Wagner: Part Professor, Part Prophet

As Tyler Cowen and Pete Boettke have noted, Richard Wagner (my macro professor!) accurately analyzed the underpinnings of this so-called financial crisis some three years ago. As evidence, check out this question from a 2005-06 PhD field exam:

Joseph Schumpeter claimed that capitalism would give way to socialism largely for ideological reasons. This does not seem to have happened, at least directly. But might it be happening indirectly? Consider, for instance, a significant change that has occurred in the economic organization of debtor-creditor contracts. Not too long ago, lenders held their loans in their portfolios. They would lose if the borrower defaulted, which gave the lender a strong incentive to monitor the borrower, particularly for large loans. Now, lenders split their loans into numerous small pieces and disperse them throughout the economy. (For instance, many people who hold mutual funds and retirement accounts will find that they are holding small pieces of large loans made by commercial banks.) The burden of non-performing loans is thus dispersed throughout the economy rather than residing with the original lender. Does this development weaken the incentive of lenders to monitor borrowers and thereby weaken overall economic performance? That is, can market transactions generate institutional arrangements that impair the market economy? However you address this topic, do so clearly and cogently.

I will be taking Wagner's Macro exam this evening. And thanks to recent events, I will NOT be missing this question--should it come up.

Blockquoting X

Some Thoughts about Writing from Thomas Sowell:

For reasons unknown, some copy-editors seem to think that words with similar sounds are substitutes for one another. But there is a big difference between Londonderry air and London derriere.

Overall, Sowell's suggestions are not what one usually hears. For example, instead of "WRITE! WRITE! WRITE!" he says "Write. But only when you have something to say."

Becoming an Economist

A little less than a year ago, I had dinner with Ben Powell and Robert Lawson where we spoke a lot about graduate study in general. At one point in the conversation, Powell described grad school as a transition from consumption to production of economics. This idea stuck out to me. And I am still trying to figure out how to make this transition.

I have been trying to write a lot more lately. McCloskey's How to be Human* was a good read; I think I will be a better writer having read it. But I am encountering what I think is the biggest problem for graduate students attempting to write decent papers: I do not know the literature.

It's worse than that. I do not know where to look for the literature. And even if I actually know the literature (i.e. I have read the important works), I do not know that I know the literature. So when I write something, I cannot help but think that someone else has already pointed this out; that I am wasting my time; that my efforts could be much more productive if I only had a little human capital built up.

It is frustrating, to say the least. I am ready to start thinking through interesting problems---to shift away from being primarily a consumer of economics. But starting the transition is proving to be much more difficult than I imagined.

Medical Mayhem

This weeks GSPW featured a paper on cheating doctors in private Chinese hospitals. Supposedly, these doctors prescribe medicine when none is needed.

On a similar note, Arnold Kling points out that roughly 66% of doctors support prescribing placebos to patients. I left the following comment at Econlog:

Actually, I think this has more to do with the patient than the doctor.

The patient comes in sick and knows, rather simply, that medicine makes people unsick. He does not know what medicine, how much, or even if any particular medicine will do much of anything for the particular sick he is.

The doctor, on the other hand, has a rough idea of what kind of sick the patient is and, assuming he is correct, knows whether or not medicine makes much sense. Some things, I believe, just need to take their course. But patients do not want to hear that. They came to a doctor. They want to be unsick. And, at least to them, that means medicine.

If the doctor does not prescribe SOMETHING, the patient may get a second opinion. And if that doctor prescribes something, he is likely to capture a new patient. To prevent this from occurring, doctors prescribe placebos.

...if only there were a way to credibly signal to your doctor that you will not be going elsewhere regardless of the treatment strategy he chooses.

How would you feel if you found your doctor had prescribed a placebo? Do you think this could be the best treatment strategy in some situations?

Blockquoting X

PJ O'Rourke is my favorite author. You can read his new piece, We Blew It, in the Weekly Standard.

It's not hard to move a voting bloc. And it should be especially easy to move voters to the right. Sensible adults are conservative in most aspects of their private lives. If this weren't so, imagine driving on I-95: The majority of drivers are drunk, stoned, making out, or watching TV, while the rest are trying to calculate the size of their carbon footprints on the backs of Whole Foods receipts while negotiating lane changes.

Wait. There's more:

Agriculture is a business that has been up to its bib overalls in politics since the first Thanksgiving dinner kickback to the Indians for subsidizing Pilgrim maize production with fish head fertilizer grants. But never, since the Mayflower knocked the rock in Plymouth, has anything as putrid as the Farm, Nutrition and Bioenergy Act of 2008 been spread upon the land. Just the name says it. There are no farms left. Not like the one grampa grew up on.

A "farm" today means 100,000 chickens in a space the size of a Motel 6 shower stall. If we cared anything about "nutrition" we would--to judge by the mountainous, jiggling flab of Americans--stop growing all food immediately. And "bioenergy" is a fraud of John Edwards-marital-fidelity proportions. Taxpayer money composted to produce a fuel made of alcohol that is more expensive than oil, more polluting than oil, and almost as bad as oil with vermouth and an olive. But this bill passed with bipartisan majorities in both houses of Congress and was happily signed into law by President Bush. Now it's going to cost us at least $285 billion. That's about five times the gross domestic product of prewar Iraq. For what we will spend on the Farm, Nutrition and Bioenergy Act of 2008 we could have avoided the war in Iraq and simply bought a controlling interest in Saddam Hussein's country.

Ok, ok. This is the last quote:

Yes, we got a few tax breaks during the regimes of Reagan and W. But the government is still taking a third of our salary. Is the government doing a third of our job? Is the government doing a third of our dishes? Our laundry? Our vacuuming? When we go to Hooters is the government tending bar making sure that one out of three margaritas is on the house? If our spouse is feeling romantic and we're tired, does the government come over to our house and take care of foreplay? (Actually, during the Clinton administration  .  .  .  )

Anyway, a low tax rate is not--never mind the rhetoric of every conservative politician--a bedrock principle of conservatism. The principle is fiscal responsibility.

Of course, I have mentioned my favorite PJ O'Rourke piece before.

Tullock on (NOT) Voting

Contrary to Fred's post at TAE, I do not believe Tullock actually voted (See comments over there). Here is a clip of Tullock explaining why he doesn't vote.

Mock the Vote

Use your hour off from work to read this piece by the Mises Institute's David Heleniak. After detailing the history of democracy, Heleniak takes the words right out of my mouth:

Wise up, America. There's nothing special about 50% plus one. Truth and justice cannot be determined by a show of hands. We are not the government. Voting is not a sacrament. And as it stands today, when we're only given a choice between two Establishment-approved candidates, voting is a joke.

Of course, this article will not take up the whole hour. So stop by Ben and Jerry's for some free ice cream as well.

From the Inbox

Though I could have entitled this post "Joke of the Day" (except that it is entirely true):

To the Mason Community:

I hear some troubling rumors, so here are a couple of facts: 1. The election is Nov. 4, for all political parties. The notion that one party votes Nov. 5 is UNTRUE. 2. It is also UNTRUE that any student jeopardizes financial aid by voting.

Peter N. Stearns
Provost

Are you serious? Does this need to be said? Anyone who is dumb enough to believe that either (a) there are separate days to vote based on who you are voting for or (b) voting could have a negative impact on financial aid IN AMERICA should not be voting anyway. I would be really upset to know my vote was being counted on par with the likes of these students if voting actually mattered (and, of course, if I intended on voting).

Lawson on Voting

Like me, Dr. Lawson has decided not to vote tomorrow (and possibly 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.

I hope he also decides to join those of us who will be washing down the ceremonial celebration of theft with a pint or a shot.

Capitalism and Tolerance

Zazzle dot com illustrates quite vividly the tolerance in capitalist societies. The successful businessman has to serve the needs of his customers, even when their religions or ideologies are in conflict. I first noticed this principle when I was in South Africa; almost all of the restaurants advertise their Halal status (which is certified by a third party). Why? Because some 70% of the world's Muslims would not eat there otherwise. That is simply a market-share businesses cannot afford to lose.

So scroll down the sidebar at Zazzle. Do you support the Democrats, Republicans, Libertarians, or Greens? Is gay marriage poor policy or A-OK? Would you prefer to win in Iraq or bring the troops home? Pro-choice or Pro-life? The folks at Zazzle don't care. They will be providing you with a nifty t-shirt regardless of your political views. For a fee of course.

As for me, I might be picking this one up.

Joke of the Day

My favorite story about government meddling. Ever.

Blockquoting X

In Exchange and Production, Alchian and Allen have this interesting paragraph (among many others, of course):

A most common instance of interspecific resources is marriage: Two people become interspecific to each other and to their offspring. Although such arrangements are not central to economic analysis, they indicate that interspecificity of resources can also apply to people; and although people do not own each other, what might appear to be unusual or otherwise inexplicably restrictive contracts or arrangements may be the means of restricting potentially exploitative behavior (173).

Economists are so romantic.

Blockquoting X

Today's X is George Stigler. The quote comes from his 1961 paper, The Economics of Information which I will be presenting in Econ 811 tomorrow.

Ignorance is like sub-zero weather: by a sufficient expenditure its effects upon people can be kept within tolerable or even comfortable bounds, but it would be wholly uneconomic entirely to eliminate all its effects. And, just as an analysis of man’s shelter and apparel would be somewhat incomplete if cold weather is ignored, so also our understanding of economic life will be incomplete if we do not systematically take account of the cold winds of ignorance.

It is certainly worth reading the whole article.

POW Camp

At Cafe Hayek, the conversation between Roberts and Munger turns to POW camps. I am sure most of you have heard the account before. It comes from R.A. Radford's 1945 Economica article, "The Economic Organization of a P.O.W. Camp." But I want to zero in on one line from Munger:

Stories circulated of a padre who started off round the camp with a tin of cheese and five cigarettes and returned to his bed with a complete parcel in addition to his original cheese and cigarettes; the market was not yet perfect.

The first time I heard this story, I was taking Comparative Economic Systems. The objective in the course was to evaluate the market on a variety of levels (efficiency, morality, etc). I found it interesting, though, that my professor noted the existence of the padre as an indication that markets might not be fair. His logic: if one person can end up with what he had to start with PLUS more in a barter economy, he must be cheating people (since nothing is produced in a barter economy).

What's the problem with his argument? The POWs are not in a pure barter economy. The Padre is producing information! He is an entrepreneur. He finds price discrepancies and takes advantage of them. But, at the same time, he reveals the information once known only to him, a roaming maverick, to the rest of the camp. How is this unfair?

Very Funny Blog

I recently discovered a blog called Twisted DNA. It is incredibly funny and very well written. Among other things, the blog author has nailed the most/least respected things in the US:


You should also read his review of The Dark Knight and his Application for Sukdeep Groceries.

[HT: Kavi]

From the Inbox

Of course, you could replace "democrat" with "politician" without sacrificing accuracy.

[HT: Aaron]

From the Inbox

[HT: Ray]

RSS Feeds

Libby's post at Technagora got me thinking a bit about blogging. Ironically, linking to it is precisely what she suggests bloggers should NOT do. But I disagree to some extent and left the following comment:

Guilty.

I know what you mean. And I am certainly guilty. I like to think there are two types of blogs: original and popularizers. Tyler Cowen, for example, is an original thinker. But he writes a lot of stuff that I could care less about. So a popularizer might scan through all of Cowen’s posts (and all of McArdle’s and Healy’s and etc…) and then pass on the most interesting. So someone with little time can come to the blog of a popularizer and get the good stuff without sifting through the rest. And popularizers will specialize in different subsets of Cowen/McArdle/etc. It is not always so distinct, but you get the point.

I would say I am a popularizer at present. I would like to be more original. But if I only posted original posts they would be few and far between. And that is not a good strategy for blog success. So I link a lot and write original posts when I find time.[...]

As for the RSS feed, I think you should decide whether you want a feed of popularizers (and if so, which ones since similar popularizers overlap) or original thinkers. Too much overlap will result in a clogged reader.

What does my RSS reader look like?

Division of Labour, The Austrian Economists, Cafe Hayek, Marginal Revolution, EconLog, Organizations and Markets. And I am thinking about adding Heroes of Capitalism which is arguably the most interesting blog I read.

Signaling, Cheap Talk, and Relationships

How does one signal to the opposite sex that they are a good catch? Think about it. Assume (for simplicity) that there are two types of guys: winners and losers (Let's not define these two terms yet...). Assume also that girls prefer winners to losers. What's the best strategy for a guy?

Winners: Tell girls you are a winner.
Losers: Tell girls you are a winner.

And there is the conundrum: simply stating which category you fall into is not an effective signal. Why? Because it is cheap. If it were expensive for losers to claim winner status, the signal would work. But it isn't.

So what are nice guys to do? For more, check out the comments. And feel free to add to my ideas (as they are clearly incomplete).

Do You Know John McCain?

Reason.tv has posted what is easily my favorite negative campaign ad. Check it out:

Presidential Debates

If you are anything like me, you don't have time to watch political debates. You have too many important things to do: work, classes, polishing yard gnomes, etc. Fortunately, the fine folks at Reason have condensed the debate from earlier this month into a short 1 minute overview. This makes it possible to hear all the b@llsh!t these two clowns threw around without sacrificing the time to hear them shuffle said sh!t back and forth (over and over again) ad nauseam.
So enjoy.

We are in the Midst of a Global Recession

...in the telling of jokes and anecdotes.

At lease that is Kirby Ferguson's claim. The culprit: Punchline Piracy. Fortunately, he offers several ways to combat this growing threat to laughter.



HIs videos on Progress Bars and Lists are also pretty good.

Voting Race

Howard Stern sent Sal into Harlem to see if race is a major factor in the upcoming election:

[Question:] And if he wins, would you have any problem with Sarah Palin being vice president?
[Answer:] No, I wouldn't. Not at all.

But the he, in this question, was NOT John McCain...

Sal first asked if the person supports Obama. Then he confirms that he also supports "Obama's" policies; in actuality, he reads off McCain's policies. The interviewee affirms the fake Obama policies. Then Sal goes so far as to ask if the interviewee has a problem with Obama's running mate, Sarah Palin. And the (unbelievable?) response is quoted above. Incredibly funny. Listen to the whole clip.

[HT: Bryan Caplan]

More on Voting/Not Voting

A couple links:

102 year old to vote for first time

John Stossel (and GMU's Bryan Caplan) questions voter drives

As for me, I am still considering whether to request an absentee ballot (and which joker to vote for if I do!). Feel free to persuade me (either way) with your comments.

Don't Vote 2008

Seriously. The makers of the original PSA had to expect an edit like this. And in my opinion, it makes it a lot better.

Econ PhD

Are you considering a PhD in economics? Here is what you can look forward to: I just had the most incredible 4h45m of sleep; but now I am wide awake because my body is just not use to sleeping much longer than that (and certainly not at that level of quality!).

I had my first Micro exam last night. Old exams are online so I knew what to expect. The difficulty was finishing the six questions in 90 minutes. I ended with a whopping two minutes to spare. You literally had to write your answers without thinking; you just had to know it. But after a solid week of studying (and weeks of reading and re-reading chapters) I felt like I had a strong command over the material. Let's hope Dr. Williams agrees.

Today's Lesson

I pulled into a gas station today where the price of regular unleaded was posted at $3.48. The sign on the pump read as follows: Only Premium. Two blocks away I bought gas for $3.56. They seemed to have plenty to go around. Why? Because prices work!

That most individuals are astonished when a single station (or even a handful) undervalues gas at a given point in time and, as a result, sells out too quickly points to how well the price mechanism works: we are so accustomed to entrepreneurial accuracy that miscalculation seems inconceivable.

Government Solutions

In traditional economics, market failures are corrected by government intervention. Pigouvian taxes, for example, can set things right. Fortunately, Public Choice has pointed out how ridiculous this position is: politicians are not disinterested do-gooders.

Nonetheless, citizens still seek government intervention to solve the so-called evils of the market. And government officials respond, though not necessarily how we would like. Consider the bailout bill that passed in the house. The Tax Foundation points out all of the "extras" included in this pass-or-perish* piece of legislation:

Energy Related Targeted Tax Credits and Changes
Sec. 101. Renewable energy credit.
Sec. 102. Production credit for electricity produced from marine renewables.
Sec. 103. Energy credit.
Sec. 104. Energy credit for small wind property.
Sec. 105. Energy credit for geothermal heat pump systems.
Sec. 106. Credit for residential energy efficient property.
Sec. 107. New clean renewable energy bonds.
Sec. 108. Credit for steel industry fuel.
Sec. 109. Special rule to implement FERC and State electric restructuring policy.
Sec. 111. Expansion and modification of advanced coal project investment credit.
Sec. 112. Expansion and modification of coal gasification investment credit.
Sec. 113. Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.
Sec. 114. Special rules for refund of the coal excise tax to certain coal producers and exporters.
Sec. 115. Tax credit for carbon dioxide sequestration.
Sec. 116. Certain income and gains relating to industrial source carbon dioxide treated as qualifying income for publicly traded partnerships.
Sec. 117. Carbon audit of the tax code.
Sec. 201. Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property.
Sec. 202. Credits for biodiesel and renewable diesel.
Sec. 203. Clarification that credits for fuel are designed to provide an incentive for United States production.
Sec. 204. Extension and modification of alternative fuel credit.
Sec. 205. Credit for new qualified plug-in electric drive motor vehicles.
Sec. 206. Exclusion from heavy truck tax for idling reduction units and advanced insulation.
Sec. 207. Alternative fuel vehicle refueling property credit.
Sec. 208. Certain income and gains relating to alcohol fuels and mixtures, biodiesel fuels and mixtures, and alternative fuels and mixtures treated as qualifying income for publicly traded partnerships.
Sec. 209. Extension and modification of election to expense certain refineries.
Sec. 210. Extension of suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.
Sec. 211. Transportation fringe benefit to bicycle commuters.
Sec. 301. Qualified energy conservation bonds.
Sec. 302. Credit for nonbusiness energy property.
Sec. 303. Energy efficient commercial buildings deduction.
Sec. 304. New energy efficient home credit.
Sec. 305. Modifications of energy efficient appliance credit for appliances produced after 2007.
Other Tax Credits and Changes
Sec. 101. Extension of alternative minimum tax relief for nonrefundable personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with longterm unused credits for prior year minimum tax liability, etc.
Sec. 201. Deduction for State and local sales taxes.
Sec. 202. Deduction of qualified tuition and related expenses.
Sec. 203. Deduction for certain expenses of elementary and secondary school teachers.
Sec. 204. Additional standard deduction for real property taxes for nonitemizers.
Sec. 205. Tax-free distributions from individual retirement plans for charitable purposes.
Sec. 206. Treatment of certain dividends of regulated investment companies.
Sec. 207. Stock in RIC for purposes of determining estates of nonresidents not citizens.
Sec. 208. Qualified investment entities.
Sec. 301. Extension and modification of research credit.
Sec. 302. New markets tax credit.
Sec. 303. Subpart F exception for active financing income.
Sec. 304. Extension of look-thru rule for related controlled foreign corporations.
Sec. 305. Extension of 15-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements; 15-year straight-line cost recovery for certain improvements to retail space.
Sec. 306. Modification of tax treatment of certain payments to controlling exempt organizations.
Sec. 307. Basis adjustment to stock of S corporations making charitable contributions of property.
Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.
Sec. 309. Extension of economic development credit for American Samoa.
Sec. 310. Extension of mine rescue team training credit.
Sec. 311. Extension of election to expense advanced mine safety equipment.
Sec. 312. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
Sec. 313. Qualified zone academy bonds.
Sec. 314. Indian employment credit.
Sec. 315. Accelerated depreciation for business property on Indian reservations.
Sec. 316. Railroad track maintenance.
Sec. 317. Seven-year cost recovery period for motorsports racing track facility.
Sec. 318. Expensing of environmental remediation costs.
Sec. 319. Extension of work opportunity tax credit for Hurricane Katrina employees.
Sec. 320. Extension of increased rehabilitation credit for structures in the Gulf Opportunity Zone.
Sec. 321. Enhanced deduction for qualified computer contributions.
Sec. 322. Tax incentives for investment in the District of Columbia.
Sec. 323. Enhanced charitable deductions for contributions of food inventory.
Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory.
Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
Sec. 401. Permanent authority for undercover operations.
Sec. 402. Permanent authority for disclosure of information relating to terrorist activities.
Sec. 501. $8,500 income threshold used to calculate refundable portion of child tax credit.
Sec. 502. Provisions related to film and television productions.
Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.
Sec. 504. Income averaging for amounts received in connection with the Exxon Valdez litigation.
Sec. 505. Certain farming business machinery and equipment treated as 5-year property.
Sec. 506. Modification of penalty on understatement of taxpayer's liability by tax return preparer.
Sec. 512. Mental health parity.
Sec. 601. Secure rural schools and community self-determination program.
Sec. 602. Transfer to abandoned mine reclamation fund.
Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados, and flooding.
Sec. 703. Reporting requirements relating to disaster relief contributions.
Sec. 704. Temporary tax-exempt bond financing and low-income housing tax relief for areas damaged by Hurricane Ike.
Sec. 706. Losses attributable to federally declared disasters.
Sec. 707. Expensing of Qualified Disaster Expenses.
Sec. 708. Net operating losses attributable to federally declared disasters.
Sec. 709. Waiver of certain mortgage revenue bond requirements following federally declared disasters.
Sec. 710. Special depreciation allowance for qualified disaster property.
Sec. 711. Increased expensing for qualified disaster assistance property.
Sec. 712. Coordination with Heartland disaster relief.
Sec. 801. Nonqualified deferred compensation from certain tax indifferent parties.

And we are suppose to believe that all this is to solve the financial problem? Hah!


*While not a reality, pass-or-perish is used to illustrate how politicians present certain situations.

In Print (sort of)

Today the real-world economics review (formerly post-autistic economics review) published a piece by Hall, Lawson, and Luther. And not just any Luther, but this Luther!

This is my first academic publication. Hopefully many, many more will follow.

Strange Ideas

George Carlin on prostitution (Disclaimer: if you are too stupid to realize a video presented as "George Carlin on prostitution" probably contains crude language, I am not sure the disclaimer is going to do much good...):

What is Missing from Political Debates

With all of this talk of the Financial Meltdown [gasp], how we might deal with Iran [shriek] and [insert additional meaningless political fodder here], I thought I might express my general opinion. Fortunately, this xkcd.com comic makes it relatively easy to articulate:



Maybe you will point to everything that is truly wrong in the world. As for me, I will look at the shape of things relative to human history. And in that light, I say let's head to the pub...

"Behave! or we're moving to Nebraska!"

Alex at MR points to a somewhat amusing, somewhat disturbing case of unintended consequences:

Under a newly implemented law, Nebraska is the only state in the nation to allow parents to leave children of any age at hospitals and request they be taken care of [...] So-called “safe haven laws” in other states were designed to protect babies and infants from parental abandonment.

Hmm. What bad could come of this well-meaning policy? < /sarcasm >

Over the last two weeks, moms or dads have dropped off seven teens at hospitals in the Cornhusker state, indicating they didn’t want to care for them any more.

“They were tired of their parenting role,” according to Todd Landry of Nebraska’s Department of Health and Human Services [...]

Like the road to hell, it seems the road to abandonment is also paved with good intentions. Full story here.

Market Provision

I have always found it interesting how even the most obscure demands are often met by markets. Did you know you can Google in Klingon?

What I am Reading

Lot's of things. Mostly my Micro textbook. And some Tullock articles. But I came across a very funny piece in the LA Times today from Joel Stein. IMHO, he gets the current financial crisis right. Here is a taste:

Do you have credit card debt? Did you buy a house with less than 20% down, or with an adjustable-rate mortgage, assuming that skyrocketing equity would let you refinance or flip it? Of course you didn't, because you're a super-intelligent reader of my column. But don't you think every single Rosa Brooks reader did?

The rest of the article carries this light-hearted tone. But he makes some very good points as well. ATSRTWT.

(Unavoidable) Email Scam

In the spirit of the old Nigerian Letter scam, this fine piece of craftsmanship landed in the inbox today:

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER
SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

At least the Nigerian Letter could be avoided...

[HT: Paul]

Pay Your Taxes (It's patriotic!)

Below is an old cartoon (wartime propaganda, really). If you ask me, it really begs the question by assuming that since paying taxes is the patriotic thing to do, it is also what individuals should do. It seems reasonable to ask whether patriotism should be an individual's primary motivation. I would say no. Others would say yes. But this is where the real disagreement rests.

Now what are you going to do? Spend for the Axis? Or Save for taxes?

Enjoy the video.



[HT: Joe]

Was Milton Friedman an Agorist?

In the fight for freedom over tyranny, Milton Friedman cites two forces on the side of liberty:

Number one is the extraordinary ability and ingenuity of the American people in finding ways to get around laws. That's a major source of strength for freedom. And number two is the inefficiency of government.

Watch the whole video here.

Oh, Charlie

Charlie Rangle makes the news, yet again:

WASHINGTON - Embattled Rep. Charles Rangel's Mercedes-Benz was towed yesterday from the House of Representatives parking space he had been using for years in violation of congressional rules.
[...]
Rangel refused to answer questions about the car, whose registration expired in 2004 and which has sat in the House garage, covered with a tarp and bearing no plates.

The Zinger comes from House GOP leader John Boehner's spokesman, Michael Steel.

The new information about Chairman Rangel taking advantage of taxpayers to illegally store his vintage luxury car is appalling, mostly because it is part of a pattern - a pattern of Chairman Rangel abusing his public position for personal gain

Can you believe that an esteemed Representative would take advantage of taxpayers? ...of course you can.

Spot the Economic Fallacy

Can you spot the economic fallacy on which this (very funny) Onion News Network clip is based (Warning: explicit language, fake news)? The answer is in the comments.


Economists Warn Anti-Bush Merchandise Market Close To Collapse

Happy Hour

Tonight I went to a hookah bar with a friend. She was telling me about her job and how they have a happy hour on Fridays. Can you imagine that? Drinking at work!

Then she told me where she works: Freddie Mac.

I couldn't help but laugh. I guess they could use a few drinks considering the mess they got into.

See here, here, here, here, here, here, and here if you believe that the folks at Freddie are the only ones drinking on the job ("Bail them out? You must be drunk!").

From the Onion

Over at Cafe Hayek, Russell Roberts links to this video from the Onion (warning: explicit language, fake news source):


Obama Promises To Stop America's Shitty Jobs From Going Overseas

Blockquoting X

Here, the X is Milton Friedman in "From Cradle to Grave", the fourth episode in his 1980 series Free To Choose

We as human beings don't have a responsibility, but I hope we have a compassion and an interest in the bottom twenty percent. And I only want to say to you that the capitalist system, the private enterprise system in the nineteenth century did a far better job of expressing that sense of compassion than the governmental welfare programs are today. The nineteenth century, the period which people denigrate as a high tide of capitalism had the-- was the period of the greatest out pouring of eleemosynary and charitable activity that the world has ever known. And one of the things I hold against the welfare system, most seriously, is that it has destroyed private charitable arrangements which are far more effective, far more compassionate, far more person-to-person in helping people who are really, for no fault of their own, in disadvantaged situations.

What I love about Friedman is his ability to articulate his position so clearly and with such conviction.

Joke of the Day

Captions:
"Ummm, Honey... I need a couple quarters."
OR
"If she doesn't come out holding that dragon, I am going to be pissed."
OR
"Ahhh, forget about her. Go for the fish!"

Do you have a funny caption for this video? Comments are open.

Free to Choose

Milton Friedman's television show, Free to Choose, is now available online. There are 10 episodes from 1980 and 5 from 1990. Enjoy.

[HT: Walter Williams]

On the Margin

In tonight's class, Walter Williams asked the following question:

What is marginal polymorphonuclear neutrophil?

Submit answers in comments (unless you were in the class, in which case you should keep quiet).

The Engineer and The Scientist

Arnold Kling illustrates the difference between "model jockeys" and academic economists.

A model jockey might ask, "What will be the effect of the stimulus proposal on GDP?" You have an equation, estimated using past data, that predicts how much consumption will go up for a given increase in disposable income. You interact that with a bunch of other equations, and out comes your answer. That is how the engineers look at macro.

Kling also explains how the time horizon selected (shorter or longer) can affect the result found. ATSRTWT

Orthodox Keynesian Fiscal Policy

In discussing fiscal policy, many macroeconomics professors speak of increasing output without regard to what specific component of output is actually increased. Often they put forward the [ridiculous] position that digging ditches and refilling them is just as effective as building roads, bridges, dams, office complexes, or sports stadiums. All of these expenditures, after all, shift the IS curve to the right.

The absurdity of such a claim makes it easy to refute. But we should ask whether Orthodox Keynesians actually subscribed to this idea before relishing in the defeat.

As it turns out, James Tobin (arguably the most prominent Orthodox Keynesian) states that a consensus between Orthodox Keynesians and Neoclassicals existed in the late 1950s and 60s:

I thought that there was also a normative consensus, in the sense that you shouldn't regard any output that you get from putting unemployed resources to work as free, because you have alternative ways of putting unemployed resources to work. The same classical opportunity cost considerations that determine allocation of resources in a classical equilibrium determine the allocation of resources as among different ways of returning to that supply-constrained regime. So I think in that sense there is no excuse for wasteful projects to increase employment, like digging holes in the ground, because you can arrange to employ people by investments or other projects that are socially beneficial (Snowdon and Vane 2005, p 151).

It seems as if many arguments refuting Orthodox Keynesian fiscal policy are actually in refutation of a position held by no one.

Of course, the model makes no differentiation between one type of output and another: a change in Q is a change in Q. But if the consensus Tobin spoke of actually existed, there seems to be little practical value in further specification of the model.

Rather than continue to knock over a straw man, then, I suggest one accepts that no one actually believes that one government expenditure is just as good as the other. Instead, ask another question: how is government to know what expenditure is best? And if Mises and Hayek taught us anything through the socialist calculation debate, it is that only decentralized actors working within a price system can approximate the best use of resources.

Economists and Sustainability

The Journal of Heritage Stewardship had this to say about the position of economists in the environmental/sustainability discussion.

For the most part, however, future concern dwindles in inverse proportion to the pressing demands of the voracious present. (35) Advocates of intergenerational equity are far outnumbered by economists who consider market forces and individual interests adequate guarantors of environmental and social heritage, (36) assume that “future generations are likely to be incomparably richer than people alive today,” (37) and rely on future technological miracles to deal, more cheaply and efficiently than can now be done, with our toxic legacies of nuclear waste, land and air and water pollution, lethal additives, corporate bankruptcies, and state indebtedness. (38)

I would say their summary of the widely held position among economists is fair. Terms like "incomparably rich" and "technological miracles" seem to poke fun at the position. But even the smallest of growth rates--much lower than our current 4%--sustained over a significant period of time result in drastic changes in standards of living. Consider that my great grandparents spent most of their time in a field so that they could eat and I spend less than 1/3 of my (rather low by today's standards, but relatively large in comparison to the past) income on food; and I do not end each day sweaty with a sore back.

Does anyone have a strong reason for why technology might not be so miraculous after all? (I don't believe it is. I would say it is an inevitable outcome. But I am more than willing to admit that my understanding of Schumpeterian entrepreneurship is more faith than fact at this point.)

[HT: Claire]

Oh, Politics

This NYT article is mediocre, but I found the title amusing: Once Elected, Palin Hired Friends and Lashed Foes.

Why don't they just say what everyone already knows: Once Elected, Palin Acted Like an Elected Official. That's right. Business as usual. Yeah, she is a scummy politician. But really, that is a redundant phrase; all politicians are scummy. In fact, I am going to even the score for Mrs. Palin.

Once Elected, Obama Hired Friends and Lashed Foes
Once Elected, Biden Hired Friends and Lashed Foes
Once Elected, McCain Hired Friends and Lashed Foes
Once Elected, POLITICIANS Hire Friends and Lash Foes

Only when we stop pretending that some politicians are saints will we be able to avoid using coercion to accomplish our ends. Until then we should expect business as usual.

Pondering Pasta

My friend Kelly and her housemate Maureen invited me over to their new apartment in DC tonight for pasta. And, of course, I started (over)thinking...

(1) Since there is no such thing as a free lunch, I must be paying a non-pecuniary price for the meal. In this case, my first thought is that I barter with my friendship.

(2) But friendship is reciprocal. It wasn't like I was only giving friendship. I was getting it as well. So I am paying friendship and getting friendship and pasta in exchange. If we assume that we value each other's friendship equally, further explanation is needed.

(3) My conclusion: she expects that at some time in the future I will divert roughly the same amount resources to her.

I think this makes a fair amount of sense. If after a couple months she finds that we always eat at here place--on her dime--and she expects it to be that way forever, she would be less inclined to be my friend. Relaxing the assumption above, we might say that the difference between how much each friend contributes to the relationship reflects the relative value of each participant. She might be willing to give a little more than me in the long run if she finds me to be an exceptional friend worth paying a premium for. And if, at the same time, I value her a little less than she values me, a long run difference in contribution is sustainable.

Her expectations, of course, take into account all future transactions. It could be the case that one friend is in a bind for an extended period of time. If she expects to recoup her losses when this time period ends, the friendship will not necessarily end.

It might even be true that friends don't expect immediate repayment when hard times are over. Just knowing that you would do the same if they found themselves in a similar situation could suffice. This treatment presents friendship as a sort of insurance scheme.

My most important observation stemming from this though is that the temporal nature of the transaction observed serves to illustrate the level of trust required for friendships. She does not know how I will act in the future. But she trusts that I will act in accordance with the social norms of friendship.

In other words: Thank you for dinner.

And Now for Something Completely Different

A guy I went to High School with recently got a divorce after being married for barely a year. I don't know him that well, so I don't know the details. And they don't really matter, I guess. But the situation did get me thinking. Maybe too much.

First: one year? Wow. I cannot imagine things spiraling into disrepair so quickly. Maybe, of course, it was a bad situation from the start, a silly decision that good friends and sound reasoning could have prevented. Can you imagine the conversation that must have taken place?

Well, it's been a year. We gave it the old 'College Try'. But I think we should cash out before the warranty on the microwave expires.

Personally, I would like to think people don't commit to bad relationships. I know they do. But I close my eyes and pretend the world works the way I think it does (too many mainstream economics courses?).

Second: why are 22 year olds getting married, anyway? Ok. Maybe I am just being a cynic. But marriage is the last thing on my mind right now. I am (happily) single (with no prospects). Other people are having relationships; I am reading books and discussing how macroeconomic phenomena might emerge.

To be honest, I don't even know where I would meet a potential spouse right now. You can almost always find me at my house (studying) or in class. Or, I am having a drink with people from the class (talking about the class!). And I am guessing that "What do you think about spontaneous orders?" is not a successful pick-up line (though, I would be willing to give it a shot).

So who is right, here? Should I be thinking more about my future wife and less about the 'big questions that puzzle me'? Or are my married and marrying friends making a huge mistake? Do they know something I don't? Or are their calculations in error. Comments open.

(And don't give me the standard econ answer. I know different people have different preferences. My question is completely normative: What should I be doing?)

Joke of the Day

Angus at Kids Prefer Cheese shows us that the value of an MBA is plummeting.

A New Economics Fable

Maybe some of you have read Russ Robert's Fable of Free Trade and Protectionism. Well, he has posted a new fable at Cafe Hayek: The Fable of Fannie and Freddie.

Once upon a time, Fannie and Freddie were partners in a business. Well, it wasn’t exactly a business. It was almost a charity. Not quite. It was sort of a government agency. Or maybe it was all three together. When Fannie and Freddie talked to investors, they acted like a business. When they talked to the government regulators, they acted like a government agency.

And when they talked to the American people, they acted like a charity. A charity whose goal was to help more people own a home.

Who could be against that?

But it’s hard to be three things all at the same time [...]

ATSRTWT

Calvin and Hobbes

John and Thomas, that is.

Straight Talk Express Rolls On

Did you see McCain's speech tonight? Here's what hit the cutting room floor.

[HT: Angela]

Cafe Hayek

There was a time when I did not read Cafe Hayek. I guess I did not find the subtle jokes that funny. Or maybe I was just not mature enough to get it. Well, that is no longer the case. Now I wake up every morning and--rather than waste my time with the headlines--skip right to the letters section featuring Don Boudreaux (No subscription needed!). Today's gem is entitled "Sex Is Pleasurable, Studies Show":

Yahoo! News

Dear Sir or Madam:

The headline of one of your reports today (Sept. 4) from the Associated Press reads "Sarah Palin and her fellow RNC speakers weren't completely truthful at times." Wow.

Why not also run a report with the headline "Law of Gravity Still Working," or one screaming "Julius Caesar Remains Dead!"? Deceitful politicians are as newsworthy as ants at a picnic - although much more avaricious and annoying.

Sincerely,
Donald J. Boudreaux

What I Love about Mason #2

The conversations.

At GSPW, Pete Boettke and Pete Leeson took part in an impromptu debate regarding whether Saddam Hussein was either (1) irrational and, thus, did not respond to sufficient offers or (2) rational but, unfortunately, was not offered enough to cease power. And this was in the context of an empirical economics paper on betrayal aversion.

Then, after PCS, Robin Hanson was talking about UFOs (apparently not an uncommon occurrence...).

Tomorrow: PPE!

There's Russians in Atlanta?

Dr. Lawson posts this very funny comic at DOL:


The last square reminds me of the very funny (though unintended to be) 1984 film Red Dawn where the Soviets invade Colorado.

Gordon Tullock

Today I was in Gordon Tullock's office at Mercatus. My assignment for the next month is to sort through all his things, box them up, and ship them to various locations. Colleen Morretta took me to the back of the room where a filing cabinet took up nearly the whole wall. She opened one of the drawers. Inside was everything Tullock had ever published. Paper after paper after paper.

I cannot express in words how I felt, though proud and honored might be used.

I was to be Tullock's research assistant at Mercatus. His unanticipated retirement means I will be working for Dr. Boettke instead. Working for Tullock would have been a great experience. But we live in a world of scarcity. And nothing makes this any clearer than the realization that men do not last forever.

Of course, everyone is blogging about Tullock right now. Here and here are some nice posts from Organizations and Markets. Another at DOL. So read up in celebration of the career of Gordon Tullock.

Haiku

Levitt is hosting an Economic Haiku contest. Check it out. Submissions due by 11AM tomorrow. Good Luck!

My submissions:
Thoughts of an Economics Professor

I spot a big bill.
(But I know that markets clear.)
It must not exist.

History of Economic Thought

Many schools of thought,
Keynes to Friedman, Hayek too!
Try to keep them straight.

Acting with Thorstein in Mind

I bought an iphone.
Purchase seems conspicuous.
Veblen might be right.

Art Carden has a good one at DOL.

From the Inbox

Allen Merten, President of GMU, sent around an email today aimed (it seems) at new students. From the second paragraph:

Many students come to college with preconceived notions of what college is like--some are accurate, some are not. Though common on many campuses, alcohol abuse is not a significant part of campus life at George Mason University. One of the most important decisions you can make is to join the vast majority of people who do not abuse alcohol or drugs. For the minority of students who abuse alcohol (including underage drinking) and illicit drugs, the official university policy will be vigorously enforced, along with state alcohol and drug laws. The on-campus use of illicit drugs or the abuse of alcohol will not be condoned merely as a “college rite of passage.” Noise, vandalism, property damage and assault resulting from alcohol or drug abuse will not be tolerated on Mason's campuses.

I couldn't help but wonder how the line between use and abuse of alcohol was drawn (and by whom). Shoot, I wondered what the line was! So I looked it up. Aside from underage drinking and vandalism, the closest thing I found to defining the level of alcohol consumption (abuse) that warrants punishment is this:

All cases involving severely intoxicated students and/or police or emergency medical responses will be referred to the University Judicial Administrator for disciplinary action. The University Judicial Administrator may mandate an evaluation by the Office of Alcohol, Drug, and Health Education, or an outside agency.

Severely intoxicated. That is the rule. Crystal clear. Thanks.

I guess it is left up to those enforcing the rules to decide in each particular instance where sufficiently intoxicated ends and severely intoxicated begins. I hope this uncertainty doesn't stop anyone from consuming alcohol all together. That could be costly.

Open Letter to Diana Blaine

Dr. Blaine,

I recently came across your story in the Village Voice (disclaimer: nudity) and wanted to say I support your right to post topless pictures online, regardless of your position at USC. After reading a few posts on your website, though, I was disappointed to find that you do not hold a strong position in support of property rights. Clearly defined property rights, after all, prevent a majority from imposing their will on individuals.

Posting those photos in your own home, for example, is beyond the reach of majority control (assuming of course that property rights are respected). It is your house. You have the right to post whatever you'd like. Likewise, if the neighborhood grocer felt so inclined he could let you post them in his store (again, assuming property rights are respected). It is his store. He makes the rules. But, in your situation, we are talking about something very different.

When things are owned in common, WE must decide what is permissible. By WE, I do not mean all of us, of course; only a majority is necessary in a democracy (and only a majority of representatives in a representative democracy!). As I am sure you can see, this means one group gets to tell many individuals what is and is not acceptable.

Fortunately in the US we are not merely a democracy. Our constitution was design to protect folks like you and I whose actions or ideas might come under attack from the majority. But a constitution is only moderately successful at binding the hands of power-hungry politicians. And political actors dominate the decision making process when things are owned in common.

What we need, then, is more private ownership and more individuals insisting that private ownership be kept out of the public sphere of decision making. We may not be able to reduce the public sphere completely, but every bit reduced means less area for majority rule to be imposed.

Thankfully, USC has not yet bowed to public pressure (and it doesn't look like it will). But we should really start questioning a system that allows otherwise uninvolved individuals to call the shots. I say "otherwise uninvolved" because they are involved in one sense: they pay taxes. Their tax dollars make them co-owners and grants them a seat at the decision making table.

Don't get me wrong, though. A private university would have every right to fire you on the spot for your personal actions. After all, they can make the rules as they see fit. But since ownership is not mandated by the state through taxation, individuals with one set of preferences (freedom of speech, academic inquiry, and the right for teachers to expose their breasts online, for example) can start one university while others can start a university with an entirely different environment (and folks like you and I can stay the hell away from there!). The best part: we don't have to fund those we disagree with (And I believe you would support this idea since you wrote "Can taxpayers be protected from having their money spent to support religious indoctrination? No, not since Bush renamed their conversion attempts 'charitable.'"). To the contrary, universal systems mean universal rules.

As long as we accept a system of public ownership, we will have to accept the decision making process that accompanies it. Sometimes this means we can inflict our will on others. Sometimes it means we are forced to go along with the group, despite our convictions. But it doesn't have to be this way. Wouldn't we prefer a more peaceful system? Can't we cooperate with communication and mutual agreement instead of force? I think so. And I hope you will give this system a little thought as well.

I have posted this letter on my blog and look forward to your response. You should know in advance that I intend to post any relevant correspondence. I do not intend to be malicious or take your words out of context; I just want to make the content of our conversations available to my readers in hopes that everyone will learn a little from the exchange in ideas. I hope you will participate in this endeavor.

Take care,

William Luther

Four Months 'til Christmas

Amazon offers a really cool feature that should help avoid the deadweight loss of Christmas: wish lists.

A wish list can be public (like mine) or private. The best part is that you can put a little button on your browser so that items can be added to your wish list from other sites. How cool is that?

I suggest everyone gets one of these pronto. It will make life so much easier for those of us who never know what to buy.

(Rather than provide a link to a general wish list, how about I direct you to mine. And feel free to pick me up something nice while you are there.)

What I am Reading

The short answer: lots of stuff. But I particularly enjoyed this quote from Schelling's Micromotives and Macrobehavior:

The fact that there is never a taxi when you need one in the rain, or that you can fly 3,000 miles more comfortably than you can fly 300 and flights are occasionally overbooked, reminds us how spoiled we are. We expect this fantastically complex system to be even better coordinated than it sometimes is. Tens of millions of people making billions of decisions every week about what to buy and what to sell and where to work and how much to save and how much to borrow and what orders to fill and what stocks to accumulate and where to move and what schools to go to and what jobs to take and where to build the supermarkets and movie theatres and electric power stations, when to invest in buildings above ground and mine shafts underground and fleets of trucks and ships and aircraft--if you are in a mood to be amazed, it can amaze you that the system works at all.

You should pick this one up if you haven't already.

TF on Radio

My former colleague Josh Barro represented the Tax Foundation on Mike Rosen's morning show. The topic: corporate tax rates.

Worth the listen.

In case you have not heard...

GMU is #1.

(Whether or not this accolade trumps those bestowed on the contributors of DOL, I am not sure.)

What I Love about Mason #1

A book written by a physicist-journalist is required reading for my macroeconomics class.

While certainly out of the ordinary--and probably not on the syllabus at Harvard--I think Turtles, Termites and Traffic Jams will be a good addition to the class. And it highlights one of the many reasons I chose GMU.

From the first page:

A flock of birds sweeps across the sky. Like a well-choreographed dance troupe, the birds veer to the left in unison. Then, suddenly, they all dart to the right and swoop down toward the ground. Each movement seems perfectly coordinated. The flock as a whole is as graceful--maybe more graceful--than any of the birds within it.

How do birds keep their movements so orderly, so synchronized? Most people assume birds play a game of follow-the-leader: the bird at the font of the flock leads, and the others follow. But that's not so. In fact, most bird flocks don't have leaders at all. There is no special "leader bird." Rather, the flock is an example of what some people call "self-organization."

Follow the link to read more.

Jack Master of all Trades

My macro professor recalls the words of George Shackle from Uncertainty in Economics in his syllabus:

To be a complete economist, a man need only be a mathematician, a philosopher, a psychologist, an anthropologist, a historian, a geographer, and a student of politics; a master of prose exposition; and a man of the world with experience of practical business and finance, an understanding of the problems of administration, and a good knowledge of four or five languages. All this is, of course, in addition to familiarity with the economic literature itself.

Expect to see many more posts from my classes/readings over the course of the next few months.

Psychology 101 Gets it Wrong

USA Today reports that while the Bystander Effect might exist, three psychologists suggest the traditional Genovese story has been debunked and should be corrected in the classroom.

It's straight out of Psychology 101: "The Bystander Effect," a phenomenon illustrated by the infamous 1964 murder of Kitty Genovese as 38 callous neighbors ignored her screams for help.
Except that while details of the case were exposed as dubious over the years, psychology instructors and students still operate off the original parable of bad Samaritans united by indifference to a gruesome attack, according to an article by three British university professors.
[...]
As the three professors prepared the article, Manning said, they were struck by the Genovese case as a contemporary parable — the antithesis of the Biblical tale of the Good Samaritan, who stopped to assist a traveler assaulted by thieves on the road from Jerusalem to Jericho.

But she acknowledged the article might make little difference in future retellings of the case. "Once such 'facts' become generally accepted," Manning said, "they are often difficult to correct."

Optimization

Today's Math Boot Camp session at Mason was on optimization. Basically, solve the First Order Condition for x* and y*. Then confirm that you are maximizing (and not minimizing) by showing the Second Order Condition is negative. Finally, go home and read some Hayek.

If you skip the third step, you are clearly not optimizing...

Declaration of the World Education Forum

The Declaration of the World Education Forum held in Dakar, Senegal in 2000 states that "by 2015 all children, particularly girls, children in difficult circumstances and belonging to ethnic minorities, have access to and complete free and good quality compulsory primary education".

Could someone please explain why the "particularly girls, children in difficult circumstances and belonging to ethnic minorities" is necessary? It seems like egalitarians value some more than others. Why not just say "all children"?

I also love the word compulsory. You will have access to it. You will be able to complete it. It will be free. And good. But if you still don't want it, we are going to force it on you.

Who pays for this again?

Rick Barack Rolling

Move over Astley, Obama is taking stage.

[HT: Connor Mendenhall]

Letters

The Columbus Dispatch accepted my letter.

Last Friday's editorial announced the Ohio Department of Agriculture's plan to "make tainted food known to the public" (Food warnings, July 25). The article notes that grocers are "under no obligation" to tell consumers they have contaminated beef. But this is simply untrue.

While there are no laws forcing grocers to inform the public, they face pressure from a very important court: the court of public opinion. The reputation effect, as economists note, compels businesses to act in the interest of their clients. Not wanting to lose future customers, Kroger was driven to "pull tainted meat off its shelves" despite the costs incurred.

Admittedly, market forces do not work perfectly. But neither do government bureaucracies. If Ohioans corrected their romantic view of government they would likely see the superiority of market solutions.

Creative Destruction

Today's after lunch snack reminded me of Tyler Cowen's book, Creative Destruction. I am presently eating a Ritter Sport bar. Without globalization, my selection set would certainly be a lot smaller. But thanks to free(er) trade, I can enjoy this German delicacy.

Wikipedia lists the Ritter slogan as it appears in several languages.

German packaging: "Quadratisch. Praktisch. Gut." ("Square. Practical. Good.")
French packaging: "Carré. Pratique. Gourmand."
English packaging: "The handy chocolate square"
English packaging (UK): "Quality in a Square."
Italian packaging: "Quadrato. Pratico. Buono."
Danish Packaging: "Kvadratisk. Praktisk. God."
Russian packaging: "Квадратный. Практичный. Хороший."

Special thanks to Marion and Julia for introducing me to this wonderful bar of chocolate.

Paris for President

What? Yes. Paris Hilton is throwing her name into the hat. And she might get my endorsement...

Ok. Not really. But she did put out a very funny political ad in response to McCain using her picture in an ad against Obama.

Like McCain’s own ad, an announcer narrates the beginning of the clip. While McCain’s clip called Obama “the biggest celebrity in the world,” Paris’ version refers to McCain as “the oldest celebrity in the world, like super-old, old enough to remember when dancing was a sin and beer was served in a bucket.”

MSNBC has the video online. Worth watching.

Rick Rolling

From Wikipedia:

Rickrolling is an Internet meme involving the music video for the 1987 Rick Astley song "Never Gonna Give You Up". The meme is a bait and switch: a person provides a Web link they claim is relevant to the topic at hand, but the link actually takes the user to the Astley video. The URL can be masked or obfuscated in some manner so that the user cannot determine the true source of the link without clicking (and thus satisfying their curiosity). When a person clicks on the link given and is led to the web page he/she is said to have been "Rickrolled". By extension, it can also mean playing the song loudly in public in order to be disruptive.
[...]
An April 2008 poll by SurveyUSA estimated that at least 18 million American adults have been rickrolled.

Today's New York Times had a decent article on Rick Rolling and firm productivity.

Asking the Right Questions: Obama

Balko also poses questions to Obama:

You not only supported the latest federal farm bill, you commended it, stating that it "will provide America's hard-working farmers and ranchers with more support and more predictability." Critics have called that $307 billion monstrosity an orgy of earmarks, corporate welfare, and protectionism. It actually increases subsidies to huge agribusinesses in an era of record grain prices — subsidies that are already crushing farmers in the developing world. The New York Times called it "disgraceful." The Wall Street Journal called it a "scam." How does the "change" candidate justify supporting a bill larded with sweetheart deals for big agribusiness when just about everyone not getting a check from the bill opposed it?
[...]
In your autobiography, you admit to using marijuana and cocaine in high school and college. Yet you largely support the federal drug war — a change from several years ago when you said you'd be open to decriminalizing marijuana. Would Barack Obama be where he is today if he had been arrested in college for using drugs? Doesn't the fact that you and our current president (who has all but admitted to prior drug use) have risen to such high stature suggest that the worst thing about illicit drugs is not the drugs themselves, but what the government will do to you if you're caught?
[...]
In a speech to Cuban-Americans in Miami, you called the Cuban trade embargo "an important inducement for change," a 180-degree shift from your prior position. The trade embargo has been in place for 46 years. Did denying an entire generation of Cubans access to American goods, culture, and ideas induce any actual change? Wasn't the real effect just to keep Cubans poor and isolated? In communist countries like Vietnam and China, trade with the U.S. has ushered in economic reform, and vastly improved the standard of living. Why wouldn't it be the same if we were to start trading with Cuba?
[...]
Your wife said that as president, "Barack Obama will . . . demand that you shed your cynicism . . . That you come out of your isolation, that you move out of your comfort zones. That you push yourselves to be better. And that you engage. Barack will never allow you to go back to your lives as usual . . ." How is any of this remotely the responsibility of the president? Where in the Constitution does it say that the president should be our personal motivator and spiritual leader? Will you help us lose weight and eat our vegetables, too?

Wow. I love this guy's questions. Any word on who will be taking Tim Russert's place at the table?

Asking the Right Questions: McCain

Randy Balko poses questions for McCain:

In your January primary debate, you referred to "greedy" Wall Street stockbrokers, and in contrasting your career to the business career of Mass. Gov. Mitt Romney, you said, "I led the largest squadron in the United States Navy. And I did it out of patriotism, not for profit." Do you think a career in public service is inherently more noble and virtuous than a career in the private sector? Are people who spend their lives on the taxpayer dole as politicians and government employees simply better people than those who create wealth and jobs through private enterprise?
[...]
After the Supreme Court's decision in the Heller gun rights case, you admirably commented, "This ruling does not mark the end of our struggle against those who seek to limit the rights of law-abiding citizens. We must always remain vigilant in defense of our freedoms." I couldn't agree more. But on the subject of campaign finance reform, you said in 2006 that, "I would rather have a clean government than one where, quote, First Amendment rights are being respected, that has become corrupt. If I had my choice, I'd rather have the clean government." How do you reconcile these two positions? Is a "clean" government (whatever that means) really more important than the rights and freedoms of its citizens?
[...]
In 1989, your wife Cindy became addicted to the prescription drugs Percocet and Vicodin. Eventually, she began stealing medication from the non-profit medical charity she ran to assist the victims of war and disaster areas. You and your wife were able to negotiate a settlement with the Justice Department that let her off with restitution and admission to a rehabilitation center, but no fines, jail time or even public disclosure. Certainly no one could fault you for trying to save your spouse from criminal sanction. But you're consistently one of the most strident drug warriors in Congress. You've voted to strengthen penalties against those who use and traffic in both illicit drugs and who divert prescription drugs. You've supported mandatory minimums and harsher penalties for first-time offenders. Why shouldn't average people without powerful connections who make the same mistakes your wife made be shown the same leniency and mercy the criminal justice system showed her?

I cannot imagine these questions coming up in the debates. But they should.

Repetition, Repetition, Repetition

At the end of Caplan's Myth of the Rational Voter, he urges economists to stress the value of markets by endlessly repeating the most basic points. Mike Cox and Richard Alm, with their very straightforward research, do just that.

Their research, in picture form, is outlined below:

1. Goods are Easier to Obtain


2. We Work Less and Earn More


3. Work is Easier


ATSRTWT

COLLEGE

Those supporting public funds for higher education typically point to the social benefits of education. But a recent study suggests college means four more years of social deviance. From a NYT article titled College Students Behaving Badly:

“College attendance is commonly associated with self-improvement and upward mobility,” Mr. Seffrin said. “Yet this research suggests that college may actually encourage, rather than deter, social deviance and risk-taking.'’

With similar results, Dr. Lawson compares the alma maters of DoL contributors with Princeton Review's list of party schools. T-Stats throught the roof.

[HT: Sarah]

Blogroll Roundup

TC says random posts are optimal.

But with Google and Wikipedia you must choose the topic. A good blog writer can randomize the topic for you, much like a good DJ controls the sequence of the music.

Justin Ross discusses HR 5843, a bill aimed at legalizing marijuana possession.

[...]as you would expect the actual bill falls far short of having any teeth.

Janet suggests Poor People Don't Need Food Anyway.

Poor people need to slim down by picking something like organic, free range, locally made granola and home made yogurt with local organic clover honey instead of that fatty Egg McMuffin. [...] Once we tell people how to budget their (very limited) funds, I'm sure they'll find a way to make it work.

/sarcasm.

And Libby gets started.

Cato Event: The Dirty Dozen

Thursday, July 31, 2008 at 12:00 PM

Not in DC? Watch live online.

Released to great acclaim in May 2008, The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom analyzes 12 U.S. Supreme Court decisions that, according to coauthors Robert Levy of the Cato Institute and William Mellor of the Institute for Justice, changed the course of American history away from constitutional government. In addition, The Dirty Dozen provides insights into the proper role of the Court and calls for judicial engagement to remedy these harmful decisions. The book has rapidly become the catalyst for an energetic, wide-reaching debate about the Supreme Court, generating an extensive range of opinions among legal professionals, concerned nonlawyers, and Court followers about the 12 cases, their impact, and the role of the Court. The Cato Institute and the American Constitution Society are pleased to provide a public platform for this important debate. Leading practitioners and academics from different perspectives will discuss the cases and the authors’ legal analyses.

Writing is Right

Over at Mises, Art Carden writes on...writing. Specifically, he says we should do more of it. A lot more.

I've been writing for a long time, but I haven't written as frequently and regularly as I should have. Also, it has taken a very long time to develop anything resembling proficiency. Nevertheless, some of my favorite wisdom on the subject comes from a chapter title in D.N. McCloskey's short volume Economical Writing: "fluency can be achieved through grit." Or, as 1986 Nobel Laureate James Buchanan once said it a little more bluntly and a little less poetically, "keep your a** in the chair."

ATSRTWT

Blockquoting X

From the cover letter to some film tax studies I am reading:

Anytime money is spent in the economy, it generates a positive economic impact. This impact varies from industry to industry. For example, the impact multiplier for earnings in the film industry is 1.93. However, for the automobile manufacturing industry it is 2.25; for a new supermarket it is 1.7; for the commercial construction industry it is 1.73; for a nuclear power plant it is 2.51; and for a new hotel it is 1.91. Thus an economic impact analysis will always show that public subsidies result in a positive economic impact for the state.

Ignore Bastiat. Assume this is correct. It should still be noted that "generating a positive impact" is not the same as being the optimal path to pursue. And in a complex world where knowledge is dispersed (and, in some cases, tacit), only a discovery process like that of the market economy can reveal the latter. Comments open.

Cato Attacked!

For those of you outside the beltway (and not on the email lists), Cato was attacked by Students for a Democratic Society yesterday. So much for peace, I guess.



Michael Cannon describes the event:

I work at the Cato Institute. I jumped up from my desk today when I heard lots of yelling coming from outside the building. When I got to Cato's interior balcony, I saw dozens of SDS lemmings pushing a handful of cops against the front doors and the glass facade of Cato's winter garden. (What did they think would happen if they got in? I guess they didn't follow Heller.) At great risk to their personal hygiene, the cops pushed the protesters back, but not before the little buggers slapped some anti-NAFTA stickers on the building and the marble wall outside. When I got downstairs with my camera, these are the pictures I took. I also took a video, and I'll see if I can post that. I'm leaving this album open for everyone to see, in the hopes that some of these SDS morons will self-identify, and we can explain to them how they're lining up with corporate interests to fuck the world's poor.

More pictures are available here.