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.

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?

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.

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.

+/-

Recent events and the words of our politicians have popularized the idea that while markets can be important to economic growth and prosperity, they can also undermine it. It is fashionable to give a nod to the forces of entrepreneurship but in the same breath assert that the power of markets must be tamed by regulation. It is complacently accepted that somehow, these regulators – the men and women in Washington -- know what’s best for American consumers.

When the current administration talks of entrepreneurship, they speak of politically favored businesses and privileged recipients of the taxpayers’ dollars. To be clear, that is not entrepreneurship. It has become conventional to say that those who openly embrace capitalism, free markets and free trade are dogmatic, ideologues, idealistic, or market fundamentalists. And if you look to the media and our leaders, you get the impression that being in favor of free markets it somehow an unreasonable position.

Unless one is ashamed of unprecedented increases in income, rising life expectancy, greater education, and more political freedom, there is no reason to be a fair-weather fan of capitalism. Sprawling free markets in countries that became more capitalist over the last 25 years have meant many more people enjoy improvements in well being and opportunities to advance human capabilities.

There is no evidence that countries that eschewed freer markets and embraced substantially greater state control performed better on any of these major indicators. On the contrary, those countries that adopt increased taxation, increased regulation, fiscal mismanagement and enormous public debt have performed demonstrably worse.

From a global perspective, we have witnessed remarkable progress of mankind through the increased acceptance of free market policies in both rich and poor countries. Before the industrial revolution, 80% of the world’s population lived in abject poverty. By 1980, that number has fallen to 34.8% and by 2000, less than 20% of the population lives on less than $1 a day. In five years, the number is expected to fall to 10% if free trade is allowed to flourish.

In just the past 25 years increased private ownership, increased free trade, and lower taxes all came at the hands of politicians like Deng Xiao Ping in China, Margaret Thatcher in England, and Ronald Regan in United States. In the years following the adoption of these policies by these global leaders, per capita income nearly doubled from 1980 to 2005; Tariffs fell and trade increased; Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast.

In the average country that became more capitalist over the last 25 years, the average citizen gained a 43% increase in income, nearly half a decade in life expectancy, and a 2 year increase in the average years of schooling. In my lifetime alone, freer markets have improved the lives of billions of people from all walks of life.

When we look back at our own history, the tremendous economic growth that Americans experienced from the time of the original Tea Party up to 1914 was the result of economic freedom from government regulation, open boarders for free immigration, and very few trade restrictions on the global flow of goods, services, and capital. Anyone could get on a boat, land on Ellis Island and become an immigrant and this benefited both domestic Americans and the immigrant alike. Business and labor were free to be entrepreneurial – and entrepreneurship created wealth. But we don’t want wealth for wealth’s sake. Wealth allows for the improvement of the human condition.

For example, in 1905, our average life expectancy in the U.S. was 47. Today it is 78. A hundred years ago only 14% of homes had a bathtub; 8% had a phone; 95% of all births took place at home; most women washed their hair once a month; and the average worker made about $300 per year.

As recent as 1984, it took the average American wage earner 456 hours of labor to earn enough to purchase a cellphone. Today, it takes the average American 4 hours. A computer has fallen from costing 435 hours of labor to less than 20. None of this accounts for the tremendous improvements in technological capacity. There are several reasons that the costs of goods have dropped so drastically, but perhaps the biggest is increased international trade.

Simply put, the free market means the poor are less poor. Globalization extends and deepens a capitalist system that has for generations been lifting American living standards — for high-income households, of course, but for low-income ones as well. When the world embraces free market reforms, the world economy expanded greatly, the quality of life improves sharply for billions of people, and dire poverty was substantially scaled back. This is not a coincidence.
It is a well-established fact that when people are free to buy from, sell to, and invest with one another as they choose, they can achieve far more than when governments attempt to control economic decisions. Widening the circle of people with whom we transact—including across political borders—brings benefits to consumers in the form of lower prices, greater variety, and better quality, and it allows companies to reap the benefits of innovation, specialization, and economies of scale that larger markets bring. Free markets are essential to prosperity, and expanding free markets as much as possible enhances that prosperity.

Voluntary economic exchange is inherently fair and does not justify government intervention. When two free people come together on terms they have agreed upon to exchange peacefully, both benefit. Government intervention in voluntary economic exchange on behalf of some citizens at the expense of others is inherently unfair. One person is coerced in order to privilege another. It really is that simple.

When goods, services, labor and capital flow freely across U.S. borders, Americans can take full advantage of the opportunities of the international marketplace. They can buy the best or least expensive goods and services the world has to offer; they can sell to the most promising markets; they can choose among the best investment opportunities; and they can tap into the worldwide pool of capital. Study after study has shown that countries that are more open to the global economy grow faster and achieve higher incomes than those that are relatively closed. This is capitalism.

Growth is not guaranteed. It seems obvious that the central challenges facing America have to do with the with predatory regulatory and tax policies conducted by governments domestic and abroad. From an economic perspective, then, the case for unilateral trade liberalization—that is reducing our own trade barriers and subsidies without preconditions or reciprocal commitments from other countries—is the best policy to promote peace and prosperity globally.

Politically, however, the concentrated and organized beneficiaries of protectionism are powerful relative to the much larger, disorganized, beneficiaries of free trade. Politicians tend to be most responsive to the loudest interest groups and are therefore inclined to view free trade unfavorably. But we as Americans must be clear – capitalism is not evil. It has done more good for more people than any acts of state, any stimulus spending, any health program or welfare initiative. Americans can no longer afford to fear freedom.

Finally, acknowledging the relationship between free markets and economic prosperity does not make someone “dogmatic”. It is unreasonable to continue to ignore these facts. Capitalism’s superiority for economic growth and development deserves the unqualified support of everyone who believe that wealth is better than poverty, life is better than death, and liberty is better than oppression.

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:

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.

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.

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.

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.

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?

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.

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]

SPEArt

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.

Indeed.

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!

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.

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 Brätland
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.

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.

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.

The Equal Marginal Benefit Principle in One Picture

Click here for a post explaining the EMBP.

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!

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!

Futurama	Weeknights, 9p/8c
Bureaucrat's Joy
www.comedycentral.com
Joke of the Day Stand-Up Comedy Free 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.

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).

Markets in Everything: Purse Theft Insurance

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

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.

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.

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?
   

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?

Who Issued that Toyota Recall?

From MercuryNews.com:

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.

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.

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.

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.

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.

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.

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.

Unions vs. School Districts: Rhode Island edition

Not sure that the teachers themselves are the problem, but it's a bold move to fire every single teacher at a high school. In a world of marginal movement, change rarely comes in large doses so it'll be interesting to see where all this settles. I'd like to think that it would lead to some market based efforts to improve the failing school district, but I can't help but to think that this situation, in the end, will be a net gain for the teacher's union.

The Art of Not Being Governed

"In one sense, the difficulty of moving grain long distances, compared with the relative ease of human pedestrian travel, captures the essential dilemma of Southeast Asian statecraft before the late nineteenth century.

...

Imagine a map constructed along these lines, designed to represent relative degrees of potential sovereignty and cultural influence. One way of visualizing how the friction of distance might work is to imagine yourself holding a rigid map on which altitudes were represented by the physical relief of the may itself. Further, let's imagine that the location of each rice-growing core is marked by a reservoir of red paint filled to the very brim. The size of the reservoir of paint would be proportional to the size of the wet-rice core and hence the population it might accommodate. Now visualize tilting this map...

The angle at which you had to tilt the map to reach particular areas would represent, very roughly, the degree of difficulty the state would face in trying to extend its control that far."

That's from the terrific The Art of Not Being Governed by James C. Scott, I'm working my way through it.

Expiration Dates as Self-Regulation

Expiration Dates are "meaningless," from Slate:

Such disparities are a consequence of the fact that, with the exception of infant formula and some baby foods, package dates are unregulated by the federal government. And while some states do exercise oversight, there's no standardization. A handful of states, including Massachusetts and West Virginia, and Washington, D.C., require dating of some form for perishable foods. Twenty states insist on dating for milk products, but each has distinct regulations. Milk heading for consumers in Connecticut must bear a "Sell by" date not more than 12 days from the day of pasteurization. Dairies serving Pennsylvania must conform to 14 days.

That dates feature so prolifically is almost entirely due to industry practices voluntarily adopted by manufacturers and grocery stores. As America urbanized in the early 20^th century, town and city dwellers resorted more and more to processed food. In the 1930s, the magazine Consumer Reports argued that Americans increasingly looked to expiration dates as an indication of freshness and quality. Supermarkets responded and in the 1970s some chains implemented their own dating systems.

So in actuality, the meaning of the date is a very complex phenomenon that is specific to the individual traits of the food and the intended quality level, and yet it is one that we seem to work with very well.

The Slate writer sees this all as a problem that needs to be fixed, while acknowledging that people seem pretty good at deciding when their food is good to eat. She also raises concerns about the next E. coli outbreak, but last I checked those (as seldom as they are) are probably even less likely to originate from you not throwing your milk away sooner.

Shifting Coalitions?

Political parties are interesting as they often bring together diverse individuals who agree on a core set of issues but disagree over what appear to be less important issues. Since the importance of this or that issue depends on what political cards are currently being played and what cards are anticipated in the future, the core set of issues might change from time to time. If there is wide spread disagreement about those issues outside the core, coalitions are likely to shift through time. Perhaps we are on the verge of such a shift.

To simplify, we can think of the GOP at present as being comprised of three groups: neocons, traditional conservatives, and neoliberals. Neocons are in favor of interventionism, both home and abroad. Traditional conservatives support free markets, but also support "traditional conservative values" and don't mind using the state to enforce said values. Neoliberals are in favor of free markets and, even though some may share the conservative values of their traditional conservative allies, they do not advocate using government power to legislate those values. I do not see the neoliberals and neocons finding common ground. So the question is: will traditional conservatives downplay their state-supported values in order to side with neoliberals or reject their free market stance in order to side with neocons?

The sides have been drawn but it isn't clear how things will end. Consider these two videos from CPAC.




It should be interesting.

Why Didn't Springfield Get Richer?

Because the dome was just like a policy that rhymes with "Shromectionism."

Inspired by Art Carden's excellent Simpson's image heavy presentation for the students of SPEA.

Closing State Deficits

The Center on Budget and Policy Priorities offers A Balanced Approach to Closing State Deficits. Since we here at TPS embrace shameless self-promotion, I will note that they favorably cite my TF paper on Movie Production incentives (pp. 4-5).

A Plea for Economic Freedom: Gilmore Girls Edition

Destiny decided that my wife would start watching Gilmore Girls just so that I would get to see this scene (no video as far as I can tell):

LUKE: I look at a thousand apartments, I choose yours. How is that possible?

TAYLOR: Well, count yourself lucky, you. With me as the owner, there is a level of quality control that is sorely lacking in this town. For example, at all my properties, we measure the grass before, during, and after mowing to attain a perfect inch and a half height, which is both pleasing to the eye and good for the grass.

LUKE: All of your properties?

TAYLOR: Ten in all.

LUKE: Ten properties? What are you, buying up the town?

TAYLOR: Not yet, but someday – who knows?

LUKE: But why isn’t anyone stopping you?

TAYLOR: Because, my friend, people are lazy. They don’t wanna think about the proper fabric for an awning or the correct historical color for a building. They just slap any old thing up on a wall and sleep like babies. But soon, hopefully, the city council will put an end to that.

LUKE: Taylor, you cannot tell people what color to paint their buildings!

TAYLOR: Well, someone has to.

LUKE: No, they don’t. We don’t live in a fascist country.

TAYLOR: Oh, this isn’t about the fascists – who, by the way, had their faults but their parks were spotless.

LUKE: I have to get out of here.

It goes on, but you get the idea.

Blockquoting X

X = Mises, Liberalism (27-28).

Nowhere is the difference between the reasoning of the older liberalism and that of neoliberalism clearer and easier to demonstrate than in their treatment of the problem of equality. The liberals of the eighteenth century, guided by the ideas of natural law and of the Enlightenment, demanded for everyone equality of political and civil rights because they assumed that all men are equal. God created all men equal, endowing them with fundamentally the same capabilities and talents, breathing into all of them the breath of His spirit. All distinctions between men are only artificial, the product of social, human—that is to say, transitory—institutions. What is imperishable in man—his spirit—is undoubtedly the same in rich and poor, noble and commoner, white and colored.

Nothing, however, is as ill-founded as the assertion of the alleged equality of all members of the human race. Men are altogether unequal. Even between brothers there exist the most marked differences in physical and mental attributes. Nature
never repeats itself in its creations; it produces nothing by the dozen, nor are its products standardized. Each man who leaves her workshop bears the imprint of the individual, the unique, the never-to-recur. Men are not equal, and the demand for equality under the law can by no means be grounded in the contention that equal treatment is due to equals.

Still Hope for Indiana Polycentricity

Indiana is still trying to figure out what to do with township governments in the state. To simplify massively: the dominant push is towards centralizing government to the county level, and the conventional view for the existence of pushback is that township-elected politicians/bureaucrats are undermining rationality. I agree that there is a problem when revenues are collected at the township and services are provided by the county, but I would go towards the route of decentralizing services from the county back to the townships, rather than centralizing the revenues to the county. A matter of taste, I guess. In the meantime, the absurdly idealistic goals for this process are the primary hurdle:

Still, a lack of direction hasn’t stopped chatter about nixing township government. Legislators have narrowed the number of possible solutions to about three: abolishing township government completely, getting rid of township boards but keeping elected trustees in each township or letting a voter referendum decide on the changes. But perhaps the most intractable problem for state leaders seems to be finding a solution that fits the needs of all 1,008 townships in the state.

Yes, a Pareto-improving state policy for >1K entities probably will be a challenge.

The Market for Fake Job References

CNN has the story here, of CareerExcuse.com, which will provide "the highest quality employment verification services and helping job seekers acquire 'great' references for their resume." In other words, if you don't have good job references and you're looking for a job, you can buy them. From the bit:

Schmidt is the founder of CareerExcuse.com, a Web site that says it will fill any gap on your résumé by acting as your past employer. It will go as far as creating a new company with an accompanying phone number, logo, Web site and LinkedIn profile. He says the site is designed to "help our subscribers meet the needs of the modern day job market."

It's an interesting service-- since signal extraction is increasingly difficult with letters of recommendation, my suspicion is that while it won't tip the scales in anyone's favor it may get someone in the door. Further, the downside risk is virtually nil; if your choice is a bad (or less than stellar) recommendation or purchasing a fake one, the consequences of the latter if found out is likely the same as the former-- you just don't get the job. Hiring is already a costly process and I don't see employers shouldering the effort of generating a network to blacklist fakes.

These would seem to work best for entry to mid-range jobs; high end positions are likely to be had through networking and networking (as far as I know) can't be purchased.

CareerExcuse is balancing an interesting line; vast success may overwhelm their ability to stay away from the public eye.

Blockquoting X

From Adam Smith in WoN( V.1.164 ):

In England it becomes every day more and more the custom to send young people to travel in foreign countries immediately upon their leaving school, and without sending them to any university. Our young people, it is said, generally return home much improved by their travels. A young man who goes abroad at seventeen or eighteen, and returns home at one and twenty, returns three or four years older than he was when he went abroad; and at that age it is very difficult not to improve a good deal in three or four years. In the course of his travels he generally acquires some knowledge of one or two foreign languages; a knowledge, however, which is seldom sufficient to enable him either to speak or write them with propriety. In other respects he commonly returns home more conceited, more unprincipled, more dissipated, and more incapable of any serious application either to study or to business than he could well have become in so short a time had he lived at home. By travelling so very young, by spending in the most frivolous dissipation the most precious years of his life, at a distance from the inspection and control of his parents and relations, every useful habit which the earlier parts of his education might have had some tendency to form in him, instead of being riveted and confirmed, is almost necessarily either weakened or effaced. Nothing but the discredit into which the universities are allowing themselves to fall could ever have brought into repute so very absurd a practice as that of travelling at this early period of life. By sending his son abroad, a father delivers himself at least for some time, from so disagreeable an object as that of a son unemployed, neglected, and going to ruin before his eyes.

Robin Hood Tax

A friend of mine wanted my thoughts on the Robin Hood Tax, so I thought I'd pass them along to you:

1. Though the page is vague about the issue, the tax would likely not be instituted by all countries evenly. Therefore, if this campaign has any success, you'll have some countries that incorporate it and some that don't. Financial transactions are *very* mobile-- as mobile as it gets-- and it would be very easy for those who would be taxed to simply move to a locale where the transaction would not be taxed. People want to avoid taxes and this one would be easy to avoid.

2. The tax seems to target "speculative" activity. Depending how you slice it, just about any financial transaction could be classified as speculative-- so there's an issue of exactly what you tax. Further, due to different financial instruments, you can generally replicate one financial transaction through a combination of others. So that could be another way to avoid the tax.

3. As always, there are deadweight loss issues concerning taxation, though some of the effects are described above. Though if you really want to split hairs, those effects described above are technically excess burden, not deadweight loss.

4. As always, the ability of governments to effectively use tax money to generate positive outcomes is dubious at best.

5. As always, there are political problems inherent in taxation in general.

Anything else? 2 would seem to be the short run outcome, 1 would be the long run.

My Interview on Pittsburgh Business Radio

Last Friday, as the storm was moving in, I had a nice talk with the good folks at Pittsburgh Business Radio. The intended topic was the living wage, though we only touched on that topic for about ten minutes. We talked about Senator Byrd, the stimulus package and a number of other topics. The link is here, it's about forty minutes long.

North Korea Documentary

From CNN, choice excerpts:

But this guy with our group who was from the L.A. Times told us, "Everyone in here besides us is secret police. If you don't act excited then you're not going to get your visa." So we got drunk and sang songs with the girls. The next day we got our visas. A lot of people we had gone with didn't get theirs.

[...]

Perhaps the weirdest thing about North Koreans is that they genuinely don't seem to know that the rest of the planet hates and fears them. They believe (or maybe they really convincingly lie about believing) that the whole world admires and envies them and that they're the true light of socialism and Juche, which is their leader's philosophy of Communist self-reliance.

By the way, my new favorite oxymoron is "communist self-reliance."

The Mileage Tax and the Efficient Allocation of Outrage

AT at MR has a pointed post on the "illogic" of a mileage tax, comparing it to a tax on breathing to punish smoking.

I agree that if your target is the reduction of environmental externalities (pollution and congestion), the fuel tax is sensible and the mileage tax is generally not. However, the history of the fuel tax (Hoover, Revenue Act of 1932; see this rather bizarre report from the US DOT) was a means of raising revenue to finance the expansion of public infrastructure.

To this day, it is a common example in public finance as a program that imperfectly follows the benefit principle of taxation. Those who drove on highways also tended to use gasoline, and hence those who benefited from the infrastructure were the ones financing it. The externality argument, as far as I can tell, came long after the 1932 act establishing the gas tax.

Conditional on the government both producing infrastructure and raising taxes to finance it, shouldn't the preference be for benefit principle taxation? So my basic suggestion is that, on the margin, libertarian outrage is better directed at other subjects, or at least at different angles of the mileage tax (privacy concerns, e.g.).

Return to Barter?

A fellow Northern VA snowpocalypse survivor came across this interesting ad while searching for a snow shovel online.

I have hundreds of PHISH cassette tapes and a boombox. They are ALL yours if you shovel my car out of the snow. It`s not a driveway. Just a small parking area. All you have to do is shovel out the left side of the car and the back of the car. If you`re interested please get in touch with me. Thanks.

I think this clearly illustrates the coincidence of wants problem. I cannot imagine this transaction was successful.

[HT: Astrid]

I'm guessing CNN...

...didn't see the plain answer to their question.

It's too bad CNN doesn't do headlines on t-shirts anymore; then again, I think I made out pretty well before it was all said and done (mine's in red).

A Degree In Growing Pot

From CNN:


The CNN reporter is pretty absurd in the coverage, at one point asking the Pot Grower about the development of clean energy for economic growth instead of legalizing pot. Nevertheless the story includes some of the interesting contradictions in Michigan law. You just kind of have to see it for yourself.

Air Marshalls

CNN has a report this morning on the air marshall program; not surprisingly, there are bureaucratic issues that distort the intentions of the program. To look more productive, marshalls oftentimes ride on shorter regional routes instead of long haul international flights, like this one. One estimate put the price tag at over $200 million per arrest.

Though the FAMS program is secretive of assignments by design, I'd love to get my hands on the air marshalls data and see what comes of it.

Free (Baseball) Data

I stumbled across my old data from my first publication, and have posted it online. It contains the signing salaries of MLB Free Agents between 1991 and 2002. It has player stats, signing team characteristics, signing team's city characteristics, and simulated tax burden with an accompanying instrument.

Of course I will be happy if someone extends the work, but it might also be a convenient dataset for students interested in baseball who are also looking to run a regression and write up the results for their econometrics class.

Enjoy!

The Effect of Prayer on God's Attitude Toward Mankind

That's the title of a paper by James Heckman in the new release of Economic Inquiry. Here's an ungated copy.

From the abstract:

This paper uses data available from the National Opinion Research Center's (NORC) survey on religious attitudes and powerful statistical methods to evaluate the effect of prayer on the attitude of God toward human beings.

From the results:

A little prayer does no good and may make things worse. Much prayer helps a lot.

The appendix includes an interesting response from Father Andrew Greeley, a well known Catholic priest and sociologist.

CBA and Bulletproof Clothing

Here is a CNN story on a Colombian tailor who makes his clothing bulletproof, even at point blank range. It opens up an interesting cost-benefit question for a social welfare analyst:

Let's assume that point-blank assassins aim at their targets in a manner that maximizes the probability of death:

p(Death) = p(Hit)*p(Death|Hit).

Where p(Hit) is a function of size of the area on the target (torso is a higher probability shot than the head, for instance), but p(Death|Hit) shrinks with the size of the area on the target (torso shots are less likely to kill than head shots).

Suppose, pre-bulletproof clothing, the dominant strategy for point-blank assassins is a single shot to the torso. It is observed by the population at risk that there is a stochastic random distribution around the area of the heart and torso. This creates the sufficient demand for bulletproof clothing.

If enough of the target population adopt bulletproof clothing, it seems to me the dominant equilibrium strategy shifts to head-shots, which remain unprotected but are harder to hit. On the net, I think we could expect the number of successful assassinations to decrease, but will it be enough collectively to justify the new more expensive tailoring? Could this be an individually rational but collectively irrational product? Things can get really interesting if you assume different levels of risk aversion among assassins.

Super Bowl Props: Year 3

It's time for this year's Super Bowl prop-a-thon! TPS stalwart Rob Holub sends along this year's props. Here's last year's post and here's the year before. Rob issued me a sound beating last year, so I need a better performance. Feel free to add in your choices and see how you do!

For the uninitiated, props are bets on certain outcomes within the game. Extremely popular games-- like national championships in college sports and title games/series in professional sport-- tend to have some listing of prop bets, though in the vast majority of games you can usually wager only on the winner and an over/under for total points scored. As always, bets are for recreational purposes only.

One final thing-- to avoid the four-corners effect, it makes a little more sense to pick props that are priced at roughly 50% (or below, if you so choose). You don't quite get the same effect from taking the "no" on the two point conversation (paying a meager -600) as you do from taking the over/under jersey number bet (generally priced at the even -115/-115 spread, and an annual Holub lead-pipe lock).

Onwards! Here are my picks:

- Will the game be tied after 0-0? Yes. (+100)

- Total Number of Different Players to Have a Pass Attempt: 2.5 (2-pt conversions do not count). Over. (+240)

- Saints: Will they convert a 4th down attempt? Yes. (+125)

- Robert Meachem, Total Receiving Yards on 1st reception: 10.5. Over. (-115)

- Peyton Manning, Will Have More Passing Yards in Which Half? Second. (-105)

You got nothing on those, Holub! I also like how four of my five prop bets could conceivably be satisfied on one play.

Again, feel free to play along in the comments.

Celebrity Look-alike

Has anyone else noticed how similar Bryan Caplan and William Stanley Jevons look?