This intensive four-day seminar will be held at the Acton Institute June 16-19, 2009. Some very interesting details:

As a participant of Acton University, you will delve into the moral, cultural, economic, legal, and theological underpinnings of the social order that values human liberty. Because you can build your own curriculum, your experience will suit your interests, whether you are an undergraduate or graduate student, a non-profit professional, a member of the clergy, professor, Catholic High School teacher, social worker, journalist or business person. More than 50 AU courses are now available, ranging from the theological and philosophical, to the policy-oriented and practical. If you are interested in deepening your understanding of the integration of sound economics, rigorous philosophy, and the Judeo-Christian faith, Acton University was designed for you. Space and scholarship funds are limited – the 2008 conference carried a siginificant student waiting list within weeks of last year's launch- so register or apply now!

Please visit www.acton.org/actonu where you will find the online registration form along with complete conference information. If you have any questions, do not hesitate to contact me at keagle@acton.org or at 616.454.3080. I hope to see you in June!
Kara Eagle
Program Officer
Acton Institute
616.454.3080

Plan A for the Treasury's $700 billion was to buy "troubled assets" from banks. The Treasury quickly scrapped that plan, although the Fed now seems determined to resurrect it on its own self-financed dime. Plan B was to inject $250 billion of new capital into banks. What would be Plan C? Uwe Reinhardt helpfully describes the new program embodied in the guarantees on Citibank's assets: (underpriced) credit default insurance. He calls the operation BBP (for Bair-Bernanke-Paulson) Trio Insurance. Unfortunately, because the guarantees are off the Treasury's balance sheet, the size of the guarantees isn't limited by the unspent share of the $700 billion:

at least there was a legislated $700 billion limit to [the bailout] and some accountability, at least in principle, if not in fact. By contrast, is there any limit to the size of the insurance book of business to which the BBP Trio Insurance can expose the taxpayer, the ultimate underwriter on this insurance? I believe it is something to worry about.

Jim Rogers -- whose book Investment Biker I recommend as supplemental reading for a money and banking class -- discusses the bailouts on a Bloomberg Radio podcast here. Total length 41 minutes, but the best stuff is up front. Here is Rogers getting down to basics (own transcription):

Why are we bailing out Citibank? Why are 300 million Americans having to pay for Citibank's mistakes? The way the system is supposed to work, Mark: People fail. And then the competent people take over the assets from the failed people, and then you start again with a new stronger base. What we're doing this time is, they're taking the assets from the competent people, giving them to the incompetent people, and saying "Okay, now you can compete with the competent people." So everybody's weakened: the whole nation is weakened, the whole economy is weakened. That's not the way it's supposed to work. ... All these homeowners who did nothing wrong are now being forced to pay for the people who did crazy things ...

Here's a panel discussion with F.A. Hayek in 1975, courtesy of the Mises Institute. Hayek has made three points that are ignored in today's policy discussion but that are nonetheless very, very relevant:

1. The crisis of the 70s was due to the policy prescriptions originating in the theory that insufficient aggregate demand is what causes recessions.

2. Inflation distorts relative prices, which draws resources (capital and labor) into lines of employment that they wouldn't be in without the inflation. Thus, further inflation is needed in order to keep them in those lines of employment. This is unsustainable in the long run. As I understand it, Hayek's emphasis on inflation-induced changes in the relative prices of factors of production doesn't get much play in macroeconomics. There were no index entries for "relative prices" in either of my grad macro textbooks (Romer's Advanced Macroeconomics, Blanchard & Fischer's Lectures on Macroeconomics). If I'm wrong, please let me know.

3. "Planning" flatters the intellectuals, who are attracted to the idea that a society is a machine that can be controlled, coordinated, and planned. Much like Adam Smith's "man of system" arranging pieces on a chessboard, the intellectuals to whom Hayek referred view societies as neat and orderly processes that can be tinkered with. I'm not convinced that we take Smith's insight that all of the pieces have their own principles of motion seriously enough, but that's another thought for another day (shameless plug: we'll discuss this in detail in my Classical & Marxian Political Economy course this Spring, and I'll be writing about it here and elsewhere).

Historical holiday widsom in a new op-ed from Ben Powell, "The Pilgrims’ Real Thanksgiving Lesson"

Many people believe that after suffering through a severe winter, the Pilgrims’ food shortages were resolved the following spring when the Native Americans taught them to plant corn and a Thanksgiving celebration resulted. In fact, the pilgrims continued to face chronic food shortages for three years until the harvest of 1623. Bad weather or lack of farming knowledge did not cause the pilgrims’ shortages. Bad economic incentives did.

Ben says the Pilgrim leaders at first centrally planned agriculture. All productive resources were commonly owned, while distribution was uniform. Bad harvests were the result. Culling Governor William Bradford's 1647 history of the Plymouth Plantation, Ben illustrates,

The problem was that “young men, that were most able and fit for labour, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense.” Because of the poor incentives, little food was produced.

Leaders changed the organization og agriculture from a commons toward private property, and happier results followed.

Makes me think of what John Wayne would have said: "Privatize, Pilgrim." In the spirit of Ben's article, I wondered about the origins of this particular John Wayne-ism. As many of you know the phrase was first used in The Man Who Shot Liberty Valance, a 1962 John Ford film and one of the best westerns ever.

I spoke on "Federal Reserve Policy and the Housing Bubble" at the Cato Institute's annual monetary conference on Wednesday (theme: "Lessons from the Subprime Crisis"), and reprised my Cato talk at the Southern Economics meetings on Friday. The Cato conference is now available for streaming as RealVideo or for downloading as podcasts here. (A fast connection is recommended for streaming the video.)

My talk was the second on the first panel. I emphasized two points: (1) the Fed held the Fed Funds rate too low too long between 2001 and 2006; (2) the Fed's new lending programs add up to a shadow bailout of $1.7 trillion. That's right, trillion. It's a bailout because it has nothing to do with being a lender of last resort in the standard sense of preventing the money stock from shrinking. Buying T-bills is an effective (and preferable) way of doing that. The Fed is trying to selectively channel credit.

Preceding the first panel was a keynote address by Donald Kohn, vice-chairman of the Federal Reserve Board of Governors, essentially defending the legacy of his mentor Alan Greenspan. I wasn't persuaded, but I do tip my hat to Kohn for sticking around to listen to the first panel. It was a rare opportunity for what our leftist friends like to call "speaking truth to power".

All of the panels were very good, and I also recommend Jeffrey Lacker's post-luncheon address. In understandbly guarded language, Lacker made it clear that he isn't happy with the Fed's departures from its traditional mission.

HT: David Boaz

"Large transfers of physical capital to Third World countries, through nationalization and foreign aid, have often been only a prelude to the deterioration of that capital."

Thomas Sowell, "Marxism," p. 192

*Meme: Marginal Revolution, of course.

From Josef Sima:

Prague Conference on Political Economy, April 24-26 2009

Call for Papers!

Details and registration http://pcpe.libinst.cz/

Cuhel Memorial Lecture: prof. Hans-Hermann Hoppe
Wieser Memorial Lecture: prof. Svetozar Pejovich

Pre-concerence event: April 23, 2009 16:00 - 19:00
Booklaunch of the Czech translation of Murray Rothbard's The Ethics of
Liberty
Key-note speech: H.-H. Hoppe (author of the introduction of New York
University Press edition)

In light of the annual controversy over how college football's national champion is determined, I've written up a proposal for how conferences can be realigned. My modest contribution is below the fold.

Read More »

I just read Alexandre Padilla's very interesting paper "Self-Regulation in the Adult Film Industry: Why Are HIV Outbreaks the Exception and Not the Norm?" Here's the revised abstract:

This paper analyzes how self-interest and long-term profit expectations provided the necessary incentives for the adult film industry to self-regulate and to find mechanisms to minimize the risks of HIV outbreaks that could result from the asymmetric information and network effects that characterize the industry. With the help of the Adult Industry Medical Healthcare Foundation (AIM), the adult film industry developed a corporate culture to facilitate widespread coordination among members and to make the industry similar to a private club. First, I discuss the predicted effects of asymmetric information and network-effect problems on the industry in terms of HIV outbreaks. Second, I tell the story of AIM and present the policies the industry has adopted since AIM’s creation to mitigate those predicted effects. In particular, I discuss how the industry managed the 2004 HIV outbreak without government intervention. Finally, I present statistics comparing HIV infection rates in the industry and general population as well as additional observations to assess the relative effectiveness of the industry in preventing and containing HIV outbreaks.

A couple of comments are in order. I really like the research design. Alex is exploring how self-regulatory institutions arise to address problems arising from networks and asymmetric information; in the porn industry, these problems are crystal clear and at the center of how the industry operates. Thus, the probability of arriving at clear insights that aren't gummed up by confounding factors is pretty high.

The worst-case scenario--HIV infection--is very clear and the transmission mechanism is unambiguous. That said, I would be interested in seeing just how the risks of working in porn compare to the risks of other hazardous occupations--in other words, I wonder how the estimated HIV-related cost of working in porn compares to the estimated injury-related cost of working in construction. Further, how does the insurance market work for porn? Do porn stars pay higher or lower premiums? How does this affect their incentives?

Another thing I like about the research design--which also complicates it a little bit--is that pornography is an internationally competitive market with near-perfect capital mobility. It can be produced virtually anywhere and sent anywhere at the click of a button. This puts serious constraints on regulators and has implications for how the industry self-regulates. I'd like to see this explored in greater detail.

The paper will probably attract attention because it has the phrase "Adult Film Industry" in the title, but the most important term in the title (and in the paper) is "Self-Regulation." It's a very interesting paper because of the obvious and seemingly intractable problems in a globally competitive industry. I look forward to seeing where this leads.

Update: via email, Alex tells me that it's going to lead to a book. I look forward to it.

Economics instruction gets better via the Monty Python YouTube Channel.

HT: Brad DeLong.

Congratulations to Jeff Daiell, who won the Essay Contest I sponsored earlier this month. Jeff won a copy of Buchanan and Tullock's The Calculus of Consent, and I learned a lot. Thanks for all the entries (a few dozen or so). And for people who are interested, I did vote (and then chose a winner after the fact). Jeff's winning essay is below the fold.

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"Shock and Awe: Institutional Change, Neoliberalism, and Disaster Capitalism." This is a long review essay on Naomi Klein's The Shock Doctrine prepared for the Journal of Lutheran Ethics. Thanks to the Fraser Institute for letting me use some of their graphs, and thanks to Bob and Josh for letting me use one of the tables from our still-uncirculating paper.

"The Skinny on Big Box Retailing: Wal-Mart, Warehouse Clubs, and Obesity" (with Charles Courtemanche, revised 11/6/08) A couple of additional changes and this one's out the door. The abstract:

We estimate the impacts of Wal-Mart and warehouse club retailers on height-adjusted body weight and overweight and obesity status, finding evidence that non-grocery selling Wal-Marts reduce weight slightly while grocery-selling Wal-Marts and warehouse clubs either reduce weight or have no effect. The effects appear strongest for women, minorities, urban residents, and the poor. We then examine the effects of these retailers on exercise, food and alcohol consumption, smoking, and eating out at restaurants in order to explain the results for weight. Most notably, all three types of stores are associated with increased consumption of fruits and vegetables and reduced consumption of dietary fat. This is consistent with the thesis that Wal-Mart increases real incomes through its policy of "Every Day Low Prices," making healthy food more affordable, as opposed to the conventional wisdom that cheap food makes us eat more.

Mean Automakers Dash Nation's Hope For Flying Cars

Remember: it isn't usually a question of funding. It's usually a question of reality.

Many DOLers are headed to the Grand Hyatt in DC for the Southern Economic Association meetings. Here is the conference program and list of participants. The Southerns are an important annual event for economics in the classical liberal tradition. For example, the Society for Development of Austrian Economics holds its meetings each year here (list of sessions is here). Also, more than 175 faculty in the Institute for Humane Studies network will attend. The Cato Institute is also hosting a reception in honor of Bill Niskanen; Saturday from 5-7 p.m. at the Cato building (details and registration here). Personally I am presenting a paper on the entrepreneurial economics of fashion apparel, "Of Human Action and Human Design: Adaptive Entrepreneurship and the Marketization of Fashion."

Finally, for friends and alumni of IHS who are in the area, please join me and Nigel Ashford at the IHS reception, Friday the 21st 6.00-7.30pm at Grand Hyatt, Penn Quarter B.

The makings of an exam question in Econ 101:

The Wall Street Journal, 11/14/08: "Wal-Mart Flourishes as Economy Turns Sour"

The Wall Street Journal, 11/19/08: "Target's Profit Continues to Slide"

I was reminded of this paper by Emek Basker. The abstract:

I estimate the aggregate income elasticity of Wal-Mart's and Target's revenues using quarterly data for 1997-2006. I find that Wal-Mart's revenues increase during bad times, whereas Target's revenues decrease, consistent with Wal-Mart selling "inferior goods" in the technical sense of the term. An upper bound on the aggregate income elasticity of demand for Wal-Mart's wares is -0.5.

My friend Don Lacombe (Ohio University -- Go Bobcats!) co-authors a nifty new paper on the minimum wage. Here's the abstract,

The relationship between minimum wage increases and youth employment is investigated using county-level data and spatial econometric techniques. Results that account for spatial correlation indicate that a 10% increase in the effective minimum wage is associated with a 3.2% decrease in youth employment, a result that is 28% higher than the corresponding estimate that does not control for spatial correlation. Thus, estimates that do not take into account spatial correlation may significantly underestimate the negative effect of the minimum wage on teenage employment. Improperly controlling for factors that vary systematically over space can lead to incorrect inferences and misinform policy.

ATSRTWT.

Lawns gardens are a great idea, and I completely agree with the writer that if one is going to spend time and energy on yardwork, why not ask that such time and energy yield something? As some of the comments on the post point out, local regulations often forbid it.

I understand the rationale for green lawns, which are basically a form of fire insurance (HT: my father-in-law, who inspects hospitals for a living and knows everything there is to know about fire codes). However, and in my mind this is unfortunate, what we think of as a "yard" has been enshrined in law and potentially useful experiments in urban living have been effectively made illegal. I'd much rather tend a tomato patch in front of the house than mow grass (or, more specifically, pay someone else to do it). I'm pretty sure the City of Memphis wouldn't let me. I'll have to look into it.

I can think of a couple of externality rationales for laws against front-yard gardens, but I don't think they're tenable when subjected to scrutiny. One could argue that there are aesthetic externalities, but first I'm not sure they justify the regulatory costs and second it isn't clear that the externality is positive or negative. Some of our neighbors do truly amazing things with their yards, and we reap some of the aesthetic benefits (they don't grow vegetables, though).

It seems like this can also be fixed through the housing market. In efficient housing markets the expected value of future positive and negative externalities emanating from the fact that we don't have onerous restrictions on what you can and can't do with your yard in our neighborhood will be capitalized into home values. One man's trash will be another man's treasure: people who value freedom and experimentation will live in neighborhoods that don't have such restrictions. People who value uniformity and continuity can select into private neighborhoods with restrictions on what you can and can't plant.

A more plausible externality argument is that edible flora will attract undesirable fauna. Again, though, the steps people would take to ensure that their veggies don't get eaten would also reduce the probability that neighbors' veggies would get eaten and at least partially mitigate the externality. Even if contracting institutions fail, I'm still not convinced that the size of the externality justifies government intervention, especially when one considers the long-run effect on incentives to use force rather than persuasion to accomplish what you want.

And while we're talking about externalities, if the "food miles" argument for locavorism has any merit--and I'm not convinced it does, but don't take my word for it--then we're trading off small negative externalities associated with at-home food production in order to reduce negative externalities associated with the international structure of food production ("global calorie infrastructure," perhaps?).

There is also a more fundamnetal question about liberty at stake here. If Sarah Palin can shoot wolves from a helicopter, shouldn't I be allowed to grow tomatoes in my front yard?

Is the media a cause or an effect of pessimistic bias? If prices rise, it will worry economists and pundits because it is inflationary. If the price level falls, it will worry economists and pundits because it signals possible deflation and a "contracting economy." For what good news might look like, here's the European Central Bank's website on price stability. With respect to macroeconomic policy, here's co-blogger Larry White on the Gold Standard and a podcast with George Selgin on free banking.

For grad students who are interested in applied Austrian monetary theory and who are reading this blog instead of writing, you can justify your procrastination by beginning an empirical/historical paper on price stability under alternative monetary regimes. You can start your lit review here. And here's the Google Books preview of Larry's The Theory of Monetary Institutions, which you can get used for $10 plus shipping at Amazon.

Mike asks whether this is illustrates pessimistic bias. Off the top of my head, I think there is some merit to the idea that what matters is not our absolute level of income, comfort, whatever but rather how those levels exceed (or fall short of) our expectations. This isn't to say that money can't buy happiness, though.

Dear Members of the Loyola [College in Maryland] Community:

The officials and members of the Adam Smith Society and the Economics faculty wish to apologize for the insensitive and incorrect remarks made Thursday, Nov. 6 by invited speaker Professor Walter Block of Loyola University New Orleans.

Walter's take and reaction is found here.

What do a major network news website's headlines tell you about a country or an economy?

Regulators: Bailout is working--Paulson and Bernanke say the $700b is working despite its critics. Future headline--"Shaughnessy: short economists more intelligent than most."

So if the bailout is working, why do we see the Ford CEO on bailout opposition: Past is past. He says "the automobile industry is just absolutely essential to the United States' economy." Elsewhere, we find out that "The automakers are asking for about $25 billion in loans to help them survive until 2010." An absolutely essential industry needs $2b a month? There are "more than 1.6 million jobs tied to the auto industry." So each affected person requires $15,625 in tax subsidy? This second story only discusses the harm from an auto industry failure; it says nothing about the current harm from misallocating scarce resources to prop up an inefficient industry.

What's really killing Detroit? I'll agree with SUV addiction, lack of small cars, lousy quality (including the struts on my '04 Pontiac Grand Prix), lack of hybrids, and union workers. But of course they also have to throw in the class-envy bone of fat executive paychecks.

From the "government can do everything" file: Bush hopes to ease holiday travel congestion.

And from the "well, maybe not" file: Blind woman threatened with suit over 1-cent. The overdue payment is for her city water bill. The city official criticizes the blind woman for not paying the extra penny in her original bill.

Don't get sick (again): Half of primary-care doctors in survey would leave medicine if they had an alternative. "Many said they are overwhelmed with their practices, not because they have too many patients, but because there's too much red tape generated from insurance companies and government agencies ... With lower reimbursement from insurance companies and the cost of malpractice insurance skyrocketing, these health professionals say it's not worth running a practice and are changing careers. Others say they're going into so-called boutique medicine, in which they charge patients a yearly fee up front and don't take insurance." And if you're looking for an example of the problems of not using price as a rationing mechanism: "People who have insurance can't find a doctor, so suddenly we are going to give insurance to a whole bunch of people who haven't had it, without increasing the number of physicians?... It's going to be a problem."

Lastly, As children starve, world struggles for solution, with a focus on Haiti. Haiti's EFW score is 6.2, but they have an abysmal 2.59 in the "legal system and property rights" category. Why would the world struggle for a 200-year old solution?

As Ricky Ricardo would say, there's a lot of 'splainin' to do. My attempt to summarize the causes of the turmoil is now available as a Cato briefing paper..

I just saw this on the WSJ's webpage:

The Treasury secretary told a House committee it is unrealistic to expect the $700 billion rescue plan to reverse the woes inflicted by the financial crisis.

Then why the @#$! are we p!ssing away the $700B? Good grief, would someone please start impeachment proceedings against this crowd since it's not safe to leave them in office for another two months.

... for including DOL on his list of The Ten *Really* Best Economics Blogs. I was also glad to see Craig included his own fine blog in the list.

Here is Mike Lester's cartoon from today's Rome News-Tribune:

Skip Sauer points to articles indicating that the Vancouver and London Olympic organizers have outstretched palms.

Anyone else feeling like The Forgotten Man these days?

Constrain the Federal Reserve's over-expansionary proclivities, writes Jerry O'Driscoll in today's Wall St. Journal. How? Impose a commodity standard, which will automatically stop the Fed from following a policy course that inflates asset prices.

ADDENDUM: Walker Todd sounds a similar theme in the Christian Science Monitor today. The intro:

Too much credit and easy money. Those were the biggest culprits behind this financial crisis. Yet, apallingly, the government's rescue attempt is built on more credit and even easier money. That's like giving a procrastinator a deadline extension.

I had just read this in a thoughtful column by Kevin Hassett:

The U.S. has always distinguished itself relative to its major trading partners by having a higher faith in free markets and a greater respect for the limits of big government. Sure, the U.S. passed a stimulus package now and then, but it also let failure run its course and refused to resort to excessive big- government intrusions into the private sector.

The risk is that we will forget this lesson. First we bailed out the financial companies; now President-elect Barack Obama is asking for $50 billion to bail out the auto companies, an effort backed by Treasury Secretary Henry Paulson. Next we will see a tax credit for people who buy General Motors Corp. cars at stores of bankrupt retailer Circuit City, provided they use the car to go to a Detroit Lions game.

A look at economic history suggests that the crazy policy intrusions have to stop.

Failure can be a good thing, and recessions force economic stragglers to make tough decisions. Those tough decisions set the stage for the recovery.

Then I read this in a puzzling column by Bill Kristol: "I don’t pretend to know just what has to be done. But I suspect that free-marketers need to be less doctrinaire and less simple-mindedly utility-maximizing, and that they should depend less on abstract econometric models."

Finally, a note posted below Kristol's article cleared it up: "Paul Krugman is off today." Nice of Kristol to fill in for him.

In a new EconTalk podcast interview with Russ Roberts, here.

Not that it's likely to matter any time soon, but here's an excellent summary of at least one part of the ANWR debate.

The proponents of ANWR development have also distorted the picture by themselves making false arguments. First, it should be acknowledged that ANWR oil production will not in itself come close to achieving energy independence for the United States. Second, ANWR production alone will not affect oil prices significantly. Even the large reserves that ANWR possesses are not large enough, relative to the total world oil market, to have much effect on future world prices.

The real issue in ANWR is the proper use of the fiscal assets of the U.S. government. The oil there is worth, minimally, $500 billion in gross value and, potentially, $1 trillion dollars or more - depending obviously on the future world price of oil.

in the latest issue of the New Yorker.

Crikey, George W. Bailout warning against too much government involvement in markets is akin to Bill Clinton warning against marital infidelity.

From Business Week:

An extension of unemployment benefits has one of the highest pass-through rates of any federal spending choice, says Mark Zandi, chief economist and co-founder of Moody's Economy.com, a subsidiary of Moody's Corp. (MCO). The June passage of 13 weeks of additional unemployment benefits, for those who had exhausted the maximum 26 weeks of benefits, cost $20 billion. Now, Zandi says, another $20 billion is needed for a second extension.

In testimony before the U.S. House of Representatives in June, Zandi offered estimates of how much each dollar of government spending in different forms would produce in real GDP each year. He said extending unemployment benefits would yield $1.64 of GDP, a temporary increase in food stamps $1.73, aid to state governments $1.36, and increased infrastructure spending $1.59. "The bang for the buck is very high," Zandi said of extended jobless benefits.

Some economists and politicians would rather debate whether to spend hundreds of billions of taxpayer dollars at all. "The federal government does not have unlimited resources to borrow and spend on whatever," says James Hamilton, professor of economics at the University of California at San Diego. "We need to reflect on what went wrong [to create the financial crisis], and not run off in every direction."

Thankfully Hamilton offers some words of wisdom. Zandi's comments are par for the course for a guy who says (see 1:45 or so of this video; HT: Joe Coletti of The Locker Room) of bailout plans and stimulus packages, "This is capitalism" and "government is always part of capitalism." Sheesh.

... but Jim Cramer must be pleased.

Today’s news:

Flames that ripped through multimillion-dollar mansions Thursday evening continuing burning this morning in the upscale Southern California community of Monticeto, near Santa Barbara. At least 100 homes have been destroyed.

Cliff Mason of CNBC, Nov.13:

Burn Our Way Out Of The Housing Crisis? It's An Idea. … Jim Cramer has suggested this plan semi-seriously on "Mad Money."

Cramer also suggested this plan semi-seriously on Conan O’Brien a few nights ago: in cities where unsold houses are depressing house prices, leading to mortgage defaults and thereby troubles for lenders, etc., have the federal government buy up the houses and torch them.

So is Cramer's plan serious, which would make it an an extension of the broken window fallacy? Or is it a parody of the broken window fallacy?

Comments are open.

President-elect Obama provided a short essay for "Teaching Tolerance," a website maintained by the Southern Poverty Law Center. Too bad that not all of his followers got the memo. This from the Chicago Tribune:

Catherine Vogt, 14, is an Illinois 8th grader, the daughter of a liberal mom and a conservative dad. She wanted to conduct an experiment in political tolerance and diversity of opinion at her school in the liberal suburb of Oak Park.

So just before the election, Catherine consulted with her history teacher, then bravely wore a unique T-shirt to school and recorded the comments of teachers and students in her journal. The T-shirt bore the simple yet quite subversive words drawn with a red marker:"McCain Girl."

"People were upset. But they started saying things, calling me very stupid, telling me my shirt was stupid and I shouldn't be wearing it," Catherine said.

Then it got worse.

"One person told me to go die. It was a lot of dying. A lot of comments about how I should be killed," Catherine said, of the tolerance in Oak Park.

But students weren't the only ones surprised that she wore a shirt supporting McCain.

"In one class, I had one teacher say she will not judge me for my choice, but that she was surprised that I supported McCain," Catherine said.

Only a few times did anyone say anything remotely positive about her McCain shirt. One girl pulled her aside in a corner, out of earshot of other students, and whispered, "I really like your shirt."

The next day, in part 2 of The Brave Catherine Vogt Experiment, she wore another T-shirt, this one with "Obama Girl" written in blue. And an amazing thing happened.

Catherine wasn't very stupid anymore. She grew brains.

"People liked my shirt. They said things like my brain had come back, and I had put the right shirt on today," Catherine said.

Some students accused her of playing both sides. "A lot of people liked it. But some people told me I was a flip-flopper," she said. "They said, 'You can't make up your mind. You can't wear a McCain shirt one day and an Obama shirt the next day.' "

With apologies to Kevin Grier ... holy crap people!

Clicking through to the story reveals something a bit less headline grabbing:

Britain is facing a sperm donor shortage after reversing confidentiality laws and limiting the number of women who can use sperm from one donor, fertility experts warned Wednesday.

Britain in 2005 changed the law protecting anonymous sperm donors and allowed children to learn the identity of donor fathers - one reason, fertility experts say, there are fewer donors now.

"The only countries that seem to have enough sperm are those that pay - like the U.S. and Spain - or the countries that retain anonymity," said Allan Pacey, a member of the British Fertility Society that warned of the shortage in the British Medical Journal.

"In the countries that have removed anonymity ... there seems to be a problem," he said.

In 1991, Britain logged 503 sperm donors, according to figures from the Human Fertilisation and Embryology Authority. In 2000, there were 325, and in 2006 - the year after the law was changed - the number dropped to 307.

From the Chronicle of Higher Ed ($):

Congress is crafting a second economic-stimulus bill, and the nation’s colleges, hit by the deepening fiscal crisis, want a share of the money.

Over the last few weeks, colleges and their lobbyists have bombarded members of Congress with letters and phone calls seeking money for research, student aid, and infrastructure. Their appeals emphasize the role colleges play in the nation’s fiscal health, not only as educators but also as employers and innovators.

Congress is expected to focus its new spending on food stamps, unemployment benefits, and infrastructure projects. Colleges will have to compete for the remaining aid with hundreds of other supplicants, including the airline industry, homebuilders, and budget-strapped states.

Thirty-nine states are predicting budget shortfalls for the next fiscal year that total more than $100-billion, according to the Committee for Education Funding, a nonprofit coalition of colleges and other education groups.

But the competition hasn’t stopped colleges from seeking a share. Faced with declining endowment income, reduced state support, and more financially needy students, institutions are desperate to avoid drastic cuts in salaries and student aid.

It's looking more and more like it will be difficult to top the bailout as an example of the famous quote, "Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

There aren't words for this. Tears, maybe. But not words.

I just found out that my paper "Profit and Production" was accepted by the Quarterly Journal of Austrian Economics. Here's the abstract; it will appear in print in 2009:

Profits and losses provide powerful incentives. This essay explores the roles of profits and entrepreneurs in a market economy. In a market with secure private property rights, profits are a reliable guide that directs productive activity. Profits reward entrepreneurs for successfully adjusting the structure of production to better suit the wants of consumers. This has implications for Michel de Montaigne's thesis that one's profit is another's loss: while this seems like an attractive (and intuitive) proposition, profits arise when an entrepreneur is able to satisfy consumer wants. This essay applies Ludwig von Mises' thesis that the source of human action is the desire to remove "felt uneasiness." For example, in a situation in which an entrepreneur alleviates discomfort, it is the opportunity to alleviate the discomfort that is the source of the profit and not the discomfort itself.

As lobbyists angle to get slices of the bailout for their clients, Brad Humphreys asks, "I wonder if [the Dallas Cowboys] qualify for some of the Federal bailout money?"

[UPDATE--A comment on Brad's posts asks whether the government would get an ownership share in the Cowboys. That would give a whole new meaning to "America's Team."]

BTW, Treasury has already spent a big chunk of the $700B:

Treasury has just $60 billion left in its rescue fund, and either the current or next administration will have to turn to Congress to request the second half of the promised $700 billion. Treasury has so far committed $250 billion to banks and is spending an additional $40 billion to buy preferred shares in American International Group Inc., the big insurer.

The way that's working out so far, maybe a chunk for the Cowboys isn't so far-fetched.

The Motley Fool carries this op-ed that is both fun and depressing--a plea to bail out neither U.S. automakers nor the satellite radio companies that beam a deadbeat product to the dashboard.

Satellite Radio: Too Big to Fail By Tim Hanson November 10, 2008

Congress is stupid. Really.

Amid all of the debate in Washington over what to do and whom to help to solve this financial crisis, our legislators are ignoring one critical and imperiled industry. It's piling up losses, overburdened by debt, and unable to attract consumers who have cut back on spending. And even a Hail Mary merger between its principal players will not save it.

Stock in its flagship company has dropped more than 90% this year, and something needs to be done.

So listen up Obama, Reid, Pelosi, and all the rest: Forget about the auto industry. Now is the time to save Sirius XM Radio (Nasdaq: SIRI).

Yes, I'm kidding
In reality, there's no good reason for the government to step in and save satellite radio. It's a terrible business that's done nothing but pile up losses and disappoint shareholders. It can't compete with the Internet, podcasts, or MP3s. The business destroys value. If the government were to loan it money, it would never see that money again.

Bailing out satellite radio is a ridiculous notion. No one -- not even the politicians in Washington (let's hope) -- is considering it. Yet Washington is considering a hefty bailout for U.S. automakers -- an industry with much more in common with satellite radio than anyone would like to believe.

So basically what we're saying here is: No, no. Don't throw good money after bad. This isn't like the financial bailouts--which really, really were important and which we really, really were reluctant to support. No, this is different. And not just because we're staked in financials. Bailouts for cars? Who's next? Here's where we draw the line. No more bailouts, please!

Meanwhile, today's WSJ reports on AMEX gaining access to financial bailout funds:

"Everybody wants to be a bank because everybody wants access to government funding," said Craig Maurer, an analyst at Calyon Securities, a unit of Credit Agricole Group.

Chris Paul of the New Orleans Hornets is why. He is a remarkable player (I'll pass on the comparison to MJ, but see below) who is fun to watch. Yes, you can say that about a number of players and that's nothing new. But Chris Paul is proving that he is on another, more worthy, and historically significant level. Recapping Saturday's victory over the Miami Heat, ESPN laid out these facts:

Paul finished with 21 points and 13 assists for his sixth straight double-double of at least 20 points and 10 assists to open the season, surpassing the mark set by Hall of Famer Oscar Robertson in 1968.

Paul also has an incredible 90 straight games with a steal. That's 13 more than Michael Jordan's longest streak and second only to Alvin Robinson at 105. Tune in my friends.

Steve Chapman is insightful, as usual:

Obama, as it happens, won by offering voters the same thing Reagan promised: tax cuts. Most of those who supported him did so on the assumption that they would not fall in the class of people who will have to cough up more to the IRS.

Not only that, but many voted against McCain partly because Obama successfully branded his health-care program as a tax increase. Americans are willing to embrace a bigger and more expensive federal government on one condition: that it doesn't cost them anything.

In this respect, the president-elect promises a continuation of the last eight years. With the exception of the recession brought on by the financial crisis, the biggest challenge is a vast array of commitments that have outgrown our willingness to pay for them. Living within our means is not a change Americans can quite believe in. Like Bush, Obama may hope to escape two terms without taking action on that front.

1. Entrepreneur Journeys by Sramana Mitra.

I received this book in the mail from Maureen Kelley of BizBookPr.com, presumably because of my previous research on economic freedom and entrepreneurship. Thanks to Ms. Kelley for sending me a review copy.

Sramana Mitra is a columnist for Forbes and in this book she interviews the founders of more than a dozen high-tech start-ups. Each chapter is an interview with a different individual and the questions and answers from each interview are presented in their entirety. The interviews are organized into five sections: (1) Bootstrapping; (2) Taking on Giants; (3) Disrupting Business Models, (4) Addressing Unmet Market Needs, and (5) Tackling Planet Scale Problems.

I suspect that I'm not the target audience for this book and that those who are in the target audience (current or wannabe high-tech entrepreneurs) might get more out of it. As an institutionalist, I am interested in how economic, political, and social institutions affect entrepreneurship. There is very little discussion of that in this book. As an economist, I don't like sampling on the dependent variable. As a series of interviews between Mitra and successful high-tech entrepreneurs, that's exactly what this book is. As a social scientist, I'm afraid I learned very little from these interviews.

For high-tech entrepreneurs, however, these interviews might provide useful roadmaps and insights on "how to get things done" or insights into their competitors. At least that seems to be the points being made by other Amazon.com reviewers and the those posted on Mitra's blog. The interviews do seem very well conducted, although I would have appreciated an explanation for many of the less-commonly known (at least outside Silicon Valley) acronyms.

2. Wine & Philosophy: A Symposium on Thinking and Drinking, edited by Fritz Allhoff.

Review hopefully coming out in the next issue of the Journal of Wine Economics.

3. Prohibitions, edited by John Meadowcroft.

Review forthcoming in the The Independent Review.

4. From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective by Cheryl Schonhardt-Bailey.

Review forthcoming in the Journal of Economics.

Mark Perry of the excellent Carpe Diem has been tracking states with gas prices below $2. Add one more--Georgia!--to his list. On my way to take in some Lady Vikings hoops earlier this evening, I saw a station posting $1.99. The RNT has a story of other local stations with price below $2 per gallon. Prices are roughly half of the price of one month ago.

I am almost back, after being absent due to the election, but I am awfully sick. Can't shake the cold I got from doing this.

Some more recent stuff. Nice of Duke to do that, frankly. I appreciate the reacharound.

Larry Kotlikoff, co-author of The Coming Generational Storm, will be giving a talk at Berry next week. Former students and readers living nearby are welcome to join us--the talk is next Tuesday at 7 pm in the Science Auditorium.

For those looking ahead, Robert Guest of The Economist will be here on Nov. 20. Details later.

Here's a news story of government regulations run amok: "Little House on Prairie," adults-only version!

No, don't worry, they haven't done a porn version of Little House on the Prairie.

HELSINKI (Reuters) – Finland has rated the DVD release of the much-loved children's television series "Little House on the Prairie" suitable for adult viewing only.

To save money, Universal Pictures decided not to submit the series to state inspection, the company's Finland marketing manager Meri Suomela told Reuters on Wednesday.

Finnish authorities charge 2 euros ($2.57) per minute for assessing the correct age limit on films and television series. Distributors who forego this can only sell their shows with a sticker saying "Banned for under-18s."

HT: Steve S.

Exhibit 1: Aggregate income tax revenues are highly inelastic to the top MTR.

The graph is from this excellently concise op-ed from today's WSJ Online:

...but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

That said, the government can alter things besides the marginal rates--such as exemptions, deductions, and credits, for example. Here is a more in-depth history of major income tax changes and their static revenue effects.

Exhibit 2: the distributional effects of higher MTR are not well understood. After the Reagan tax rate reductions in 1981, the share of taxes paid by high-earners increased. After the 1993 tax rate hikes, taxable income decreased.

These two points, in a nutshell, are why Obama's tax plan relies so much on credits and so little on changing the marginal rate structure.

Bonus track: the labor supply effects of marginal tax rates are also not well understood. The balance of the literature (good intro here) concludes that labor hours are inelastic, but that only begs the question: are we measuring the right things (e.g. quality of work environment, work effort, timing of compensation, etc.). Here is Austan Goolsbee in the Journal of Political Economy on taxing the rich.

I recently received this email from a student:

She [a relative living in Zimbabwe] wanted to know the name of this figure: 10,000,000,000,000,000,000,000,000 (1 with 25 zeroes) ? This figure is the equivalent of what 1 trillion dollars is today, however in the old currency (before they knocked 13 zeros off). The banks actually took off another 6 zeros last week as their systems couldn’t handle the numbers anymore.

I don't know the name of that number--anyone? Bueller?

BTW, Cato has a nifty page on Zimbabwe's hyperinflation.

UPDATE: A kind reader informs me the number is 10 septillion.

I'm optimistic about liberty's long-run future, and here are two reasons. First, Steven Horwitz's excellent "Open Letter to My Friends on the Left" is spreading around the world in multiple languages.

The publishing work being done by groups like FEE, the Mises Institute, Liberty Fund, and other organizations gives me another reason for optimism. Here's Jeff Tucker speaking on Mises Institute publications. They've taken full advantage of the internet age and have put together an impressive repository of classics from Ludwig von Mises, Murray Rothbard, and articles by much lesser lights. According to Jeff Tucker's talk, everything on Mises.org is now available via Creative Commons.

This post started with one reason to be optimistic after I saw Steve's post on translations of his open letter. Then it became "two reasons" when I saw Jeff's talk in my RSS reader. Then it finally became "three reasons" when I thought about how the blogosphere serves as an almost instant corrective to flawed economic reasoning. Major newspapers can't mishandle economic theory without Don Boudreaux writing a letter to the editor about it and posting that letter at Cafehayek.com. Here's one example among many, many others.

With all the precincts in Missouri reporting, unofficial totals as of this morning have McCain carrying the state by only 5,868 votes over Obama. In percentage terms, the outcome was 49.4% to 49.2%. You could say that Libertarian Party candidate Bob Barr, with 11,355 votes (0.4%) , held the “balance of power” or was a “spoiler”. But then you’d have to say the same about Ralph Nader, who drew 17,769 votes (0.6%).

Meanwhile, Barr is reportedly calling himself a spoiler in North Carolina, which is still too close to call at last report, where

Democrat Barack Oama has a 12,000-vote lead over Republican John McCain, and Barr, a former Republican congressman from Georgia, has 25,181 votes, or 1 percent.

Google and Yahoo have called off plans for a joint advertising partnership. One executive points out that moving forward would likely mean a long battle with regulators. I speculate here, but I wonder whether Google, Yahoo, and other large firms are anticipating a tight regulatory regime under an Obama administration. The stock market seems to think so. Here's the CNN coverage; people with an interest in media bias might be interested to note that the Fox News story mentions immediately that this is the biggest day-after-election stock drop in history.

Addendum: here's some encouraging wisdom on elections and angst from Bryan Caplan.

Mike made a pretty decent showing in the NC governor's race: 120,000 votes, 2.9% of the total.

My former student John Fowler points me to this news item:

Some baseball agents already are thinking about trying to beat a possible tax increase for their well-paid clients under an Obama administration.

President-elect Barack Obama has proposed increasing the top federal income tax rate from 35 percent to 39.6 percent, where it was under president Bill Clinton.

If signing bonuses are paid before Jan. 1, they likely would be taxed at the current rate and would not be subject to any increase.

"It's something we'll consider," agent Craig Landis said Tuesday at the general managers' meetings. "Besides the federal issue, we have a state issue in some cases, anyway, where it's advantageous to take signing bonuses because of the state income tax. A Florida resident can take the signing bonus and not have to pay his team's state tax."

Obama's proposal would increase federal income tax on families earning more than $250,000 annually, money that would help finance a decrease for workers and families earning less than $200,000. It's also possible more income might be subject to the Social Security tax.

Next year's major league minimum is $400,000. Agent Scott Boras, negotiating eight- and possibly nine-figure deals for free agents Manny Ramirez and Mark Teixeira, already has thought about the possibility of asking for larger signing bonuses payable this year in some of his contracts.

In these trying economic times, the family and I have been partying like it's 1939. Several meals have included/consisted of baked potatoes cooked over an open fire in the back yard (HT: Robert Lawson and Ryan Stowers for helpful hints). As part of the search for cheap, tasty food we hit on a pretty good combination that we'll probably turn into a dip or something this holiday season: salsa and blue cheese dressing. It has just the right combination of kick and pungency, with a texture that varies depending on the chunkiness of the ingredients. It most closely resembles a totally awesome buffalo chicken cheese dip our Sunday School teacher made for a Super Bowl Party back in ought-seven, and we've found it to be a cheap way to spice up otherwise mundane meals. Two seconds with Google yielded a recipe for buffalo chicken cheese dip, courtesy of Cooks.com.

I often look at the world through the lens of an insitutionalist. I look to see what political or economic institutions in society will come into play when individuals voluntarily interact, whether in the marketplace or in the political arena.

Here's an example: In many states it is illegal to sell your body as a prostitute, but it is not illegal (or if it is, the penalty is far lower) to make an offer to buy a prostitute's services. If a voluntary action between two individuals is deemed illegal, why punish one side but not the other? This makes sense if nabbing the “john” was much more difficult than nabbing the “call girl,” creating an assymetric allocation of enforcement costs, but that seems very unlikely.

So here’s my concern about our American democracy: I find it interesting that a citizen's vote is not considered private property. If you can characterize politicians as suppliers of public policy and voters as consumers of said public policy, there is clearly a market populated by politicians (call girls) “soliciting” for voters’ (johns’) ballots--pun intended, of course.

Politicians can directly offer prices they are willing to pay for citizen’s votes (see Obama’s tax break calculator) without fear of prosecution. However, a voter can go to jail for offering to sell his vote, as we saw in the infamous case of the e-Bay vote seller.

So my question is this: Is it more ethical to allow for politicians to directly compete for votes by offering "explicit" (snicker!) benefits to individual voters than it is to allow voters to compete to sell their vote to the highest bidder?

Inquiring minds want to know...

I'm going to post a few thoughts as the evening progresses. Comments are open.

First up--CNN has "The Diff" in its election results.

Looks like Obama has it won; Fox has called PA and OH for him. FL, IN, NC, and VA are not yet called so Obama might take several moderate to large states from McCain.

Decent news on the gridlock front--GOP senators in GA and KY have held on and it looks like Trent Lott's seat in MS will stay GOP and there's some chance of taking a Dem seat from LA. Maybe the filibuster will still be an option.

UPDATE (9:30)--Bryan Caplan raises an issue I've been wondering about--would McCain have fared better if he had voted against the bailout? I think so.

UPDATE (9:40)--The Raleigh NC News and Observer reports co-blogger Mike Munger has 3% of the vote with 24 NC counties reporting complete results and 49 others reporting partial results.

UPDATE (10:00)--Much has been made of Starbucks giving out free coffee today (to the benefit of two of my favorite students), but Instapundit points to a shop giving out sex toys to folks who vote.

UPDATE (10:45)--Obama repeatedly charged that McCain supported tax breaks for companies shipping jobs overseas. What specifically was he refering to? Surely there is no tax credit or other break specifically for transferring a job from the US to overseas.

Last update of the night--Obama's large margin (13) in PA leaves me wondering why McCain spent so much time there over the past 10 days. Not that it mattered since Obama is rolling to about 375 electoral votes. Senate is Dems plus 5 with OR, MN, and AK to go.

A catalog arrived in the mail today, addressed to me for some reason, which featured Bollywood workout videos (among other items). That's another drop in the Prosperity Pool.*

*HT: Don Boudreaux.

On this election day, we do well to consider the opening of Frederic Bastiat's "The Law:"

The law perverted! And the police powers of the state perveted along with it! The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself is guilty of the evils it is supposed to punish!

If this is true, it is a serious fact, and moral duty requires me to call the attention of my fellow-citizens to it.

He does so here.

I received quite a few emails about my decision to not vote. One issue was the question of whether I thought my vote matters. On this point it is important to note that my switch to non-voting status has nothing to do with whether I think my vote matters. I've always understood that my vote doesn't matter and yet I still voted previously.

The "logic" of my decision has to do with a change in my premise about the nature of voting. If your premise is that democracy is how we make decisions collectively, then there's nothing per se wrong with voting. I see nothing wrong, for example, with a group of people taking a vote to determine which restaurant to go to so long as individuals are then free to go with the group or not.

But my evolving premise is that democracy is closer to rape--that is, it is about some people forcing other people to go along with their will. Given that premise, which I consider immoral, I choose not to participate.

To be sure (1) I think someone who votes because he thinks his vote will matter is wrong as a matter of fact, but the main issue is that (2) I think someone who votes because she thinks voting is some sort of uplifting civic good needs to "check her premises" as Ayn Rand used to say.

From the Nov. 3, 1908 NYT (election day 1908):

NATIONAL ELECTION DAY

Oh, say,
To-day
The great Bald-Headed Eagle
Roosts on the peaks remote
And screemless folds his wings and tail
To watch the People vote.
The Bird
Hasn't a word
To say
Either way.
The Declaration's thunder tones,
Which erstwhile sent a thrill
Through tyrants' hearts
And other parts,
To-day is hushed and still.
The Glorious Fourth, our natal day,
This day, has been deposed;
Its fierce uproar
Is heard no more
Until the polls are closed.
The Starry Banner of the Free
Floats silent in the sky;
And that is all -
It has no call
Except to wave on high.
The Constitution holds its breath
And dodges out of sight
Until WE say,
By vote to-day,
What is or is not right.
The Ship of State is shaking now
From mizzenmast to keel,
And all her crew are wond'ring who
Will take her by the wheel.
The Nation's glories and her gods
To-day are merely dross,
And common stuff
To make a bluff -
VOX POPULI is BOSS.

W.J. Lampton

After voting in every presidential election since 1988 and almost every other election and special election since, I have decided to cut my losses. I have not registered to vote in my new state of Alabama and will not vote tomorrow or perhaps ever again.

My working metaphor for politics is gang rape. If 9 rapists and a woman are in a room and hold a vote, it's 9-1 in favor of raping the woman. If the woman doesn't vote, it's 9-0. Same result. But at least the victim doesn't have to sanctify the process that violates her rights. I am no longer going to go to the polls to give legitimacy to these criminal politicians.

Though I appreciate and agree with Brad's point that Obama is a serious threat to liberty--far more than McCain in fact. This is a case where I simply can not vote for the lesser of two evils.

I read a saying somewhere recently (where? anyone know?) that says "when faced with a choice between two evils, it is important to pick neither." Words to live by. [UPDATE: possible source: Charles Spurgeon. HT: Craig]

...even though I'm not certain we should be. After last night's thrilling conclusion to the Texas-Texas Tech game, Alabama is #1 in the AP, USA Today, and Harris Polls. I expect the Tide to be #1 in the BCS standings whenever they come out. My Top 10 plus a few thoughts are below the fold.

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My good friends at Reason have taken their quadrennial presidential “poll” of contributors and other libertarians. (I passed on an opportunity to participate.) Of those who would reveal their preference, there were 14 for Obama, 4 for McCain, 13 for Libertarian Bob Barr, and 1 for Ralph Nader.

I respect the folks responding to Reason, and many of them I know personally and consider friends. But when I read the infatuation of these libertarians with Barack Obama, I simply have to conclude that they are not thinking seriously.

For example, one common reason for the choice was to “punish” Republicans. Science fiction writer John Scalzi typifies this sentiment: “I think the GOP need [sic] a moment or two in the Time Out corner, don’t you?” Ron Bailey says, “The Republicans must be punished and punished hard.” Author David Brin argues that if the GOP is “utterly … sent into exile,” then, “perhaps sincere men and women may remember Barry Goldwater and resurrect some kind of healthy, libertarian Conservatism.”

Let’s leave aside the question of which party could really stand for some time in time out (Us!? What about them!!) The problem with this theory is that such “punishment” simply doesn’t yield the desired results.

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