Friday, April 30, 2010

Very Good Sentences

From Megan McArdle, on the new Arizona Immigration Law:

I'd be a lot more sympathetic to this law, in fact, if it required the police to check the immigration status of every single person they pulled over, without any gauzy "reason to believe" fig leaf to cover up what's really going on.

Raise your hand if you think that law could have passed in Arizona.
My hand is down, by the way.

Thursday, April 29, 2010

Blockquoting X

X = Lawrence H. White (@ 36:17).
So, one way to sum this up is to say that, in theory, there is no difference between monetary theory and practice. But in practice, there is. I guess that is true of most theories.

Funniest Thing I've Read All Day

From the comments section at Kids Prefer Cheese.
Has anyone EVER seen a cat skeleton in a tree?
The post is good too.

Blockquoting Who?

Following Will's game, guess who said this:
Every tax, however, is to the person who pays it a badge, not of slavery, but of liberty.
This one demonstrates the power of pulling quotes out of context. Answer in the comments.

The Bender Brewer Project

If you are looking to waste a little time, this website details how a Bender capable of brewing beer was built. A fun read, even if a waste of time.

Wednesday, April 28, 2010

Revenue Maximizing Parking Tickets

The economics of parking tickets have been on the mind recently as I received one a couple of weeks ago. Let's assume cities want to maximize the revenue gained from parking. This comes in two forms-- 1) metered/garage parking, where individuals pay up-front for the parking, and 2) issuing tickets for violations.

Of the garages that I've frequented, there's not too much of a story here. You either pay for a pass which allows you access or pay by the trip, which happens before or immediately after the parking is done. I don't see much non-compliance here-- it's not terribly difficult to enforce the arrangement. Revenue comes in from drivers, expenditures go out to workers, ticket machines, upkeep on the garage, etc. End of story.

Things get interesting with the meters, however. Revenue at the meters is a function of a number of things-- garage availability and price, price to park at the meter, price of the ticket for not paying the meter, and the probability of receiving a ticket for not paying the meter. In turn, the probability of receiving a ticket is a function of the number of people working to catch violators. Costs of such an arrangement are upkeep on meters, hiring people to collect the money, a court system to enforce the tickets and hear appeals, and, again, hiring individuals to enforce the arrangement and catch violators. The number of people hired to catch violators comes in on both revenue and costs-- this leads me to believe that there's an optimal number of people to hire.

Appeals are costly and are a function of the price of the ticket. I got uncountable $5 parking tickets in Morgantown; why appeal? If those were $5000 parking tickets, every single ticket would likely be appealed. Naturally, the city make more money by increasing ticket prices, but only to a point.

I'm curious about the optimal mix of parking meters and garages. It should also be noted that most (all?) private parking arrangements are done without meters; I think this is important to consider and makes me think that a best case scenario does not involve meters. Then again, cities don't have the full spectrum of options at their disposal-- they can't have unlimited garages due to space constraints, and along similar lines, there isn't infinite space for parking meters.

So the questions, then: What is the optimal ticket price? What is the optimal meter price? What is the optimal garage price? What is the optimal mix of garages and meters? What is the optimal number of people searching for meter violators? Is there an optimal number of appeals?

All are a function of local conditions and all matter in determining the others.

Tuesday, April 27, 2010

Blockquoting Who?

As suggested by co-blogger Matt, I offer a quote today as a challenge. Guess who said this:
It is not sufficient to contrast the imperfect adjustments of unfettered private enterprise with the best adjustments that economists in their studies can imagine. For we cannot expect that any State authority will attain, or even whole-heartedly seek, that ideal.
The answer is below the fold.+/-

Juicing the Mitchell: Facebook Regulation

Sure are a lot of these lately. From Yahoo News:
Four U.S. senators want Facebook to make it easier for its more than 400 million users to protect their privacy as the website develops new outlets to share personal information.


Schumer sent a letter Sunday to the Federal Trade Commission calling for regulators to draw up clearer privacy guidelines for Facebook and other Internet social networks to follow.
Hat Tip: Todd Nesbit

Monday, April 26, 2010

Do As I Say, Not as I Text

Fiddling with your iPhone behind the wheel can get you fined across much of the nation. But many states are more than happy to tweet you with up-to-the-minute directions on how to steer clear of a traffic jam.


At least 22 states that ban texting while driving offer some type of service that allows motorists to get information about traffic tie-ups, road conditions or emergencies via Twitter.

Saturday, April 24, 2010

Is Starbucks the Next Bailout??

Exhibit A:

Regulatory Capture in The Science of Success

I've been enjoying playoff hockey, the Smuttynose Brewing Company and The Science of Success this afternoon. Charles Koch presents his managerial ideas in a straight-forward manner, and it's a relaxing read. Though I was particularly intrigued by this (unintentional?) reference to the capture theory of regulation:

But, even when faced with laws we think are counter-productive, we must first comply. Only then, from a credible position, can we enter into a dialogue with regulatory agencies to demonstrate alternatives that are more beneficial.

From The Old Farmer's Almanac

Courtesy my colleague's door:
If Patrick Henry thought taxation without representation was bad, he should see how bad it is with representation.

Friday, April 23, 2010

China Begins Forced Sterilization of Citizens

Story from the Telegraph. Like KipEsquire, I wonder what Tom Friedman's reaction is and if he would continue viewing them as being run by enlightened elites. Excerpts from the story:

Family planning authorities in Puning, a city in the southern province of Guangdong, have detained more than 1,300 people in the drive, the Nanfang Countryside Daily said in an investigative report.

Those detained included parents who refused to undergo the surgical procedure and their "relatives", the report said.


Huang Ruifeng, a 64-year-old father of three, said he was contacted by a local official ordering him or his wife to have the surgical procedure, the Nanfang newspaper said.

Mr Huang refused, claiming he was too busy. Later his father was taken away.

Authorities said they were using "extraordinary measures" to encourage couples to undergo sterilisation, such as refusing to provide the children proper registration documents.

The move effectively denies the children access to public services such as health insurance and free schooling.

Thursday, April 22, 2010

Circumventing International Recognition

In 1991 Somaliland declared independence from Somalia. Unlike the rest of Somalia, Somaliland has managed to establish a degree of peace in the time since. It prints it's own currency, the Somaliland shilling, and issues passports. The problem: Somaliland is not recognized by the international community. The solution:
At various roadside junctions in central Hargeisa currency vendors sit at battered metal containers piled high with brick-size wedges of Somaliland shillings, US dollars and Euros. Wedged into these stacks of cash are Somali passports.

“We sell these passports because our government is not recognised, so if we want to do business outside Somaliland we have to use this document”, 26 year old Hussein told me flicking through the front pages of a pristine Somali passport. Adding ones details is no sweat – simply glue a photo over the box that says ‘picture’ and fill in your details by hand. A minister’s signature is required from Mogadishu – if indeed there is a Minister of Immigration -but that is easily circumvented.

“We just forge the signature”, Hussein said nonchalantly.

“And the Somaliland officials turn a blind eye?” I asked. “Of course they do”, smiled Hussein, “They have to travel on these passports too”.
Anyone interested in traveling to the horn of Africa?

Wednesday, April 21, 2010

Selgin on Free Banking

The Daily Bell interviews George Selgin.
The fundamental reason why central banks, which are essentially mercantilist institutions, survive today is because they have managed to secure economists' blessing. This blessing in turn reflects economists' tendency to treat monetary instability as a problem inherent to free markets, which only central banking can address, instead of seeing central banks themselves as a principle source of monetary instability, as they might were they to study monetary history more carefully than most do. Consequently economists have come to apologize for government currency monopolies, despite having long condemned such monopolies in other realms, and for good reasons.

Juicing the Mitchell: Birther Conspiracy Edition

From CNN:
White House aides are scoffing at a move in the Arizona legislature to force President Obama to show his birth certificate to get on the state's ballot in 2012 for his likely re-election battle.

"This is a question that has been answered exhaustively," White House spokesman Bill Burton told CNN. "I can't imagine Arizona voters think their tax dollars are well served by a legislature that is less focused on their lives than in fringe right-wing radio conspiracy theories."
Actually, I do believe I will be better served by a legislature that is less focused on my life. If that means focusing on any number of trivial pursuits, then so be it.

Monday, April 19, 2010

What is Inflation?

Christopher Pang asks (and answers) that question. This line stuck out:
The latest country to fall to hyperinflation was Zimbabwe, where inflation rate reported to be at 89.7 sextillion (10^21) percent in 2008, about 14% increase in prices daily.
Ouch. I didn't even know 'sextillion' was a unit.

[HT: Astrid]

Tax Day Tea Party Talk

I was invited to speak at San Jose’s Tax Day Tea Party event last week, and since Justin linked to the short news clip about it, I thought I’d post my remarks. The take away of my argument is that economic freedom is the key to growth. Of course, a speech at a political rally is necessarily less precise than a scholarly article, but I draw heavily on evidence found in Andre Shleifer’s paper “The Age of Milton Friedman”, arguments in Peter Leeson’s piece “Two Cheers for Capitalism?”, and various other sources. It was an enjoyable experience talking to a larger group than I’m accustomed to (700-900 people according to one news source), and I hope that I was able to persuade some of them of the merits of economic liberty. The full speech is below the fold. Enjoy.


Residents Refuse FEMA Buy Out

From the AP here. It seems that residents in flood-prone areas prefer the status quo of other people paying for their costs of living in a flood zone, as opposed to accepting a payment to live somewhere else.

I'm fine with people who knowingly wish to remain in flood prone areas, but this highlights the dynamic problems of getting the government in the business of this particular type of bail out.

The Historical Complexity of Federal Public Finance

For whatever reason, this morning I found myself looking at this old handout from Russ Sobel's public choice course that compares government receipts and expenditures in the late 18th century with that of the mid-1870's. I thought I'd share it here, not so much to make any broader point, but rather as some eye candy.

Looking at it in piecemeal, starting with the 1790's:

What is interesting is just how simple it all is. Expenditures are primarily devoted towards expenditures on military/national defense, as well as interest on debt. There are 3 categories for revenue (customs, excise, and direct). Now, looking at 1866-1879 expenditures:
The expenditure categories are still very basic and focus on military and interest on debt. The category "Indians" now appears, and my guess is that this is basically a military expense as well. The "Miscellaneous" category is further broken down, and it appears to mostly consist of administrative expenses in taxation, "postal deficiency" (?? Too good to be true, there must be a different meaning here), the provision of lighthouses, printing money, and public buildings (to some extent, another administrative expense).

Now, the revenue side:
So, revenue sources appear to have grown in categories, but my guess is that this reflects changes in the economy over the ensuing century and improved administrative infrastructure more than anything else. It does appear, however, that revenue collection became more complex at a faster rate than expenditure patterns over the inaugural century. Is there a reason we should expect this? My guess is that this reversed after the Great Depression, but I wonder what it would have looked like in the 1920's.

Here is the webpage devoted to modern government revenue and expenditure categorization.

Emily Schaeffer on Greater Freedom

Fellow TPS blogger asks (starting about 1:07) Tea Party attendees to support more open border (trade and immigration) policies:

Saturday, April 17, 2010

Blockquoting X

X = Brennan and Buchanan, The Reason of Rules (p. 45):
The jury, as an institution, is an instrument designed to fascilitate the discovery process. If it is efficient, as an institution, it may be the best available means of ascertaining judgements of guilt or innocence in situations in which one or the other of these verdicts is socially required.

Thursday, April 15, 2010

Today's Juicing the Mitchell

I wholeheartedly encourage Congress to investigate fully the pandemic of smokeless tobacco use in Major League Baseball.

Public Safety through Private Action

From the NBER:

Given the central role of private individuals and firms in determining the effectiveness of the criminal justice system, and the quality and availability of criminal opportunities, private actions arguably deserve a central role in the analysis of crime and crime prevention policy. But the leading scholarly commentaries on the crime drop during the 1990s have largely ignored the role of the private sector, as have policymakers. Among the potentially relevant trends: growing reporting rates (documented in this paper); the growing sophistication and use of alarms, monitoring equipment and locks; the considerable increase in the employment of private security guards; and the decline in the use of cash. Private actions of this sort have the potential to both reduce crime rates and reduce arrests and imprisonment. Well-designed regulations and programs can encourage effective private action.

One creative method to harness private action to cost-effective crime control is the creation of business improvement districts (BIDs). Our quasi-experimental analysis of Los Angeles BIDs demonstrates that the social benefits of BID expenditures on security are a large multiple (about 20) of the private expenditures. Creation and operation of effective BIDs requires a legal infrastructure that helps neighborhoods solve the collective action problem.

Wednesday, April 14, 2010

What I've Been Reading

So the recent trip to Vegas for APEE and tonight's Penguins playoff game have allowed me to get through most of Hirschman's The Passions and the Interests. I was debating using it as supplementary reading for my Micro Principles class in the fall but I think I'll pass, though it would be a solid book for a history/moral foundations of capitalism class.

The following is the epigraph (translated) and sums it up nicely:

And it is fortunate for men to be in a situation in which, though their passions may prompt them to be wicked, they have nevertheless an interest in not being so.

I'm drawn to the idea of the interplay between economic interests and political interests; oftentimes we think of the latter harming the former, but this book explores the interaction going the other direction. It's a hidden virtue of capitalism that seems to have been lost, as the author argues, around the time of Adam Smith.

Thursday, April 08, 2010

iPad Middlemen

CNN has a story today on the value of middlemen to the iPad market in Hong Kong.

On Saturday, Leung and dozens of his friends stood in line at Apple stores around the San Francisco area. "We were limited to buy only two apiece," he said on Wednesday, toting a suitcase filled with iPads fresh off a plane from San Francisco and ready for resale on the streets of Hong Kong.

All told, he and his friends brought back about 200 iPads for sale in Hong Kong, where stores were selling them for as much as 60 percent higher than their $499 retail price.

Note also the individual looking to extend the process to China.

Wednesday, April 07, 2010

Libertarian Paternalism @ CATO Unbound

Glen Whitman has prompted an interesting exchange at Cato Unbound on Libertarian Paternalism. Richard Thaler replies:
Consider the following common problem. Most firms have an open enrollment period in November when employees can elect their benefit package for the following year. At my employer, the University of Chicago, you have a few weeks to log on to the appropriate web site and make your selections. The question is, what should the employer do for those employees who forget to log on? (Professors’ reputations for absent-mindedness are well deserved.) For each of the choices the employee has, the employer needs to select a default option for those who do not log on, and normally the default is either “same choice as last year” or “back to zero” (meaning, decline this option). At Chicago the default option for the health insurance plan is the same as last year.

Of course it is possible to criticize this choice of the default option, but it is essential to understand that the employer must choose something. Some employers use “back to zero,” which minimizes the costs to the employer; somewhat less drastic would be to default employees into the plan that is cheapest for the employer; one could even choose a default plan at random (don’t laugh — this is the strategy used for some participants in the Medicare Part D prescription drug coverage implemented by the Bush administration); or the employer could somehow force employees to make a choice. The Nudge philosophy here is that the person who designs the plan, whom we call the choice architect, should choose the default that she thinks, all things considered, will make the participants best off. Does Professor Whitman have a better suggestion?
It's hard NOT to support this version of Libertarian Paternalism (of course, I'd prefer the choice architect be a private entity). If a default must be set, one should (in my normative opinion--and apparently Thaler's and others') set the default to what would most likely make the participant best off.

It seems, however, that this is a very narrow subset of the LibPat agenda. Typically, the government (not the employer) is the choice architect. And when the employer IS the choice architect (say in that cafeteria/fruit example) the government intervenes as supreme default-setter. Nudging is transformed from an ethical guideline that individuals should employ to a government mandated policy. Yet Thaler and others continue to present the very narrow subset of LibPat as the whole agenda. Is my perception of the debate correct? Or have I missed something?

Tuesday, April 06, 2010

Yardstick Competition in School District Income Tax Adoption

Joshua Hall and I now have a paper (ungated here) forthcoming in Public Finance Review, titled "Tiebout Competition, Yardstick Competition, and Tax Instrument Choice: Evidence from Ohio School Districts." Those interested in spatial econometric applications and interpretations in public finance settings might find this to be of particular interest. Here is the abstract:
Previous research has shown that Tiebout-style fiscal competition among local governments reduces the likelihood of adopting income taxes. This literature has not yet considered the impact of yardstick competition on tax instrument choice. This paper employs spatial econometrics to test for yardstick competition in the decision to adopt an income tax. The results, based on Ohio school district data, indicate that school districts are more likely to adopt an income tax if their neighbors have already done so. While a negative correlation of Tiebout competition on district income tax adoption persists, controlling for spatial dependence reduces the statistical significance of the effect.

Monday, April 05, 2010

Onion Nails Levitt-style Thinking

From The Onion:
A University of Chicago freakonomics professor told General Electric investors Monday to keep a close eye on recent fluctuations in the heights of competitive powerlifters from Mexico. "Usually we can count on a stable average of 5 feet 8 inches, but last month's quarter-inch drop in height among Mexican dead-lift competitors in the middle-heavyweight division could spell disaster for GE's aviation and software subsidiaries," freakonomist James Duncan said. "But, like anything else, a shrewd investor must always ask himself one thing: How many hot dogs did I eat last year?" Duncan previously gained recognition for tracking first-time home ownership and teenage mothers' gum purchases against the Times Tom Jones Is Played Per Day Index.
[HT: Omar]


Once a year, SPEA holds a gala where students and faculty donate items to a silent auction. The funds are then used to provide scholarships to students. One of the items on the auction block this year was "SPEArt: An official artistic tribute," by Stefanie Mojonnier. I was very flattered to see that one of the two paintings was "a tribute to Justin Ross economics." Here it is:

Beer, nachos, and pretzels. TPS readers also might recognize the example.

I won the auction with a bid of $50, a bargain at twice the price!

Improvement through art

This is an interesting article concerning serving sizes in artist's representations of the Last Supper. Entrees, plates, bread-- it's all been growing over the last millennium. The implication that the super-sized fare is only of recent times, and all of the purported negativity that comes from that, isn't the case. But what simpler way to show the vast improvement in human life over the last 1000 years? As is noted at the end of the piece:

Instead, they suggest, it's a natural consequence of "dramatic socio-historic increases in the production, availability, safety, abundance and affordability of food" over the millennium that started in the year 1000 A.D.


Thursday, April 01, 2010

Warning: Overpopulation Could Cause Tipping

Congressman Hank Johnson, Representing the 4th District of Georgia, is concerned that the island of Guam might "tip over and capsize." I am not making this up. Roll the tape.

It should be noted that Congressman Johnson has been battling Hepatitus C. From the AJC:
The Lithonia Democrat's already-thin frame has shed 30 pounds in the past year. His speech is slower than ever, and he regularly gets lost in thought in the middle of a discussion. He is easily fatigued and often impatient and irritable.
He was officially declared free of the virus in January, but it has ravaged his liver, resulted in thyroid problems and other health issues, including depression, for which he's also being treated. To keep the disease in remission, Johnson is going through an experimental treatment that he said has been the worst part so far.
It seems to me that Johnson is unfit to serve as Congressman. Rather than ousting him, though, I suggest a full scale investigation. What bills has he authored, supported, and voted for? How is his illness affecting other congressmen? What are his children doing these days? Let's get to the bottom of this!