Will we look back on 2009 as the year we headed toward 1994?

Or toward 1964?

Here's what I think, on the REASON web site....

The Rap Video that has been "going back and forth for a century!" Check it here....

Read More »

A useful graphic, depicting population shares and tax shares.

The two endpoints:

* The top 1% of income earners pay 40% of all federal taxes
* The bottom 46+% pay zero, nada, nothing, no part of the federal budget

My Father-in-Law and I just put together Jacob's Christmas "Black & Decker Junior Play Workbench." Here's more evidence that our standard of living has increased: the little screwdriver that comes with it is battery-powered.

Drip: an homage to Don Boudreaux's "Prosperity Pool" meme.

"From each according to his abilities, to each according to his political influence."

NB: inspired by a link from Rhodes student Brent Butgereit.

If this is the first you've heard of it, before you click on this link, try to guess how much Woods' misconduct has depressed the values of the companies that associated with him.

"Any time Dennis Kucinich is the voice of reason, you know you're really screwed." HT: Steve Horwitz.

Does more joint housework lead to more sex? (HT: Charles McKinney) Causality issues aside, I'm sure a lot of people will read this article and start testing for whether the model makes good out-of-sample predictions.

If you support nationalized health care, remember that it will not be run by perfect people or even "wise and disinterested statesmen," whatever those are. It will be run by people like (a possibly drunk) Max Baucus (HT: Steve Horwitz). A quick Google doesn't yield confirmation that Baucus was drunk--there's some innuendo from partisans, but not much else in the first few results--but the case against his position is stronger if he gave a performance like that while sober.

If what I've heard on Christian talk radio and what I've read in a few places is any indication, the GOP's response in the debate has been a disappointing hash of Euro-phobia (They're going to make us more like the French!) and special interest politics (and they're going to cut Medicare to do it!). From both sides, it has been less about ideas and more about beating the Bad Guys.

In reviewing 2009, I think one of the most interesting stories was the way partisans changed their rhetorical strategies. When W. Bush was in office, it was the left claiming that dissent is patriotic while the right was screaming "America! Love it or leave it!" Now that Obama is in office, the right is screaming "dissent is patriotic!" while the left is screaming "America! Love it or leave it!" This cements my conviction that partisan politics is a spectator sport rather than an intellectual, social, or spiritual exercise.

From Bryan Caplan:

"Translation: Regulation forbids an adult and a child to consensually form a permanent family. What for? To protect the "rights" of abandoned minors' abusive and neglectful blood relatives - plus random bigots."

From "Long history of vote-trading on Capitol Hill" in today's Washington Times --

Mr. Reid . . . said the trading is no different than what happens with the thousands of earmarks in the dozen annual spending bills.

He said senators should be embarrassed if they weren't able to carve out exemptions.

"There's 100 senators here, and I don't know if there is a senator that doesn't have something in this bill that was important to them," he said. "And if they don't have something in it important to them then, it doesn't speak well of them."

-End quote-

And on that note I'd like to wish the faithful readers of DoL a Merry Christmas!

Courtesy of William Easterly (original HT: Chris Coyne). My inner Hayekian/Smithian finds this hilarious because it's an exercise in indulging the (fatal) conceit of the men and women of system who think themselves qualified to direct other men and women in the use and employment of their capitals. My inner humanitarian is weeping because a lot of people are going to die.

Update: Bill Easterly posts a response from someone in the military. Feedback/transparency/accountability WIN.

Banks with political ties got bailouts, study shows

As I am reading for a long-overdue project, I came across this acronym:

USTFCCCA

Answer below the fold.

Read More »

I just wrote a check to pay an $11 parking ticket for having my car parked in front of my house facing the wrong direction on the morning after Thanksgiving. We live in a neighborhood with no through streets or center lines. Possible exam question: Are tickets like this a wise use of police resources (hints: opportunity cost, equal-marginal principle)? How does your answer change if it's a busy street?

Extra credit: discuss the similarities between this and the incident that led Gary Becker to develop his economic theory of crime and punishment.

Paper idea: Discuss how the spontaneous evolution of parking norms in residential neighborhoods would obviate the need for police involvement (hint: the name of the scholar you should be referencing here begins with "Elinor" and ends with "Ostrom").

From the NYTimes:

Senator Dianne Feinstein introduced legislation in Congress on Monday to protect a million acres of the Mojave Desert in California by scuttling some 13 big solar plants and wind farms planned for the region

At least one Kennedy (as in NIMBY, Massachusetts) takes exception:

“This is arguably the best solar land in the world, and Senator Feinstein shouldn’t be allowed to take this land off the table without a proper and scientific environmental review,” said Robert F. Kennedy Jr., the environmentalist and a partner with a venture capital firm that invested in a solar developer called BrightSource Energy. In September, BrightSource canceled a large project in the monument area.

From the NYTimes:

Senator Dianne Feinstein introduced legislation in Congress on Monday to protect a million acres of the Mojave Desert in California by scuttling some 13 big solar plants and wind farms planned for the region.

At least one Kennedy (as in NIMBY, Massachusetts) takes exception:

“This is arguably the best solar land in the world, and Senator Feinstein shouldn’t be allowed to take this land off the table without a proper and scientific environmental review,” said Robert F. Kennedy Jr., the environmentalist and a partner with a venture capital firm that invested in a solar developer called BrightSource Energy. In September, BrightSource canceled a large project in the monument area.

Here's a recent cartoon from the Rome News-Tribune's Mike Lester.

Rent-seekers in action:

American catfish farmers have demanded that tougher safety rules be imposed on certain fish from Vietnam -- which are hurting their business, the industry says. But U.S. catfish farmers must first get the U.S. Department of Agriculture to say the Vietnamese fish is a catfish. That is a little awkward since just seven years ago the farmers successfully urged Congress to ban the Vietnamese fish from ever being labeled a catfish.

In Washington and elsewhere, trade, sometimes as much as science, has a way of defining a species. Something might look, taste and feed off the bottom like a catfish, but until an agency calls it a catfish, it might as well be a duck.

American catfish farmers aren't alone in trying to manipulate food names. Three years ago, the Maine lobster industry fought restaurants that offered "langostino lobster," saying that the Chilean crustacean isn't a lobster at all. They called it a crab.

Those who receive the Mercatus Center's weekly email update may have already clicked to get a preview of the Keynes v. Hayek rap video by Russ Roberts. In a related NYT interview on Economix blog, Russ Roberts defends the Hayekian position against Lord Robert Skidelsky who defends Keynesian countercyclial stimulus spending. Around the 6:00 mark, when asked whether stimulus spending is necessary to reach full employment after a negative shock, Roberts invokes political inefficiency.

Roberts: Well unfortunately, what Keynes has done is he has given solace to politicians who want to spend money wastefully on special interests rather than on things that would help us.

Interviewer: Is that completely unfair?

Skidelsky: No, not completely unfair. There's a lot of waste. But the waste doesn't matter. There's more waste if you have heavier unemployment. See you're balancing a smaller waste against a larger waste. There's no ideal way out of the hole.

In a new Mercatus Center working paper called "Stimulus Facts," Veronique de Rugy and David Brito analyze the Economic Recovery Act's FY 09 Q4 allocations by congressional district.

On average, Democratic districts received 1.6 times more awards than Republican ones.... Democratic districts also received 1.89 times more stimulus dollars than Republican districts. The average dollars awarded per Republican district is $232,047,857, while the average dollars awarded per Democratic district is $439,200,100. In total, Democratic districts received 73.47 percent of the total stimulus funds awarded.

And as for comparative waste?

A total of 56,399 contracts and grants totaling $157,028,362,536 were awarded in this first quarter for which Recovery.gov reports are available. The number of jobs claimed as created or saved is 638,826.54—an average of $245,807.51 per job.

Open to full professors with 5+ years administrative experience. Requires five letters of recommendation. Deadeline January 14, 2010.
Full listing here.

...or silver; basically, anything other than Federal Reserve notes. See the text of House Bill 430 here.

I know it's just a protest bill. I know simply introducing the bill was the entire point. Still, for style, if nothing else, my hat's off to Representative Franklin. Almost makes me wish I still lived in that fine state (straight up; no sarcasm).

Ya know, E.F. Stephenson has some monetary stuff in his background. Do you suppose he had anything to do with this?

HT: Mike Casey, again.

On Sunday, supporters bolted a chain to the establishment's bar, and some patrons hundcuffed themselves to it for about an hour while sipping on pints of beer. They say they'll do it again when authorities try to seize the property.

The bar in question is Freddy's Bar and Back Room, one of properties that the Empire State Development Corporation has condemend to make way for the Atlantic Yards development. Story here. For an analysis of the Atlantic Yards case, here is Ilya Somin

In this Bloomberg story Senator (but seemingly not Statesman) Reid lets us know exactly why the past two elections were so important for those who prefer more rather than less liberty and less rather than more statism - and also why the rest of the country will be paying for the entire increase in medicare/medicaid costs for Nebraska (and probably Louisiana as well):

"A number of states are treated differently than other states," Reid told reporters. "That's what legislation is all about. Compromise."

I guess I missed that lecture during my political science class in college.

I am sure I don't know what legislation is "all about" but I am not so happy that it entails, in the eyes of the current (and past?) leadership, treating the states differently. In Ayn Rand's Atlas Shrugged legislation and regulation morphed into the codified whims and pragmatism of the "Aristocracy of Pull." However, her point, in my reading, was that legislation that specifically aimed at carving out special exemptions for one state or region are a symptom of a deeper problem in the body politic.

It is fine for Ben Nelson to "secure" federal funding for Nebraska - but that federal funding doesn't materialize out of thin air (unless the good folks in Washington turn on the money press) but rather comes from us in Charlotte and Auburn and Spokane. Now, I am ticked at my Senator for not being #60 and getting the good folks of Lincoln (Neb) to finance the expansion of I-485 or helping Concord with the subsidies we "promised" to a local Speedway owner. After all, if money is on the table then I should be participating in the receiving not the giving. This reminds me of libertarian reporter John Stossel admitting to taking federal money to rebuild his hurricane damaged/destroyed house twice(!)*.

Of course that is exactly the problem - everyone wants everyone else to pay for their stuff and, in the end, the politicians are only too happy to facilitate - with a little help from the muzzle of a gun (taxes) and the mint's printing press (inflation).

I am fairly certain this is not what the (Federalist) founders had in mind.

Four predictions of what will happen (or not happen) after "reconciliation" (which this time around has too much irony for comfort):

1. small businesses do not expand because of uncertainty in exactly how much the reformed health insurance will cost, thereby prolonging the recovery or perhaps driving us into the "double dip" (this is already in the air among small business owners I know);

2. some tanning salons will go out of business (what is the price elasticity of demand for tanning machines?) and some of their customers will a) turn to good ol' Sol for their tanning needs thereby leading to more skin cancer than before (that one might be hard to test) or b) go the chemical route for their tanning needs with unknown unintended(?) consequences;

2b. After many rural tanning/hair/nail salons go out of business there arises a black market for tanning beds, permanents, and pedicures. This black market, what with those providing the tannings/perms/pedicures not licensed and trained by the state will lead to claims of even more health problems. This, in turn, will lead to the need for a new bureaucracy to crack down on this illicit black market and allowed to make a few "examples" out of the new criminal class;

3. medical tourism will almost expand in Barbados, Bermuda, Belize and other pleasant environs south. When it becomes apparent that (gasp, rich) folks are going out-of-the system to gain access to medical procedures without the wait/red tape/bureacracy, the Federal government will impose nearly prohibitive taxes on foreign-applied medical procedures purchased by U.S. citizens. This will also require a new bureacracy and attempts to gain access to U.S. citizen medical records that reside in another country, similar to what was recently wrested from Switzerland.

I'm sure there are more (funny and/or scary) predictions. If anyone thinks of clever side-effects of the probable reforms, I "tag out."

* As he wrote in a 2004 Reason magazine article titled "Confessions of a Welfare Queen."

When he earmarked $100,000 in taxpayer spending to go to Jamestown's library, Rep. James E. Clyburn meant for it to go to the library in Jamestown, S.C., which is in his district.

But in the bustle to write and pass the $1.1 trillion catchall spending bill, Congress ended up designating the money for Jamestown, Calif. - 2,700 miles away and a town that doesn't even have a library.

"That figures for government, doesn't it," said Chris Pipkin, who runs the one-room library in Jamestown, S.C., and earlier this year requested $50,000, not the $100,000 that Congress designated, to buy new computers and build shelves to hold the books strewn across the room.

Spend twice as much as necessary and still screw it up--that sums up the U.S. Congress pretty nicely.

Source (HT: Betsy's Page).

Now that the U.N. climate summit has ended gloriously in a fiasco and a non-binding agreement, will anyone else confess that, for the entire weeks of coverage, the Rush song "The Trees" was running through his/her head?

So the maples formed a union and demanded equal rights. "The oaks are just too greedy! We will make them give us light!" Now there's no more oak oppression for they passed a noble law and the trees are all kept equal by hatchet, ax, and saw.

So Rome is hosting--hold on to your seats folks--the NAIA National Football Championship game. After the game was rained on last year, local poobahs cowtowed to the NAIA and agreed to put astroturf on the local stadium. Given the immense economic benefit generated by the game (even though it's not a sellout) and the (in the words of one member of the host committee) "immeasurable" (dictionary definition: so large as to be impossible to measure) indirect economic benefits that accrue to having the game telecast on some CBS network that runs on channel 250-something locally, I'm thinking Rome needs to cut out the half steps and go straight to having a domed stadium in order to properly host this mega-event. And we could call it the RomeDome!

Via Matt Ryan:

This article reaffirms the proposition that anything with "Democracy" in the title--organization, publication, etc.-- is likely to be heading in the wrong direction.

Finals week on campus is kinda like early morning airport security lines. Both are filled with people who apparently haven't been here in a while.

In my inbox today:

Big Think Convenes Unprecedented Online Commission to Document the Causes of the Financial Crisis

NEW YORK -The on-line think tank, Big Think today launched "What Went Wrong?" an eight-week, Web-based educational series with leading economics experts collaborating to understand the root causes of the recent global financial crisis, in the interest of preventing yet another.

This ambitious and innovative initiative, sponsored by the Charles G. Koch Charitable Foundation, comes out of the urgent need to improve our understanding of the factors that led to the crisis and assess proposed reforms to avert new crises already looming.

The interactive series will combine Big Think's singular ability to engage a range of top figures in government, business, academia and media with an open network of the world's leading economics bloggers and columnists -- who will drive the agenda of the series through their questions and analysis.

More below the fold

Read More »

The Koch Associate Program is a challenging job opportunity for professionals who are passionate about free-market ideas and want to become more effective at advancing liberty throughout their careers. During the year-long program, each Associate works in a full-time, paid position with a market-oriented think tank, policy institute, or grassroots organization; while also receiving valuable management training in a seminar setting one day out of each week at the Charles G. Koch Charitable Foundation. For more information, visit www.cgkfoundation.org/associate-program.

Comes from Berry alum Mike Hammock: You Know Medical Marijuana is Here to Stay When the Sellers Begin Rent-Seeking

Berry is hiring for an open line in economics.

How do public policies influence measures of economic performance?

That is the general topic for the brand new (and big payout!) Policy Communicators Contest that we will be conducting in advance of APEE 2010.

The 2010 Policy Communicators Contest invites college professors and graduate students from all disciplines to submit essays on the relationship between public policy and economic growth. It is of particular interest to compare and contrast individual countries, states, regions or major metro areas—why some are succeeding and others are failing....

First Prize: $15,000
Second Prize: $7,500
Third Prize: $4,000

Deadline is February 13. Graduate students and faculty of all ranks are invited to apply. For complete details and entry guidelines, here is the announcement. You can call or email me with questions.

Hey, folks-
For reasons tedious , but honest (and not at all nefarious or mysterious!), I need to make a little policy paper of mine publicly available, and do so pronto! I also need to make sure the public knows the paper is available.

I posted the paper at www.freepdfhosting.com. The link to the paper itself is here.

The paper is a comparative study relating limited government (also known around here as "economic freedom") to socio-economic outcomes, focusing on Arkansas, Louisiana, oklahoma, and Texas. Bear in mind that it's written for a general audience, not the erudite, big-cerebral-cortex folks that habitually read DoL.

If you have any interest, hustle over quick. The paper will be up for only 30 days. Shoot me comments, if you like.

The Dec. 15, 1909 NYT prints a letter to the editor with an interesting question to which I think Gary Becker might have an answer:

Will a mere man who has been a student of economic problems answer this question: Is there any factor which can affect wages other than supply and demand? My feeble intellect is absolutely staggered by this cry of votes for women on the plea that it will increase wages. I understand perfectly that by popular vote the city employes, school teachers, etc., can be put on an equal schedule with men, but the few covered by this special enactment has absolutely nothing to do with the mass of women workers, hence when the suffrage leaders try to influence women to clamor for the ballot on this plea they are sailing under false colors.

I like Becker's theory on labor market discrimination (for it's elegance and it's universality) but if supply is the relationship between price and willingness to sell and demand is the relationship between price and the willingness to buy, then everything ultimately can be cast in "supply and demand." As I tell students in an introductory class (only half in jest) - there are really only three or four different "graphs" in economics, what changes are the labels.

I have also suggested that the standard "supply and demand" model, and more specifically the comparative statics of supply and demand, might help one reach the "correct" answer/prediction about 80% of the time. I have no evidence for such a claim, but I stand by it until proven wrong (ha ha).

I have had students in the past suggest that the supply-demand model is almost a cop-out on the part of economists, because, after all, it's all about supply and demand and that leaves little room for the non-monetary and intangible. Yet, that is exactly one of Becker's points about labor market discrimiation (in my reading), that the intangible and non-monetary "tastes" of the individual demander or supplier can manifest in actual, tangible, differences such as pay gaps. Of course, labor market discrimination is not the only source of a pay gap, which is why it is important to be careful to accurately measure the sources of such gaps.

I think the letter-writer is correct in the sense that the vote can be used to alter the wages of public employees, and it seems that is definitely what is happening today (one of the reasons I have always been a bit uncomfortable with public employee unions). I also think the letter-writer might be correct in that it is difficult to see how granting women the vote would directly impact female wages.

Perhaps granting women the franchise increases the desire to obtain human capital, which over time would be expected to alter female wages. Perhaps the franchise would ensure a broader, stronger, and deeper social safety net, which in turn might relieve women of some of the traditional (as of 1909) responsibilities with which they were charged and which, in turn, might have improved their productivity and hence their wages.

On the other hand, the claim from 1909 suffragists could have just be a lot of hot air rhetoric - not much different than the hot air rhetoric surrounding many of the social issues of today.

A few things that have caught my attention over the past few days:

1. A Cato Unbound on the common law featuring Timothy Sandefur, John Hasnas, Bruce Caldwell, and Dan Klein.

2. A NBER WP on gains in treating cancer; part of the abstract:

Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years, and the average willingness-to-pay for these survival gains was roughly $322,000. Improvements in cancer survival during this period created 23 million additional life-years and roughly $1.9 trillion of additional social value, implying that the average life-year was worth approximately $82,000 to its recipient. Health care providers and pharmaceutical companies appropriated 5-19% of this total, with the rest accruing to patients. The share of value flowing to patients has been rising over time.

3. This story on the growth in federal government workers making 6-figure salaries. Sounds like a better use for the "pay czar" than his hectoring of private firms.

4. NPR: Treasury Unleashes Foreclosure 'SWAT Teams' (The headline is nice reminder that, for all the platitudes about democracy, government accomplishes its ends via coercion.)

5. Folks like me who live in towns with cable systems that don't carry the Fox Business Network can find (at least for now) the first episode of John Stossel's show here. FWIW, I thought it was a good show but, for the most part, nothing special. I thought the highlight was Jerry Taylor's explaining to an audience member that taking measures to stop global warming would cost lives in poor countries by stifling economic growth.

6. From Germany: Coffee tax collection costs dwarf revenue. Wonder how one says deadweight loss in German.

The Dec. 14, 1909 NYT reports the following:

BERLIN - The Committee on Appropriations unanimously voiced today to report to the Reichstag a resolution appropriating $500,000 for the relief of tobacco workers who have been thrown out of work as a consequence of the reduced consumption of cigars and cigarettes under the operation of the new tax measures.

Glad to see public policy has come so far in one hundred years.

Oh no, I've been published in a neo-con journal!

Read More »

The public perception of conservatives (and I have to lump libertarians into this category, which I think is accurate here, and there's not really separate polling data for libertarians - see below), fostered by Hollywood and TV, many major media publications, and of course liberals, is that conservatives are uptight, unhappy, nasty people.

I have noted in this space that these perceptions are not true - polling data has consistently shown that conservatives are more likely to say they are happy with their lives; they are more active, both in terms of hobbies and sports and in terms of volunteer activities; they are more likely to be satisfied with their sex lives (and to have sex more often), than are liberals.

The latest part of the mantra from the cultural elites is that conservatives are also anti-science. Remember how Barack Obama even promised to restore science "to its rightful place."

Well, now comes an interesting survey from Pew that debunks the idea that liberals are more science oriented, too. In fact, it turns out that liberals are nearly twice as likely as conservatives to believe in astrology (30% to 16%), "spiritual energy" (35% to 18%), or reincarnation (33% to 18%). It's interesting to note that while conservatives and liberals are equally likely to believe in the "evil eye" (17% each), Democrats are more likely than Republicans to believe in the evil eye by 19% to 12%.

Maybe all those "Reagan Democrats" of a generation ago were just fans of Nancy, who was said to have an interest in astrology. But clearly the rejection of science for superstition knows no ideological boundaries.

ANNOUNCING THE 2010 YOUNG SCHOLARS PROGRAM

APEE has received a grant to help young faculty and graduate students attend our annual meeting April 11-13, 2010 in Las Vegas, Nevada. These funds are designed to encourage younger scholars to consider the advantages of APEE membership.

Successful applicants will have their registration fees reduced to $75 (normally $390) and be eligible for a stipend of up to $595 toward travel expenses. To apply applicants must supply us with the following: (1) a short essay (250-300 words) explaining why the applicant wishes to attend the meeting; (2) a short letter of reference, preferably from an APEE member or someone known to APEE, indicating why support should be provided to the nominee, and (3) a brief letter from the applicant's department chair or graduate director indicating the level of departmental support that the applicant can expect for this trip. Some of the applicants may be on the program and preference will be given to these applications. The deadline for applying is January 30, 2010. Those selected will be notified within two weeks of that date. Successful applicants will be required to register for the conference (at the reduced rate of $75) by February 28, 2010.

Please send applications to Dr. E.F. Stephenson at efstephenson[at]berry[dot]edu. If you have questions, you may e-mail Dr. Stephenson or call him at (706) 238-7878.

This is a laudatory profile of Stephen McIntyre, who has questioned the integrity of the data on which the infamous Hockey Stick is based. A telling excerpt:

Peer review in scientific journals is good, he suggested, but it is limited and vulnerable to compromise. “There is far more independent due diligence on the smallest prospectus offering securities to the public than on a Nature article that might end up having a tremendous impact on policy.”

The Nobel Prize Chronicles includes a link to a video of Ostrom's Nobel lecture.

This Berkeley webpage includes a link to a video of Williamson's "Nobel Prize Day Highlights."

1. Mises: His Importance and Relevance. This was inspired in part by the recent Freeman symposium on Human Action and based explicitly on my notes from Jorg-Guido Hulsmann's opening lecture at Mises University. I read Hulsmann's biography of Mises in May (link is to PDF); if you haven't read it and are interested in intellectual history, you should.

2. Gordon S. Wood, Empire of Liberty. One of the takeaway points is that "Great Man" and "Golden Age" historical narratives are lacking. I'm about 350 pages in, and I would recommend it to anyone who wants to understand a crucial era in American history.

3. Hayek on Hayek. It's a collection of interviews and autobiographical notes from Hayek. In it, he points out that two mistakes he made were that he never reviewed Keynes's General Theory or Friedman's Essays on Positive Economics.

Apropos of exactly nothing, two links that caught my fancy:

1. The Strange Economics of Apple-picking....

2. "Let me google that for you!" Along with GIYF (google is your friend), the new insult sweeping the interwebs. Let me google that for you, as perhaps everyone but I already knows, requires you to fill in the search field in this URL:
http://www.lmgtfy.com/?q=_____.

Suppose someone in comments says, "Ludwig von Mises! Who is Ludwig von Mises?" You would say, condescendingly, "GIYF!" (In other words, the doofus should use Google, not use you as a research assistant.)

But you could also just give them, http://www.lmgtfy.com/?q=Ludwig+von+Mises" (TRY IT!)

The implied insult is even clearer, and LOTS more fun. Try it at Christmas parties. If you read DoL, you likely ALREADY don't have any real friends, so what harm can it do?

The new issue of New Perspectives on Political Economy is available here; it includes my paper "A Note on Profit, Loss, and Social Responsibility."

The University of Alabama has canceled three days of classes for the BCS National Championship Game. HT: Richard Vedder.

An article in REASON. On health care, and why subsidizing insurance is a remarkably dumb idea.

Read More »

Is there an entire book's worth of negative fallout from Tigergate? My guess is yes. From today's Sporting News Today:

The band had been raising money since February, with the effort culminating last weekend with a concert and silent auction. The auction's high-dollar item, requested well in advance: an autographed photo of Woods...

It was expected to go for $1,500 at auction. But after a series of unflattering revelations about the golfer's personal life, Bagstad said few people wanted to bid on the item. In the end, it only went for $300.

The band, from Clintonville, Wisconsin, was raising money to go to Disney World for spring break.

There is an implicit assumption that people are not willing to pay so much for a Tiger photo because they don't want to be associated with Tiger or don't want to hang a Tiger photo on their wall. This might be the case for some. However, an under-appreciated aspect of the sports memorabilia market is how much of it is based ("rationally" or not) on speculation.

If Tiger's chances for setting the career record for Major victories, tour victories, or any other statistic (in golf) have been permanently reduced, then a gap-down in the value of Tiger's memorabilia today would be expected as the future value of the same falls.

Some may think it a shame that the band will have a harder time getting south for Spring Break, but I won't be surprised when a private benefactor steps forward to help the kids get to Mouseland. However, there is a "teachable moment" that seems ignored: perhaps it is best to not put one's hopes and future on the actions and reputation of a person one does not really know (heads up to fans of George Bush, Barack Obama, John Edwards, Mark Sanford, and just about anyone other celebrity and politician).

I think someone wrote a book that was somewhat about that.

These short modules are excellent for discussions of basic micro.

Today the President "accepted" his Nobel Peace Prize. The purse is reported to be approximately $1.4 million, a number which might be a little inflated given teh the weaker dollar relative to previous years.

The Dec. 10, 1909 NYT reports the 1909 Nobel Prizes and reports that each is worth approximately $40,000. Granted there is a mix of prizes that carry the name of Nobel, but this is not my point.

The folks at eh.net claim that $40,000 in 1909 is $976,430.84 in 2008 dollars. Give the dollar a slide of 40% and the real value of the Nobel prize hasn't changed that much in 100 years.

How cool is that?

[Update (12-11-09): From this story from PhysicsWorld:

The Foundation announced at the weekend that it might cut the $1.5m it hands out for each of the six prizes awarded each year. The reason, it says, is the credit crunch and the impending recession, which has led to losses in the foundation’s assets.

]

A few thoughts and links:

1. William Easterly discusses growth econometrics and the relationship between development economics and climate science. I just printed the paper he references.

2. Climategate is going to make a lot of scholars across disciplines think very, very hard about what they're doing. The reaction to the Card & Krueger minimum wage paper is a feather in the cap of the economics profession. C&K appeared in the American Economic Review and was subjected to thorough examination and criticism before the bulk of the evidence came down on the side of competitive models of the labor market (cf. Neumark and Wascher).

3. Here's Bob Murphy on geo-engineering (HT: David Henderson). I'm skeptical of a lot of geo-engineering proposals because of the probable unintended consequences: "carbon-eating trees" sound scary, but they could just be like strains of GM corn or cotton. Note that there is an inconsistency in some of the arguments about geo-engineering: people claim that the physical environment is so complex that we cannot possibly hope to be able to engineer it appropriately. Many of these same people, I would suspect, are using this to support their claim that they should be given the power to engineer the global economy.

Ask Lynne Kiesling's and Andrew Kleit's new book, Electricity Restructuring: The Texas Story. From the AEI online store description:

In the early 1990s, the U.S. electricity industry was plagued by cost overruns and stagnant productivity. Many states turned to deregulation to promote innovation and cut costs, a strategy that had worked for the telecommunications, trucking, natural gas, and airline industries. Yet, after the California energy market's infamous meltdown in 2000-2001 triggered the recall election of Governor Gray Davis, deregulation lost popular and political support. Plans to introduce competition and retail choice in electricity markets were stalled or abandoned nationwide--in every state but Texas.

This volume explores how Texas's groundbreaking program of electricity restructuring has become a model for truly competitive energy markets in the United States. The authors contend that restructuring in Texas has been successful because the industry is free from federal oversight within the state; because new investments in electricity supply have been encouraged to insure that increased demand for power is met; because restructuring has spurred the growth of more efficient electricity technologies and business models; because the markets integrate wholesale and retail competition; and because the operation of the transmission grid has been changed to maximize its efficiency.

Here is the link. Congrats, Lynne!

TARP = Troubled Administration Reacting Politically

So says Richard Rahn:

The underground or "black" economy is rapidly rising, and the fault is mainly due to government policies.

Here is the evidence. The Federal Deposit Insurance Corp. (FDIC) released a report last week concluding that 7.7 percent of U.S. households, containing at least 17 million adults, are unbanked (i.e. those who do not have bank accounts), and an "estimated 17.9 percent of U.S. households, roughly 21 million, are underbanked" (i.e., those who rely heavily on nonbank institutions, such as check cashing and money transmitting services). As an economy becomes richer and incomes rise, the normal expectation is that the proportion of the unbanked population falls and does not rise as is now happening in the United States.

See also Mark Perry's excellent post: The Imaginary Hobgoblin of "The Unbanked"

One of the best days I've spent was two years ago when I attended the teaching workshop that Jim Gwartney sponsors (in conjunction, I think, with a similar center at USF) on teaching intro econ classes. DOL pals Russ Sobel and Dirk Mateer were two of the featured speakers. Both were fantastic and Dirk got me hooked (to my wife's chagrin) on using film clips to illustrate economics concepts.

The 2010 workshop will be held in early February. I've put some info about it--including this year's speakers (Robert Higgs is one) below the fold.

Read More »

What poor student couldn't use $2,000-$12,000? One of the Institute for Humane Studies' many fine program is the Humane Studies Fellowships. The awards support graduate and outstanding undergraduates exploring the principles, practices, and institutions necessary for a free society through their academic work. Info here; the application deadline is December 31.

UPDATE: I hadn't seen Art's HSF post. Two endorsements--a really strong signal that liberty minded students should apply.

Regarding people’s desires that I should like zombie movies less than I do, reader Michael writes:

“It is, if you like, a wish to edit people’s preferences (or, at least, their ability to express their preferences). It is the phenomenon of meta-preference: preferences about people’s preferences.

Inquisitorial preferences, perhaps? (No one expects the Spanish Inquisition!)

There is a label somewhere out there that is memorable and fits.”

Something deep in my memory (down there with the repressed memories of childhood abuse in my former lives) tells me that Amartya Sen talked about this, using the example of different people having read or not read Lawrence’s “Lady Chatterly’s Lover.” I believe that Sen analyzed the issue as a straightforward problem of externalities; after all, costs are subjective and ephemeral, not objective and monetary, and one definition of negative externality is private behavior that imposes costs on others, with no consideration given to those third-party costs.

If Sen (or anyone else) actually performed this analysis, and it’s not just a fever dream from my years chasing the dragon, then the analysis is technically correct, but still lacking in “punch,” I believe. To the hearts and minds that must be won, “an externality” equates to “polluting the environment;” or “the neighbors’ party is too loud.” My fondness for zombie movies is simply boorishness. And the world would be a better place if there were less boorishness in it.

My colleague, Joe McGarrity, directed me to a Milton Friedman quote from the 18 May, 1961, WSJ: “What most people object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really a lack of belief in freedom itself.”

Friedman, as always, nails it in one try. But I want to condense a pithy paragraph into a pithy phrase.

What would that phrase be?

One of my corporate paymasters friends at the Institute for Humane Studies asked me to pass along information on the Humane Studies Fellowship. If you're a graduate student or if you plan to be one someday, these are great. The deadline is December 31, 2009.

When will the SEC (or National Weather Service) feel it's necessary to look into whether there are weather forecasters manipulating the market for temperature-based futures?

This paper forthcoming in the Journal of Banking and Finance, "The Pricing of Temperature Futures at the Chicago Mercantile Exchange," suggests that futures prices respond to forecasts up to 11 days in advance. Oh what fun the weather forecasters could have with this one.

Here's the abstract:

This paper analyzes observed prices of U.S. temperature futures at the Chicago Mercantile Exchange (CME). Results show that an index modeling approach without detrending captures the prices exceptionally well. Moreover, weather forecasts significantly influence prices up to 11 days ahead. It is shown that valuations of temperature futures relying on a model without detrending yield biased valuations by overpricing winter contracts and underpricing summer contracts. Several trading strategies are devised to exploit the mispricing observed at the CME and to demonstrate that speculating on temperature futures can not only generate high overall returns, but also perform well on a risk-adjusted basis.

Read more here

Regarding the new uses for the serdipitously found TARP savings:

OK, so banks need less TARP money because the ramp up in the equity market has made it easier for financial firms to re-capitalize and equity earnings have helped offset revenue losses from loans. To get the Federal monkey off their backs, financial firms are using less Federal money and/or repaying TARP funds at an accelerated rate. Ergo, instead of paying down the massive debt, the Administration wants to spend these “savings” on a new jobs program.

How might this work out?
Scenario 1: World markets truly believe that expansionary fiscal policy can create new job; fiscal policy CAN create new jobs, and the U.S. government is not approaching the market-imposed debt ceiling… in this case, equity markets stay strong, the economy adds jobs, and the recovery of the tax base allows the U.S. to pay down the whopping debt. My expectation is that Scenario 1 is very, very unlikely.

Scenario 2: By “showing willing” to continue deficit-financed expansionary fiscal policy, the administration confirms the market's worst fears. The dollars devalues more rapidly, increasing the US price of imported raw materials. People begin to dump equities for commodities, real estate, etc. Financial firms’ newly-acquired capital loses value, their equity portfolios provide less cash flow, and these institutions begin to falter again… requiring another TARP.

Scenario 3: As the market becomes more certain the “TARP-funded jobs program” will pass, equities rise. Initially, this will look like Scenario 1, and the press will report it as such. However, the underlying causes are different. In reality, equity investors see the weakening budget position of the Federal government and assume the Fed will continue to engage in massive increases in the monetary base to keep the Treasury afloat. The investors feel that much of this money will—as had happened in 2009—find its way into equity markets, pushing equity prices higher. If so, equities are clearly in another bubble, not unlike the late-1990s era bubble and not unlike the late-2000s era housing bubble. These sorts of bubbles are not sustainable, and there is another crash, like in 2008 (again involving financial firms).

I don’t whether Scenario 2 or Scenario 3 is more likely, but I’m leaning toward Scenario 3. If Scenario 3 is basically correct, then we’ve located the inflation that the recent growth in the monetary base would lead us to expect. We haven’t seen outrageous general price level inflation, because the excess money has been bubbling into equities.

One of my favorite XKCD strips recounts one of my recurring nightmares. It's especially appropriate as final exams are almost upon us (NB: a bit of salty language).

Addendum: here's an offbeat take on B2B Christmas gifts from Jeff Tucker.

If you’re anything like me, you’ve asked yourself, “I wonder whether any Norwegian filmmaker has ever made a movie about a group of snow-bound twenty-somethings in a cabin under attack by SS Nazi zombies?” Good news, everyone! This movie exists, and it is awesome! Never have I seen more intestines in 90 minutes of cinema than in “Dead Snow.” If there is justice in the world, this movie will sweep the Norwegian awards season.

I don’t think anyone associated with this movie will have to buy beer for 20 years. I can imagine the scene now:
Gunnar walks into a pub and sits down.
Gunnar: “You know, I was one of the zombies in ‘Dead Snow.’”
Knut: “Cool! I don’t know you, but I want to buy you a beer!”

Why blog about this? Well there’s the obvious: Didn’t you just read what I wrote? Nazi zombies!

Second, although it’s been shown that I don’t know my Soviet cinema, I’m quite confident that the Sovs never made a Nazi zombie movie.

Third, I’m certain that many loyal DoL readers, high-tone folks that they are, are lamenting my taste. Some may even be hoping no more zombie movies are made, ever. This brings me to my point. Trained economists praise the market for efficiency, but may assail it on the grounds of equity in distribution. Certainly, the academic literature on market failure circles around instances of market inefficiency and inequity. I’ve come to feel, however, that these may be secondary reasons for Joe Mainstreet to criticize the market. As bloggers on DoL have pointed out, many people do not approve of the mix of products the market produces. An item is not to their taste, and it is not enough to avoid personal consumption. Rather, they want the offending product to no longer be produced.

This is subtly different from paternalism. Practically no one is interested in improving my moral or spiritual well-being, in protecting me from myself, by denying me the opportunity to consume (braaaaaaains!) zombie movies. Rather, (for example) my arts and humanities colleagues at the next Academic Assessment Committee meeting would feel more comfortable about the world if, as they sat next to me, they KNEW I had not thoroughly enjoyed a movie about Nazi zombies eating Norwegian college students the evening before… even if I never tried to discuss the movie with them! Remove the movie-remove the knowledge that people might enjoy the movie-Noel is marginally more palatable as a committee colleague.

I don’t know what the proper term is for this phenomenon. But, I believe, it is real, pervasive, and powerful. Plus-partly since we never discuss it-it’s more difficult to defeat than efficiency or equity-based arguments.

For three semesters now, I have had the pleasure of teaching from David Friedman's Law's Order. At certain times during this semester, I've considered a change. It is passages like the one below that give me great pause.

To set up context, David is discussing the 18th Century English system, in particular how it lacked public police and prosecutors and therefore relied solely on private prosecution to bring criminals to justice. The system contrasted with the French, which had paid police, public prosecutors and imprisonment. Why were the Brits so slow to "modernize" their criminal law system? Perhaps, Friedman speculates, the English were worried that if the Crown were solely responsible for prosecuting crimes then friends of the crown could do as they please -- could get away with murder. "That problem is still with us," Friedman says, and he points to various episodes of government overreach and democide.

These examples suggest an important point too often forgotten in the economic analysis of the law: The rationality assumption applies to enforcers as well as enforcees. In constructing legal institutions we cannot simply assume that legislators, judges, and police will go out and do good—in the economist’s version, promote efficiency. We have to think about their incentives too.

For three semesters now, I have had the pleasure of teaching from David Friedman's Law's Order. At certain times during this semester, I've considered a change. It is passages like the one below that give me great pause.

To set up context, David is discussing the 18th Century English system, in particular how it lacked public police and prosecutors and therefore relied solely on private prosecution to bring criminals to justice. The system contrasted with the French, which had paid police, public prosecutors and imprisonment. Why were the Brits so slow to "modernize" their criminal law system? Perhaps, Friedman speculates, the English were worried that if the Crown were solely responsible for prosecuting crimes then friends of the crown could do as they please -- could get away with murder. "That problem is still with us," Friedman says, and he points to various episodes of government overreach and democide.

These examples suggest an important point too often forgotten in the economic analysis of the law: The rationality assumption applies to enforcers as well as enforcees. In constructing legal institutions we cannot simply assume that legislators, judges, and police will go out and do good—in the economist’s version, promote efficiency. We have to think about their incentives too.

An interesting working paper popped up on SSRN this past week with the intriguing title The Wages of Failure: Executive Compensation at Bear Stearns and Lehman 2000-2008 . Here's the abstract:

The standard narrative of the meltdown of Bear Stearns and Lehman Brothers assumes that the wealth of the top executives of these firms was largely wiped out along with their firms. In the ongoing debate about regulatory responses to the financial crisis, commentators have used this assumed fact as a basis for dismissing both the role of compensation structures in inducing risk-taking and the potential value of reforming such structures. This paper provides a case study of compensation at Bear Stearns and Lehman during 2000-2008 and concludes that this assumed fact is incorrect.

We find that the top-five executive teams of these firms cashed out large amounts of performance-based compensation during the 2000-2008 period. During this period, they were able to cash out large amounts of bonus compensation that was not clawed back when the firms collapsed, as well as to pocket large amounts from selling shares. Overall, we estimate that the top executive teams of Bear Stearns and Lehman Brothers derived cash flows of about $1.4 billion and $1 billion respectively from cash bonuses and equity sales during 2000-2008. These cash flows substantially exceeded the value of the executives’ initial holdings in the beginning of the period, and the executives’ net payoffs for the period were thus decidedly positive. The divergence between how the top executives and their shareholders fared implies that it is not possible to rule out, as standard narratives suggest, that the executives’ pay arrangements provided them with excessive risk-taking incentives. We discuss the implications of our analysis for understanding the possible role that pay arrangements have played in the run-up to the financial crisis and how they should be reformed going forward.

Alex Padilla has a new op-ed in Forbes.com. At issue, whether the state of California ought to require condom use in the adult film industry to protect public health. Alex concludes:

Good intentions do not guarantee good results. The costs and consequences of adopting a condom-only regulation far outweigh any benefits. The adult industry has done an excellent job policing and testing itself. The government is likely to do more harm than good to the health of both porn performers and the general public if it meddles in adult entertainment.

ATSRTWFT

I'm prepping for the last meeting of Econ 339 this semester and, in light of some student questions, I'm re-reading Hayek's Nobel Address. This stands out:

“…the economists are at this moment called upon to say how to extricate the free world from the serious threat of accelerating inflation which, it must be admitted, has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.”

Addendum: this is worth remembering, too. Hayek closes with this gem:

“The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice to man’s fatal striving to control society- a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.”

The State of North Carolina today announced a new website for bank robbers in the state. No, the web-site doesn't provide tips and FAQs about the art of the heist. Rather, the website provides CC photos and descriptions of bank robberies.

Check it out here.

Luckily, I didn't see any family or friends on the site.

I wonder if, all else equal, this raises the costs of being a bank robber, which is expected to reduce bank robbing (on the margin), or if this adds to the cache of being a bank robber, again on the margin, which might lead to an increase in bank robberies (on the margin).

I might file this one away for a potential masters thesis idea.

I found this one interesting. The bank robber, er, withdraw expert, is on the phone - I wonder how that conversation went.

From the December 8, 1909 NYT comes an "oops" of a headline:

Soccer is Dawning in American Sports

Less Dangerous and More Open Football Becoming More Popular

Yale and Princeton Also Giving More Attention Than Ever Before to Clean and Healthful Game

The story discusses how Harvard and the other Ivy League schools are interested in promoting soccer to "the plane of major sports, including it in the category with football, rowing, baseball and track."

Yep, that worked out.

I'm sorry Tyler Cowen isn't going to get past the first hundred pages of Gordon S. Wood's Empire of Liberty. I would encourage him to read the part beginning on page 150 for an intriguing account of how Thomas Jefferson and James Madison persuaded poet Philip Freneau to start and edit the anti-Hamiltonian National Gazette. The following sentence is most revealing (p. 151): "After being offered a position as translator in the State Department and other promises of support, Freneau finally agreed." The lesson I take from the Madison/Jefferson/Hamilton/Freneau incident Wood discusses is that we shouldn't be naive about the capabilities or the intentions of Great Statesmen. It's a lesson worth taking to heart as we watch Climategate unfold (see here and here).

First, this cartoon from Henry Payne:

Now a video:

I still don't know if global warming is real, but the so-called scientific consensus appears to have been a sham. Of course, it doesn't stop the nihilists who want micromanage other folks lives from jetting off to Copenhagen to be driven around town in 1,200 limos.

Sorry, no links because I forgot where I read this.

Apparently, there was an advanced, pre-agricultural society based in the Danube River valley. They made wonderful pottery and copper and gold artifacts. We know they had an extensive network of contacts because we've found their artifacts distributed over a wide range, and in a lot of places where these folks weren't.

Apparently they didn't go in for monumental architecture, but they buried some of their dead with lots of snazzy pottery and gold doo-dads.

On the basis of these "noble burials," the anthropologists quoted in the blurb I read concluded that their economy was not not based on commerce, but on heroic gift giving of these high-status goods (think of the feasting scenes from Homer).

Say what?

This culture buried some of their dead with rich grave goods. My grandfather was buried in a pair of Big Smith overalls with a pack of Juicy Fruit in his pocket. Based on his grave, would anthropologists assume we have no commerce, and are rather poor?

What is it about rich grave goods in a few graves that would have precluded a skilled flint-knapper from specializing and trading his excess arrow heads for a venison haunch from a particularly skilled hunter?

Call "heroic gift giving," or whatever you want, but isn't a wide-spread trade network in fine pottery and jewelry--things other cultures were NOT making at this time--prima facie evidence for exchange?

Maybe there's a lot more evidence that these people didn't trade, but the blurb didn't mention it. I doubt it. "The propensity to truck, barter and exchange one thing for another is common to all men...," as Adam Smith told us. Exchange in a pre-literate society won't leave much record for anthropologists to find after 7000 years. I'm happy to accept that there is little to no evidence of specialization and exchange among these people, but to conclude that trading was not a significant part of this culture?

Unwarranted conclusion, sirs; unwarranted.

From an interesting report by the House of Commons on the use and abuse of language in government:

Q2 Chairman: In a sense, we know all this stuff that is floating around us, and we know what Orwell told us back in 1946, that "prose consists less and less of words chosen for the sake of their meaning, and more of phrases tacked together like the sections of a prefabricated hen-house." We have that all around us in official language, and what I really want to ask you is: Does this drivel matter or does it just irritate us?

Interesting (and sometimes painful) reading.

Here's a PDF of the first chapter of Patrick West's Conspicuous Compassion, via Merlin Mann's Kung Fu Grippe Blog (ht: Will Wilkinson). Co-blogger Wilson Mixon has described this as "better to feel good than to do good" on a number of occasions.

Addendum: I wrote about the economics of anonymous giving for Lifehack.org about a year ago.

Apropos Bob's and my paper on human rights and economic liberalization, here's a great post by Alex Tabarrok on Salvador Allende's attempts to solve the problem of economic calculation in the socialist commonwealth with some technological wizardry. Pay no attention to the man behind the curtain.

It's too soon, but within the next few decades I look forward to a complete and comprehensive intellectual history of the twentieth century. I expect that the two most important contributions will be Mises's "Economic Calculation in the Socialist Commonwealth" and Hayek's "The Use of Knowledge in Society."

The NCAA now sanctions 34 post-season football Bowl Games in the Bowl (ie. Division I) Division. That's room for 68 teams. 119 teams play Division I ball. To be eligible for a bowl, however, you have to win at least 6 games, at least 5 of which must be against Division I competition. This year, there are 71 such teams.

So three eligible teams won't go to bowls this year. And there will be some pretty dull matchups. Go below the fold to explore the possibilties.

Read More »

F.A. Hayek once said that you can take any concept and make it meaningless by modifying it with "social." "Justice," for example, is meaningful. "Social justice" is not.

Along the same lines, you can take something innocuous and turn it into something scary and bad by modifying it with "foreign." "Oil" is okay. "Foreign oil" is bad. "Workers" are okay. "Foreign workers" will stop at nothing to take our jobs. "Trade" creates wealth. "Foreign trade" destroys American jobs. A lot of people thought "ER" was a great show. "Foreigner"...yeah.

Here's DOLer Mike Munger discussing the anti-economics of peak oil, which motivated enormous giveaways to ethanol producers (econ 101 students: use a supply and demand diagram to show how ethanol subsidies lead to the production of gallons of ethanol for which marginal cost exceeds marginal benefit). Now, as Mike points out, we might not be able to use all the ethanol produced to meet the mandates. According to the ethanol lobbyist quoted in the NYT article, though, ethanol will wean us off of foreign oil. Clearly, we need appropriations to build a strategic ethanol reserve. Of course, we could have an entire Ethanol Wing in the Boondoggle Museum.

see more Epic Fails

Source: Failblog.org.

Here's a guest post by my friend Mike Hammock on the Climategate scandal. I asked Mike to weigh in because he always has something thoughtful to say about things like this and because I've learned most of my environmental economics by talking to him over three years of lunches at Rhodes. Here's Mike:

Art Carden asked me to write up a blog post summarizing my thoughts on 'Climategate'. For those of you not following along, someone managed to hack into the University of East Anglia’s email server and extract emails sent by climate scientists, some of which show questionable behavior. Climatologists there may have tried to keep skeptical papers from being published, may have evaded requests under the U.K.’s Freedom of Information Act, and may have altered data to get the results they wanted. It won’t be clear until the investigation is finished.

My thoughts are pretty much the same as Tyler Cowen's. This is embarassing for East Anglia, and it weakens the consensus view, but it doesn't come close to destroying it. The pundits shouting the loudest about the leak—the Sean Hannitys of the world—are the least qualified to judge the science. I’m certainly not qualified, and ideologues won’t resolve the issue. I expect this to play out in the literature as it would in any other science. I will still defer to the collected expertise of climatologists, which, for the moment, still supports the AGW hypothesis.

I also expect climatologists to defer to economists when it comes to the question of "what to do about it". I still think a well-designed carbon tax or cap-and-trade system (the former being preferred to the latter) could result in significant welfare gains if paired with a cut in distortionary taxes (particularly payroll taxes), but I also think the odds of getting a well-designed regulation out of the political system are low. The question of whether a real-world regulation would create benefits greater than costs isn't yet clear to me. I'm not an advocate of the "we must do something, this is something, therefore we must do this" position on global warming. It is also worth keeping in mind that regulation doesn’t have to work badly; the U.S. market in SO2 permits is generally considered a success, reducing SO2 emissions at a lower cost than was expected. If I were a betting man, however, I would not bet on CO2 regulation working out very well.

I also don't think that Levitt's geoengineering stuff is a good substitute for CO2 reduction. It doesn't do anything about, ocean acidification, for example, and could have its own unintended consequences.

I don't, however, have much sympathy for Cowen's "In order for scientists to behave so badly, things must be really serious, so we should be worried!" argument. I see where he's going with it, but I don't think it's a good reason to overlook unethical behavior. Paying attention to someone’s argument because of their unethical behavior seems to me to create perverse incentives. I suppose he would say that we shouldn't overlook it, but we should place a lower weight on unethical behavior in a good cause.

I'll be live on Radio Free Market tomorrow at 1:00 CST to talk about why capitalism is so unpopular. Here are a few links that might be interesting to readers and listeners. Forgive the conspicuous product placements and self-citations, but most of what I'll say during the interview will be based on the following:

1. Deirdre McCloskey's The Bourgeois Virtues. Her opening "Apology"--the entirety of which should be on Google Books--is a tour de force. If you're going to read one thing before the end of the year, this should be it.

2. A few months ago, Josh Hall and I wrote a paper on "The Institutional Necessity of Economic Freedom" that discusses some of the themes McCloskey and others develop.

3. Speaking of Josh, here's an Economic Affairs "Economic Viewpoints" piece in which he and I discuss international labor standards. This is based on Josh's lectures at IHS "Liberty and Society" Summer Seminars where we've both been on the faculty.

4. Speaking of Economic Affairs, Mike Hammock and I discuss whether economists are "market fundamentalists."

Carden, Art and Robert A. Lawson. 2009. Human Rights and Economic Liberalization, under review at Business and Politics.

This paper has made the rounds at a handful of conferences and is finally available. Thanks to everyone who has offered comments and suggestions.

The abstract:

Using several case studies and data from the Economic Freedom of the World annual report and from the CIRI Human Rights Data Project, we estimate the effect of human rights abuses on economic liberalization. The data suggest that human rights abuses reduce rather than accelerate the pace of economic liberalization.

Back story and additional links below the fold. Cross-Posted at The Beacon and the Mises Blog.

Read More »

In the spirit of some of Bob's posts (below), Neal McCluskey offers the following on student protests about increased college tuition:

There’s a word for this kind of activism, and it’s not “idealism” or anything else so complimentary. It’s “rent seeking.” Or, if you want to put it more bluntly, “freeloading.”

... and uses it as a rationale for passing the monstrous health care bill. Here's a snip of his interview today with Fox Business Network's Liz Claman:

CLAMAN: Businesses investing again, they need to, they want to.

But I have to tell you, I talk to a lot of CEOs. So do you. And in advance, I told them I was going to be talking to you. And they said, look, we don't have a lot of this ability. We don't have clarity on where interest rates are going to be, what energy costs are going to be, what the health care situation is going to be. They would love some of that visibility clarified.

GEITHNER: They want -- businesses want certainty. They need certainty so they can make long-term plans today. And that's why it's so important that Congress gets health care behind us, that we bring financial reform in place so people know what the rules of the game are. And that's a very important thing to do. And that's why we're working so hard to make sure we bring clarity quickly.

UPDATE: Newsweek's Robert Samuelson also weighs in on regime uncertainty: "More important, the decision to press controversial proposals (health care, climate change, taxes) was bound to increase uncertainty and undermine confidence."

So does NPR--listen to the last 15 seconds of this story.

Tyler Cowen points to this post on the licensing of hypnotists (no kidding) in Indiana.

Instapundit points to this video from IJ (one of my favorite organizations) on licensing yoga teacher training programs in Virginia.

Here's a reason.tv video on licensing requirements for interior designers.

This cartoon by the Rome News-Tribune's Mike Lester reminded me of a barber shop I walked by while in San Antonio for the SEAs. The barber shop had a sign in the window promising a free beer to people purchasing haircuts.

The Dec. 3, 1909 NYT reports on an X-prize of the day:

Official announcement was to-night made of the offer of $100,000 by a Yale alumnus, who declined to allow his name to be known, to the person who discovers an adequate remedy for tuberculosis. The money has been turned over to Yale University as custodian, and the faculty of the medical school has been chosen its Trustees.

The story ends with the qualifications for winning the prize:

The donor of the prize stipulates that the cure for which the award is given shall have been in use five years and its permanent efficiency tested for that time.

Okay, I couldn't come up with a clever title for this blog entry but a story in the Dec. 3, 1909 NYT drew my attention for some reason:

Orders abolishing the standing guard of one company of regular army troops about the tomb of the late President William McKinely have been received here [Canton, Ohio]. Secretary Hartzell of the McKinley National Memorial Association was notified yesterday by Lieut. Householder of the Second Infantry that Secretary of War Jacob M. Dickinson had decided to reduce the guard to two non-commissioned officers. It is believed that this guard will be ample.

I wonder what this is all about. A company of regular army troops is around 100 soldiers. Why would such a force be required to guard the tomb of the late president? Granted McKinley was assassinated and it is plausible that there might have been concern that his grave would be desecrated for some reason, but the cynic in me wonders if the company was in place as some form of "pork spending."

The not so subtle sarcasm of the last sentence is also somewhat interesting.

My undergraduate sports class is wrapping up and it has been one of the best group of students I have had in almost 15 years of teaching. They are bright, energetic and intuitive. I have a renewed hope for the undergraduate corps, at least at my institution.

Given the events surrounding one professional golfer, I held an informal poll in my class this morning.

"Who has heard of Tiger-gate?" 30 of 30 or 100% of those in attendance.
"Who has heard of Climate-gate?" 2 of 30 or 6.6% of those in attendance.

Regardless of whether climate-gate is true or not - that won't be decided for some weeks, months, perhaps never - the fact that these kids had heard nothing about a potential scandal surrounding international public policy but had heard about the actual scandal surrounding what ultimate comes to a non-issue in our lives was an eye-opener.

I have not finished my magnum opus "Robust Inference on One Observation," (which when finished will assure me the Nobel Prize), so I hesitate to generalize too much from my one data point, but I wonder if other informal surveys would have the same result.

I have become much more dovelike as I've gotten older, but I still see a distinction in principle between killing in war and murder, but the line is getting blurrier in my mind.

The so-called surge in Iraq, while not necessarily worth it on MB>MC grounds imo, was at least technologically possible. Iraq, with enough application of force, can be ruled as Saddam Hussein and the British before him demonstrated.

Afghanistan, on the other hand, CAN NOT be ruled.. By anyone. Alexander the Great tried and (basically) failed. The British tried and failed. The Soviets tried and failed. The Afgahnis themselves have tried and failed. No application of force will be sufficient to do the job of turning Afghanistan into a modern functioning state. It. Can. Not. Be. Done.

Leaving aside the question of costs and benefits, it is criminally insane to engage in any kind of state building effort that has literally zero chance of working. Generally, I do not consider U.S. military actions to be murderous, per se, misguided yes but not murderous, but in this case, that is the only word I have.

[This post was prompted by Pete Boettke's.)

A friend and I have had an interesting email exchange about my higher education bubble post. Part of the discussion centered on the differences between what we might call non-traditional higher ed (community colleges, for-profits and onlines like Phoneix, tech schools) versus traditional higher ed (e.g., Auburn).

Maybe I'm being naive but I think the traditional schools are better positioned when/if there's a higher ed bubble burst.

In my opinion non-traditional schools exist only because of massive implicit subsidies to students in the form mostly of guaranteed student loans. This is especially so for for-profits and tech schools. So the kids get stuck with debt (or taxpayers in case of default) for what I suspect is very little market return. The question is what happens if those subsidies slow. And seriously, the coming budget problems caused by social security and medicare (and now Obamacare) are going to force some cuts elsewhere. They simply can't use taxes or debt/inflation to cover it all.

My reading of places like Auburn (and most other traditional 4 year schools) is that were selling a consumption good, call it "the college experience", more than an actual education or any kind of job training. We're in the entertainment business! That doesn't mean we're not overbuilt ourselves because of subsidies as well, but I think the consumption aspect of our business model make our demand less elastic in the face of subsidy cuts/price increases than that facing the non-traditionals.

We're the modern day equivalent of the old practice where British elites sent teenage kids to continental Europe for a few years before coming back to England. As with college today, the theory was that it was to "enlighten" them, but the reality was it was a huge party for them.

Adam Smith had some very unkind things to say about the practice:

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

While talking to a community member about my decision to remove my children from the local public schools and send them to a private school a 30 minute drive away we had the following (roughly paraphrased) exchange.

Me: The academics at the school are great.

Him: Yes, but you'll be missing out on the diversity you have here in town.

Me: Actually, the school is quite diverse. In the second grade class, roughly 60 percent of the students have parents who were born in different countries. India, China, Korea, Mexico, France, etc. It's amazingly diverse.

Him: What about African-Americans?

Me: There are a couple per class.

Him: Well I guess I was thinking about other types of diversity, like income diversity.

Me: Actually, the school is more diverse in terms of income too, because it has a much wider range of incomes.

Him: That wasn't exactly what I meant.

Me: Oh, you're defining a lot of lower-income folks as "diversity." If that's your definition, then yes, the new school is less diverse.

It's true: the LittleRock/North Little Rock/Conway metropolitan area is at the top of the charts among U.S. metro areas, according to the Brookings Institution/Business Week and Forbes.

Based on job growth, employment, economic growth, and home prices, Business Week has LR/NLR/Conway ranked 4th in the nation.

Forbes ranking on "best bang-for-the-buck" cities (solid housing markets, relatively stable employment, enviable cost of living and quick commutes) places LR/NLR/Conway second.

Eat it, Dallas/Ft. Worth/Arlington, TX, and Jackson, MS!

Who woulda thunk it?

Will this translate into more/better applicants for the econ job here at University of Central Arkansas?

is to be able to hear wonderful lunchtime presentations by fellow faculty members across the curriculum. Today, retiring English Professor John Rosenwald (co-editor of the Beloit Poetry Journal) read ten poems. All were beautiful, but "Declaration" by the Chinese poet Bei Dao really struck me because of its pro-freedom message. I could not find a copy on-line, but it is well worth the effort to look up.

Two of my favorite parts:

I'm no hero
In an age without heroes
I just want to be a man

...

I will not kneel
And let the executioners look tall
Blocking the winds of freedom

Bullet holes are like stars:
From them flows the blood-red dawn

Or, "Arrrrrh! Infrrrrastrrrructurrrrre!"

Same article.

"Piracy-related business has become the main profitable economic activity in our area, and as locals we depend on their output," Mohamed Adam, the town's deputy security officer, told Reuters. "The district gets a percentage of every ransom from ships that have been released, and that goes on public infrastructure, including our hospital and our public schools," Adam said.

Read the story here.

Quoted awesomeness:

"Four months ago, during the monsoon rains, we decided to set up this stock exchange. We started with 15 'maritime companies,' and now we are hosting 72. Ten of them have so far been successful at hijacking," Mohammed, a former pirate, told Reuters. "The shares are open to all, and everybody can take part, whether personally at sea or on land, by providing cash, weapons or useful materials."

HT: The best boss in the world, Mike Casey.

The situation: My 14 year old daughter and I at Moe's last night for dinner. Me casually watching President Obama on a (muted) television screen behind her. She causaully watching PTI on ESPN on a television screen behind me.

Me [grimacing]: Grrrrr.

She: What?

Me [pointing to the tv behind her]: The president.

She: What's he talking about?

Me: Oh, he's decided to kill a lot more people.

[Long pause.]

She: My tv is pretty good.

It saddens me that we both can be so accepting.

The Dec. 2, 1909 NYT has an editorial addressing the relationship between Wall Street and Elm Street and how the politicians fail (intentionally?) to explain each to the other:

It might be as well and as profitable for the country to understand Wall Street, as for Wall Street to understand the country. The country is being told that capitalists invest hundreds of millions in restraint of trade. Is it reasonable? Many persons seem to believe that railways charge extortionate rates because they enrich themselves by demands which prevent shippers from making a profit by the movement of their goods. Is that reasonable? Investors who sink millions of dollars, in enterprises thereby absolutely subject to the most oppressive laws without any possible escape, do not customarily and willfully break the laws and invite destructive penalties.

There are reasons why these things, or some of them, are done, and it interests the country to understand them. They are not obscure. They are written large in commercial history for those who have understanding to read them. Why is it that [William Jennings] BRYAN and the rest of the people's friends can have fresh issues for each campaign, time without end, while the railways, and the trusts, and every interest subject to the laws, persist in alleged sin and obduracy? There's a reason. The country's greatest need is a leader for the truth as influential as those leaders for the false in finance, who have cost the country so dear, and apparently must yet cost it so much more.

My interpretation of the op-ed piece is as follows. It is true that there are excesses and abuses in capitalism. However, competitive pressures from below and reasonable (or unreasonable) regulation from above generally keeps the majority of firms in check - the firms provide quality service and products to their customers or they would otherwise die. It is true that some firms enjoy government monopoly protection, get rich off of government contracts, and lobby government for special exemptions and rules that either lower their costs, ensure their revenue, or increase their rivals' costs. However, the common denominator in these examples of excess is government intervention in the form of picking winners rather than agnostic regulation.

The op-ed uses the railways as the "big nasty" to worry about but it is true that the railways could not price transportation, of people or goods, to the extent that it would put their customers (especially business customers) in a negative profit situation. Although there might not have been a large number of substitutes to trains, at least for moving product long distances over the mass of the continent, it is true that a firm didn't have to ship those long distances. Railways, of course, recognized this and priced for a profit but not for extortion and definitely not for the death of their clients.

In today's lingo it is possible, perhaps, to substitute "health insurance providers" for "railways" and any statist Democrat for the name "BRYAN" and we have not evolved much in the general political debate in one hundred years.

I like the op-ed's appeal for a leader who could talk sensibly about the benefits of capitalism (especially today given the 20th century's examples of Soviet Russia and Communist China and the unfathomable human suffering that attended those non-capitalist systems). It is clear that the "friends of the people" haven't moved off their talking points for over 100 years and the "friends of capitalism" have not generated a charismatic leader (unless, perhaps, Reagan? I am not sure about that generalization, I admit).

The Dec. 2, 1909 NYT reports on the sale of a minor league team:

The deal transferring Little Rock's Southern League baseball franchise to Chattanooga was closed today. The price paid by Chattanooga was $12,000.

The price is approximately $290,000 in 2008 dollars (according to eh.net). This team is renamed the Chattanooga Lookouts, my hometown team while growing up.

I watched the President's speech on Afghanistan last night, and I keep seeing clips of it replayed, and one question keeps gnawing at me: where the heck is this place "Pockeestan" that the President kept referencing? Is it near Pakistan? Will our allies from Scotland and France - or are they now to be called "Scootlund" and "Frhawnse?" - know where to find it?

Would the President have referred to our southern neighbor as "Mejico" in a speech? If mentioning India, would have done his best impersonation of Apu?

Me thinks his effort to show off his world knowledge sounded a bit dumb.

We start talking about externalities in econ 101 today.

Google Scholar's move into case law retrieval is a big deal and also major bad news for Lexis and Westlaw. This competition should be very interesting.

The Federal Register dating back to 2000 has been converted into XML. Details here.

More to come.

Here was the pattern in the real estate market:

(1) Government subsidizes home ownership (mortgage interest tax deduction, FHA, Freddie/Fannie, low interest rates set by Fed, CRI, et cetera).

(2) Resources flock to subsidized markets and asset prices and wages in market increase at unsustainable rates.

(3) Bubble bursts. Asset prices and wages in the market plummet. Financial Institutions hit hard. Credit crunch. Recession.

Could this cycle by happening in higher education? We subsidize the crap out of higher ed (student loans, grants, direct subsidies to schools, educational IRAs, 529s, et cetera). Higher ed continues to expand rapidly its capacity building more and more and more buildings, dorms, student centers, jock palaces, etc, and faculty/staff wages by all accounts have grown more rapidly than most over time. If this is a bubble how does it burst?

Take note of this headline: "For-Profit Colleges: Scooping Up the Stimulus." Is the University of Phoenix the next Countrywide?