Wednesday, March 31, 2010

Recommended Reading for Isreali Lawmakers

Here's my suggestion. Here's the story (HT: KipEsquire):
An Israeli lawmaker is hoping to butter up voters and pass a law that would limit outrageous popcorn prices at the movies.

Carmel Shama, from the governing Likud party, plans to bring the "popcorn law" for a vote when parliament returns from its Passover break next week, the mass-selling Yediot Aharonot newspaper reported Wednesday.

"We have to put an end to this. The public should not have to mortgage their houses for a soft drink and a snack," Shama told the paper.

Tuesday, March 30, 2010

The Pursuit of Justice: The Law and Economics of Legal Institutions

The editor is San Jose State economist and DOL blogger Ed Lopez. You can buy the book here. I haven't read it, but I had the pleasure of sitting in on a West Virginia University seminar with Ed several years ago when it was still in the editing phase and found it fascinating. I have never been able to take seriously the show CSI since that time. Here are the Table of Contents:

An Introduction to the Pursuit of Justice--Edward J. Lopez
The Rise of Government Law Enforcement in England--Nicholas Currott
Electoral Pressures and the Legal System: Friends or Foes?--Russell S. Sobel
Romancing Forensics: Legal Failure in Forensic Science Administration--Roger G. Koppl
Judicial Checks on Corruption--Adriana Cordis
Effects of Judicial Selection on Criminal Sentencing--Aleksandar Tomic
Economic Development Takings as Government Failure--Ilya Somin
On the Impossibility of “Just Compensation” When Property is Taken--John Br├Ątland
The Lawyer-Judge Hypothesis--Benjamin H. Barton
Class Action Rent Extraction--Jeffrey Haymond
Cy Pres and its Predators--Charles N. W. Keckler
Licensing Lawyers: Failure in the Provision of Legal Services--Adam B. Summers

(And No Uncle Sam, I got nothing for this post.)

Large Hadron Collider Update: March 30, 2010

It seems the Large Hadron Collider is finally doing what it was built to do. Here's the last post we had on the issue, and it links to all the others. If we take today at the date it started doing what it was meant to, the expectation-of-experiments-taking-place-within-months prediction in September 2008 turned out to be about 18 of them.

There should be some interesting results, though the lesson, as always, is to think in terms of net benefits, not gross benefits.

And yes, this was only a matter of time.

Monday, March 29, 2010

Blockquoting X

X = Abba Lerner.
[...] whatever may have been the history of gold, at the present time, in a normally well-working economy, money is a creature of the state. Its general acceptability, which is its all-important attribute, stands or falls by its acceptability by the state.

Sunday, March 28, 2010

Working Paper: BRACE for the New Interventionist Economics

Roger Koppl and I have a new working paper. Here's the abstract:
The Great Recession seems to be creating a New Interventionist Economics characterized by bubbles, radical uncertainty, animal spirits, complexity dynamics, and extra-market control. When placed in that order, these characteristic create the acronym BRACE. We review some evidence and literature pointing to BRACE economics and briefly suggest some avenues to challenge the new interventionists.
The full version is available via SSRN.

Saturday, March 27, 2010

Friday, March 26, 2010

Skarbek Accepts Offer at Duke

Let's all congratulate co-blogger David Skarbek. Dave has accepted a position in the political science department at Duke University as Searle Visiting Assistant Professor. Congratulations, Dave!

Wednesday, March 24, 2010

Landsburg and Counterfeiting

My colleague Eli Dourado has blogged about our interaction with Steve Landsburg regarding the morality of counterfeiting. Here's a snippet:
In case it is not obvious, Landsburg’s standard of morality is economic (Kaldor-Hicks) efficiency. “Certainly not” is a strong statement, and Will, who has done some interesting work on the subject of counterfeiting, asked some insightful probing questions. I asked a follow-up question: “Is it okay to counterfeit if the central bank is not being sufficiently expansionary?”

Landsburg looked at me skeptically. “Are you going to keep the seigniorage?” he asked. “Sure. That’s just a distributional question,” I replied. Landsburg thought for a second, smiled, and very graciously admitted he did not have an answer.
In addition to being an incredible (and incredibly clear) writer, Landsburg is one of the nicest academics I've met. (Academic economists admittedly establish a low bar. Landsburg is a nice guy by much higher standards.) In conversation after the talk, we agreed that the morality (his word) of counterfeiting depends on whether one believes price adjustments are costly.

In honor of the Census postcard, following the Census letter, notifying me of the forthcoming Census form

Do enjoy the first 50 seconds of this video!
FuturamaWeeknights, 9p/8c
Bureaucrat's Joy
Joke of the DayStand-Up ComedyFree Online Games

My Fiscal Debt Prediction

Here is Mankiw's:
My own guess is that the United States will raise taxes substantially, and taxes will reach levels as a percentage of GDP never seen in U.S. history (although common in Europe). The politics of that will be fascinating to watch. If the political process is stymied as our leaders debate the relative merits of tax hikes versus spending cuts, bond investors may get nervous, and we could get witness either the Krugman inflation scenario or the much less likely default scenario.
I actually see the default scenario as the most likely out, perhaps because my guess of what future tax rates will have to look like are higher. Not only do I expect them to be higher than in Europe, but more importantly I expect Americans to be far more disdainful of higher tax rates to pay off the previous generation's debt. I could see a lot of Americans accepting high taxes for European-level services, but that's not what they would be getting.

Note that I am certainly not making an economic argument, but a political forecast, which is well outside the domain of my expertise.

Tuesday, March 23, 2010

Blockquoting X

X = Steven Landsburg, from his new book The Big Questions:
It takes a profound ignorance of science to believe that God created the world six thousand years ago. It takes an equally profound ignorance of economics to believe that protectionism--the use of quotas and tariffs to discourage the importation of foreign goods--can make us more prosperous.

It's true that a small number of working scientists manage to embrace some form of creationism, and a small number of working economists manage to embrace some form of protectionism--but in each case we're talking about tiny (though sometimes vocal) minorities. The vast majority of the time, scientific knowledge precludes creationism and economic knowledge precludes protectionism.

There's a difference, though: The case against creationism relies largely on facts about the fossil record and geologic strata, while the case against protectionism relies primarily on logic. The facts that refute creationism are discovered and reported by scientists; the rest of us have to take it on faith that those scientists are being truthful. By contrast, the logic that refutes protectionism is available for anyone to evaluate from scratch.

Therefore it seems to me that the protectionist's position is even less respectable than the creationist's. If you're convinced that most scientists are liars--that everything they say about fossils, for example, is false--then you can be a logically consistent creationist. But you can't be a logically consistent protectionist (p. 51).

Monday, March 22, 2010

Markets in Everything: Purse Theft Insurance

In Latin America, $2/month premium, very interesting throughout:

Friday, March 19, 2010

Blockquoting X

X = Richard Timberlake.
A central bank and a gold standard are incompatible, if the central bank is actually doing anything. [...] By and large it's the case, as Thomas Hobbes put it, if two men ride on a horse, one has to ride in front.

Best Morning Sentence

This comes from Will Wilkinson during his "most influential book" list, specifically with regard to Charles Murray's book on education:
And it helped me understand the difference between trying hard to honestly think through tough social problems because you care and mouthing comfortable pieties in an effort to get credit for caring.

Monday, March 15, 2010

Blockquoting X

X = F. A. Hayek from Law, Legislation, and Liberty (volume 3) p. 99:
It is at least conceivable, though unlikely, that an autocratic government will exercise self-restraint; but an omnipotent democratic government simply cannot do so.

Central Bank Reform

I just got back from the annual Public Choice meeting (held in beautiful Monterey, CA). While there, I had the pleasure of discussing Sven-Olov Daunfeldt's paper on central bank reform. Here's the abstract:
This paper is a first empirical attempt to investigate why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to fine-tune the economy. A new data-set covering 132 countries, of which 89 countries had implemented such reforms, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country has been characterized by a high variability in historical inflation and if they faced a high probability of being replaced. No such effects were found for OECD-countries.
You can find the full version here.

Thursday, March 11, 2010

Questions: On Food Taxes to Fight Obesity?

One of the popular proposed mechanisms for fighting obesity has been various proposed food taxes. At the least, states looking to raise taxes seem to be using this as a justification for moving on the food taxes. Consider this recent article:
According to a new study published in the Archives of Internal Medicine, increasing the price of soda by 18 percent would result in a decrease in overall sales, leading to fewer calories a day for regular soda-drinkers.

For years, nutrition experts have recommended a federal tax on soda and other sugary drinks to cut consumption of high-calorie, unhealthy drinks and to help obese Americans lose weight.

Just for the sake of argument, let's accept the following propositions as being true: An obese individual confers a negative externality upon others. Taking this as a given, here are my questions:

  1. Why is it to be believed that the obese (or potentially obese) are unaware of the social consequences of their weight? This explanation is necessary to justify an obesity motivated tax on Pigouvian grounds.
  2. How would you reconcile this argument with the near universal view that society places too much emphasis on body image?

Tuesday, March 09, 2010

We Told You So

"We" being economists. The Oregonian (HT: Art Carden) has the story of Chinese "sweatshops" so derided in the past by critics being a excellent source of prosperity.

Here is Paul Krugman in praise of cheap labor.

Tourney Predictions

We here at TPS have a healthy appreciation for college football rankings, but it's college basketball time, so let's turn our attention that direction. In my life, the number of people that have filled out a bracket far outweigh the number that have not, but what interests me are the folks that attempt to predict what the bracket itself is going to look like. The most popular iteration of this process is probably Joe Lunardi, whose Bracketology has shown a remarkable gain in popularity in recent years.

Naturally, I wondered how accurate these predictions end up being. There are four smaller brackets of sixteen teams each and, all put together, there are 65 teams invited to the tournament (there is a play-in game for one of the 16-seed lines). That means four 1-seeds, four 2-seeds, etc., all the way though the 16-seeds. So the question was: How accurate is Joe Lunardi?

Naturally, whenever I have sports questions, I fire an email to TPS Sports Correspondent Rob Holub, and he sent along the following (excellent) assessment of bracket guesses.

It turns out there's a lot more people besides Joe Lunardi guessing! But there's something I found interesting in that rundown. Note that every guess is scored and then compared to the others within that year. Some years may be harder than others to figure, so the variance calculation controls for that. But note the variance of the variance-- the dispersion of within year performance by guesser. Ultimately, people don't consistently perform better (or worse) than average. To be certain, when you average these variances, you can generate an order of who has done best-- you can argue about how appropriate a simple mean is for determining the most successful guesser from the underlying ratings, as well as the scoring matrix in the first place, but it's a legitimate first stab at the issue-- but outside of a few individuals, most people have comparatively successful years followed immediately by comparatively unsuccessful years. The range within each guesser is generally over 10, and (just glancing) more often than not over 20.

How to account for that?

- The NCAA Selection process is notoriously secretive, though strides have been made in recent years to try and provide a bit more clarity to the process. (Individuals have been invited to mock selection meetings, though I don't have any links at the moment.) Could it be that there's a degree of information concerning the selection process that can never be incorporated? If the selection process remained the same from year to year-- namely, standards for selection into the tournament and the individuals making the decisions-- then this information should be accessible. Yes, teams and the distribution and nature of performance changes year to year, but so long as the standards stay the same, this shouldn't matter in the long run. The problem, as I see it, is that standards may stay de jure similar, but the individuals making the decision change, and the former is necessarily a function de facto of the latter. So as long as new people as continually cycled into the selection process, there may be reason to believe that there's a degree of uncertainty that can't be overcome (and if we believe the previous calculations, it could be a significant amount).

- The bracket itself is very sensitive to errors. In theory, you could have seeded every single team correctly yet have none of the match-ups correct. Also, you could have correctly identified every team selected for the tourney but actually earn zero points according to this ranking system. This could be a factor for the large dispersion in variance-- very minor errors can lead to big point differences.

- As a side note, I am curious if there is a betting market for bubble teams-- teams on the cusp of making or not making the tourney-- and I'm curious how well they incorporate information as the time gets closer. (Though that's not exactly what the above rankings measure.)

Any further thoughts?

Monday, March 08, 2010

Who Issued that Toyota Recall?

The fact that the November 2009 recall of 3.8 million vehicles was initiated by Toyota — while the National Highway Traffic Safety Administration declined to reopen a closed investigation into potential Toyota defects — highlights the private sector's incentive to compensate for perceived problems. Worldwide voluntary recalls on the part of Toyota confirm this.
That of course, is TPS blogger Emily Schaeffer.

One unintended consequence of Congress parading Toyota executives around for political gain is that they are probably more likely to discourage the future discovery of problems rather than incentivize their up-front correction (on the margin, of course).

Friday's Radio Spot

The good folks at Pittsburgh Business Radio had me back last Friday, you can find the audio here. I'm with a colleague of mine, Bill Carlson, so this one's a bit longer than the last one-- about 90 minutes. We talked about banks and CEO compensation, among other topics.

Saturday, March 06, 2010

Professor fired over facebook status

From ABC News (HT: Jason Oberle):

Gloria Gadsden, a sociology professor at East Stroudsburg University in Pennsylvania, says she was suspended last week after updating her Facebook status with complaints about work that alluded to violence.

In January, she wrote: "Does anyone know where I can find a very discrete hitman? Yes, it's been that kind of day…" Then in February: "had a good day today. DIDN'T want to kill even one student. :-). Now Friday was a different story."

Gadsden says she posted the comments in jest, on a profile she thought could only be seen by friends and family. She says officials were notified of the posts by a student -- even though she says she had no students in her "friend" list.

Friday, March 05, 2010

My Favorite Negative Book Review

For those who haven't heard, Professor Joseph Weiler is facing criminal charges for publishing a negative book review, and has asked others dig up far more negative reviews so that he may prove this one is nothing out of the ordinary. Steven Landsburg published his nominee here. Here is mine, written by Edward Snyder (University of Chicago) and published in the prestigious Journal of Economic Literature on "Confessions of an Economic Hit Man." Here is the opening paragraph:
This awful autobiography is mostly about conspiracies orchestrated by the U.S. corporatocracy and the troubled global economy. John Perkins writes in an absurdly comical way, offering at the outset that this "is a true story" that "must be told" (p. x). Whether it is worse on the conspiracy or economy dimension is not obvious. A more worthy question that I'll address later is how Confessions became a New York Times best seller.
The whole review is worth reading. Confessions is not.

Thursday, March 04, 2010

Blockquoting X

X = Hayek from Law, Legislation and Liberty volume 1 (p. 51).
While it is sensible to supplement the commands determining an organization by subsidiary rules, and to use organizations as elements of a spontaneous order, it can never be advantageous to supplement the rules governing a spontaneous order by isolated and subsidiary commands concerning those activities where the actions are guided by the general rules of conduct. This is the gist of the argument against 'interference' or 'intervention' in the market order. The reason why such isolated commands requiring specific actions by members of the spontaneous order can never improve but must disrupt that order is that they will refer to a part of a system of interdependent actions determined by information and guided by purposes known only to the several acting persons but not to the directing authority. The spontaneous order arises from each element balancing all the various factors operating on it and by adjusting all its various actions to each other, a balance which will be destroyed if some of the actions are determined by another agency on the basis of different knowledge and in the service of different ends.

Wednesday, March 03, 2010

Commenter Accountability

Following a more recent MR post to an older one of TC's analysis of the Pinochet regime's economic consequences, I noticed this in the comments from "neil" (bold emphasis added):
Also, Santiago (with over a third of Chile's population) has an odd, privately-owned public transportation system, where drivers own their own buses and keep their fares. This has been nothing short of disaster -- inefficient, as every bus route goes through the crowded center, more profitable than operating more efficient feeder routes, leading to hundreds more buses clogging the streets than are needed; dangerous, since bus drivers race each other in competition for passengers (I have personally been on a bus that hit a pedestrian and didn't stop, as well as in a car that was hit by a bus which didn't stop); polluting, since drivers have plenty of incentive to keep old, broken buses on the road rather than buying new ones; and not even really privatized since all of the dozens of bus companies raise fares simultaneously (and also band together for strikes against attempted governmental interference). If there was ever a place for central planning, it's here.

Posted by: neil at Dec 20, 2006 12:22:39 PM
"neil" got his wish, and how did that turn out?

Snow and Parking in Pittsburgh

Here in Pittsburgh, if there is snow on the road and you clear the snow from and around your car in its on-road parking space, you have established de facto property rights over the space. Evidently, Pittsburghers are quite Lockean. (Freakonomics writes about the phenomenon briefly here.)

What's fun about it? It's totally unplanned. Most people respect the fact that if you dig out a parking space, you should enjoy the fruits of your labor. So, people leave a chair or a laundry hamper to show intent to return and use the space. By in large, this system seems to work pretty well here. I get a kick out of seeing assorted wares near the side of the road, but I haven't heard anyone complain about it. (Unlike my neighbors.) Incentives fall to dig out the space if the space can be occupied when you return (though I think the effect is smaller than at first glance). All in all, it's nice to see what people can work out for themselves-- and remember, if the city government were effective at removing snow, this practice would not have evolved in the first place.

Why talk about it now? One municipality here, Dormont, has decided it's gone far enough. Starting today, anyone that leaves an item in the road will have that item removed.

It's government against social norms here in Pittsburgh! Situations like these generally don't have clean outcomes.

Tuesday, March 02, 2010

Do Econ Majors in Congress Vote Against the Minimum Wage?

Forthcoming in Public Choice by O'Roark and Wood:
Much has been made about the lack of economic education among the public at large, yet little has been said about the limited education of Members of Congress. This paper examines the economic education levels of Members of Congress voting on the 2007 increase in the minimum wage. Controlling for a variety of characteristics of members and constituents, this study finds that members who majored in economics as undergraduates were less likely to vote for the minimum wage increase than their colleagues. No other major had a consistent influence. A large number of statistical specifications confirm the robustness of the finding.

"Economists are Rude"

That is in the opening 2 minutes of the video below, and being in an interdisciplinary school, I can appreciate that observation.

The subject of the talk, however, is the always interesting Bill Fischel on the history of school district formation. The underlying theme is contrasting the various views on why school district consolidations took place, one being that it was driven by the enlightened elite compared to the view that it was driven by competition in local public goods:

You can find Fischel's most recent book on schools and local government here.

Global Warming Update

You've heard plenty about Climategate, and there's more to shake out, but here's a decent story from the London Telegraph that wraps together quite a bit of it. The author has a bone to pick, but this part was interesting:

Put the errors together and it can be seen that one after another they tick off all the central, iconic issues of the entire global warming saga. Apart from those non-vanishing polar bears, no fears of climate change have been played on more insistently than these: the destruction of Himalayan glaciers and Amazonian rainforest; famine in Africa; fast-rising sea levels; the threat of hurricanes, droughts, floods and heatwaves all becoming more frequent.

All these alarms were given special prominence in the IPCC's 2007 report and each of them has now been shown to be based, not on hard evidence, but on scare stories, derived not from proper scientists but from environmental activists. Those glaciers are not vanishing; the damage to the rainforest is not from climate change but logging and agriculture; African crop yields are more likely to increase than diminish; the modest rise in sea levels is slowing not accelerating; hurricane activity is lower than it was 60 years ago; droughts were more frequent in the past; there has been no increase in floods or heatwaves.

A smattering of our posts on climate change here, here and here.

Monday, March 01, 2010

African Poverty

Still not the best place in the world, but things have been improving. Here's the abstract from a new paper by Sala-i-Martin and Pinkovskiy:

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.

Note #3 from the abstract-- a popular (ill-guided) concern over African growth is that income inequality will result, and that's bound to cause problems. The latter is debatable, but the former isn't the case.