigger a federal or local review of the plant, opening a can of worms some plant managers would rather keep closed.

Much more problematic are the regu­lations surrounding utilities. Several waves of deregulation have resulted in a hodgepodge of rules without providing full competition among power generators. ... [M]any industrial plants cannot themselves use all the electricity they could produce: they can’t profit from aggressive energy recycling unless they can sell the electricity to other consumers. Yet by­zan­tine regulations make that difficult, stifling many independent energy recyclers.

The Stevenson-Wolfers study on growth and happiness has been discussed by a lot of economics blogs. Wolfers himself will be blogging about it at Freakonomics for the next few days.

Here are Stevenson and Wolfers on CNBC. Their segment begins at about 1:22.

HT: Justin Wolfers

One of the first headlines on my iGoogle page inspired a small set of review questions for econ 101. They're posted below the fold; if you you have any comments or suggestions, please let me know. Otherwise, feel free to use and abuse them as you see fit.

Read More »

Erstwhile DOL-er Mike Munger led an interesting seminar yesterday in Fred Miller’s graduate philosophy class here at Bowling Green State University (where I’m hanging out this semester). Discussion centered on the perplexing question raised by Mike’s must-read essay “They Clapped”: Why do so many people support laws banning trades between informed consenting adults, specifically, laws against “price gouging”, prostitution, and human organ sales? Munger’s hypothesis: objections to the trades are actually displaced objections to the distribution of pre-trade endowments. As if banning the trades would somehow make life fairer.

As a very frequent Delta flyer I've followed with interest the merger talks with Northwest that were just finalized. The gubmint is probably going to raise all sorts of red flags. And there are union worries on NWA's side.

The thing is these airlines have both been in bankruptcy once. If they don't merge (heck even if they do) it is likely that one or both will file again and this time it won't be clear that either will even survive as a company. The bottom line is that contraction is going to occur, either in the form of an orderly merger or a disorderly liquidation. If the gubmint stops the merger, you all can blame them some years (months?) down the line when you get stranded after one or both suddenly stops operations.

As for the NWA pilots union, the issue as I understand it, is that they're on average less experienced than DL's pilots. They're worried that when the two groups of pilots are merged, they'll lose relative position on the all-important seniority lists that determine who gets the best assignments. (Btw, doesn't it make you feel good that the pilot up there got that flight, not because he was the best for the job, but because that was the best flight he could get given his seniority status?)

Fuel prices may be the catalyst but this deal makes sense anyway as I've been saying for years. DL has great Atlantic routes and NWA has great Pacific routes. DL specializes in the south and NWA in the north domestically. But on both margins they compete head to head for certain routes in the middle of the country and also on Atlantic routes thanks to NWA's extensive code sharing with KLM/AirFrance. (I also think a DL/NWA/KLM/AF deal makes sense as that would add an extensive intra-European market.)

The airlines are naturally trying to reassure employees and various affected municipalities. My prediciton: DL's hub at Cincinnati and NWA's hub in Memphis are goners. (Memphis's Interstate BBQ is the best airport joint in America btw. It's near gate B14--look for the long line of NWA pilots!)

The 2008 Sir John M. Templeton Fellowships Essay Contest

Top Essays to Be Awarded $2,500 (Students) or $10,000 (Untenured Faculty)

The Independent Institute is pleased to announce the 2008 Sir John M. Templeton Fellowships Essay Contest. Cash prizes will be awarded to outstanding college students—and untenured “junior” faculty—from around the world through a competitive essay contest. The essay topics change annually. This year’s topic pertains to property rights and human rights:

UCLA economics professor Armen Alchian once wrote, “For decades social critics in the United States and throughout the Western world have complained that ‘property’ rights too often take precedence over ‘human’ rights, with the result that people are treated unequally and have unequal opportunities. Inequality exists in any society. But the purported conflict between property rights and human rights is a mirage—property rights are human rights.” (Source: “Property Rights,” in The Concise Encyclopedia of Economics.

Are property rights human rights? How are they related? What are their similarities and differences? If property rights are human rights, why have they enjoyed fewer legal protections and intellectual champions than other human rights?

A panel of three judges will look for the best essays related to the topic—original essays distinguished by their clarity, rigor, and eloquence. The essays need not be technical or demonstrate hyper-specialized scholarship, but they should be serious in content, tone, and style. Held annually, the Sir John M. Templeton Fellowships Essay Contest (a continuation of the Olive W. Garvey Fellowship Competition) was created to encourage and reward scholarship pertaining to the meaning and significance of economic and personal liberties.

STUDENT DIVISION:

College students up to the age of 35
First Prize: $2,500
Second Prize: $1,500
Third prize: $1,000

FACULTY DIVISION:

Junior faculty members up to the age of 35 and not yet tenured:
First Prize: $10,000
Second Prize: $5,000
Third Prize: $1,500

ELIGIBILITY: 1) Student Division: Any student 35 years or younger enrolled at a recognized college or university anywhere in the world. 2) Junior Faculty Division: Untenured college or university teachers, Assistant Professor or higher, 35 years or younger.

LENGTH: Student essays must be 1,500 to 5,000 words long. Teacher essays must be 5,000 to 8,000 words long.

DEADLINE: May 1, 2008

MORE INFORMATION, including complete eligibility requirements, a suggested reading list and examples of past winning essays can be found here.

Paul Krugman makes an interesting point: it's "political poison" to criticize small-town values, but for some reason it is perfectly acceptable to criticize "big-city" values or suggest that somehow the values of urban Americans are "out of touch" with the "real America." Curious. And I'm definitely going to visit the Tenement Museum the next time I'm in New York. Meanwhile, here's Bryan Caplan on the amenities of urban living; in particular, the people.

There was lots of blogging about the NYT report of increasing joblessness among prime age males; e.g., Don Boudreaux and Mark Perry.

Here are some findings from Laurence Kotlikoff and David Rapson:

--For 30-year-old couples earning $20,000 the marginal tax rate on an additional dollar earned is 42.5 percent ....

--At age 45, couples earning $30,000 a year face a higher marginal tax rate (41.9 percent) than do those earning $200,000 a year (35.9 percent).

--At age 60, couples earning $10,000 a year face a marginal tax rate of 50.9 percent ....

In fairness, I should point out that Kotlikoff and Rapson's findings have stronger implications for hours worked than for the decision to enter the labor force. For some combinations of age, children, and marital status (see their figures I, II, V, VII, and VIII) Kotlikoff and Rapson find low or even negative (presumably because of the EITC) MTRs at the $10,000 level of earnings. By contrast, the high MTRs at the $20,000 of income level and above do provide a strong disincentive against more hours of work.

BTW, Larry Kotlikoff will be speaking at Berry next fall. Alumni, friends, and retired colleagues might find it a good occasion to visit campus. Stay tuned for details.

This article makes some good points about the prospects for universal health insurance, as opposed to health care.

The first is that such a distinction needs to be made. After all, what we call health insurance is no such thing; it is prepaid medical care. But, as Kellerman says, "The assumption seems to be that insurance – rather than the service delivered by doctor to patient – is the important commodity."

As for implications:

[A]ny middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.

The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection." But even the Mafia doesn't stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture....
[...]
[T]he consequences of any insurance-based health-care model, be it privately run, or a government entitlement, are painfully easily to predict. There will be progressively draconian rationing using denial of authorization and steadily rising co-payments on the patient end; massive paperwork and other bureaucratic hurdles, and steadily diminishing fee-recovery on the doctor end.
[...]
A few highly technical and complex procedures that need to amortize the purchase of extremely expensive hardware will be out of reach for any but the wealthiest patient. For that extremely limited category, insurance might work. A small percentage of indigent individuals won't be able to afford even low-cost procedures. For them, government-funded county facilities are the answer, because any decent society takes care of the weakest among us. But a hefty proportion of health-care services – office visits, minor surgeries – would be affordable to most Americans if the slice of the health-care dollar that currently ends up in the coffers of insurance companies was eliminated.