The Future Monetary System of Zimbabwe

I blogged recently about Zimbabwe's now defunct 100-trillion-dollar note. Currently, citizens of Zimbabwe are free to use US Dollars and South African Rand for their transactions. Since inflationary finance and seigniorage are often key political tools in developing countries, one should not be surprised if Zim notes make a return in the near future. New Zimbabwe reports:

Finance minister Tendai Biti says the country needs at least six months import cover and a sustainable track-record of economic growth, inflation stability and above 60 percent capacity utilisation in industry before the Zim dollar can be brought back into circulation.

However central bank chief, Dr Gideon Gono said the country should consider adopting a gold-backed currency.“There is a need for us to begin thinking seriously and urgently about introducing a Gold-backed Zimbabwe currency which will not only stable but internationally acceptable,” he said in an interview with state media.

Whether Zimbabwe will adopt a commodity-backed system remains to be seen. I think it is highly unlikely. But it is encouraging to see that option on the table.

Blockquoting X

X = Hal Varian:

But where to get ideas, that's the question. Most graduate students are convinced that the way you get ideas is to read journal articles. But in my experience journals really aren't a very good source of original ideas. You can get lots of things from journal articles--technique, insight, even truth. But most of the time you will only get someone else's ideas. True, they may leave a few loose ends lying around that you can pick up on, but the reason they are loose is probably that the author thought about them a while and couldn't figure out what to do with them or decided they were too tedious to bother with--which means that it is likely that you will find yourself in the same situation.

My suggestion is rather different: I think that you should look for your ideas outside the academic journals--in newspapers, in magazines, in conversations, and in TV and radio programs. When you read the newspaper, look for the articles about economics...and then look at the ones that aren't about economics, because lots of the time they end up being about economics too. Magazines are usually better than newspapers because they go into issues in more depth. On the other hand, a shallower analysis may be more stimulating: there's nothing like a fallacious argument to stimulate research.

Emily Skarbek on Reason TV

Blockquoting X

X = John Taylor, as quoted in this WSJ article on Zimbabwe's now-defunct 100-trillion-dollar note:

No self-respecting monetary economist goes around without a 100-trillion-dollar note.

Being a trillionaire ain't what it used to be.

[HT: Dan Smith]

Blockquoting X

X = J. Bradford Delong:

The fact is that we need fewer efficient-markets theorists and more people who work on microstructure, limits to arbitrage, and cognitive biases. We need fewer equilibrium business-cycle theorists and more old-fashioned Keynesians and monetarists. We need more monetary historians and historians of economic thought and fewer model-builders. We need more Eichengreens, Shillers, Akerlofs, Reinharts, and Rogoffs – not to mention a Kindleberger, Minsky, or Bagehot.

I am pleasantly surprised that he feels this way.

What I've Been Writing

In my latest working paper, I consider the debate between Friedman and Hayek in the 1970s and 1980s following the publication of Hayek's Denationalisation of Money. Here's the abstract:

Hayek (1976, 1978, 1984, 1990) is often credited with the resurgence of interest in alternative monetary systems. His own proposal, however, received sharp criticism from Friedman (1984), Fischer (1986), and others at the outset and never gained much support among academic economists or the wider population. According to Friedman, Hayek erred in believing that the mere admission of competing private currencies will spontaneously generate a more stable monetary system. In Friedman’s view, network effects, to use the modern term, discourage an alternative system from emerging in general and prevent Hayek’s system from functioning as desired in particular. I offer new evidence provided by recent events in Somalia as support for Friedman’s initial doubts.

As some of you will no doubt recognize, this builds on my earlier work with Larry White.

Did Intrade Forsee Bin Laden's Capture?

Intrade might have foreseen the capture of Saddam Hussein, but it doesn't look like that was the case this time:

And the prediction market doesn't appear to be waiting around for a long-form death certificate to close the deal.

Round Two

Title IX Shenanigans

Hey, it's my first "The War on Duh" post!

The title: Schools distort figures to meet Title IX

The shocking truth: "Many Division I schools are distorting the number of students participating in sports so they can comply with Title IX..."

The fantastic quote: "Among the tactics is to pad rosters of women's teams with unqualified players or even men. The [NYT] found schools counted athletes who no longer wanted to compete or never played for that team, listing male practice players as women..."

Who would have guessed?!

Hedge Fund Managers and Sports

I'm not convinced that the causality is there, but here's a nonetheless intriguing bit from Business Week (which, by the way, is orders of magnitude better than when I started getting it a few years ago) about the poor performance of hedge funds when their managers purchase sports teams.

Buchanan and Wagner (1977)

[HT: Josh Hall]

Aid is a success! No, it’s a failure! Wait, it depends.

Aid evaluation is all the rage. But how is successful evaluation possible if we don’t know the benchmark? Some aid advocates argue that aid can end world poverty while some critics of aid are more modest stating that aid can not increase growth but may ease human suffering. In a recent debate in the Cato Journal, Peter Leeson and David Skarbek argue, in their article 'What Can Aid D0?', that foreign aid is both a success and a failure:

“Foreign aid’s advocates claim aid has been successful. Aid’s critics claim aid has failed. We explain why both camps are correct. Aid can, and in a few cases has, increased a particular output by devoting more resources to its production. In this sense, aid has occasionally had limited success. However, aid cannot, and has not, contributed to the solution of economic problems and therefore economic growth. In this much more important sense, aid has failed” (page 392).

They go on to argue that, on its best day, aid can provide more ‘stuff’ but not find the solutions to the economic problem of poverty:

“So, what can aid do? Like other forms of central planning, aid can increase X by devoting additional resources to X’s production… If planners pick a specific outcome, such as more immunizations, aid can provide additional resources to produce immunizations. All of the “success stories” that aid’s advocates highlight are of this nature (page 394)…Solving the economic problem determines whether a country’s economy develops. It is strange, then, that professional economists have had trouble distinguishing the positive relationship between inputs and outputs from solving the economic problem when it comes to evaluating foreign aid” (page 391).

In a critique, Gustav Ranis claims that “. . . Skarbek and Leeson are ready to throw the baby out with the bath water,” but that different forms of aid, such as grants for projects, can be more effective than past aid. However, Leeson and Skarbek remind us in a follow up piece of the important distinction between positive versus normative analysis:

“The thrust of our original paper, which asked the simple question, “What can aid do?”, was that no foreign aid initiative can solve the economic problem societies must solve to climb from poverty. That problem requires identifying the resource allocation that maximizes resources’ value to society. “Grants for projects” don’t help us identify this. They’re an example of what aid can do—increase a predetermined output by devoting more resources to its production—not what aid must do to make poor countries rich, which is to solve the economic problem stated above. Whether developed countries should use aid to increase a predetermined output by devoting more resources to its production is a normative question. Our original argument analyzed a positive one” (pages 1-2).

So the next time a shouting match breaks out between those who claim aid is successful and those saying aid is a failure, perhaps we need to first agree on what aid can achieve and evaluate aid in this context.

HERE IS WHERE YOU PLACE THE HIDDEN TEXT.

Depression Era Housing Prices

Caplan at EconLog asks why housing prices held their ground for the most part during the Great Depression. Obviously, no one can say why prices are what they are, but my suspicion is that the mortgages played a role somehow. In fact, early mortgages were made interest deductible because it was primarily a business expense, and mortgages did not become a major homeowner vehicle until after the Great Depression began. From the NYT:

It was not until the 1920's and the spread of the automobile that home mortgages outnumbered farm mortgages. In the 1930's, the mortgage industry got a huge assist from the feds — not from the tax deduction, but from agencies like the Federal Housing Administration, which insured 30-year loans, and, over time, the newly created Federal National Mortgage Association, or Fannie Mae. Before then, the corner bank would issue a mortgage and wait for the homeowner to pay them back; now savings and loans could replenish their capital by selling their mortgages to Fannie Mae — meaning they could turn around and issue a new mortgage to someone else.

So in part, the stability of housing prices might have been partly due to FHA induced demand for housing stock, relative to other assets and consumption possibilities.

I'll leave it to my Austrian co-bloggers to decide if this fits into a Austrian/Recalculation story of explaining the prolonging of the Depression by changing the relative prices of capital, or if this aided as a form of liquidity the Fed failed to provide.

Gresham's Law and Zombie Banks

From TC at NYT:

ALL of the ways forward look ugly but, sooner or later, some variation of at least one of them is likely. Unfortunately, they all share the property of lowering European bank values, whipsawing currencies, hurting business confidence and possibly ending the European Union as an effective institution for collective decisions. That’s all because the euro, in retrospect, appears to have been a misguided attempt to equalize the values for some very unequal assets, namely the bank deposits of strong countries and those of weak countries.

ATSRTWT

iPad = Job Killer

Phallocracy

It's a government ruled exclusively by men. And, according to Cracked, it is George Lucas's ideal future.

You've got all these species and races living harmoniously--jawas, ewoks, fish monsters, people--all working together. But almost no women.

I know what you are thinking: "What about Princess Leia?" Just watch the clip.

Why 'Star Wars' Is Secretly Terrifying for Women -- powered by Cracked.com

The Elasticity of Supply of Air Traffic Controllers

If you'd asked me before this air-traffic-controller-sleeping bit came about, I'd have told you that I believe the supply of air traffic controllers to be rather inelastic; I presume it takes some amount of specialized training and at current wage levels there aren't a lot of unemployed air traffic controllers. (Perhaps I'm wrong.) But as I read the reports of a new FAA regulation requiring two air traffic controllers at night, I'm having some elasticity doubts.

In an interview this morning the head (or perhaps just a representative) of the Department of Transportation said that they've got the air traffic controllers to fill this new regulation and the money to do so. Now, granted, when a government agency says they've "got the money" to undertake an expansion, that has a little different flavor than when Wal-Mart or FedEx says they've got the money. But in light of the tight budget situation now (and, in fact, budget cuts projected for the Department of Transportation were mentioned in the interview), it seemed like this wasn't an expansion-in-expenditure scenario.

So what are the possibilities here?

1. My assumptions above are wrong; there is slack in the air controller labor market and the new regulation will reduce it.

2. The government is putting on a front that this won't cost money when in fact it will cost more money. Relatively speaking, I would guess this money number is small, but still this is a solve-it-with-money scenario, not a utilize-untapped-resources situation. If there's not a large amount of unemployed air traffic controllers, then this is also a raise-wages-to-incentivize-entry-into-the-industry situation. But what's the latency in assuming a job in this industry? 6 months of training? 3? 12? More? I don't know, but I feel it's got to be at least a number of months. Again, not saying it should be-- but I'm guessing that it is.

3. They are only requiring 27 towers to abide by these new rules. Compared to the number of overall air traffic control centers (of varying sizes), this is small. However:

a) These sites are geographically separate; we're not taking a pool of laborers and requiring extra hours at a variety of locations. Along the lines of issue #1, are there spare air traffic controllers to be had, or are more hours required of the existing working pool?

b) Not unrelated to this is the fact that air traffic controllers are thought to be over-worked right now as it is (not judging the merits of that claim, but that's still relevant), so where exactly these extra working hours comes from is still unclear in my mind.

Something--somewhere-- is off, either my perceptions of the state of the market or in the stories being told. Knowing me I probably gravitate to #2 but I think that oversimplifies the problem.

Justin, will you be leaving for your new air traffic controller position soon?

What I've Been Writing

As Walter Williams often remarks, “It's a poor dog that won't wag its own tail."

.tailwag

Title:
Positively Valued Fiat Money after the Sovereign Disappears: The Case of Somalia (w/ L. H. White)

Abstract:
Economists commonly invoke sovereign powers to explain the acceptance of unbacked paper money at a positive value. The government accepts or compels taxes paid in the money (makes it publicly receivable) or compels creditors to accept it (grants and enforces legal tender status). Thus fiat money is thought to rely on enforcement of a literal fiat or decree. The case of Somalia defies this account: following the state’s collapse in 1991, unbacked paper Somali shillings continued to circulate at a positive value. We explain how historical acceptance, or “inertia,” can sustain the ongoing acceptance of unbacked money even in the absence of ongoing sovereign support. Although sovereign power might be necessary to launch a fiat standard, we conclude that it is not a necessary condition for its survival.

You can download the full version here. Also, my book review of Jimmy Stewart is Dead appears in the most recent issue of Economic Affairs.

./tailwag

Torture Supply Curves Slope Up

I suppose, when all things are considered, that is good news. From Wired:

But in FeldmanHall’s study, things actually happened. “There are real shocks and real money on the table,” she said. Subjects lying in an MRI scanner were given a choice: Either administer a painful electric shock to a person in another room and make one British pound (a little over a dollar and a half), or spare the other person the shock and forgo the money. Shocks were priced in a graded manner, so that the subject would earn less money for a light shock, and earn the whole pound for a severe shock. This same choice was given 20 times, and the person in the brain scanner could see a video of either the shockee’s hand jerk or both the hand jerk and the face grimace. (Although these shocks were real, they were pre-recorded.)

The article is actually about how this result differs from cases where subjects are given similar hypothetical scenarios. To me, this is evidence in favor of relying on revealed preference approaches over surveys in social science.

Slay Which Tax 'Monster'?

Veronique de Rugy argues here that we should eliminate the Alternative Minimum Tax.

Her points are fair enough, but if we are going to argue for such a large move in the tax code, I would instead suggest that we eliminate the traditional part instead and put everyone on the AMT. That would broaden the base, and allow us to lower the rate, which offers better incentives all the way around.

Masticating

Arnold Kling reports:

Michael Mandel pointed out that the large increase in household debt is not consistent with the basic necessities becoming easier to afford. I have to agree. Something to chew on.

If households get greater access to credit markets and necessities fall in price, then income effects can shift the preferences towards luxury goods.

I am far more likely to believe that households are buying more luxury goods than I am to believe that the price of necessities has increased. This would also be consistent with the observation that college students have nicer televisions and go to more exotic vacation spots than I.

The Circle of (Anti)Trust

It seems like just the other day, Microsoft was a darling of Schumpeterian competition, being chased by incompetent rivals who were better at choosing lawyers than figuring out what features consumers wanted on their desktop. Now, Microsoft seems to be prepared to come full circle:

In a European Commission filing this week, Microsoft asked European regulators to investigate the search giant on antitrust grounds, accusing it of pursuing "anti-competive practices." Microsoft accused Google of boxing out competitors by walling off content, signing exclusivity deals, and making it difficult for companies to move Google advertising campaigns to rival search sites.

Sounds familiar!

The Curious Task

"I don't understand this," he wrote. And he says about economics in general: "I cannot understand it, and I cannot believe that anyone else understands it, either. People may say they understand it...but I think it is all a fake."

That is Isaac Asimov, according to Julian Simon, being bewildered by Simon himself.

History of the Libertarian Movement...

...that I was unaware of. According to Will Wilkinson,

Charles Koch founded the Cato Institute in 1977 with Ed Crane and Murray Rothbard, an iconoclastic "anarcho-capitalist" economist and political theorist.

That's right, folks, Rothbard was a beltway libertarian! I am sure there are some juicy stories--perhaps a great falling out--that I have not yet heard. Feel free to post all the seedy details in the comments.

____________________
ADDENDUM:
I should have clicked a few more links before blegging for details.

New TPS phrase

One of my favorite parts of the blog? Juicing the Mitchell. It's a phrase that captures quickly and accurately a wide range of (usually) legislative activities. Effective...efficient...Will Luther! (Insert Bill Raftery voice here.)

Well, I'd like to add another line-- this one from The Simpsons-- to the TPS lexicon. During one episode, Moe become attached to Maggie and becomes a bit of a surrogate father. At Maggie's birthday party, her aunts Patty and Selma buy her a rattle as a gift, to which Moe replies, "Thanks for breaking a five."

It captures the feeling nicely-- an embarrassing modicum of effort usually overstated. I'm going to work it into the proceeds here as best as I can.

Sending two planes to an international conflict in the Middle East? Thanks for breaking a 5, France.

Cutting $100M from a $1.6T budget deficit? Thanks for breaking a 5, (insert politician here).

Onwards!

Radiation Chart

Just as understanding millions from billions from trillions is important, so too is understanding radiation and the risks from it. Here's a handy chart that gets at the latter nicely, many thanks to Greg Cooney.

The general lesson for those in America freaking out about radiation from Japan: Take a deep breath and understand the magnitude of things.

Sumner on Recessions and Policies to Combat Them

Scott Sumner at TMI hits the nail on the head:

We need to stop thinking about deep slumps as a sort of random “problem” that needs to be “fixed.”  They need to be prevented; if they aren’t, they probably won’t be fixed.

ATSRTWT

Q: Why Do We Need Pro Athletes?

A: Because politicians make poor role models. Consider Newt Gingrich, via the AP.

The twice-divorced former U.S. House speaker has said he had an affair with Callista, a former congressional aide, while married to his second wife. It happened at the same time he was attacking President Bill Clinton for his relationship with White House intern Monica Lewinsky.

Do as I say, not as I do.

TPS Bracket Challenge

March Madness is here! Fill out your bracket and see how you stack up against TPS bloggers. Picks must be submitted by 11AM on March 17. Good luck!

Collected Links

1. Is it even possible to soak the rich for all the new spending, from an accounting perspective?
2. The post tax price of a year's supply of "free donuts" is $1,000.
3. Prostitutes and Porn are not tax deductible medical expenses, and neither are these nine other things.
4. TSA nude body scanners produce 10x more radiation than they originally thought. And yet, it is only a minor objection I have to the device.
5. Ohio 13-year old entrepreneur.
   

Broken Window Fallacy?

Recent events in Japan have prompted discussions of the broken window fallacy. The typical chain of events goes something like this:

1. Natural disaster
2. Reporter (or, reporter citing an economist) notes GDP might increase because of disaster.
3. Economist (probably not the one cited by the reporter) yells "BROKEN WINDOW FALLACY!" And, presumably, scores points for being reasonable.

Today, I will venture into the land of heresy by suggesting those who point out that natural disasters might make people better off are not necessarily committing a fallacy.

A fallacy is a chain of reasoning whereby the premises do not support the conclusion. But consider the following chain of reasoning.

1. Individuals may have a bias whereby they do not upgrade appliances when doing so would make them better off by their own assessment.
2. Natural disasters force them to buy new appliances.
3. The net effect of natural disasters is ambiguous (i.e., it might be positive, negative, or zero)

Where's the fallacy? Note: I am not saying that natural disasters make us better off. I am saying they might make us better off if the behavioral problem identified is significant. I think it is unlikely that the benefits from upgrading our refrigerators would be so great that they would offset the buildings destroyed by the natural disaster. (Of course, if the underlying behavioral problem is significant, it might apply to more than just household appliances.) But this is an empirical question.

My suggestion: stop calling such claims a logical fallacy. Point out that an increase in measured GDP does not necessarily imply an increase in welfare and then move on. There is no need to paint those we disagree with as unreasonable, illogical, or stupid.

How the NFL labor situation will play itself out

As I'm not a lawyer nor a legal scholar, how the NFL labor situation stands to evolve is rather confusing to me. This article lays out the road ahead. Does this make it any less confusing? Maybe a little. But at least it's all in one place.

As with the sentiments of this blog, we can only hope the Congress gets involved.

Splitting the Bill? Impossible.

That is how I interpret this line from Paul Krugman's latest NYT article:

Think of it this way: Congress could, with a stroke of a pen, cut Social Security benefits in half. But it couldn’t do the same with health spending: Medicare can’t suddenly start paying to replace only half a heart valve or mandate that bypass operations stop halfway through.

Really? Because I am pretty sure they could. I've even drafted a short letter which they can use if they decide to make it happen (I'll waive my usual consulting fees).

___

Dear Medicare and Medicaid Recipients,

Henceforth, the government will only be paying for half of qualified medical expenditures.

Sincerely,

Congress
___

Happiest States in America

Nothing says good times like more happiness research!

TPS happiness guru Rob Holub sends along this survey, it ranks all 50 states and the pdf is here. If you follow this blog you already know who's at #50. They break it down further by city and Congressional district.

Finally, a concrete, water-tight ranking of the happiest places in America!

What if the government were a household?

One of my colleagues, Antony Davies, has created a fun pdf that translates the government down to household size. You can find it here-- enjoy!

Kansas Red Light Laws

TPS Cardinals fan Steve Miller sends along this bit about a potential new law in Kansas that allows motocycle riders to run red lights. I shook my head when I first read it, but now that I think of it, as long as the riders bear the full burden of their decision-- both legally (I hope so, not clear in the article) and physically (clearly)-- I think we'll end up with a Pareto superior outcome.

But the best part of that article?

The riders testifying in support of the bill belonged to a group known as ABATE, or A Brotherhood Against Totalitarian Enactments.

Peaceful protests and authoritarian regimes

Here's the best piece-- by a degree of magnitude-- that I've seen that gets after a question that's been nagging me during the Middle East upheaval: If dictators are capable of such atrocities to acquire power and to maintain their position, how can peaceful protests, of all things, bring all of this down?

What's Will's string of letters? ATSRTWT. That's five minutes of hunting those down that I won't get back.

Are the Poor Getting Poorer?

Marriage as Moral Hazard

From the Huffington Post:

Probably not the first thing you feel like doing, but you know what's really not romantic? Using marriage as an excuse to get lazy. Recent studies show that married people exercise less than singles do, and in our own survey, 56% of married people said they'd put on weight since the big day. We slack off in other ways, too: 46% said they were less affectionate with their spouses, and 54% said they wish they were having more sex--yet they don't seem to be doing anything about it. Thinking like an economist, marriage is a moral hazard, a situation that encourages people to behave irresponsibly because they know they can get away with it.

The authors have a new book, Spousonomics: Using Economics to Master Love, Marriage, and Dirty Dishes, which--as far as I can tell--is pretty much what it sounds like. I liked this:

Incentives motivate people to act. If you want your husband to listen, don't nag. If you want your wife to have sex with you, do the dishes.

Interesting. Might be worth reading the full version.

[HT: Astrid]

Re: Thoughts on Jeopardy! and Watson

I heard via the Scott Van Pelt Show that Watson crashed several times during the taping of the first episode--so many times, in fact, that it took 4 hours to complete the round. Wow. Not impressed. Matt is our resident Jeopardy! expert. But I imagine that the average human contestant could not delay the game for this amount of time.

I can only imagine the fatigue that comes with four hours of waiting for Watson to reboot. This could be a decisive advantage to the computer. Thoughts?

Quote of the Day

Courtesy of Ed Glaeser:

[T]here's nothing greener than blacktop.

Thoughts on Jeopardy! and Watson

We here at TPS are big fans of Jeopardy!, and I'm sure you've heard of the Watson vs. Ken Jennings and Brad Rutter event that took place last night and will continue today and tomorrow. A few thoughts (and just for ease of writing, I recognize that I've switched "answers" and "questions" in the framework of a Jeopardy! game):

- It's clear that Watson will do better with fact-based questions as opposed to interpretation-based questions; I'd attribute a large amount of its success last night to questions of the former type. I would guess-- unless it's been directly programmed to deal with it-- Watson would be helpless on before-and-after-type questions.

- There was a video going around a few weeks ago of a test round between the three contestants, with much the same result as last night-- Watson does well early, the remaining contestants perform better as the round progresses. One striking aspect of the practice round, however, was that when Watson felt it was confident enough to answer the question, it always rang in first. Every. Time. That's the big advantage of the machine, because Jeopardy! isn't just about knowing the answers-- it's being able to time the buzzer correctly so you actually get a chance to answer. A machine, naturally, will have a faster reaction time than a human. You've effectively eliminated the competitive portion of the game. So while it is impressive that you can design a machine to parse through mountains of data to come up with an answer in short period of time (more on that in a second), but don't look past the fact that you've basically given one player a massive advantage over the other two.

But last night, I believe only once, Ken Jennings beat Watson with the buzzer. (When Watson has a "green" answer, he's trying to buzz in.) In my eyes, that was the most surprising moment of the night. It's a risky move to try and anticipate the proper time to ring in (constestants can ring in once a light goes on; if they ring in too early, they are locked out for a few seconds), but up against a machine that's going to react faster than you, contestants don't have much of a choice.

- It's natural to think that you tell a computer to do something, and it does it in the blink of an eye. But what the computer has to do here is titanic-- seconds matter, milliseconds matter. To that end, the more time Watson has to think, the better of a chance it has. I noticed last night that Watson did distinctly worse on short questions-- I remember one particularly short question where it struggled to formulate anything of a guess. Most of the questions last night were of the longer, factual variety-- right in Watson's wheelhouse. As long as both of those margins remain, expect Watson to perform pretty well.

Conservatives Ask Libertarians for Divorce

Kevin McCullough at Fox News is not happy about this year's CPAC. It seems Republicans were content with picking up a percent or so in the general polls. But now that these "disrespectful libertarians" are speaking up, they are probably more trouble than they are worth. McCullough explains:

Libertarians and Conservatives are as different as Libertarians and Liberals. The truth is libertarians are the worst form of political affiliation in the nation. Combining the desire of economic greed, with the amoral desire to promote any behavior regardless of its cost to our culture is a stark departure from the intent of the Founding Fathers.

I hope this means conservatives will drop the pro-market (read: economic greed) rhetoric. Good riddance, I say.

[HT: Steve]

State Tax Competition Among Neighbors

This would make for a nice bit of anecdotal evidence for someone wanting to write a paper on the subject:

The state of Indiana and the Northwest Indiana Forum are partnering on an increased effort to convince more Illinois businesses to move across the state line. An advertising campaign aimed at Illinois businesses, featuring slogans including "Feeling Squeezed by Taxes?," has been launched on the heels of the "Illinnoyed" initiative rolled out last month after lawmakers in Illinois approved massive tax hikes.

The Fragility of Estimated Effects of Unilateral Divorce Laws on Divorce Rates

And here's another! I've seen four papers today, Valentine's Day, and two of them focus on divorce. Good times! Here's the abstract:

Following an influential article by Friedberg (1998), Wolfers (2006) explored the sensitivity of Friedberg’s results to allowing for dynamics in the response of divorce rates to the adoption of unilateral divorce laws. We in turn explore the sensitivity of Wolfers’s results to variations in estimation method and functional form, and we find that the results are extremely fragile. We conclude first that the impact of unilateral divorce laws remains unclear. Second, extending Wolfers’s methodological insight about sensitivity of differences-in-differences estimation to allowance for dynamic response, we suggest that identification in differences-in-differences research becomes weaker in the presence of dynamics, especially in the presence of unit-specific time trends.

No-Fault Divorce and Rent-Seeking

That's the title, and what better topic for Valentine's Day? Here it is, and the abstract is below:

Couples filing for divorce in Belgium have the option to either opt for a no-fault divorce trajectory or a consensual trajectory. We analyse the determinants of divorce trajectory choice and of the resulting post-divorce transfers. The no-fault trajectory is more likely, if spouses are more specialised in either domestic or labour market production. This is consistent with a theory of divorce as rent extraction. Child support payments depend neither on the divorce trajectory nor on alimony transfers or relative incomes, but are driven by the payer's wage and the child(ren)'s residence. Partner alimony transfers are higher for no-fault unilateral divorces with pronounced self sacrifice.

Who is John Galt?

(Note: The size isn't quite right. Double-click the video to view in fullscreen.)

Behavioral Public Choice

Robin Hanson writes:

When folks expect to be able to evade a norm, they don’t mind making that norm stronger. This lets them sound more pro-social, while actually giving themselves an advantage over folks who can’t evade as easily.

I think this is a very attractive argument for those interested in behavioral public choice. Anecdotal evidence abounds. And it provides a mechanism for the Baptists and Bootleggers claim (i.e., asymmetric evasion costs). What do you think?

How Big is the U.S. Debt?

Here is a short clip from a colleague of mine, Antony Davies, putting debt into perspective.

AER Recognizes Hayek (1945)

An AER committee consisting of Kenneth J. Arrow, B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow has selected the top 20 papers ever published in the AER. Hayek (1945) made the cut. In the comments over at the Coordination Problem, an interesting back and forth is going on concerning the brief summary provided by the committee Here's the summary:

The author addresses the fundamental question of the nature of the economic system and, in particular, its role in dealing with resource allocation when a fundamental knowledge base is distributed in small bits among a large population. The knowledge needed includes consumer valuations, production relations, and resource availabilities. In particular, general scientific principles, where expert opinion might be best, are only a small part of the knowledge base. The author argues for the importance of a price system in achieving coordination and efficiency in resource use without implying an impossible aggregation of information in a central place.

What's the dispute? Well, some are saying it just illustrates that the committee doesn't understand Hayek. Others are saying a charitable reading of the summary is warranted. You can read the comments and decide for yourself.

Here's my challenge. The original summary was 97 words long. If you find the committee's summary wanting, provide your own summary (< 100 words) in the comments.

Made in the USA

That is the title of a recent Boston Globe article. Here's the take-away:

There’s just one problem with all the gloom and doom about American manufacturing. It’s wrong.

Americans make more “stuff’’ than any other nation on earth, and by a wide margin. According to the United Nations’ comprehensive database of international economic data, America’s manufacturing output in 2009 (expressed in constant 2005 dollars) was $2.15 trillion. That surpassed China’s output of $1.48 trillion by nearly 46 percent. China’s industries may be booming, but the United States still accounted for 20 percent of the world’s manufacturing output in 2009 — only a hair below its 1990 share of 21 percent.

Stupid argument (They took err jeerrrbbbs!). Bunk stats. It's a double doozie!

WSJ on Regulations

The WSJ today has an article on occupational licensing, you can find it here. You can never have enough examples of stuff like this, so give it a quick read and add your favorites to the arsenal. The following, though, has to be the best part of the article-- you can't make this stuff up:

In Kentucky, the Board of Hairdressers and Cosmetologists has eight full-time inspectors who spend much of their time responding to anonymous tips about unlicensed manicurists. The inspectors rarely catch the alleged offenders, says Charles Lykins, the board's administrator, because "they take off running."

Mr. Lykins says it's in the public's interest to insist manicurists are well-trained. "Have you ever had a nail fungus? It's terrible," he says. "That's why we're there."

Super Bowl Impacts

Fresh off my victory in Propapalooza IV, I thought I'd send along this paper concerning the economic impact of the Super Bowl. Here's the abstract:

The Super Bowl is America’s premier sporting event. This paper details basic economic facts about the game and examines the controversy surrounding the purported economic impact of the game on host communities. While the league and sports boosters claim that the game brings up to a $500 million economic impact to host cities, a review of the literature suggests that the true economic impact is a fraction of this amount.

I've always thought that the appropriate question should be "How much better off are we because we make a large deal about the Super Bowl?", not drawing arbitrary lines and estimating accounting benefits for cities and/or states.

The NFL On Welfare Incentives & Credible Threats

A lot of good economic intuition coming out of the Super Bowl coverage in the shadow of the lockout:

Steelers veteran safety Ryan Clark also was critical of this week's special masters ruling not to stop millions in guaranteed money from television networks going to the owners if there is a lockout.

"If no football is played next year, the networks will have no games to show but are going to pay [the NFL] still," Clark said. "You don't put a contingency plan like that into place if you don't plan on using it. If someone told you this week, 'I will pay you a million dollars to not go to work, what incentive do you have to go to work?'"

Well said.

Propapalooza IV

Yes, it's time for this year's Super Bowl prop battle. See Propapaloozas I, II, and III for more information.

Here are this year's props, all 22 pages of them. Props are bets not directly concerned with the outcome of the game itself-- basically anything beyond "Team X will win" or "Team X will win by Z points." Every year, TPS stalwart Rob Holub goes toe to toe with yours truly and every year, realizes he's vastly over matched. Ok, that's not exactly true, but I'm feeling good about capturing my first victory this year.

The contest: Pick 5 props that are priced at roughly even money, i.e., anything in the -120 range and above. Most number right takes Propapalooza IV.

Feel free to add your own in the comments and join in the fun!

Some favorites:

What color will the Gatorade by that is dumped on the head coach of the winning team? Lime Green (11-2), Yellow (5-6), Orange (5-1), Red (12-1), Blue (12-1), Clear/Water (3-2). I think Orange has good value there. What if it's Powerade?

Who will the Super Bowl MVP of the game thank first? God (1-1), Family (4-1), Teammates (2-1), Coach (9-1), Does not thank anyone (3-1). I think God is mispriced here; that trend seems to have fallen off a bit. I see it like this-- odds on favorites to win the MVP are QBs, and they generally thank the teammates first, though I still don't feel that 2-1 is paying off well enough.

How long will Christina Aguilera hold the note BRAVE at the end of the Star Spangled Banner? Over/Under 6 seconds. Isn't the general trend to belt out "Free" and then finish with a crisp "Brave?" I'm going under.

How many times will FOX mention Brett Favre on TV during the Game (Live commentary only/anything taped does not count): Over/under 2.5. Boy that's low, but what counts as the live commentary only? What about halftime? You gotta figure once when Rodgers starts playing, mentioning how he succeeded Brett Favre, and then as the game goes along if he's nearing any Super Bowl team passing records-- I think the over is the sound bet but watch the technicalities.

Who will Barack Obama pick to win Super Bowl XLV? Steelers (-140) vs. Packers (+100). Pennsylvania has twice the electoral votes that Wisconsin does. Further, Obama won Wisconsin by almost 14% yet won Pennsylvania by about 10%. Pennsylvania is traditionally viewed being being "more battleground," though recent presidential elections have been closer in Wisconsin (2000 and 2004, thought not 2008). I think the Steelers are the good bet here, though they are slight favorites.

If Barack Obama picks a team to win Super Bowl XLV, will the President's pick be correct? Yes (-115) vs. No (-125). Independent of the political factors above-- and this line reflects that-- it's humorous to see a line that says the President is more likely to pick the wrong team to win the game...and he hasn't picked a team yet.

My selections:

Total Net Yards by both teams: 666.5, Over -115

Most Receiving Yards: Mike Wallace (+15.5) v. Greg Jennings, -115

Packers - Total Rushing Yards: 78.5, Under -115

Heath Miller - Total Receptions: 3.5, Over -135

Heath Miller - Will he score a touchdown? Yes +200

The Miller total receptions bet is a bit above the -120 cutoff, so I'll offset that with the Miller touchdown bet.

Local Government in Pittsburgh

Seems to be a particularly inept day for local government in the Post-Gazette. Both of these are from the front page:

West Mifflin gas card paid for heroin habit

Just consider the volume of purchases (emphasis mine):

A criminal complaint filed this week by West Mifflin police said the ex-girlfriend of a borough employee stole his government-issued gas card early last year, and for months pumped at least $72,000 in gas for people at two local stations in exchange for half the value in cash. The woman, Dawn Veze of Munhall, and an accomplice netted more than $30,000, which she allegedly told police she used to buy heroin.

The purchases started in the last week of April and were not discovered by the borough's new manager until Jan. 12, meaning the card was racking up bills equalling $9,000 monthly without being discovered.

One person's gas card. $9,000 per month in gas. Now that's quality oversight!

Bill aims to curb trash haulers who disturb city resident's sleep

Pittsburgh City Councilman Bill Peduto has introduced legislation aimed at ending the late-night and early-morning Dumpster-emptying known for rattling residents from a sound sleep.

The city code already prohibits commercial haulers from emptying Dumpsters and picking up refuse from 10 p.m. to 6 a.m., but based on the complaints he regularly receives, Mr. Peduto believes the restriction is widely ignored.

Alright, fair enough-- I don't like being woken up any more than the next guy. And as long as we're worrying about this, we're not starting programs to give out tax-payer funded gas cards. But here's the kicker:

The restriction now is a zoning law and is supposed to be enforced by city inspectors, but they don't work late-night or early-morning hours.

That means when the law was written, it never could have been enforced. That's fantastic.

How UPS Reduces Fuel Consumption

By minimizing left-turns!

You wouldn't think of something as benign as avoiding a left-hand turn could conserve fuel, but Atlanta-based United Parcel Service (UPS) swears by it. In fact, the parcel carrier has technology in its systems that help map this out routes that minimize the number of left turns the driver has to make.

I wonder if the USPS has followed suit?

Dilbert on Austrian Business Cycle Theory (or Recalculation Theory)

I think that would be a fair assessment, given that it says "New Capital Investments," but I'll let actual Austrians/Recalculationists clarify in the comments if needed.

Note: There are 3 panels, you will have to click on the comic to see the full thing. Sorry.

Interesting Line of the Day

From Squire (1988) in LSQ:

According to Bell and Price's (1975) study of members of the California Assembly, most legislators take two years to understand the legislative process.

The US/Country Map

I saw this is last week's Economist; the good folks at MR tracked it down online. It's a map of the United States, only instead of the state's names they place the country in the world which has the economy closest in overall size.

Even more fun-- the countries of the world were arranged like this, how would things shake out? Switzerland next to Libya creates an interesting dynamic, as does Australia and Yemen.

There's something bizarrely satisfying about West Virginia as Iraq.

Is the Assessment Process Progressive or Regressive?

That is a question* that has been asked a lot by public finance scholars. My latest paper, forthcoming at Land Economics, argues that it is the wrong question and that we should instead ask what might cause it to be one or the other, rather than thinking about the process as being inherently one-sided. For those interested in the property tax incidence debate, one must be careful about how political opportunism might be submitted as evidence in favor of either side, but more on that to come from me in the future. The abstract:

The previous literature on vertical equity in property assessment has focused on parcel level data within a single area, and has produced mixed conclusions on whether the process is progressive or regressive. This paper advances the discussion to identifying what differences between jurisdictions might account for the mix of findings. Using data from Virginia cities and counties between 2001 and 2007, evidence is presented that indicates having tax maps available online, appointed assessors, and senior citizens all influence the level of regressivity observed between jurisdictions. Overall, the results support the hypothesis that interjurisdictional differences are determinants of vertical inequity.

*The assessment process would be equitable across property classes if they all get the same rate of fractional assessment. For example, if all properties were assessed at 80% of true market value, then this would be vertically equitable despite being inaccurate. If the more expensive properties were only assessed at 70% of true market value, while the low-value property was assessed at a rate of 90%, then we would call this a "regressive" process.

Portugal's Drug Laws

Here is an interesting bit (HT: MR) concerning Portugal's experiment with loosening drug laws. I was surprised by the price responsiveness (presumably) amongst those sampling drugs for the first time-- drug laws do have palpable deterrence effects. Nonetheless, it's all about tradeoffs between policies and this is a great example.

Timeouts

Here's a bit in the NYT about time outs in football, more specifically the poor strategic use of them in the NFL. I'm very surprised at this:

Many [teams] assign an assistant to be their conscientious clock manager.

Really? I've never heard this mentioned; all I hear are the complaints (generally justified) about a head coach's missteps. I'd be willing to cede that many teams follow this de jure, only to transition to the Cowher method in the heat of the game.

Regardless of the nature of the industrial organization of a football team, isn't it surprising that there are persistent errors with regards to clock management? How has this not been corrected?

Dead(Dog)weight Loss

From Time:

Pierre-Alain Némitz said he's been overwhelmed by insults and threats since the Reconvilier municipal council he heads informed residents in late December they risked seeing their dogs killed if they don't pay the $48.50 annual tax the village levies per pooch.

Reconviler is a Swiss village.

What I've Been Reading

- Fooled by Randomness by Nassim Nicholas Taleb. An enjoyable read and an interesting perspective on players within financial markets. I think he's a bit strong in his assertions but, for example, the general point of noise vs. market signal is a salient one. I also like the line (paraphrasing) that small wealth is a function of skill but large wealth is a function of luck. The Black Swan is the subsequent read; has anyone read both? Is the second a significant departure from the first or more of the same?

- Honeybee Democracy by Thomas D. Seeley. It's a bit heavy on the specifics of all experiments-- not that the information is without merit, but the marginal value to a biologist is far grater than to me. Nonetheless, the general idea of how bees make group decisions is an interesting one. I'm on the fence as to whether bees are actually practicing democracy-- to me, a realization of the larger framework of "we need to make a decision and voting is how we're going to do it" is necessary to realize a functioning democracy. Maybe it's a semantic issue between democracy and a democratic process...I could be convinced either way.

- Alexander Hamilton by Ron Chernow. This has been on the to-read list for a few years now, I finally just got it on the Kindle and now I'm looking forward to getting through it. I didn't realize Hamilton was so prolific as a writer-- a complete set of his writings assembled a little while back by a group at Columbia (I believe) came to 32 volumes.

- Moby Dick. Somehow missed this throughout my education; I am likely missing the larger picture issues that make this a classic but it's a surprisingly enjoyable read.

- The Lodger Shakespeare by Charles Nicholl. Not sure how far I'll go with this, but I read the first few chapters and have a feeling that I've secured all likely surplus. In short: We know Shakespeare's stories but have little glimpse of his voice outside of his works. This is the story of a court case in which Shakespeare provided recorded testimony-- thus, the only believed instance of Shakespeare speaking in real life.

- How the Beatles Destroyed Rock n Roll by Elijah Wald. Just started this as well; every time I read music history I realize how much of the world of music I'm completely and utterly ignorant. Nonetheless, it may provide quality fodder to support my assertion that the Beatles are the most overrated rock band in history.

Toilet Economics

Always an outlet for the interesting, the Economic Inquiry that landed in my mailbox today offers the following paper: Up or Down? A Male Economist's Manifesto on the Toilet Seat Etiquette. An ungated version is here. The abstract is as follows:

This paper develops an economic analysis of the toilet seat etiquette, that is, whether the toilet seat should be left up or down. I investigate whether there is any efficiency justification for the presumption that men should leave the toilet seat down after use. I find that the “down rule” is inefficient unless there is a large degree of asymmetry in the inconvenience costs of shifting the position of the toilet seat across genders. I show that the “selfish” or the “status quo” rule that leaves the toilet seat in the position used dominates the down rule in a wide range of parameter spaces including the case where the inconvenience costs are the same. The analysis can be applied to other shared facilities that can be customized to each user’s preference.

I love the second sentence.

Blockquoting X

X = F. A. Hayek, Denationalization of Money (pp. 83-4):

But the present political necessity ought to be no concern of the economic scientist. His task ought to be, as I will not cease repeating, to make politically possible what today may be politically impossible. To decide what can be done at the moment is the task of the politician, not of the economist, who must continue to point out that to persist in this direction will lead to disaster.

Protesting Taxes: Romanian Edition

This from the AP:

Witches from Romania's eastern and western regions will descend to the southern plains and the Danube River Thursday to threaten the government with spells and spirits. Mauve has a high vibration, it makes the wearer superior and wards off evil attacks, according to the esoteric group Violet Flame - which practices on Thursdays.

The policymakers are sincerely concerned, and there is much more delicious bits about astrologers and the Romanian Witch Queen getting in on the act. You should not pass this story up.

Also, I now await to see if anti-tax, anti-immigrant politicians decide that their sentiments for the former are strong enough to grant a special and speedy citizenship process to Romanian witches.

Development Data Blog

Passing along a link from MR, here's a blog devoted to data for development economists.

Team success and jersey color

I'm going to make an effort in 2011 to talk more about papers. We'll see how long it lasts.

Nonetheless, here's a new paper concerning the color of sports team's jersey is a determinant of success-- the abstract:

Baron von Richthofen (the Red Baron) arguably the most famous fighter pilot of all time painted his plane the vividest of red hues, making it visible and identifiable at great distance, showing an aggressive pronouncement of dominance to other pilots. Can colour affect aggression and performance and if so is it observable within team sports? This study explores the effect of red on sporting performances within a team sports arena, through empirical analysis of match results from the Australian Rugby League spanning a period of 30 years. While the descriptive analysis reports a positive relationship, the multivariate analysis provides some mixed results once you control for team effects. Thus, more evidence at the team level is required to better understand whether teams in red do enjoy greater success controlling explicitly in a multivariate analysis for many factors that simultaneously affect performance.

One factor that needs to be considered (and is brought up): If I'm wearing red, presumably the impact is larger upon my opponents than it is on me (as they're viewing my uniform more than I am)-- so it's not an issue of red making me perform better, if the effect exists, but rather making my opponents perform more poorly. Now, granted, the effect may be diminished in team sports-- if my basketball team wears red and I'm on the court, I see five opponents wearing, say, blue, while I only see four teammates wearing red. Individual sports would be the place to find some better natural experiments-- particularly in the Olympics, and they cite a paper that does exactly that. (Which, by the way, has the fantastic policy suggestion in the abstract "that the colour of sportswear needs to be taken into account to ensure a level playing field in sport.") But, to me, it seems that with team sports the problem is just too muddled.

I was surprised that Tiger Woods was not mentioned once.

Economist Screensavers

Here is a folder of portraits of 17 famous economists I created for my Nook's screensaver. They are all 600x800 jpegs, and seem to be of reasonable quality. This seems to be the same recommended properties for the Kindle as well.

Enjoy, and feel free to share any added portraits you dig up.

"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.