Wednesday, April 26, 2006

File this under: Well thought out government programs

To what lengths would you go to secure a free gallon of gas? Thanks to (gasp!) an unintended consequence of the public sector, some drivers in California simply strand themselves and wait for a free gallon to be provided by John Q. Taxpayer.

My daily drive to and from campus here in Morgantown requires less than a gallon of gas daily-- I wish we had a program like this. On the margin, it probably wouldn't cost me that much more in taxes, I'd get my gas paid for so long as I didn't venture far from home, and the legislation wouldn't push West Virginia any lower on the economic freedom lists since, well, we're already at the bottom.

We have a lot of foolish laws here in West Virginia. I think it's time that some of them benefit me.

Tuesday, April 25, 2006

That pesky global warming

Good times at the recent American Meteorological Society's 27th Conference on Hurricanes and Tropical Meteorology. As it turns out, global warming is causing more hurricanes. While this isn't entirely different than saying colder weather causes temperatures to fall, the real debate, of course, comes in what is causing the global warming. Is it increased greenhouse gases or just a natural cycle in the Earth's temperature?

I'm not convinced either side has made a convincing argument. I have to admit, though, that it seems like every time someone wants to engage me on this issue, they are of the (usually quite strong) opinion that greenhouse gases are the guilty culprit. I make it a personal goal of mine to steer the debate such that I'll admit greenhouse gases might be playing an important role in global warming if they'll admit that greenhouse gases might not be playing any role at all. (Well, either that or bringing up the fact that a good segment of the world isn't dreading global warming at all.)

Try it yourself-- it's harder than you'd think!

Monday, April 24, 2006

The best bargaining chip?

In a fun study in Nature, researchers in Belgium have found that showing sexy pictures to high-testosterone males reduces their bargaining vitality in the ultimatum game. The interesting line comes at the end-- "Since a few coins is better than no coins at all, men thus become more economically rational after exposure to lingerie or sexy women," he says.

Of course, the alluring aspect of the ultimatum game is that player's don't act rationally. If they followed the blackboard, you'd see nothing but the smallest offers from Player 1-- a single penny-- and have them be immediately accepted by Player 2. Should Player 1, after viewing the latest Victoria's Secret catalogue, decide to accept $2.50 of $10 as opposed to $3, is he acting any more rationally? He's accepted an offer closer to the accepted rational outcome, but he's still acting irrationally according to the definitions of the situation. I'm not sure there are degrees of rationality here-- not when you've solved the problem beforehand and are looking for a specific result.

Nonetheless, the next time I'm playing poker against a particularly aggressive adversary, I'll make sure to bring the latest in pictorial bliss-- I may be able to steal a hand or two.

Saturday, April 22, 2006

Don't Sweat Sweatshops

I was inspired to write another letter to the editor of the San Jose State daily newspaper, The Spartan Daily. The article reported on a lecture given by an ex-sweatshop worker, Carmencita "Chie" Abad, who now promotes campaigns to ban purchase of sweatshop goods on college campuses. (If you like this letter, you may enjoy this paper written by Ben Powell and I).

Dear Editorial Staff,

Erin Hull’s well-written piece " ‘Made in U.S.A.’ not always sweatshop free, speaker says" lacked only one thing – another perspective on the issue. From Paul Krugman on the left to Walter Williams on the right, economists across the political spectrum agree that there are benefits for poor people from sweatshops in developing countries. One such benefit is that sweatshop wages often provide a higher than average standard of living for that country; the sweatshops mentioned in the Northern Mariana Islands are no exception.

According to estimates in the World Bank Indicators Database, workers in the Northern Mariana Islands earn an average of $3,256 to $10,065 a year. Working only 40 hours a week for $3.75 an hour, the wage Abad reported, leads to an income of $7,800 per year. This income is more than double the lower estimate and nearly as high as the upper estimate. If workers put in as many hours as Abad claims they do, "14 hour days, seven days per week", then they’ll make $19,110 per year. This is nearly double the upper estimate of the average income and nearly six times the lower estimate! Sweatshop jobs are some of the most rewarding in the area.

Sweatshops provide a better standard of living than most people in the Northern Mariana Islands are able to enjoy. If, as Abad hopes, college students stop buying products manufactured in sweatshops, workers will lose good jobs and have a substantially lower standard of living. Plans to improve the lives of the poor in developing countries should not include programs that will lower the worker’s incomes.

David Skarbek

Tuesday, April 11, 2006

I, mint juleps

In the spirit of Leonard E. Read's I, Pencil, consider the thousand-dollar mint juleps that will be sold at the upcoming Kentucky Derby. With mint from Morocco, ice from the Arctic Circle and sugar from the South Pacific, it's a testament to specialization and world trade.

Which got me to thinking: How much does the U.S. interfere in the good natured desire to sell a $1,000 mint juleps at the Kentucky Derby? Enter the Official Harmonized Tariff Schedule of the United States, a 2716 page behemoth by our friends at the United States International Trade Commission, which outlines exactly which markets the U.S. chooses to get its fingers into.

Here's the recipe for mint juleps; water, sugar, mint, bourbon and crushed ice. My water bill goes to a government run agency. Sugar actually has its own chapter in the Tariff Schedule. Bourbon, as alcohol, has been excised taxed for years. Ice could be treated as water, though imported ice has a tariff level of .26 cents per liter (heading 2201.10.00 of the tariff schedule, for those keeping score at home, which seems to imply that ice for consumption is taxed while other ice is not).

Mint is an interesting story. As it turns out, there's a United States-Morocco Free Trade Agreement (UMFTA)-- remember, the mint for the thousand-dollar mint juleps is from Morocco. Now normally, as per 1211.90.40 of the Tariff Schedule, imported mint is taxed at 4.8% of its imported value if manufactured (crude or non-manufactured mint slides by Uncle Sam uncharged). But due to the UMFTA, manufactured mint from Morocco is duty free. So maybe we're observing some substitution effects, from other dutied mint to non-dutied Moroccan mint. Let's hear it for the United States government and their desire to let the Moroccan mint market persist unfettered.

I'm not sure if there's a better example of government inefficiency than the Official Harmonized Tariff Schedule of the United States.

(My favorite line concerning the UMFTA: "Originating goods under the terms of the United States-Morocco Free Trade Agreement are subject to duty as provided for herein.")

Monday, April 10, 2006

Nigeria stamps out another functioning market!

Evidently, the apple in Nigeria doesn't fall far from the tree. In short, Nigerian soccer refs can now accept bribes from clubs so long as it doesn't change how they would otherwise call the game. It seems like an implicit admission that the soccer bribery market was functioning quite well. Considering Nigeria's place in the murky depths of the Economic Freedom Index, the elimination of any functioning market is something that Nigeria seems to have down pat.

My take on this is that rent-seeking breeds rent-seeking. Nigeria finds itself near the bottom of every corruption index I can find; here is one from the Kurtzman Group; here's another one from Transparency International. If you're in a corrupt regime for long enough, you come to learn that the only way to get what you want is via rent-seeking. Granted, the incentive to follow the shaky rules isn't there, but if the MLS were suddenly imposed on Nigeria, would the bribing refs suddenly stop? Not likely.

Real Madrid looks to improve their team with better players; sure enough, the institutions within la Liga are much more sound. The cost of bribing a Spanish ref, considering the punishment, would be far higher than in Africa. The question is this: If Real Madrid were to play one match against a Nigerian club in Lagos, would they partake in bribing the refs?

Friday, April 07, 2006

Get in line for some swine

The Citizens Against Government Waste have recently released their annual and utterly enjoyable Congressional Pig Book, a survey of pork barrel spending by the U.S. government. Taxpayers footed a $29 billion bacon bill in fiscal 2006; some comments:

- In nominal terms, only California and New York get more pork than Hawaii. What's in Hawaii that's costing $482 million in 2006?! And they got even more in 2005!

- Alaska is a force when it comes to pork. There's just no two ways to look at it. They can go toe to toe with anyone even in nominal terms, and when you figure their population is less than 700,000, their per capita figure is through the roof. No one's even been close since 2000. Hurricane Katrina's budget impact finally brought them back to the pack, but it's got to be something in the clean Alaskan water that breeds rent seeking.

- I've finally found a list in which West Virginia isn't last. West Virginia is gettin' in while the gettin's good-- to the tune of $131.58 per person. Just think-- if that money went right to the populus, the per capita income would go up by about half a percent. Draw your own conclusion on any of a number of margins there.

- They have a section on the oinker awards, which are particularly hilarious pork allocations, but I've yet to find a state that you can't pull up a list of pork comedy. Some choice West Virginia ham: $160k for poultry litter composting, $100k for the Mason County Tourism Mural Project, $50k for sidewalk enhancement, $750k for Multiflora rose control (fear the Floribunda), and $160k for feed efficiency.


A step back for West Virginia

Occasionally, good things happen in our little state of West Virginia. For example, eminent domain legislation, though imperfect, was recently signed into law. But it seems for every step in the right direction, the Mountain State takes three or four backwards. Enter the state's recent passage of House Bill 4023, which calls for a two-step increase in the minimum wage to $7.25 an hour by the middle of 2008. I like to think of West Virginia as being the caboose of the freedom train, and bills like this simply put a few more train cars between us and the rest of North America.

Interestingly enough, everyone has a bone to pick with the bill. Those in favor of it feel that the bill's scope is too narrow; only 2,000 of the state's 20,000 minimum wage workers would be affected. After all, if you're going to have legislation, isn't the idea to have an effect with the laws you pass? I might even agree on that margin. As John Wooden used to say, "Don't mistake activity for achievement"-- even suppporters of the Legislature's decision are calling them on it.

On the other side of the issue, those who have taken Econ 101 know that increases in the minimum wage do nothing but handcuff companies' ability to be profitable and reduce aggregate employment. Any bill to 'increase the minimum wage' can and should be modified to instead read 'increase unemployment.' Nobel Laureate James Buchanan said it most effectively: " self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores."

Sadly, this isn't over and done with. Larry Matheny, secretary-treasurer of the West Virginia AFL-CIO, the state's largest labor-related interest group, has proclaimed that "[i]t's a shame. It's a shame, but we'll be back." Yes, they will be back. They will be back to keep West Virginia at the bottom of the economic freedom list, the bottom of per capita income, and the bottom of general resident well-being. I guess when you're at the bottom of the list, you can't have any legislation that reduces your relative position, right?