"Government Challenges, Your Solutions"

That is the slogan of the new government website, challenge.gov. The website is a result of the recently passed America Competes Act, with the intention to transition government support of private R&D away from paying for inputs to paying for outcomes. The idea is that they will pay out cash rewards to those who meet certain challenges, similar to the famed X-Prize for commercial space flight. You go to the website, find a government challenge, and then submit your entry. When I read about this new program in Slate ("Can Washington Get Amercia's Economy Moving Again with Cash Rewards?"), it sounded like a positive change to government financing of R&D, so I was optimistic.

However, going to the website (which I highly recommend you do) and picking over the different prizes, it is difficult to come away impressed. Though there are some challenges with arguable social value, but a lot of them are bizarre marketing programs.

For instance, I naturally clicked on the "economic" challenges. The first challenge offered was the "'How Has Social Security Made A Difference In Your Life' Video Contest":
Not a good start, right? This of course, wet my appetite for what other creative challenges they expect to have large positive externalities. The organizations list had a hyperlink to challenges sponsored by the USDA, a group that usually gets a mention in the price control section of many econ textbooks. I learn from it that there are no existing cookbooks for children:

That one pays up to $12,000, an amount which could basically buy out the entire cookbook section of your local Barnes and Nobles.

What about the Department of Defense? Perhaps it carries some challenges for improving radar technology, or more protective body suits for soldiers? Software to better teach languages important to the intelligence community? Click the link and here is your first one, a Press Holiday Scavenger Hunt!
Yikes! Going back to the homepage, I quickly come across two more gems in their scrolling marquee:
You see, Taxpayer, stop asking for your money back and start enjoying an augmented reality photo in the National Archives!!

For this last one, I actually do use a lot of government data and I think it does provide some social value, but somehow I cannot find it in me to write a love sonnet about Census data. At the very least, even if the government data does create value, it is not clear to me how a love sonnet does.

Challenge.gov most definitely gets the TPS Seal of Approval.

Indiana Rep Proposes "Entrepreneur Auction"

Story:

Sue Ellspermann (R-74) says she has filed a bill allowing recent college graduates to pitch their business ideas to local leaders, who would then decide if they want to make an offer to locate the startup in their community.

Under the plan, entrepreneurs could have several offers which would then be reviewed to decide which community would make the best fit.

I can think of several advantages and disadvantages to this proposal, but I think the bottom line is going to have to be "Winner's Curse."

American Pie

Economist Bob Higgs parodies the classic song by Don McLean. Here's a taste:

And in the streets: the children screamed,
The lovers cried, and the poets dreamed.
But not a word was spoken;
The mainstream’s bells were broken.
And the three men needed in this flurry:
Ludwig, Fritz, and my old friend Murray,
Were laughed out of court by the mainstream jury
The day the dollar died.

ATSRTWT.

Financial Panic: The Musical

Courtesy The Browser, this headline from FT.com:

Depicting the financial crisis in music. An orchestral interpretation from Julian Anderson, London Philharmonic Orchestra's composer in residence. "The notes of Keynes’s surname emerge, and with them a sense of hope"

Bowl Showdown 2010: Gus vs. Sagarin

As the college football bowl season is underway, it is fun to track Gus' ability as a predictor of bowl games against other, more complicated schemes. What better one to compare it to than Jeff Sagarin's. Both rankings predict identical outcomes for many of the bowls, but the discrepancies are listed below in chronological order (Gus' prediction given, Sagarin's would be the opposite):

December 23 - Poinsettia Bowl - Navy over San Diego State
December 28 - Champs Sports Bowl - West Virginia over North Carolina State
December 31 - Liberty Bowl - Central Florida over Georgia
January 1 - Capital One Bowl - Michigan State over Alabama
January 3 - Orange Bowl - Virginia Tech over Stanford
January 4 - Sugar Bowl - Ohio State over Arkansas
January 10 - BCS Championship - Auburn over Oregon

As there's an odd number of differences, there has to be a winner! For the record, both rankings picked all three already-played bowl games identically and sit at 2-1. (Correct on BYU and Northern Illinois, incorrect on Ohio University.)

The State as Both Parent and Dealer

The "state as both parent and dealer" meme is familiar to anyone who has expressed annoyance that the government would subsidize tobacco and then tax cigarettes. Same meme with a twist seems likely in Kentucky, a state which presumably subsidizes a science curriculum in public education and is looking now to subsidize a creationist museum that teaches that science is wrong. You can argue the merits of this as being fair to all sides, I suppose, but I think it better illustrates the slippery slope of public subsidies in general:

The theme park will be called Ark Encounter and will be made up of educational attractions that highlight all that is wrong with the scientific method. The park will be run by Christian evangelicals who also run the Creation Museum, which is on the Kentucky-Ohio state line. The museum teaches, and the theme park will teach, a literal reading of the Bible that leaves little room for Charles Darwin. Scientists' estimates that the earth is really 4.5 billion years old are the result of a mathematical error.

[...]

Kentucky Gov. Steve Beshear (D) supports giving tax incentives to the owners of the for-profit park. He says he's doing it because the park will create 900 badly needed jobs and he fears that the creationists might move to Indiana. Supporters of the park say that tax incentives are appropriate because the park is not explicitly religious, but rather an alternate explanation of the origins of the earth.

FWIW, it is $35 million in tax incentives, which works out to a little less than $40,000 per job.

2010 Gus Rankings: Week 15

To make things official, here are the final regular season 2010 Gus Rankings. Last weekend's Army/Navy game rounds out this year's rankings.

BCS Downside?

TPS loyalist Mike Assenzio sends along this bit, which cites this original article. What's the downside of making a BCS bowl game? When your fans don't go. Some excepts:

The Fiesta Bowl distributed 17,500 tickets to UConn, and the school is responsible to sell them all. The cheapest of those tickets cost $111 (in the lower end zone) and can cost as much as $268 for club level.

UConn also has a hotel obligation — a total of 550 rooms at three different hotels ranging in price from $125-225 a night, not including tax, with blocks reserved for either three or seven nights.

Additional expenses include a chartered flight and meals for the team, staff and 300-member band, as well as a $100,000 bonus to coach Randy Edsall, and smaller bonuses for assistants, per their contracts, for getting the team to a BCS bowl.

Cost of any tickets or hotel rooms that go unfilled are absorbed by the university.

[...]

As of Monday night, only 4,000 tickets had been sold, meaning UConn was still holding roughly $2.5 million in unsold tickets.

As the original article notes, UConn's inflow from making the Fiesta Bowl should be over $3 million, but consider this: Since teams that don't make BCS games in BCS conferences still get revenue, it's quite possible that by winning their final game at South Florida, UConn could have set itself back an amount of money that could stretch into the millions of dollars. Granted, going to a lower tier bowl game presents its own financial difficulties along the lines of what was described above-- albeit on a much lower scale-- but I can't help but to think that simply in terms of the bottom line, UConn is worse off making the Fiesta Bowl.

I don't think UConn's going to lose money on the deal, but it's not going to be the financial jackpot so frequently assumed when you get a BCS invitation.

Happy Meal Legal Issues

Looks like McDonald's is getting sued over their Happy Meals or, more specifically, that they include toys with their Happy Meals. Says the plaintiff herself:

Parham, a 41-year old state employee, says her kids repeatedly ask for Happy Meals, mainly for the toys. "We have to say no to our kids so many times and McDonald's makes that so much harder to do. I object to the fact that McDonald's is getting into my kids' heads without my permission and actually changing what my kids want to eat."

Doesn't this invalidate all advertising for kids products-- if it's not the Happy Meal that's the problem but the "into my kids' heads" aspect of it? Further-- are doctors then prohibited from giving out lollipops after shots?

Also, the fantastically-named Center for Science in the Public Interest is along for the ride.

Quantitative Easing Explained

I disagree with both of the following videos. But the question I pose to TPS readers (and co-bloggers) is: which of the two videos more accurately describes your position on quantitative easing. Alternatively, feel free to post what you hate about each video.

What would we do without the State?!

Forever lose property, evidently. Beneath the jovial nature of this article-- concerning the fact that Steve Jobs hasn't claimed $37.91 worth of property from Apple-- is nature of the regulatory beast:

California law requires claims be posted for property "abandoned or lost" for more than three years. If the person doesn't claim it after six months, the property is transferred to the state, which then attempts to contact the owner, the spokesman said.

Anyone care to venture the social cost of filing claims for property, transferring it to the state, and then having the state undertake a search for the owner of its own?

Childrens' Books For Economists: The Grinch

Art Carden delivers what I think is an instant masterpiece in a retelling of "How The Grinch Stole Christmas." My favorite paragraph:

The Whos, with one voice crying out in the night

Screamed “bring back our stuff! You haven’t the right!

“We know that we’re noisy all through Christmas Day,

But if you don’t like it, it’s you who should pay!

“For we were here first, and homesteaded the rights

To sing, to make noise, and to hang Christmas lights

“The costs of our Christmas joy helped you to save!

They were fully reflected in the price of your cave!”

2010 Gus Rankings: Week 14

Army/Navy notwithstanding, here are the final regular season Gus Rankings.

Now that the season is done, had the Gus Rankings been used as the sole measure of determining the BCS Bowls (and bowls choose the highest ranked team possible when their turn comes up), we'd have the following lineup:

National Championship Game: Auburn vs. Oklahoma
Rose Bowl: Oregon vs. Ohio State
Sugar Bowl: TCU vs. Michigan State
Fiesta Bowl: Boise State vs. Connecticut
Orange Bowl: Virginia Tech vs. Arkansas/Missouri

Arkansas and Missouri are tied, so one of them would claim the Orange Bowl slot.

The Morality of the Market

TPS stalwart Rob Holub lets us know that The University of Wisconsin takes a strong stance on the issue.

I think I'm changing my understanding of these situations; I don't think it's a dislike of the secondary market, per se, as much as it's a dislike of there's-a-deal-to-be-had-and-I'm-not-in-on-it. I feel this because if the University of Wisconsin were to auction off the tickets from the get go-- thereby effectively eliminating the secondary market-- the same vitriol would be directed at the University. (Though the perception of a deal to be had would change.)

There are few stronger sentiments than the sense of entitlement.

Elected Property Assessors: A Denver Case Study

From the Denver Post (Hat Tip to Zach):

The Adams County assessor has slashed millions of dollars from the taxable value of properties owned by the largest contributors to his election campaigns, a Denver Post investigation found.

[...]

The review of assessments on properties owned by top contributors to Reyes' campaigns found that his leading donor, a California-based warehouse company, has won reductions in taxable value totaling $23 million on 11 buildings. Those reductions saved the company more than $800,000 in property taxes this year alone.

I share this, in part, for self-promotional purposes. Here is my paper on elected versus appointed property assessors.

Printing Press for the $100 Bill is Broken

Insert your own government spending joke, then proceed to this link:

As a metaphor for our troubled economic and financial era -- and the government's stumbling response -- this one's hard to beat. You can't stimulate the economy via the money supply, after all, if you can't print the money correctly.

Because of a problem with the presses, the federal government has shut down production of its flashy new $100 bills, and has quarantined more than 1 billion of them -- more than 10 percent of all existing U.S. cash -- in a vault in Fort Worth, Texas, reports CNBC.

I await an Austrian response on whether or not a interrupted printing process is good or bad in ABCT. My guess is that, unless its permanently broken (and only then in ABCT), this is a bad turn of events under any theory of the business cycle.

Working Paper: The Great Recession and its Aftermath from a Monetary Equilibrium Theory Perspective

Steve Horwitz links to our working paper, so I guess I should do the same. Here's the abstract:

Modern macroeconomists in the Austrian tradition can be divided into two groups: Rothbardians and monetary equilibrium (ME) theorists. It is from this latter perspective that we consider the events of the last few years. We argue that the primary source of business fluctuation is monetary disequilibrium. Additionally, we claim that unnecessary intervention in the banking sector distorted incentives, nearly resulting in the collapse of the financial system, and that policies enacted to remedy the recession and financial instability have likely made things worse. Finally, we offer our own prescription to reduce the likelihood that such a scenario occurs again by better ensuring monetary equilibrium and eliminating moral hazard.

The paper is slotted to appear in the second volume of Macroeconomic Theory and Its Failings: Alternative Perspectives on the Global Financial Crisis, edited by Steve Kates. My contribution to that volume (co-authored with Pete Boettke) can be found here.

Why Do We Have a Central Bank?

O'Driscoll poses this very important question in a recent WSJ article. Here's the take away:

The Federal Reserve System was created by an act of Congress only in 1913. It then presided over a great wartime inflation followed by a major depression in 1920-21. The 1920s were an era of prosperity, due as much to Treasury Secretary Andrew Mellon's wise fiscal policies as anything the Fed did. The Fed's performance in the Great Depression was disastrous, a judgment shared by its current chairman, Ben Bernanke.

The Canadian banking system weathered the Great Depression without a central bank. Instead of the thousands of small, undiversified banks that the United States had, Canada had a small number of banks (with many branches across the country) that were able withstand localized downturns. Even in the Great Depression, banking failures in the U.S. were concentrated in specific regions. Canada's central bank, the Bank of Canada, was created in 1935 in part because of pressure from the rest of the world. Canada had survived without it quite well.

In short, central banking has been neither necessary nor sufficient for the development of a modern economy and financial system. A number of reform proposals for the Fed are being crafted, but there is no agreement on why the institution exists.

ATSRTWT.

2010 Gus Rankings: Week 13

Here are this week's Gus Rankings. Auburn has a choke hold on the top spot; even a loss in this weekend's SEC title game shouldn't take them from the top spot. TCU, Ohio State, Oklahoma and Michigan State round out the top five.

Just as last week, if the standings remain as listed, the BCS would shake out as follows (higher ranked teams assumed to win appropriate conference championships):

National Championship Game: Auburn vs. TCU
Rose Bowl: Ohio State vs. Oregon
Fiesta Bowl: Oklahoma vs. West Virginia
Sugar Bowl: Michigan State vs. Arkansas
Orange Bowl: Virginia Tech vs. Boise State

In addition, at Art Carden's request, here is a breakdown of the average rating by conference:

ACC: 2.3 (Atlantic 7.0, Coastal -2.3)
Big 10: 13.9
Big 12: 19.1 (North 11.8, South 26.3)
Big East: -2.1
Pac-10: 5.6
SEC: 17.2 (East -0.7, West 35)

And while we're here, the following is my prediction of how it will actually shake out:

National Championship Game: Auburn vs. Oregon
Rose Bowl: Wisconsin vs. TCU
Fiesta Bowl: Oklahoma vs. Stanford
Sugar Bowl: Arkansas vs. Ohio State
Orange Bowl: Virginia Tech vs. West Virginia

(...with the caveat that: if Connecticut makes it from the Big East, put them in the Fiesta and put Stanford in the Orange Bowl, and the Virginia Tech spot is for the winner of Virginia Tech/Florida State and the Oklahoma spot is for the winner of Oklahoma/Nebraska.)

Assorted Links

1. Friend of TPS Mike Assenzio sends along word that Nevada's victory over Boise State cost them about $1M; take that Coase!

2. Longtime TPS reader Rob Holub sends along Jack White and his understanding of the secondary market. I've long believed that if artists really want to collapse the secondary market for memorabilia or concert tickets, simply incorporate an auction mechanism for distribution-- the market will either go away or be vastly reduced in scope. It's nice to see Jack White take a step in that direction.