Financing Christmas

From all of us at TPS: Happy Holidays!

Top 10 Economics Papers of 2011

Here is one person's take on the best economics papers of 2011, you'll find a familiar name in the #2 spot...

Paper Money

Matt recently brought up the deviation between exchange value and cost of production for fiat monies. Although he was specifically considering pennies, the same discussion applies to paper monies. As I wrote in the comments of the original post:

If the penny is over valued (exchange value > cost), forgery is encouraged. If the penny is under valued (exchange value < cost), it pays to repurpose existing pennies. [...] In the same way that maintaining overvalued fiat monies requires monopoly privilege, maintaining undervalued fiat monies require the prohibition of repurposing.

Here's the BBC profiling paper money from the Ming Dynasty. The first line of the BBC article reads:

This Chinese Ming dynasty banknote is inscribed with the title Great Ming circulating treasure note and a warning that counterfeiting is punishable by death.

That is one way to discourage entry and thereby maintain the exchange value.

These Kids and their Darn Rap Music...

Fayetteville State University's Supply and Demand video contest has several contenders. Here's one from my colleagues in the GMU Econ Society:



And here's another from the Hayek-loving Dorian Electra:



Best of luck to all participants!

Large Hadron Collider Update: December 13, 2011

It's something we've been following for a while. Here's the new story from CNN.

Years, not months!

A Question for Will Luther

Perhaps I'm overlooking something here, but I think Will can help me out.

I hear people mention that the price of producing a penny is greater than one cent. Moreover, the value of the materials used to make one penny are also greater than one cent. While I think there is something to the discrepancy between the two, I'm going to go with the latter-- the copper and zinc in a penny are worth more than one cent. And people use this as reason to get rid of the penny-- but I'm not quite certain where this eventually leads.

Free of government restriction, people would acquire these pennies, melt them down and use them for their material purpose. The money supply contracts, the copper and zinc supplies increase, and we end up at a new equilibrium. Fair enough.

But people aren't allowed to do that. It's illegal. I'm not saying that I agree with the law, but assume that people follow it and it remains in place for the indefinite future. Money system-wise, what's wrong with having a penny that's would be worth more than one cent in raw materials? What if pennies were made of gold-- what then? I suppose people could trade them as commodities expecting at some point to be able to use them as something other than pennies, but then we're back to the law and it either de jure or de facto not holding. The more valuable the penny, the stronger the incentive to get around the law-- but again, I'm curious what makes it not function as a unit of currency.

Does this penny-made-of-stuff-worth-more-than-one-cent argument necessarily need to go hand-in-hand with the ban on destroying money? If so, that's fine-- I just don't see people arguing it beyond "THE COPPER IN PENNIES IS WORTH TWO CENTS!" What am I missing here? I defer to Will's superior knowledge here and am eager to see where I've messed up.

Charts!

CNN links to a collection of charts from the BBC; it's a quick look so take a gander. I think the unit labor cost presentation is most striking, though perhaps the marginal impact of the next "we're in big financial trouble" graph has been beaten down to near zero levels?

2011 Gus Rankings: Final Regular Season Poll

Here are the final Gus Rankings for the 2011 college football season.

If Gus had his way, the BCS bowls would look as follows:

National Championship Game: LSU vs. Oklahoma State
Rose Bowl: Oregon vs. Wisconsin
Fiesta Bowl: Stanford vs. Houston
Sugar Bowl: Boise State vs. Alabama
Orange Bowl: Virginia Tech vs. West Virginia

The final conference rankings are as follows (average team score):

Big 12: 18.2
SEC: 18.0
Big 10: 9.2
Pac-12: 5.2
ACC: 2.8
Big East: 2.6
Mountain West: -1.9
Conference USA: -10.3
Mid-American: -13.2
Sun Belt: -13.9
WAC: -20.0

Further, which team was the highest ranked team not to be invited to a bowl game (USC is ineligible for postseason play)? Western Kentucky, at #35.

Which was the lowest ranked team to receive an invite to a bowl game? Northwestern, at #75.

2011 Gus Rankings: Week 13

Gus has his own opinion on who should join LSU in the National Championship Game this week-- Houston! The Cougars come in ranked #2 this week, even on points with Stanford. Oklahoma State and Virginia Tech are tied for fourth. This week's rankings are here.

LSU looks to be a lock for #1 even with a loss to Georgia this weekend-- it would take a perfect storm of Georgia upsetting LSU and UCLA defeating Oregon, along with Houston beating Southern Mississippi and North Texas finding a way past Middle Tennessee State. And even that wouldn't do it if West Virginia defeats South Florida.

Houston, though, looks like a solid bet to hold on to the second spot through next weekend. Naturally, they would need to win their conference championship-- a home game against Southern Mississippi. But otherwise, things look promising. A win by Houston guarantees them second place; their two-point edge over Oklahoma State and Virginia Tech combined with a 9 point win would be too much for the pair of chasers to overcome. Further, Stanford looks to drop in the rankings by virtue of not playing. Here's how the weekend shapes up, points-wise:

Houston: Would earn 9 points with a win over Southern Mississippi; potential additional points from North Texas and UCLA. Total possible points: 11

Oklahoma State: Would earn 9 points with a victory over Oklahoma; one additional point from the Texas/Baylor winner. Iowa State also plays Kansas State; either outcome yields no net gain for Oklahoma State. Total possible points: 10

Virginia Tech: Would earn 7 points with a victory over Clemson (Clemson's 8 wins, less a point due to losing to Clemson earlier in the year). One potential additional point from Arkansas State. Total possible points: 8

So, in our weekly installment of the BC(GU)S, here's how Gus would allocate the teams:

National Championship Game: LSU (SEC champion) vs. Houston (automatic qualifier)
Rose Bowl: Oregon (Pac-12 champion) vs. Michigan State (Big 10 champion)
Fiesta: Oklahoma State (Big 12 champion) vs. Alabama (at large)
Sugar: Stanford (at large, replacement for LSU) vs. Boise State (at large)
Orange: Virginia Tech (ACC champion) vs. West Virginia (Big East champion)

One more week of regular season action!

2011 Gus Rankings: Week 12

Here are this week's Gus Rankings. LSU continues to lead the pack, and Oklahoma State retains the second position despite suffering their first loss of the season. Houston surges into the third position, followed by Alabama and Virginia Tech.

As we noted last week, it's fun to project the BCS lineup per the Gus Rankings. You can find the BCS selection procedures here; remaining games are assumed to be decided by the Gus Rankings as well. As such, Gus determines the lineup for the BCs games should be as follows:

National Championship Game: LSU (SEC Champion) vs. Oklahoma State (Big 12 Champion)
Rose Bowl: Oregon (Pac 12 Champion) vs. Penn State (Big 10 champion)
Fiesta Bowl: Alabama (at-large, replacement for Oklahoma State) vs. Boise State (at-large)
Sugar Bowl: Houston (automatic qualifier, replacement for LSU) vs. Stanford (at-large)
Orange Bowl: Virginia Tech (ACC Champion) vs. Rutgers (Big East champion)

Not a bad lineup; the Sugar Bowl and Fiesta Bowl would probably swap lineups in this situation out of geographic preference. I don't see Boise State making it, but Alabama and Stanford have to be looking pretty good at this point to secure at large bids. Note also that Michigan cannot make the Big 10 title game and thus does not secure the automatic Big 10 bid. Rutgers takes the automatic Big East bid because I *think* Gus predicts a 4-way tie at the end of the season, and the tie-breaker is highest BCS ranking.

2011 Gus Rankings: Week 11

Here are this week's Gus Rankings. LSU leads the way with Oklahoma State two points back in the second spot. Alabama is third, Oklahoma fourth, and Oregon fifth.

At the bottom of the rankings, Memphis holds a two point "lead" over Tulane.

At this point, it is fun to extrapolate whom Gus would have playing in the BCS bowl games. We'll use the current Gus Rankings to determine bowl choice and to break any conference tiebreakers or uncertainty.

The National Championship Game is easy enough-- the top two ranked teams in the poll are LSU and Oklahoma State, here assumed to be the champions of the SEC and the Big 12, respectively.

The Rose Bowl is the next easiest bowl to figure. The champion of the Pac-12 and the Big 10 are each sent to the Rose Bowl unless they are committed to the National Championship Game. Neither figure to fit this stipulation this week; Oregon would be the champion of the Pac-12 (with the highest Gus Ranking), and would face Michigan (again, the highest ranked team from the Big 10). Note that the actual Big 10 race is still wide open; Michigan finds itself one game behind Michigan State in the standings, and Nebraska, Penn State and Wisconsin all have two losses or less as well.

Only one remaining conference has a binding tie to a particular bowl-- the ACC, in which current Gus champion Virginia Tech would travel to the Orange Bowl. The SEC (Sugar) and Big 12 (Fiesta) champions are not committed to these bowl because they have been chosen for the National Championship Game. These bowls get to choose replacements before the pool of at-large teams is considered.

So, the first bowl that gets to select a replacement is the Sugar Bowl, as LSU was the first team to be taken for the National Championship Game with their #1 ranking. We assume that the Sugar Bowl takes the highest remaining team in the Gus Rankings. Thus, the Sugar Bowl selects Alabama, which is ranked #3.

The Fiesta Bowl is next in selecting a replacement for Oklahoma State; next highest on the list is Oklahoma at #4.

The remaining teams are selected according to the pre-determined order for the season: Fiesta, Sugar, then Orange. The Big East champion remains as an automatic qualifier; the highest ranked Big East team is West Virginia at #29. Because Houston is presumed to be the conference champion of Conference USA and they are ranked within the top 12, they, too, are an automatic qualifier (though would have been the next team selected by virtue of ranking strength anyhow). That leaves one remaining team to be selected from the Gus Rankings-- and Boise State captures the final at-large selection.

So, in assembling the final selections according to requirements and still preferring teams with the highest possible rankings, we are left with the following bowl lineup:

National Championship Game: LSU vs. Oklahoma State
Rose Bowl: Oregon vs. Michigan
Fiesta Bowl: Oklahoma vs. Houston
Sugar Bowl: Alabama vs. Boise State
Orange Bowl: Virginia Tech vs. West Virginia

Of course, things change from week to week...so we'll see where this ends up! As a fun side note...what would be the over/under on that Fiesta Bowl matchup?

Blockquoting X

X = Robert E. Lucas, Jr. on Keynes and the Keynesian consensus:

I think that in writing the General Theory, Keynes was viewing himself as a spokesman for a discredited profession. That’s why he doesn’t cite anyone but crazies like Hobson. He knows about Wicksell and all the “classics,” but he is at pains to disassociate his views from theirs, to overemphasize the differences. He’s writing in a situation where people are ready to throw in the towel on capitalism and liberal democracy and go with fascism or corporatism, protectionism, socialist planning. Keynes’s first objective is to say, “Look, there’s got to be a way to respond to depressions that’s consistent with capitalist democracy.” What he hits on is that the government should take some new responsibilities, but the responsibilities are for stabilizing overall spending flows. You don’t have to plan the economy in detail in order to meet this objective. And in that sense, I think for everybody in the postwar period—I’m talking about Keynesians and monetarists both—that’s the agreed-upon view: We should stabilize spending flows, and the question is really one of the details about how best to do it. Friedman’s approach involved slightly less government involvement than a Keynesian approach, but I say slightly.

2011 Gus Rankings: Week 10

Here are this week's Gus Rankings. LSU leads the pack, followed by Oklahoma State, Oklahoma, Alabama and Boise State.

At the bottom end of the rankings, Tulane has taken a commanding lead, outpacing UAB by a full five points.

Free Market Reform in Cuba

NPR reports:

Cuba announced Thursday it is allowing the purchase and sale of real estate for the first time since the early days of the revolution, the most important reform yet in a series of free-market changes ushered in by President Raul Castro.

The law, which takes effect Nov. 10, applies to citizens and permanent residents only, according to a red-letter headline on the front page of Thursday's Communist Party daily Granma.

This video provides a clear picture of the living standard in Cuba prior to these new "free-market changes." You won't be surprised.

The Economics of Halloween Candy

Here is a fantastic article from NPR on the spontaneous Halloween candy after-market. From the piece:

"Within seconds of returning home, the first group at the trading party spilled their pillow cases onto the floor and started making piles.

...

Sierra quickly became the queen of Reese's by jumping into the market early. While most kids were still organizing their piles by brand, she was already making moves and trading her way to a hefty collection of Reese's Pieces and Peanut Butter Cups.

...

The decibel level in the candy-trading room rivaled that of Wall Street. The trading peaked about 20 minutes in as cross-room deals had Milk Duds flying overhead while a Jolly Rancher came the other way. Whoppers went for Smarties. Kit Kats went for a Twix. Charleston Chews, the pennies of the lot, didn't seem to move at all."

2011 Gus Rankings: Week 9

Here are this week's Gus Rankings. Oklahoma State finds itself on top after both LSU (2) and Alabama (3) had byes. Oklahoma (4) and Stanford (5) round out the top 5.

There is an equally ferocious fight for the bottom spot. One-win Tulane and UAB are currently tied for the final spot, outpacing winless Idaho and Indiana.

At this point, it is fun to see how the BCS stacks up against the Gus Rankings. The top 5 teams with the biggest gains in the BCS compared to Gus are as follows (i.e., Gus says are overrated BCS-wise):

1. Wisconsin (11 spots)
2. Arkansas (7)
3. Arizona State (6)
3. Oregon (6)
5. Kansas State (5)

And the top 5 teams with the biggest gripe against the BCS vis a vis Gus (i.e., Gus says are underrated BCS-wise):

1. Penn State (6 spots)
2. Auburn (5)
2. Houston (5)
4. Clemson (4)
4. Michigan (4)

2011 Gus Rankings: Week 8

Here are this week's Gus Rankings. LSU remains at the top, followed by Alabama and Oklahoma State, with Boise State and Clemson tied for the fourth spot.

There are 8 undefeated teams left in college football; the first seven spots in the Gus rankings are occupied by undefeated teams. In the six spot is Stanford followed by Houston at seven. The lowest ranked team still without a loss is Kansas State at #12.

At the other end of the rankings, Idaho has taken over the final spot from UAB, winners of their first game last weekend.

Conference rankings are as follows (average team points):

1. Big 12: 8.60
2. SEC: 7.42
3. ACC: 3.17
4. Big 10: 3.17
5. Pac-12: 2.42
6. Big East: 0.88
7. Mountain West: -2.50
8. Conference USA: -3.92
9. Sun Belt: -5.33
10. Mid-America: -6.14
11. WAC: -8.75

Sargent and Sims Press Conference

Although I encourage you to watch the entire video, I want to draw attention to the following quote from Sargent:

So here's a phrase that you hear; it's partly about language. You hear that US fiscal policy is unsustainable. You hear that over and over again. You actually hear it from both parties. And that can't possibly be true because government budget constraints are going to make it sustainable. So what they mean is that certain promises that people have made about taxes, entitlements, medicare, medicaid---those are incredible. They are not going to fit together. So the US fiscal policy is sustainable. It's very uncertain. It's uncertain because it's not clear which of these incredible promises are going to be broken first.

UPDATE: Peter Schiff engages in some creative editing to make it appear as if Sargent and Sims are know-nothings. Schiff uses an awkward pause and disclaimer by Sims (wherein Sims cautions the audience not to take the views of the two newest Nobel Laureates in Economics as irrefutable) to suggest Sims avoids the question. Schiff then skips from 15:35 to 16:13 (during which Sims presents his view) where Sargent says "I don't have much to add to that ... I was hoping he was going to ask about Europe." As the above quote captures, Sargent goes on to discuss his view of recent fiscal policy.

Schiff then manipulates a humorous move by Sargent---requesting a question about Europe and then, when the question is asked, deferring to Sims---to appear as if Sargent knows nothing about Europe as well. The audience recognized the humor with laughter and applause.

Shame on you, Schiff.

2011 Gus Rankings: Week 7

Our apologies for the missing Gus Rankings from last week...but we're back! Here are this week's rankings. (For those interested, here are the rankings from Week 6.)

LSU holds the top spot, one point ahead of Alabama. Boise State and Oklahoma State tie for third, and Oklahoma rounds out the top five.

On the other end of the rankings, UAB has taken a commanding lead for last place. The Blazers are 23 points on the wrong side of zero, with Memphis and Idaho giving chase four points back.

Conference rankings are as follows (average team score in parenthesis):

1. Big 12 - 7.10
2. SEC - 5.67
3. Big 10 - 2.92
4. ACC - 2.75
5. Pac 12 - 1.75
6. Big East - 0.75
7. Mountain West - -1.63
8. Conference USA - -4.00
9. MAC - -4.62
10. Sun Belt - -4.67
11. WAC - -7.38

Juicing the Mitchell: World Series edition

It's been a harrowing few months-- politicians have been keeping the blinders on and pressing forward on economic matters. Or taking vacations. Either way, we've been woefully devoid of Luther's Juicing the Mitchell...

...until now!

Four U.S. senators and health officials from the cities hosting the World Series are urging the baseball players union to agree to a ban on chewing tobacco at games and on camera.

The senators, including No. 2 Democrat Dick Durbin of Illinois, and health officials from St. Louis and Arlington, Texas, made the pleas in separate letters, obtained Tuesday by The Associated Press.