Blockquote X

X = Ron Coase:

It is a striking – and for that matter depressing – feature of economics that it has such a static character. It is still the subject that Adam Smith created. It has the same shape, the same set of problems. Now of course we’ve made improvements, we’ve corrected some errors, we’ve tightened the argument, but one could still give a course based on Adam Smith. In some respects it would be better; in some respects it would be worse. But we could base what we say on Adam Smith.

Stealing as Charity: The Distributional Analysis is Interesting but Incorrect

From CNN:

Tim Jones, parish priest of St Lawrence and St Hilda, told his congregation in York, northern England: "My advice, as a Christian priest, is to shoplift."
[...]

He continued: "I do not offer such advice because I think that stealing is a good thing, or because I think it is harmless, for it is neither.

"I would ask that they do not steal from small family businesses, but from large national businesses, knowing that the costs are ultimately passed on to the rest of us in the form of higher prices."

If you read the entire argument in context, the shoplifting aspect is not very interesting or even relevant. People who have exhausted all other means might have to resort to stealing if it means survival, and they don't need a priest to tell them that. What is interesting is his distinction between large and small businesses and how "we" pay the social costs.

In essence, his argument is that an individual in a democratic society which has not elected for "enough" benefits should, when at the point of deciding to steal, impose those costs in dispersed form back onto that society rather than concentrating them on any particular individual. That is a really creative argument, but it leaves something to be desired. (It's also an "eye-for-an-eye" argument, which is a bit strange coming from a priest.)

That which is to be desired is the misplaced view that it is a free lunch for society when a small family business fails due to shoplifting. Competition is competition, no matter how large. There is no reason, ex-ante, to think that smaller businesses failing due to shoplifting would have a smaller impact on market prices than large businesses incurring higher costs that are passed on to consumers. Both cases disperse costs far and wide, and perhaps a few individuals will incur a disproportionate share.

Congrats to Michael Cox!!

For successfully defending his dissertation, titled "Exploring the Dynamics of Social-Ecological Systems: The Case of the Taos Valley Acequias." My favorite paragraph was the one that, in my view, was very representative of the Bloomington School's influence:

An additional source of disturbance has been the implementation of state-level policies mandating that the New Mexico Office of the State Engineer (OSE) quantify all water rights and regulate them in accordance with the principle of prior appropriation; a principle which, while underlying the acequias’ claims to their historically used water, may also undermine their common property institutional arrangements. This mandate has been implemented in Taos through a formal water rights adjudication suite referred to commonly as the Abeyta case (State of New Mexico ex rel. State Engineer v. Abeyta and State of New Mexico ex rel. State Engineer v. Arellano), the purpose of which is to quantify and prioritize all of the individual-level water rights in the valley.

Michael is one of our Public Affairs PhD students out of the Workshop on Political Theory and Policy Analysis.

Here is a sample of his work that has a R&R at JEEM. Another chapter of his dissertation has an R&R elsewhere.

Here you can read Elinor Ostrom discuss Michael's scholarly contributions in the context of the Bloomington School in a piece for the Lincoln Land Institute.

He is on the job market this year, so if you are hunting for a candidate please take a look at him. His dissertation committee consisted of Elinor Ostrom (chair), JC Randolph, William Bloomquist, Tom Evans, and myself.

Centralized Planning is a Plan for Failure

Chris Coyne passes along this gem which colorfully illustrates "the plan" for Afghanistan.

Does Corporate Tax Incidence Increase Progressivity?

Yes, according to a new working paper out of the Tax Policy Center by Benjamin Harris:

This paper reaches three related conclusions. First, because wage and capital income are highly correlated, higher-income taxpayers will pay a relatively larger share of the tax, regardless of whether the corporate income tax falls on labor or capital. Second, even if capital income is broadly defined to include income accrued to tax-preferred retirement accounts, this conclusion is little-changed. Third, the incidence of the corporate tax has only a modest effect on overall progressivity simply because the tax collects only a small fraction of federal revenues.

The paper uses the Tax Policy Center microsimulation model to estimate the progressivity of the corporate tax—and the tax code in general—under the alternative assumptions that capital bears 20 percent, 50 percent, or 80 percent of the corporate tax burden. Under all three assumptions, average corporate tax rates generally rise with income, indicating progressivity.

2009 Gus Rankings: Bowl Edition

As there was only one game last weekend between FBS schools, here are the final Gus Rankings for the regular season. I neglected to put the numbers next to the schools noting their actual rank, but here are the previous week's rankings that should be reflective of this week's rankings.

One big advantage of the Gus Rankings would seem to be its ability to compare teams across conferences. If there only were a natural experiment to test this...oh wait, the NCAA offers 35 games that match teams from different conferences. Let's see how Gus does!

(Justin talked about college bowl games here , and here is a similar experiment I did two years ago.)

The typical format for picking bowl games seems to be to assign a point value to each game and see how many points you can accumulate. You are to give every game a point value between 1 and 35, and you can only use each value once. Naturally, the games you feel most strongly about you will give the most points. The key, of course, is to define "feel most strongly about."

We'll do it as follows. Each team has a point total for the season; the team with the most points in the bowl matchup will be predicted as the winner, and the difference in points will determine the confidence in the game.

So, for which bowl game is Gus most confident? That would be the Chick-fil-A Bowl, with Virginia Tech (42 points) lining up against Tennessee (12). Gus also feel pretty confident about the Gator Bowl, with West Virginia (32) facing Florida State (4).

Least confident? Gus is opinion-free concerning the Holiday Bowl, that has Arizona (28) squaring off against Nebraska (28), and isn't terribly confident about the BCS Championship Game, Alabama (75) and Texas (74), the Texas Bowl, Missouri (18) and Navy (17), and the Champs Sports Bowl, Miami (FL) (33) and Wisconsin (32). We'll use the wisdom of the crowd to break any ties-- 76% of the CBS Sportsline crowd likes Nebraska, so we'll go with them, and we'll follow the same methodology to assign confidence levels for bowls that have the same difference in points.

The first game is this afternoon so you'll need to act quickly, but feel free to pit your strategy against the all-knowing, simple-calculating power that is the Gus Rankings.

Will New Regulations Hurt Non-Profits?

From Reason:

Charged with regulating "financial advice" of all kinds, the massive mandate of the CFPA includes "educational courses," such as the financial literacy program offered by the Girl Scouts, where girls earn badges for learning how money works.

Assuming you think 1,279 pages [PDF] of new regulations on financial institutions are a good idea, Rep. Barney Frank (D-Mass), chairman of the House Financial Services Committee, and his coauthors had no choice but to include nonprofits in the mix. A loophole for all nonprofits begs today's for-profit financial advisers to become tomorrow's nonprofit financial advisers—who just happen to have close ties to a bank. Money has a way of flowing around rules (remember campaign finance reform?) so the bill's authors couldn't let nonprofits off the hook.

But there's another dynamic at work as well. In addition to going soft on drugs, crime, and their wives, congressmen now have to worry about appearing to go soft on nonprofits, thanks to the political and financial mess created by the nonprofit ACORN earlier this year.

I would like to add that my belief has increased since this post that the tax treatment of non-profit status is excessively burdensome for non-profits. For a non-profit group to maintain their tax exempt status, there are a variety of fund raising activities they cannot engage in. For example, a museum must be very careful in their management of any gift shops or cafeterias that they might use for a source of funding. It is quite easy for such an operation to wind up violating their tax exempt status, and many avoid doing so for that reason.

Exempting non-profits from taxation is just another part of the charade that corporations and businesses pay taxes they are levied. They suffer the burden of taxation, yes, but that is quite independent of the manner in which they deal with the IRS. Drop the charade and with it the taxation of business income. Then we can get a better look at what non-profits can accomplish.

A Curious Take on College Education

I can't match Will's economics rap songs (or his developing the phrase "Juicing the Mitchell"-- Will's had a solid first year here at TPS), but I do send along this bit on Pell Grants. Note that the author would certainly fall into the skill accumulation camp, not the signaling camp, for a college education. It's an interesting, if ill-reasoned, take on college education as a whole. My thoughts:

1. The author is skeptical about the ability to determine which colleges are doing well While I agree that it's not exact, I think the situation is nowhere near as dire as the author makes it out to be. Even if it's broad, US News & World Report gives a one-stop picture of colleges and provides a rudimentary metric by which to compare them to each other.

2. The author attributes the inability to track good outcomes with the staggering rise in the price of a college education. I don't see the link. Though I've seen research that attributes over half the rise in the price of a college education to forcing colleges to follow a multitude of regulations.

3. Reputation effects are huge for colleges with regards to which graduates do well and where employers will look in the future based on those previous graduates.

4. Assume colleges were strictly skill accumulation academies. If that's the case, there's a massive information opportunity to provide that information in a condensed, easy to access form. Last I checked, there were a lot of people buying a lot of rankings just like these. See #1.

5. It's puzzling to me why choosing a college based on reputation is bad. I suppose it's because I realize that there's a large signaling process in earning a college degree from a reputable school. Though the author even says "reputations are based on...admissions selectivity..." I mean, sweet crispy Christ, he's right there and still can't see it.

6. In the eyes of the author, the value of college is a function of its ability to teach students. Research is excluded, and even the possibility of teaching being a function of research is ignored.

7. In the broad sense, the intimate that students (and parents) are making information-blind decisions concerning one of the most important choices in their life is a bit juvenile.

This article reaffirms the proposition that anything with "Democracy" in the title-- organization, publication, etc.-- is likely to be heading in the wrong direction.

Keynes vs. Hayek (Word to your mother.)

In what is arguably the most even representation of two viewpoints in the entire history of news reporting, Russ Roberts debates Lord Skidelsky on the merit of adopting Keynesian policy at present. The video also features the Keynes vs. Hayek rap song Roberts wrote (I'll go ahead and apologies for my ridiculous title).



If anyone spots the full version of the rap video, I'd greatly appreciate an email. It does not appear to be available at present.

Growth is Good for the Holidays

Christmas will no doubt be a little tough for some families this year. ReasonTV reminds us that it will on large part be better than Christmas in the 1970s, thanks to the wonders of economic growth.

The Chinese Government vs the E-Bike

According to this Yahoo! video news report (Hat Tip: Jason Oberle), the Chinese government has resurrected regulations that are 10 years out of date to push consumers away from e-bikes. The e-bikes are produced by the private sector, and critics say this is a move to protect their state-owned competitors.

The story also makes an interesting point that many of the e-bike consumers were looking to switch away from cars, so there may be an environmental consequence as well.

Blockquoting X

X = Paul Samuelson:

[...] there is no sight in the world more awful than that of an old-time economist, foam-flecked at the mouth and hell-bent to cure inflation by monetary discipline. God willing, we shan't soon see his like again.

And, in honor of Samuelson, today's edition of Blockquoting X will be a double feature. This one comes from the 1970 edition of his textbook:

"What good does it do a black youth to know that an employer must pay him $2.00 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"

[HT: David Henderson @ Econlog]

Structural vs Atheoretical Econometrics

Forthcoming in the Journal of Econometrics, by Michael Keane:

In this paper I attempt to lay out the sources of conflict between the so-called “structural” and “experimentalist” camps in econometrics. Critics of the structural approach often assert that it produces results that rely on too many assumptions to be credible, and that the experimentalist approach provides an alternative that relies on fewer assumptions. Here, I argue that this is a false dichotomy. All econometric work relies heavily on a priori assumptions. The main difference between structural and experimental (or “atheoretic”) approaches is not in the number of assumptions but the extent to which they are made explicit.

If I can return to this after finals week, I will try and add some comments regarding the content. For now, I just suggest that it is worth a read and some thought.

Paul Samuelson Passes Away

He was 94.

Congrats to the Duquesne Econ Majors!

A hearty congratulations to the economics majors at Duquesne who recently finished up their senior theses. All of the topics were great, here's a slice of the ideas:

Forecasting's Final Destination: How Well Can Individuals Predict Their Own Death?

Fix or Float: Why Do Countries Choose Different Exchange Rate Regimes?

How Do Psychological Clues Alter Our Discount Functions?

Does State Monopoly Control on Alcohol Deter Alcohol-Related Traffic Fatalities?

The Impact of Legislative Term Limits on State Infrastructure Spending

Moral Hazard in Baseball: Does Relief Pitching Increase Hit Batsmen?

Great work! At some point in the (hopefully) near future these should be online for all to read.

Juicing the Mitchell: BCS Edition

Anyone up for a little morning Juice? Today's installment, boldface is mine:

The Subcommittee on Commerce, Trade, and Consumer Protection will consider a bill that would allow the Federal Trade Commission (FTC) to prohibit any bowl game from calling itself a "national championship" unless the game is "the final game of a single elimination post-season playoff system." The subcommittee is expected to vote on the proposal on Wednesday after a line-by-line consideration of the bill.

"With everything going on in the country, I can't believe that Congress is wasting time and spending taxpayers' money on football," Bill Hancock, the BCS executive director, said in a phone interview with The Associated Press. "We feel strongly that managing of college sports is best left to the people in higher education."

All considered, we here at TPS feel strongly that managing sports is best left to those in Congress.

As a side note, I don't like the default response of "we want to fix this and we're going to do it through regulation." Why not do it through the following: Universities are nonprofit entities, which means they get favorable tax status on a wide swath of income-generating activities. If we're going to coerce schools into acting a certain way-- not justifying the action-- why not threaten to remove their favorable tax position? I think the schools would respond as desired, they wouldn't end up any different on their bottom line (as separate from a different bottom line from a playoff vs. a BCS system) since they'd ultimately maintain their current tax position, and we wouldn't have the troublesome side effects inherent in regulation. Note the teeth of the bill:

The bill would give the FTC the authority to regulate the college football postseason with the power to obtain injunctions and to assess huge fines against any organization that promotes a "national championship game."

You don't think someone could find a way around that? What about calling it the "Game to Decide the Best Team in College Football" instead? Maybe that still falls under the expanding jurisdiction of the FTC but you get my drift.

Not that taxation or regulation is ever a desirable outcome, but given the choice, I'd go for a more evenly applied tax code than shoveling on more regulation. Splitting hairs, perhaps, but I don't like the default position.

UPDATE: The relevant subcommittee moved the bill forward this morning.

An Optimistic View of Taliban Pay

CNN:

"There is no set pay scale, but by our intelligence, they are paying the equivalent of about $300 a month and that is higher than we are paying Afghan army or police," McChrystal told the Senate Armed Services Committee, where he testified on Tuesday.
[...]
"In coordination with the Afghan government, we just almost doubled Afghan army and police training [pay]. It is in parity now. It is less than $300 a month but it's much closer," he told the committee.

"Almost doubling" indicates prior pay was in the neighborhood of $150 a month. It's no surprise then that the Afghan Security Forces have suffered from corruption charges and desertion– especially in the face of higher Taliban pay.

Anyone else find the news that the Taliban pay more than the Afghan Security Forces somewhat encouraging?

I do. The reason is because it gives us a clue about the direction of the compensating differentials. Like any organization with scarce resources, the Taliban probably only pays the competitive wage it needs to get the people they want. When the people they want are looking for employment, the Taliban finds itself needing to pay double the ASF to retain and attract. In other words, at the margin people would rather work for ASF than the Taliban (admittedly for reasons that are not necessarily ideological).

Again, I consider this good news because it revises my priors. True, the observed pay of the ASF may not match the actual compensation because of corruption and bribery, and so it could be that pay is roughly equivalent. However, corruption and bribery of ASF employees is not new information, as I think we all had a pretty good handle on the fact that this was occurring.

More Moral Portfolio Theory: Ethical Consumption Edition

From Slate:

But new research by Nina Mazar and Chen-Bo Zhong at the University of Toronto levels an even graver charge: that virtuous shopping can actually lead to immoral behavior. In their study (described in a paper now in press at Psychological Science), subjects who made simulated eco-friendly purchases ended up less likely to exhibit altruism in a laboratory game and more likely to cheat and steal.

In an experiment, participants were randomly assigned to select items they wanted to buy in one of two online stores. One store sold predominantly green products, the other mostly conventional items. Then, in a supposedly unrelated game, all of the participants were allocated $6, to share as they saw fit with an anonymous (and unbeknownst to them, imaginary) recipient. Subjects who had chosen items from the green store coughed up less money, on average, than their counterparts. In a second experiment, participants were again assigned to shop in either a green or conventional store. Then they performed a computer task that involved earning small sums of cash. The setup offered the opportunity to cheat and steal with impunity. The eco-shoppers were more likely to do both.

Also, I would argue that voting is a type of "ethical consumption."

Markets in Everything: Prison Gifts

If you're feeling the Holiday Spirit for those naughty kids who don't anticipate Santa coming by on December 25th, you can order a prison gift package for a special someone incarcerated at the Men's Central Jail in Los Angeles (the largest jail in the world). "LA Gift Pack #6" is guaranteed to make an inmate feel loved this Christmas season!

Hayek Caricature

Tonight I googled "Hayek Caricature" in hopes of finding more pictures like the one above (from Cafe Hayek). Instead, I got this. Imagine my embarrassment.

I'll take this as a sign that I have officially lost touch with the outside world.

Too Poor to Not Be Audited by the IRS

Seattle Times:

It all started a year ago, when Porcaro, a 32-year-old mom with two boys, was summoned to the Seattle office of the Internal Revenue Service (IRS). She had been flagged for an audit.

She couldn't believe it. She made $18,992 the previous year cutting hair at Supercuts. A few hundred of that she spent to have her taxes prepared by H&R Block.

"I asked the IRS lady straight upfront — 'I don't have anything, why are you auditing me?' " Porcaro recalled. "I said, 'Why me, when I don't own a home, a business, a car?' "

The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.

"They showed us a spreadsheet of incomes in the Seattle area," says Dante Driver, an accountant at Seattle's G.A. Michael and Co. "The auditor said, 'You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle."

And "Getting by" means what?

Hat Tip: Kipesquire

The Benefits of Identity Theft

Here's a bit from CNN on the "hidden costs of identity theft." It got me to thinking-- if we do a cost-benefit calculation, are we overstating or understating the costs? I think it's the latter.

Let's go through the costs. The individuals in the story had a particularly rough go of it-- credit cards, cars and even houses all against their once good name. Any direct fiduciary responsibility that trickled back to the couple and any losses due to compromising credit scores are certainly costs born the victims. The point of the story is that there's an emotional side to the matter as well-- indeed, that's a also a cost.

I'd imagine the couple is probably taking some proactive action to prevent any further harm. This, also, is a cost of identity theft-- think about a business that has to spend money on doors and locks at the warehouse. Those are resources that can't move into the productive process-- ergo, more costs. A wide range of people incur this cost due to the possibility of identity theft-- you don't need to be a victim to feel this one.

Online companies know that potential customers are concerning with the security of their websites; they go to great length to emphasize the safety of the shopping experience. My question is this: Could it be possible that the preemptive security measures taken by online companies get more people to shop online than if the entire identity theft issue had ever come up?

It seems a bit foolish to write that just now, but let's consider the following: There exists Option A, something you've never heard of, or even if you have, you haven't considered it seriously but would nonetheless enjoy. There exists a similar Option B, something you also haven't heard of or hadn't seriously considered but would still enjoy, but suddenly you hear that not only has Option B once had problems, there have been significant strides to mitigate the problem. Wouldn't that seem-- rightly or wrongly-- to take some of the risk out of Option B? I think you could make the argument that Option B might, all said and done, see a bit more activity due to the problem and its solution. And that effect, whatever its size, has to be viewed as a benefit of identity theft.

So it's my thought that we're overstating the impact here. I'm curious if anyone else has a take on the issue.

2009 Gus Rankings: Week 14

Ahead of tonight's BCS Selection show, here are the Gus Rankings for Week 14. Boise made a strong move to the #4 spot, and Florida fell only two spots to #3. At this point, assuming Alabama and Texas make the title game, the winner would take the Gus Rankings Championship Trophy.

Gus still favors Iowa over Penn State; I think the Paterno effect is overrated, and that aside, it's tough to take Penn State over Iowa when they lost at home to that very team.

Nerding Out

I really enjoyed this Arnold Kling comment on a recent MR post:

Suppose that the credibility of a scientist is a function of two variables: (1) the evidence he offers; and (2) the strength of his beliefs. I am willing to allow the partial derivative of (2) to be positive and to stipulate Tyler's argument that faking data is a signal of strength of beliefs. But the partial derivative of (1) is much stronger, and fake data enters with a negative sign.

In other words, C=f(E,B), with the first partial derivatives being positive. But, I think the real interest being expressed here is in the nature of the second derivatives, especially the cross partials:

Fundamentally, what are the signs of the off-diagonal elements? As a general rule the Hessian Matrix is symmetric, but would that makes sense in this particular case? The signs on the diagonal elements are interesting too...are there increasing, diminishing, or constant returns to credibility in either evidence or beliefs?

Piratical stock exchanges

They're not The Invisible Hook's pirates, but they're just as interesting. Check out this excellent piece on the present-day pirates from the Financial Post. Some good bits:

In Somalia's main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate.

...

It is a lucrative business that has drawn financiers from the Somali diaspora and other nations -- and now the gangs in Haradheere have set up an exchange to manage their investments.

...

"Four months ago, during the monsoon rains, we decided to set up this stock exchange. We started with 15 'maritime companies' and now we are hosting 72. Ten of them have so far been successful at hijacking," Mohammed said.

"The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials ... we've made piracy a community activity."

...


"The district gets a percentage of every ransom from ships that have been released, and that goes on public infrastructure, including our hospital and our public schools."

...

"Ransoms have even increased in recent months from between $2-3 million to $4 million because of the increased number of shareholders and the risks," he said.

...

"I am waiting for my share after I contributed a rocket-propelled grenade for the operation," she said, adding that she got the weapon from her ex-husband in alimony.

"I am really happy and lucky. I have made $75,000 in only 38 days since I joined the 'company'."

Excellent piece. By the way...alimony in stateless Somalia?!

2009 Gus Rankings: Week 13

Here are this week's Gus Rankings. Texas keeps the top spot, but should relent the position next week to the winner of Florida and Alabama regardless of their performance. The winner of the SEC title game adds 11, compared to Texas' potential 9 point gain, and both Florida and Alabama stand to gain an additional point if Florida International wins their game against Florida Atlantic.

Random fun fact: There are no one-loss teams in the Gus Rankings, nor in I-A college football.

At this point, the four BCS at-large teams, according to Gus, are the Florida/Alabama loser, TCU, Boise State and Iowa (with Texas, Oregon and Cincinnati winning their respective games). If those teams win, I do think those are the four that will be selected. Of course, that's a big if when dealing with 20-year olds and a lot of pressure. Check back next week to see how it all shakes out. But at this point, Gus predicts the following:

Championship: Alabama/Florida winner vs. Texas
Rose: Oregon (Oregon State) vs. Ohio State
Fiesta: TCU vs. Iowa
Sugar: Alabama/Florida loser vs. Boise State
Orange: Cincinnati (Pittsburgh) vs. Georgia Tech

Gus would likely suggest Cincinnati for an at-large position if they lose--taking Iowa's spot--though I (surprisingly) haven't heard much on this margin from those in the know.

Should be interesting to see how it all falls!

File this under: Regulation of the day, pointless

Does the idea of contracting a debilitating skin condition from allowing un-sterilized Chinese fish eating away at the dead skin on your feet keep you awake at night? Don't worry, the government is here to protect you.

As a side note, I wonder what the correlation between the labels "Regulations" and "Bad Economics" is?

How to Increase Social Welfare by Not Voting

Suppose you and your spouse are both voters with opposite political views. As a result, on election day you both show up to the ballot box and simply cancel each other out. Regardless of how you both valued the alternative outcomes, if one always cancels out the other while each incurring the cost of voting, this is a net social loss. If you and your spouse could simply agree to not vote, you would not incur said cost and improve social welfare.

If you vote, or plan to vote in the next election, you could similarly improve social welfare by finding another voter who would otherwise cancel your vote out and find a way to similarly ensure that you both abstain from voting in the next election. Perhaps you could both unregister to vote at the same time or maybe write a contract that requires your political opposite to compensate you if they register to vote.

If these transaction costs are lower than the costs of voting, you have yourself a net increase in social welfare. The less likely you are to be the median voter, the greater the social savings will be. In other words, the further in advance you know who you're voting for, the more benefit you'll confer to the world by just staying home with your new friend.

Perhaps a entrepreneur can arrange a website to lower the transaction costs and help political yangs find their yins.

The Effect of Newspaper Entry and Exit on Electoral Politics

That's the title of Jesse Shapiro and company's latest effort on media, available at NBER.

We use new data on entries and exits of US daily newspapers from 1869 to 2004 to estimate effects on political participation, party vote shares, and electoral competitiveness. Our identification strategy exploits the precise timing of these events and allows for the possibility of confounding trends. We find that newspapers have a robust positive effect on political participation, with one additional newspaper increasing both presidential and congressional turnout by approximately 0.3 percentage points. Newspaper competition is not a key driver of turnout: our effect is driven mainly by the first newspaper in a market, and the effect of a second or third paper is significantly smaller. The effect on presidential turnout diminishes after the introduction of radio and television, while the estimated effect on congressional turnout remains similar up to recent years. We find no evidence that partisan newspapers affect party vote shares, with confidence intervals that rule out even moderate-sized effects. We find no clear evidence that newspapers systematically help or hurt incumbents.

It seems that the existence of a news source is the primary factor; additional newspapers don't have a big impact, and the emergence of radio and television seem to mitigate the impact of newspapers on presidential races (though not Congressional races-- I wonder if there exists, or will exist, a good media substitute for local newspaper coverage). Perhaps most importantly, the partisanship of the newspapers don't have an end-of-the-day impact on the favored party's outcomes.

Interesting work from extremely capable folk.

2009 Gus Rankings: Week 12

Here are this week's Gus Rankings. Texas jumps to the top spot, followed by Alabama at #2 and Florida and TCU tied at #3. Some thoughts:

- It's fun to see who controls their own destiny for the top spot prior to bowl games. Of course, no one can directly control their own destiny-- your score will fluctuate based on whether teams you have already beaten continue to win (and if teams you have lost to continue to lose, though these top 4 haven't lost to anyone). To this end, within-league teams are unlikely to have a large impact; most of these teams play pretty balance schedules within the league, so if two teams play each other that say, Alabama, has defeated, Alabama will get a point since one of them has to win. What it comes down to is the teams outside of your conference performing well. Florida has Troy and Florida International, Alabama has Virginia Tech, Florida International and North Texas, Texas has Louisiana-Monroe, Wyoming, UTEP and Central Florida, and TCU has Virginia, Clemson, and Southern Methodist.

- However, even though you don't have direct control over your score, you do have control over beating the remaining teams on your schedule. Here's how many points the remaining teams stand to gain directly from beating their remaining opponents:

Texas - Texas A&M (6 points), Nebraska (8 or 9 points, depending on their performance vs. Colorado) for a best possible increase of 15 points.

Alabama - Auburn (6 points), Florida (10 or 11 points, depending on their performance vs. Florida State) for a best possible increase of 17 points.

Florida - Florida State (5 points), Alabama (10 or 11 points, depending on their performance vs. Auburn) for a best possible increase of 16 points.

TCU - They only play New Mexico and stand to gain 1 point for doing so.

Alabama looks to have the best direct shot at it, but Texas' opponents listed above have (in my opinion) a much better shot at winning their respective games, which would erode the direct advantage Alabama has. It's going to come right down to it, Art!

File this under: Assorted Links, Malaysian

I've happened across what I believe to be a Malaysian news site, bintulu.org. The English may be spotty at times, but check out these (what appear to be reputable) news stories:

- The Cuban government is offering penile implants. TINSTAAFL has never been validated so strongly. Insert your own jokes here...equity/efficiency, from each according/to each according, incentives and information, etc.

- There's a market for personalized license plates in Malaysia.

“For example, the number 1 in Kuala Lumpur goes for between RM60,000 and RM80,000 while the same number in Malacca would go for RM35,000 to RM45,000.” The digit 1 is always the highest priced number in any state, followed by the digits 2, 3 and 8.

One Malaysian ringgit is about 0.3 US$, so these are sizable prices. The piece mentions one particular plate that went for over $60k; the per capita income of Malaysia is about $3300, so the plate went for 18 times average annual income. Scaled to America, that would put the most lucrative license plate at nearly $600,000. Were there to be a market or license plates in this country-- and the associated status that comes with such a market-- I could imagine highly public high income earners shelling out that much money for said plate.

The article mentions that the numbers are sold through "public tender"; I'm guessing that's some form of auction, though the bit also mentions about numbers with the highest price which could either confirm or refute the auction guess depending on how you want to read it.

- Three to four percent of Malaysian children of school-going age don't attend school. This seemed remarkably low to me; this data about Grade 1 intake rate, if accurate, would confirm that.

Bias in College Basketball Referees

Here's a bit talking about a new paper talking about bias in college basketball referees. In particular:

- The probability of a foul being called on the visiting team was 7 percent higher than on the home team.

- When the home team is leading, the probability of the next foul being called on them was about 6.3 percentage points higher than when the home team was trailing. The professors also cited an earlier study that concluded there were more calls against teams ahead in games on national TV versus those ahead in locally televised games. Calling fouls against the leading team tends to keep games closer, the studies said.

- The bigger the difference in fouls between the two teams playing, the more likely it was that the next call would come against the team with fewer fouls. When the home team had five or more fouls than the visiting team, there was a 69 percent chance the visiting team would be whistled for the next foul.

I haven't seen a copy of the article itself, and while bottom two statements take some effort to be put forth accurately, the top one speaks plainly to an issue worth looking at. 365 games is admittedly small but it's a great start for a wide-scale investigation. I'd be curious to see at what point that home advantage dissipated-- smaller D-I basketball? D-II or D-III? High school? Middle school?

The Mystery of Yawning

I knew earlier in my life, either through someone telling me the fact of it or just passing along an old wives' tale, that we didn't know why we yawned. Well, we still don't know. It seems to serve a behavioral purpose more than physical one; the information on those with autism or schizophrenia was interesting. I also wasn't aware that you don't yawn while lying-- that in itself opens up a pandora's box of possibilities.

An interesting read.

The Right to Hang (Your Laundry)?

Story here:

PERKASIE, Pennsylvania (Reuters) – Carin Froehlich pegs her laundry to three clotheslines strung between trees outside her 18th-century farmhouse, knowing that her actions annoy local officials who have asked her to stop.

Froehlich is among the growing number of people across America fighting for the right to dry their laundry outside against a rising tide of housing associations who oppose the practice despite its energy-saving green appeal.

Although there are no formal laws in this southeast Pennsylvania town against drying laundry outside, a town official called Froehlich to ask her to stop drying clothes in the sun. And she received two anonymous notes from neighbors saying they did not want to see her underwear flapping about.

"They said it made the place look like trailer trash," she said, in her yard across the street from a row of neat, suburban houses. "They said they didn't want to look at my 'unmentionables.'"

Froehlich says she hangs her underwear inside. The effervescent 54-year-old is one of a growing number of Americans demanding the right to dry laundry on clotheslines despite local rules and a culture that frowns on it.

[...]

Florida, Utah, Maine, Vermont, Colorado, and Hawaii have passed laws restricting the rights of local authorities to stop residents using clotheslines. Another five states are considering similar measures, said Lee, 35, a former lawyer who quit to run the non-profit group.

Do the 6 states that have already passed laws against clotheslines have anything in common? That is a very diverse group.

While states are getting in on the action, it seems primarily that private homeowners associations are the primary conduit here. It brings up the hairy issue of distinguishing between clubs and government. It is hard for me to see it as coercion since that meant there was a contract you had to agree to ex-ante in order to buy the house, but the same can be said of any local government rule (or pirate ships for that matter).

I take very seriously the externality concerns in this story. While I can not find it in me to object to someone hanging their laundry, others might feel it equivalent to someone standing nude on their front lawn. The Coasian/Bloomington school in me thinks that this should be resolved over a pie among neighbors rather than in the courts.

(Hat Tip: Jason Oberle for the story.)

Back to the Future II

False alarm....the hover-board has not yet made it to the shelves. However, this week saw the release of Tony Hawk's Ride for the Wii and Xbox360. The board comes equipped with motion sensors that allow you to control the game by pushing off for speed, tilting the board and shifting your weight to steer and do tricks.

According to Michael Mandel, the current outlook of economic growth does not reflect cutbacks in R&D spending. "That's because the official statistics are not designed to pick up cutbacks in "intangible investments" such as business spending on research and development, product design, and worker training. There's ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation."

In Peter Boettke's analogy, the success of capitalism (whereby the ultimate goal of business is to meet consumer demands) is an ongoing race. If the innovation of Schumpeter and the free-trade of Adam Smith can outpace government policies that stifle innovation, economic growth will occur.

If one believes the predictions of Back to the Future 2 (1989), Americans could possibly be enjoying the fruits of capitalist innovation of hover-board technology by 2015. Innovative consumer successes such as the Tony Hawk Ride, while amazing accomplishments, are suggestive of the illusive counter-factual -- what level of wealth and prosperity could people enjoy if the government were not allowed to participate in the race? What types of technologies are resources being diverted away from with government bailouts, stimulus, and inflation?

If the hover-board example seems trivial, consider the new Cato policy analysis by Glen Whitman and Raymond Raad. They note that

"health care issues commonly considered most important today — controlling costs and covering the uninsured — arguably should be regarded as secondary to innovation, inasmuch as a medical treatment must first be invented before its costs can be reduced and its use extended to everyone."

As Kenneth Rogoff has stated,

"[I]f all countries squeezed profits in the health sector the way Europe and Canada do, there would be much less global innovation in medical technology. Today, the whole world benefits freely from advances in health technology that are driven largely by the allure of the profitable U.S. market. If the United States joins other nations in having more socialized medicine, the current pace of technology improvements might well grind to a halt."

The hover-board example works to illustrate how policy today can prevent product development tomorrow because people can envision that which may be forgone by stifling innovation. In health and medicine, innovations and developments are less visible to the public and hence possibly more susceptible to the whims of democratic interest group politics. By 2015, there may be many more significant invisible losses than the lack of a hover-board technology.

2009 Gus Rankings: Week 11

Here are this week's Gus Rankings. A few comments:

- Art's team, Alabama, continues to impress. It's at this point that I wish I had previous years of Gus Rankings to fall back upon. Is a 4 point lead large at this point in the season? If things shake out a certain way, could that be overcome by Texas or TCU in a week's time? (It's probably harder for Florida due to the common opponents.) I get the sense that it's probably not likely but I'd like some historical precedent.

- Congrats to Marshall and his Rice Owls-- winners over Tulane and likely removing themselves from the bottom spot at the end of the season. As Marshall mentioned last week, the Owls had the inside track for the bottom rung of the Gus ladder but righted the ship just in time.

The larger question: Can the Gus Rankings grow in popularity beyond Rhodes College?

- I did some quick calculations to get a sense for conference strength-- here's the average number of points:

SEC: 12.25 (West: 18.33, East: 6.16)
Big East: 10.00
Pac-10: 7.30
Big 10: 7.09
Big 12: 6.17 (South: 12.83, North: -0.50)
ACC: 5.25 (Coastal: 14.33, Atlantic: -3.83)

Mountain West: -1.78
WAC: -7.89

The top 6 are the BCS conferences, and the bottom two have teams in the running for an at-large BCS spot.

Surprising is the dichotomy between divisions in the three BCS conferences that have such a split. Again, it would be nice to have some sort of historical precedent. Is this usually the case, or are both sides of the conference pretty balanced? Before looking at this, I would have guessed that you might have a split in the Big 12's divisions but not in the SEC and the ACC. It's an interesting result. You could certainly slice the remaining conferences to have differences like this if you so desired, but what's par for the course? I'm intrigued.

TPS at the 2009 SEA's

Here is where TPSers can be found in San Antonio this weekend for the Southern Economic Conference:

Sunday, 8AM - 9:45AM, Session 03F "Applied Political Economy"
Claudia Williamson will present Culture and Economic Freedom

Sunday, 10AM - 11:45AM, Session 08G "Economic Behavior"
David Skarbek will present Why The Inside Rules the Outside: The Economics of Criminal Gang Control

Sunday, 4:15PM - 5:45PM, Session 02I "Cities and Disasters"
Emily Schaeffer will present Searching for Sympathy in All the Wrong Places: Adam Smith and Social Distance Determined Charitable Giving

Monday, 8AM-9:45AM, Session 08J "Decisions and Social Outcomes"
Justin Ross will present Is There Crowd Wisdom in the Judgment of Experts? Evidence from College Football Rankings

Calculating the Silverdome as an Investment

My former professor Bob Lawson posted some silly calculations up at DOL.

PV(1975) = $55.7million. FV(2009) = $583k. Yield = -12.55%

If anyone is actually interested in calculating the return on investment, be sure to include the annual revenue stream from the project.

As a comparison, imagine if I were trying to convince an old fashioned monk who spends his day transcribing texts by hand to invest in a copier. "It only costs $100 up front," I point out, "and you can resell it for parts in twenty years for $10." With a few scribbles in the margin of some sacred text, he turns to me and says "Do I look like an idiot? That investment has a negative return!"

Note: I am not claiming the stadium was a good investment. Rather, I merely suggest that we consider the benefits before we say it is too costly.

The Costs and Benefits of Married Life

Paul Fritjer's work is summarized in this article (Hat Tip: Pavel Yakovlev):

WHAT'S a marriage worth? To an Aussie male, about $32,000. That's the lump sum Professor Paul Frijters says the man would need to receive out of the blue to make him as happy as his marriage will over his lifetime. An Aussie woman would need much less, about $16,000.

But when it comes to divorce, the Aussie male will be so devastated it would be as if he had lost $110,000. An Aussie woman would be less traumatised, feeling as if she had lost only $9000.

For fun, take the points at face value:

So, a man who marries and divorces would be worse off on net by an estimated $78,000 than if he never married at all, whereas a woman would remain better off still from having been married by a $7,000 margin. In a utilitarian sense, this is a $71,000 loss to social welfare arising from marriages occurring that result in divorce.

There should be a bargaining opportunity to arbitrage away this difference, where a man should be able to bribe his would be ex-wife into remaining. This willingness to bargain though might be individually rational but collectively problematic for men in a rent-seeking sense.

The Research Productivity of Robert Tollison

Forthcoming in Public Choice, and the authors are Nicole and Mark Crain. I admit that I think this is one of the strangest paper ideas I've ever seen, which of course predisposing me to liking it. Abstract:

Academic performance is typically measured as some combination of teaching, publishing, and professional service. This paper focuses on the publication aspect of academic output, estimating the determinants of publication productivity using data for Robert D. Tollison (RDT). Robert Tollison published 433 articles and books, and collaborated with 524 coauthors while at a dozen institutions over thirty-eight years. Our findings indicate that RDT’s output is significantly correlated with several factors, including co-authorship, the diversification of his research portfolio, business cycles, and academic pay. To a lesser extent, his production pattern is influenced by non-work interests and specific institutional affiliations.

Auctioning off a Stadium

New stadiums are great, but what happens to the old ones? Usually the edifices are torn down to make way for parking, but sometimes they remain. Joel Osteen bought the Houston Rockets' old stadium. TPS Clevelander Rob Holub sends along this link concerning the Pontiac Silverdome, home of the Detroit Lions until 2001.

From the article:

"Williams & Williams, a Tulsa, Okla.-based auction firm, is accepting sealed bids until the deadline. Under the terms of the auction, city officials can accept the highest bid or invite as many as five of the bidders to a live auction on Monday. If the live auction happens, the bidding will begin at the highest offer from the sealed bids"

Rob offers the following:

"Does it not benefit each bidder to bid lower than they would if the live auction result was not a possibility? Why bid what you feel is your best offer, if the next "best offer" is 30% less than yours? I'd think each bidder would lowball so that they either a) get a bargain in their eyes, or b) engage in the live auction so they can make a more educated bid in the presence of their competitors."

The structure of the auction is interesting; it's like a action with a reserve price, only the failure to reach this price kicks the deal over to a new, live auction.

My thoughts:

- Has the city ever revealed what that reserve price is? If they never have, they're strictly better off by automatically defaulting to a live auction since the bids start at the highest sealed entry.

- Insofar that the participants can learn from the bidding process, Rob is right-- everyone is better off in the live auction. Independent of the incentive for the city to take this to a live auction, imagine the situation of everyone desiring a live auction and restraining their bids accordingly. One shirker takes the auction, but if everyone shirks then everyone is worse off. A situation where you acting in a certain manner makes you better off but if everyone acted as you did then you all would be worse off? That's a prisoner's dilemma.

- Given the above two points, I believe that the final result is no different whether the participants know the reserve price or not.

- Auction theory has always been of interest to me; I very nearly wrote my undergraduate thesis on the topic. It cuts at the larger (public finance) question of how to get people to honestly reveal their preferences. There's plenty of alternatives; my favorite is to deliver sealed bids and the winner pays the second place bid. Incentives are weak to misrepresent your true value. What are some others?

How is that Pfizer Deal Working out, New London?

The City of New London (CT) and the U.S. Supreme Court stole Susan Kelo's home, and the Tax Foundation blog has a great post providing us with an update:

The Court accepted the argument of the City of New London, Connecticut, that transferring the property from the current homeowners to private developers would increase the number of jobs in New London and increase the tax revenues available to the city. This, in the Court's mind, was enough to satisfy the "Public Use" requirement of the Takings Clause.

[...]

Well, how much tax revenue is it generating now? Zero. The developers have changed their minds and have no plan to develop the land, as Business Insider explains, alongside a picture of the vacant lot where only feral cats now live.

I recommend the whole post, which also mentions that Justice Souter, who cast the decisive vote for the majority, became the target of a Kelo-style eminent domain attempted seizure for something called the "Lost Liberty Hotel."

Facts of the day

Except for Oregon, John McCain carried every one of the 17 states with the lowest tax levels in the 2008 presidential election, while Barack Obama won every one of the 17 at the top of the list except for Wyoming and Alaska.

...

Besides Mississippi, every one of the 17 states with the lowest state and local tax levels had positive net internal migration from 2000 to 2007. Except for Wyoming, Maine, and Delaware, every one of the 17 highest-tax states had negative net internal migration over the same period.

That's from this bit on Tiebout, California and Texas.

2009 Gus Rankings: Week 10

Here are the Gus Rankings for the week. Alabama claims the top spot this week, and by a healthy margin. There are six non-BCS teams in the Top 25. As the Top 10 goes, 2 from the SEC, Big 10 and ACC, and one each from the Big 12, Mountain West, Pac-10 and Big East.

I'm also curious to see who, in absolute terms, can post the highest number. It's neck and neck right now with Alabama (39) and New Mexico (-39). Basically, can New Mexico's opponents be worse to a greater degree than Alabama's opponents be good? I'm intrigued.

Congrats to Janey Wang!

For successfully defending her dissertation, titled "Redistributive Budget, Intergovernmental Transfers, and Fiscal Institutions."

Congrats, Dr. Wang!

Blogging is NOT a Crime

Kareem Amer is the Egyptian blogger arrested in 2006 for posting his thoughts online. He received a three year prison sentence for insulting Islam and inciting sedition and another year for insulting the Egyptian President. Kareem has not yet been released.


For more information on Kareem Amer, including English translations of his writings, visit the FreeKareem website.

Illegal Substance Taxes

I did not realize that several states have an illegal substance tax. Check out the following rates in North Carolina:

Marijuana stems & stalks that have been separated from the plant $0.40 for each gram or fraction thereof More than 42.5 grams

Marijuana other than separated stems and stalks $3.50 for each gram or fraction thereof More than 42.5 grams

Cocaine $50.00 for each gram or fraction thereof 7 or more grams

Any other controlled substance that is sold by weight $200.00 for each gram or fraction thereof 7 or more grams

Any other controlled substance that is not sold by weight $200.00 for each 10 dosage units or fraction thereof 10 dosage units

Any low-street-value drug that is not sold by weight $50.00 for each 10 dosage units or fraction thereof 10 dosage units

Illicit spirituous liquor sold by the drink $31.70 for each gallon or fraction thereof No minimum

Illicit spirituous liquor not sold by the drink $12.80 for each gallon or fraction thereof No minimum

Mash $1.28 per gallon or fraction thereof No minimum

Illicit mixed beverages $20.00 on each 4 liters and a proportional sum on lesser quantities No minimum

There is a lot of great stuff in the above hyperlink, so do check it out. Now, to calculate the deadweight loss of these taxes, we would need to discount for the probability of being caught on each unit. It would be further interesting to calculate if these rates are revenue maximizing, that is, holding constant the probability of being caught, do the tax too much illegal activity to be revenue maximizing? How have the tax structures influenced the way the products have been produced? There is probably a dissertation here.

Here is a Table from Tennessee that shows that tax revenue on illegal substances swelled 80% from the previous fiscal year.

Hat Tip: Sarah Larson for both the link and the Table.

H1N1 calculation

I can't say I'm surprised about the hubbub over certain Wall Street firm receiving H1N1 vaccines. But it seems that the justification of how to distribute H1N1 vaccines is only half the story. The "highest risk" individuals are to first get the scarce vaccine-- that means those that are most likely to contract (and suffer most) from H1N1. That's only the direct cost. If we're economists, we also want to look at the indirect cost-- the lost productivity from contracting the flu. To that end, one could make the argument that maybe it was those on Wall Street that should be vaccinated first. It also could be the case that it's not those on Wall Street but another group entirely-- it doesn't matter either way. The point is that there's more to consider that just probability of catching H1N1. As it turns out, the market would cover this aspect quite nicely; willingness to pay considers foregone productivity. What we do know is that the government can't aggregate this information and create a top-down distribution strategy that replicates the market outcome. (Nor, for that matter, are they likely to be able to effectively distribute along the simpler lines of "highest risk" either.)

Congrats Will!

TPS bloggers are rolling in the awards lately, now with Will taking home some hardware for his work on money supply in the Great Depression.

Congrats, Will!

Blockquoting X

X = Phillip Swagel, former Assistant Secretary for Economic Policy at the Treasury.

This became a familiar story: nearly every Treasury action had some side effect or consequence that we had not expected or had foreseen only imperfectly (p. 43).

2009 Gus Rankings: Week 9

Here are this week's Gus Rankings. Iowa maintains the top spot. Of the seven remaining undefeated teams, they occupy the top 11 spots. The lowest one-loss team is Utah at 22.

Simplicity works!

File this under: Lobbying, BCS-style

We all know lobbying in the Capitol Hill sense, but concept need not stop there. Anytime someone is in a decision-making position that has monetary consequences we can expect some political efforts.

Today's example? The Western Athletic Conference on behalf of one of its members, Boise State University.

The Western Athletic Conference is using Boise-based PR firm Scott Peyron & Associates to help Boise State's football team in its push for a BCS bowl.

The firm was put on a monthly retainer this summer to help promote Boise State as a legitimate participant in a BCS bowl should it go undefeated regardless of whether another nonautomatic qualifying school is ranked ahead of it.

But you'd think that the WAC would want the most favorable treatment possible for Boise State, right? This year, as opposed to previous seasons, Boise State can claim a large-scale marquee victory (over the University of Oregon). They deserve a spot as much as any other undefeated team, right?

The WAC doesn't care where Boise State gets into the BCS, just that it gets a spot.

Alas, the payment for a spot in the BCS is the same whether you play in the title game or one of the four supporting bowls.

Praise for Bauer

I just wanted to draw your attention to my post and the discussion over at AidWatch on the importance of Bauer in development economics, especially on the role of foreign aid.

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Presidential Proclamation Database

Database here.

According to the website, a presidential proclamation is

...“an instrument that states a condition, declares a law and requires obedience, recognizes an event or triggers the implementation of a law (by recognizing that the circumstances in law have been realized)” (Cooper 2002, 116). In short, presidents “define” situations or conditions on situations that become legal or economic truth. These orders carry the same force of law as executive orders – the difference between the two is that executive orders are aimed at those inside government while proclamations are aimed at those outside government. The administrative weight of these proclamations is upheld because they are often specifically authorized by congressional statute, making them “delegated unilateral powers.” Presidential proclamations are often dismissed as a practical presidential tool for policy making because of the perception of proclamations as largely ceremonial or symbolic in nature. However, the legal weight of presidential proclamations suggests their importance to presidential governance.

Now, the database goes back to 1789 with G.W., who issued one proclomation that seems to be a formal recognition of Thanksgiving as being November 26th. In 1790 he makes two proclomations pertaining to treaties reached with Indian tribes. In 2009, there are several proclamations per month, most of which seem to be raising awareness of something. Just skipping around, it seems this behavior started with Ford in 1974-1975. Prior to Ford, nobody seems to issue a proclamation on even a monthly basis.

It would be interesting to try an correlate number of proclamations with employment or other business cycle variables.

DMV Day: Pennsylvania Edition

We here at TPS seem to provide anecdotes in all their DMV glory. Claudia talked about a visit here, I provided one here, and Justin seems destined for a life of frustration.

Nothing too outlandish this time around, though I did enjoy the back-of-the-envelope calculation that can come from it. The entire experience took about 75 minutes, as my name had a typo (understandable, since my name is particularly difficult to spell) and I had to do the whole process over again, but it took 45 minutes to be called to the front in the first place. When I got my automated ticket, it mentioned that my estimated wait time was 11 minutes. They were free to estimate any time they wanted, take into consideration any factors they felt important, and even bias it to make themselves look better. But they were still off by a considerable margin!

Government production: 4 to 5 times more inefficient than even their own estimates.

Terrorism and Labor Market Effects

Exactly what's the impact of a terrorist attack on labor market outcomes? It's an interesting question, here's an attempt to get after the answer. Note that they look at suicide attacks by Palestinians in Israel, then compare the Israel effects with the Palestinian effects. They admit the problems in disentangling cause; nonetheless, it's a place to start. The abstract is below.

The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This paper aims to fill that gap by examining the economic costs of committing suicide terror attacks. Using data covering the universe of Palestinian suicide terrorists during the second Palestinian uprising, combined with data from the Palestinian Labor Force Survey, we identify and quantify the impact of a successful attack on unemployment and wages. We find robust evidence that terror attacks have important economic costs. The results suggest that a successful attack causes an increase of 5.3 percent in unemployment, increases the likelihood that the district’s average wages fall in the quarter following an attack by more than 20 percent, and reduces the number of Palestinians working in Israel by 6.7 percent relative to its mean. Importantly, these effects are persistent and last for at least six months after the attack.

Sleepless in Morgantown

When it comes down to it, it's not that hard to find additional lists that places West Virginia last. And the CDC has generated yet another. It turns out that West Virginians are the most sleepless of all the 50 states, with 1 in 5 residents reporting that they didn't get a single good night's sleep within the last month.

(I'm having trouble finding the actual study itself-- help?)

The determinants of sleeplessness at the state level, anyone? Average number of kids? Long-term career opportunities?

2009 Gus Rankings: Week 8

It's a bit tardy, but here's this week's Gus Rankings. Iowa still holds the top spot, and Temple finds itself at 23-- a tribute to it's 5-1 record in FBS games, but also a highlight of the difficulty in accounting for FCS losses. The Owls lost to Villanova to start the season. We'll have to find a way to deal with this situation next year, but a non-arbitrary solution has thus far avoided me. I'm open to suggestions...

File this under: Quote of the day, ideas, bad

In the process of perusing as much literature as possible on global public goods, I came across this gem:

Capacity building in developing countries is critical to achieving the objective of financial stability and market efficiency. The seigniorage earned by the central banks of industrial countries could be an appropriate funding source.

Honestly-- that's exactly how it reads. As a section header, no less.

Just to clarify-- the policy suggestion is to generate seigniorage for the goal of promoting financial stability.

Wow.

It's from Global Public Goods: Taking the Concept Forward. And who, you ask, published this nugget of wisdom? The United Nations Development Programme, that's who. Let's hear it-- the international development community, everyone!

More Peltzman Effects in NASCAR

From Public Choice, "Rubbin' is Racin'" by Pope and Tollison:

The Peltzman Effect is a well known and controversial theory in the literature. Studies have struggled to find a dataset that can accurately test for the presence of the effect. We have created a unique dataset and use a natural experiment from the sport of stock car racing to test the theory. Using race-level data from NASCAR events, we find strong evidence that a major safety regulation has led to more on-track accidents and an increased risk to both spectators and pit crew members.

FYI: If you were wondering how this differed from a 2007 paper by Nesbit and Sobel, according to footnote 5, page 5, the Pope and Tollison dataset covers the implementation of the HANS device.

What are Frowning Economic Educators?

I'll take "Jeopardy! Contestants Don't Know Economists" for 500, Alex.



Do you think this will affect Matt's love for Jeopardy?

[HT: Boettke]

Funny personal story below the fold.
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When I was in the third grade, my grandma and I would play Jeopardy! against each other for dimes. So I would secretly watch it on one channel at 7PM while she was watching Wheel of Fortune in the other room. Then I'd watch it again with her (and win a lot of dimes, obviously) at 7:30PM. Sorry Grandma...

Infinite Monkey Hypothesis or Not?

The Bay Guardian realizes what is important in Governor Schwarzenegger's latest veto message:

On Distance Variables in Hedonic Regressions

My paper "Inconsistency in Welfare Inferences from Distance Variables in Hedonic Regressions" with Michael Farmer and Cliff Libscomb is now forthcoming in the Journal of Real Estate and Finance Economics. It's intended audience is for researchers doing applied work that involve estimating the determinants of housing prices.

If you are considering using a "distance to" variable in a housing demand regression, below the fold you can find the cliff notes from the paper on why direct interpretation of these variables is misleading.
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Here is a very common applied research scenerio: You have data on a bunch of housing sales in a neighborhood or metropolitan area. You think there is some significant landmark that may be relevant, perhaps downtown or some toxic waste dump along the periphery. To control for this, you calculate every observation's distance from said site and include it in your regression as "Distance to CBD" or "Distance to Toxic Waste Dump." The expectation is often that the coefficient will tell you how these things will influence housing prices. As our paper demonstrates, this is not a correct interpretation.

Q1: Why is it not correct?
As long as distance to something matters, then distance to virtually anything will also matter in a regression. One of the easiest ways to think of this is with the Toxic Waste Dump on the periphery example. Suppose on the periphery directly opposite to the waste dump is a park. Is the coefficient picking up your proximity to the park, or distance away from the waste dump? Unless you are very familiar with the area, there are probably many of these types of landmarks that you are not even aware of as a researcher.

Q2: What does the distance variable tell us, if not the value of a landmark?
Basically, they give you an indication of the optimal area in terms of location.

Ultimately, you can think of a distance variable as a line moving through space. Any other line you happen to draw through space will have an angular relationship with it that will (unless it is orthogonal) influence the coefficient on your distance variable. If there are multiple competing locations, these lines become collinear if they are all included, but if you only use a subset the coefficient becomes a weighted average of the most dominating influence(s).

Q3: Ok, if distance to something matters, can we just treat it as a proxy variable, or otherwise use it to obtain unbiased estimates of the other coefficients?

Yes, but once you realize this is what you are functionally doing, you are much better off by formally modeling it rather than thinking of it as a proxy variable. Include latitude, longitude, and their quadratic counterparts. The resulting coefficients will allow you to solve for the max/min coordinates.

Q4: Are all "distance to" variables like this?
No, some distance variables are actually "distance to nearest." This problem emerges when all observations have a common point. Suppose there are multiple pollution emitters, and the variable is measuring the distance to the nearest one. This is ok, because the variable is not capturing each observation's relative position in space.

Q5: Can I just fix this problem with a spatial autoregressive (SAR) or spatial error model (SEM)?
No, the standard SAR and SEM are designed to capture a interdependent relationship (like a spatial multiplier), not a directional effect or an optimal position in space.

Q6: I would really like to know the welfare significance of some local amenity, is there a work-around to get at this without the "distance to" variable?
We do intend that to be the next stage in our research and we have some specific ideas, but nothing we're willing to market at this point (this point being Oct 27, 2009).

Brad Delong and Scott Sumner, "Fed Up"

In a Reason magazine article entitled Fed Up, Brian Doherty writes:

The Berkeley economist Brad DeLong, a popular blogger and former Clinton Treasury Department official who once dismissed Mises’ general monetary theory as “batshit insane,” still told this story in the October 2008 issue of the liberal American Prospect: “The current financial crisis has its roots in Greenspan’s decision to keep interest rates very low in 2002 and 2003 to head off the danger of a deflation-induced double-dip recession.…Six months ago, I would have said that his judgment was probably correct. Today… I can no longer state that Greenspan made the right calls with respect to the level of interest rates and the housing bubble in the 2000s.”
[...]
Scott Sumner, a monetary economist at Bentley University who writes the much-cited blog The Money Illusion, thinks the Federal Reserve was and is too tight with interest rates and money for optimal economic performance. “As everyone knows by now,” Sumner complained in June, “the once kooky and discredited Austrian business cycle model has now become conventional wisdom.”

Interesting. What do you think?

Congrats to David on the 2009 Lavoie Prize!

It has been announced that TPSer David Skarbek has won one of this year's three Lavoie Prize for his paper on "Self-Governance in San Pedro Prison."

Here is a blog post where David summarizes this work, in which he explains why the San Pedro prison is among the safest prisons despite being governed by prisoners instead of guards.

Congrats, David!

Vromen on Freakonomics

TC at MR points us to Jack J. Vromen's essay in the Erasmus Journal for Philosophy and Economics, titled "The Booming Economics-Made-Fun Book Genre: More Than Having Fun, But Less Than Economic Imperialism."

It was the second part of the title that caught my interest, and indeed the essay is not so much a recent review of the way in which economics has expanded in popularity as it is a discussion of what constitutes economics and its place in social science. In particular, Vromen offers a response to the genre's critics that view this as "economics imperialism."

These critics are found in the other social sciences and parley their overall critique of economics (or at least what they perceive economics to be) and its expansion into "their" subject matter. By "their" subject matter, it is taken to mean the general non-econ aspects of life that tend to be discussed in this genre (more sex is safer sex, tipping your dentist, identifying the cheating sumo wrestlers, etc). They apparently view this as economists stealing their subject matter to apply our own (distasteful) methodology towards understanding it. In short, the criticism is that they do not want people "thinking like economists" in their subject area.

My favorite passage comes on page 79, in which he dismisses this critisim on the grounds that ideas are public, not private goods (whether he catches the irony or not, I cannot tell):

This presupposes that subjects (and issues and phenomena in general) can be appropriated by some discipline in a similar way as natural resources in some territory, such as oil and gas, can be appropriated by some foreign country or company. But are the subjects tackled or addressed by some discipline like that? If economists start tackling “outlandish” phenomena, are other disciplines that traditionally tackled these phenomena thereby denied access to them? It seems not. Unlike natural resources, which are private goods, subjects are more like public goods. Their “use” by the one discipline does not diminish the opportunities for other disciplines to “use” them. Disciplines cannot be dispossessed of their subjects in the same way that countries can be dispossessed of their natural resources.

That is thinking like an economist to determine the subject domain of economics, and the critics will not like it. I loved the essay, and highly recommend it.

Happy Anniversary to the Berlin Wall Collapse

Do check out this book review on the subject at Reason:

On February 6, 1989, Gueffroy and a friend attempted to escape from East Berlin by scaling die Mauer—the wall that separated communist east from capitalist west. They didn’t make it far. After tripping an alarm, Gueffroy was shot 10 times by border guards and died instantly. His accomplice was shot in the foot but survived, only to be put on trial and sentenced to three years in prison for “attempted illegal border-crossing in the first degree.”

Twenty years ago this month, and nine months after the murder of Gueffroy, the Berlin Wall, that monument to the barbarism of the Soviet experiment, was finally breached.

[...]

When the whole rotten experiment suddenly failed, eventually bringing to an end not just Moscow’s Warsaw Pact client governments but the proxy civil wars it fought in the Third World, instead of engaging in overdue self-criticism many commentators clung to shopworn shibboleths. In 1990 the academic Peter Marcuse, also writing in The Nation, bizarrely claimed that East Germany “had never sent dissidents to gulags and rarely to jail” and expressed outrage that the “goal of the German authorities is the simple integration of East into West without reflection,” instead of heeding the pleas of the intellectual class who were at work on a more humane, less Russian brand of socialism.

Blockquoting X

X = Mancur Olson, The Rise and Decline of Nations:

Special-interest groups also slow growth by reducing the rate at which resources are reallocated from one activity or industry to another in response to new technologies or conditions. One obvious way in which they do so is by lobbying for bail-outs of failing firms, thereby delaying or preventing the shift of resources to areas where they would have a greater productivity (1982, 63-64).

File this Under... Profit and LOSS System

They are called Winkers. Just watch the video.



[HT: Angela]

[UPDATE!]

Here are some additional details from the Winkers Website:

Year Introduced: 2009
Developer: William A. Jones, a retired man from Washington state
Price range: $149-569
Each pair hand-painted by request
Available in human eyes, ducks, clap boards, owl eyes and lion eyes

I stand by my original prediction that the market will sort this entrepreneur accordingly (and by that, I mean into the waste bin). Please let me know if you spot a pair of Winkers in your neighborhood, though. In fact, take a picture and I'll post it on the blog.

Nook-and-Mortar

I am tentatively planning on buying a e-reader in the Spring, so I've been keeping an eye on the new product lines that are coming out, the latest being the Nook from Barnes and Noble. It is hard not to appreciate the way innovation has been the primary point of competition. My favorite examples from a Wired review:

One of the best things about hardcovers or paperbacks is that you can give them to family and friends. E-readers, so far, haven’t offered that to consumers. Instead, devices such as Kindle have locked down books and made it impossible for users to lend books that they have bought. Nook tries to change that with its LendMe feature. Nook users can loan books to friends for two weeks and those e-books can be accessed through PCs or smartphones such as the BlackBerry and the iPhone. Lending the book through Nook makes it unavailable to the original owner, but at the end of the two weeks, the book reverts back to its owner.
[...]
Most of us turn to Amazon when it comes to buying books, but there is something to be said for walking into a bookstore, sitting there with a cup of coffee and browsing. The Nook lets you do just that. In a neat trick that takes advantage of Barnes & Noble’s brick-and-mortar stores, the Nook lets users read entire e-books for free in-store.

Will future Barnes and Noble stores be replaced by coffee shops with wireless access to their books? How will libraries adapt to a world in which returns will be automatic, and hence no late fees?

There is also a relevant status signaling issue. When e-Reader's first started coming to the market, some critics remarked that it would not take hold because it would hide people's "intellectual trophy case i.e. the giant bookshelf of all the books I've read." I suppose now e-Readers create a mobile trophy case of unrevealed size, increasing the status of those who read at least enough to warrant the purchase of an e-Reader.