TheAnti-Candlemakers'League

A Goodbye of Sorts

2009-04-14T13:01:00.003-04:00

The fine folks at TPS have asked me to join the team. So if you have enjoyed reading my rants thus far, update your RSS reader to reflect my new location.

Thanks for reading and commenting over the last year and a half.

Dating

2009-04-11T23:21:00.002-04:00

A good date makes you dinner.
A great date makes you dinner and helps you finish off a sixer.

Joke of the Day

2009-03-29T15:19:00.002-04:00

I had a funny thought today. It followed a comment on my status (which read: Will is up and at 'em.); my friend Annette thought the phrase was "up and adam," but admits that my version actually makes sense. My remarks were as follows:

I always find it amusing when cliches morph.

For example, my grandma often says "a bird in the bush" as if this phrase has any meaning in and of itself. I know that she is referring to the proverbial bird in the hand which is worth TWO in the bush. I am just confused as to how this simplified to a single bird in a bush.

I have often thought about cutting her off by saying "I know, it's worth 0.5 in the hand." But this doesn't seem right. Surely half a bird is worth less than half the value of a whole bird... especially if you are interested in keeping birds as pets.

I also find it amusing when people say "I could care less." when they actually mean that they COULDN'T care any less. One of my favorite YouTubers, hotforwords, comments on this in more detail.

XKCD

2009-03-29T10:36:00.002-04:00

Today's XKCD is incredible (particularly because I am working on a paper regarding lock-in)!

Remembering Friedman

2009-03-29T10:30:00.004-04:00

His clarity and persuasiveness always amazes me.

Learning by Doing

2009-03-27T15:58:00.001-04:00

Helmet Laws

2009-03-25T16:53:00.001-04:00

Some members of the motorcycle club I am in were discussing helmet laws. My comment follows:

"I guess some folks' "personal liberties" are more important than safety."

I think personal liberties are pretty important.

Nothing is "safe," it is a matter of degrees. Crossing the road is unsafe. So is eating meat. Or breathing, even, since many germs are airborne (of course, not breathing is pretty unsafe too!). The question is not between personal liberties and safety. Instead, it is a matter of WHO gets to decide WHAT LEVEL of safety is appropriate for YOU. Those of us who prefer personal liberties think that YOU are in the best position to decide what is best for YOU. And, if you think otherwise, you can always put someone else in charge of your life (Isn't that what marriage is?).

Surely you would not argue that riding a motorcycle is (a) 100% safe or even (b) safer than alternative forms of transportation. Yet YOU decide that the benefits from riding a motorcycle outweigh the potential costs of a motorcycle accident. And I respect your decision.

My mom doesn't respect your decision. And she'd try to convince you it is a bad idea to ride... which is well within her rights to do. It would not be okay for her to lock you up or make you pay a fine for deciding to go for a jaunt on a Saturday afternoon. Yet this is exactly what laws like "You must wear a helmet" do. They say what most people feel is an appropriate decision for them and then force that decision on everyone else.

So if you think everyone should wear a helmet, convince them. But using the force of law is inappropriate.

Fire Dennis!

2009-03-24T14:49:00.002-04:00

As Milton Friedman once said, "There is nothing more permanent than a temporary government program." But Dennis Lennox is trying to abolish a PERMANENT government position in Cheboygan, Michigan. HIS position.

Maybe libertarians should take note of this strategy...

Blockquoting X

2009-03-23T00:28:00.001-04:00

I found this gem in the comments section at TAE:

The best part of being a member of the AEA was that I received the directory of all assn. members -- with addresses, office phone numbers, even many with home phone numbers. As a junior I called Milton Friedman's office -- got his secretary and asked if I sent a copy of my Free to Choose book, would he and Rose sign it. Certainly he would, she responded, and off it went. I also called John Kenneth Galbraith's home (I don't recall if I got that number from the directory or from his department secretary). I wanted to drill him on his Keynesianism. Instead, his housekeeper answered and refused to allow me to talk to him.

Very nice, Dr. Prychitko.

Blockquoting X

2009-03-20T19:00:00.002-04:00

X = Harold Demsetz:

Whether the free enterprise solution can be improved upon by the substitution of the government or other nonprofit institutions in the financing of research cannot be ascertained solely by examining the free enterprise solution. The political or nonprofit forces that are substituted for free enterprise must be analyzed and the outcome of the workings of these forces must be compared to the market solution before any such conclusion can be drawn. (Information and Efficiency: Another Viewpoint, p. 2)

Opening Line

2009-03-18T00:00:00.008-04:00

I have always wanted to write a novel. But the first line seems to be the selling point. How about:

"We are free men. And free men must submit to authority." The words echoed throughout the room from a small radio in the corner.

What do you think?

Maybe I will just edit this and enter The Bulwer-Lytton Fiction Contest. That seems like a more manageable task.

Blockquoting X

2009-03-17T21:28:00.005-04:00

It is game day every day for me. It is judgment day every moment of every day. It is only one way to play the game of life, and that is to play to win. Winning is a way of life. Winning is the only way. I no longer recognize or identify with the poor mentalities or mind states of the universe. I study hard, train hard, eat hard, sleep hard, vision big, think big, act big, and yet I still walk and talk with a sense of humility and peace. I’m so sincere people. I am so serious.

Try not to laugh. Today's X is Maurice Clarett, former Buckeye running back, present prisoner at Toledo Correctional Institution, and (if you can believe it) blogger.

He does not have an internet connection, so he must relay posts to friends and family via phone.

Stats

2009-03-07T18:12:00.002-05:00

From XKCD:

On Settling

2009-02-12T14:53:00.005-05:00

I just read an interesting article on settling written by self-proclaimed feminist, Lori Gottlieb.

Whenever I make the case for settling, people look at me with creased brows of disapproval or frowns of disappointment, the way a child might look at an older sibling who just informed her that Jerry’s Kids aren’t going to walk, even if you send them money.

[...]

It sounds obvious now, but I didn’t fully appreciate back then that what makes for a good marriage isn’t necessarily what makes for a good romantic relationship. Once you’re married, it’s not about whom you want to go on vacation with; it’s about whom you want to run a household with. Marriage isn’t a passion-fest; it’s more like a partnership formed to run a very small, mundane, and often boring nonprofit business. And I mean this in a good way.

Personally, I support the idea of settling. Finding the perfect person is just too costly. When do we hold out for the perfect anything? In a world where search costs are positive, we always settle. The more important question:What characteristics are most important and by what magnitude?

It's entertaining. And something to think about. Certainly good conversation fodder for the upcoming Valentine's Day. ATSRTWT

[HT: Angela]

Considering Dating Pools

2009-02-12T12:04:00.009-05:00

This XKCD comic got me thinking this morning. I agree that the quantity of prospects might increase as one gets older. However, what is there to be said about the quality of these prospects? I drafted the following chart to help with this discussion.

There are a few things to note about this graph. First, the shape of the curve f(x) is such that f'(x) < 0; for some initial age A to A + E, f''(x) > 0; from A + E to infinity, f''(x) < 0. This first derivative expresses that people are exiting the dating pool (by marriage, death, etc.). The second derivative states that they do so at an increasing and then decreasing rate (a lot of people exit around 23-30, while fewer exit from 40-50). The area under the curve is the total number of prospects in your non-creepy range.

Suppose you are x years old (where x > 26). What can you conclude about your prospects? I'd suggest that those to the right of the dashed line are probably lower quality prospects. Probably. There are certainly some who have not yet married because they were focusing on their careers or traveling the world. But most are simply the leftovers.

If we were to adjust the original XKCD findings to include a qualitative measure, we would essentially eliminate the area to the right of the dashed line. However, a portion of those to the left are low quality as well. This could be illustrated by shifting the entire f(x) curve down.

Now let's think of this in a dynamic sense. Every year, your x moves one notch to the right. But, a batch of new prospects (NP) enter your non-creepy range on the left [recall that we are ignoring those entering on the far right because we already know they are low quality]. Of these new prospects, a portion of them are low quality, NP(LQ), and as such are above the red curve (but below the black curve). The rest, however, are average quality, NP(AQ).

At the same time, a portion of the average quality prospects who had entered the dating pool in earlier years exit the pool (again, by marriage, death, etc.). Let's call them EP(AQ). The question, then, is whether NP(AQ) is greater than, less than, or equal to EP(AQ).

I think some back of the envelope calculations would support the original XKCD hypothesis. Even adjusting for quality, your non-creepy dating prospects increase until around middle age.

So don't feel bad if you are single on Valentine's Day. Unless you are middle aged or older...

[HT: Angela]

Nailed 'Em - Amtrak Photographer

2009-02-03T16:52:00.001-05:00

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Nailed 'Em - Amtrak Photographer

Colbert Report Full Episodes
Paul McCartney Appearance

Funny Political Videos
More Funny Videos

Second Amendment

2009-02-03T14:21:00.004-05:00

Who's rights are protected by the US constitution? I would say American citizens. Rahm Emmanuel has a slightly different view (at least with respect to #2):

If you're on that no fly list, your access to the right to bear arms is canceled. Because you're not part of the American family. You don't deserve that right. There is no right for you, if you're on that terror list.

I wonder if being a member of the American family (whatever that means) is a precondition for other rights protected by the constitution. That could be scary. And, if not, what argument allows one to make the exception for the second amendment?

Blockquoting X

2009-02-02T19:44:00.001-05:00

X = Caplan. On rigorously solving GE equations:

There must be some journal that still takes these papers, but you don't want to be in it. Well, maybe you do. But you don't want to read it.

ZimTalk

2009-02-02T15:27:00.002-05:00

My friend Braam Hanekom will be speaking at Harvard Law this month.

Time and Place
Date: Monday, February 16, 2009
Time: 6:30pm - 8:30pm
Location: Ropes Grey, Harvard Law School
Street: 1563 Massachusetts Ave
City/Town: Cambridge, MA

Details
The Zimbabwe Kupemha is a dinner to raise money for PASSOP (People Against Suffering, Suppression, Oppression, and Poverty), an organization based in Cape Town, South Africa that works both with Zimbabwean refugees in South Africa and with those remaining in Zimbabwe.

Braam Hanekom, the Chairperson of PASSOP, will be speaking at the event about the current situation in Zimbabwe, as well as about PASSOP's initiatives to aid Zimbabweans. Braam is regularly featured in South African media reports on the problems immigrants face in South Africa, in addition to the situation in Zimbabwe. Braam recently won the Inyathelo Award for Youth in Philanthropy, an award from the South African Institute for Advancement.

Tickets are $20. Contact Leigh Ann for additional information: lwebster@jd10.law.harvard.edu

Trust Us

2009-02-02T14:25:00.003-05:00

After all, you elected Us because We know best.

That seems to be the message broadcasting from the leader at the top of the party in power. In all honesty, I am becoming increasingly afraid of a full embrace of collectivism under Obama. I am typically quick to brush off all the right-wing propaganda. But three things have me second guessing this initial impulse:

1. Lot's of people love him. And it's the do-anything-for-you sort of love. Exhibit A.

2. There is already talk of mandatory national service. Exibit B.

3. The so-called financial crisis. And we will let Higgs' work on the Ratchet Effect stand as Exhibit C.

If I am unnecessarily fearful, please correct me.

With all due respect, Mr. President...

2009-01-28T18:58:00.002-05:00

that is not true.

So reads Cato's full page advertisement in the NYT in response to this quote from President Obama:

There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.

Cato lists many, many economists who disagree. See the whole advertisement here (including 8 signatures from GMU professors).

The Bailout Game

2009-01-27T19:16:00.004-05:00

Move over Monopoly, there's a new game in town: The Bailout Game.

Gone are the days when only politicians in Washington could throw away vast sums of money on potentially failing banks. Now, you can try your hand at squandering tax dollars from the comforts of your own living room. But watch out. The evil recession is creeping up from behind.

Seriously, though. If you have not seen this yet, check it out.

Manual Jokes

2009-01-27T12:55:00.006-05:00

From page 6 of Getting Started with Stata for Macintosh:

Starting Stata from the Dock
You may wish to keep Stata in your Dock so that you can start it quickly. While Stata is still running, drag the Stata icon shown in the Dock either to a new position on the Dock or simply up and down again. After you quit Stata, its icon will remain in the Dock and can be double clicked to start the application.

If you have many Stata projects in different folders, and you made differently named blank do-files for each folder, you can drag these to the Dock to start your work on each project. You could also add commonly used Stata data files to the Dock. There are many such shortcuts you could use. Pick your poisson.

Some of you are still looking for the joke, Some of you assumed I made a typo. Two of you are laughing. And I know which two...

For those of you without initials L. J. or K. S., here is a hint.

Quoting Caplan

2009-01-26T20:11:00.001-05:00

From this evening's class:

Pareto efficiency: you still have to learn it. But if you are interested in doing policy analysis, it's basically useless.

Lies, Damn Lies, and...

2009-01-25T13:36:00.005-05:00

Statistics.

Unemployment in the US, as of January 9, is estimated to be 7.2 percent. This is certainly high by American standards, but the European Union averaged roughly 8.5 percent from 1996-2006 (Data).

I cannot help but ask: do we have an economic crisis or a media frenzy? Please, show me the numbers.

Stimulus Gift Card

2009-01-21T15:24:00.010-05:00

A little over a month ago, ThinkOOB suggested offering stimulus checks in the form of gift cards that expire after some period of time. They claim it would prevent people from saving the stimulus money. And they are right. Well, sort of. Can you spot the economic fallacy? These folks couldn't...

nerdrevenge Says:
December 1st, 2008 at 1:13 pm
I was a fan of this website before this idea showed up and now I am an even bigger fan. who comes up with this stuff and why isn’t anyone doing anything about it? This seems like something that someone should know about

policywonk Says:
December 2nd, 2008 at 6:46 am
This is why I alwyas check this site every week, because of stuff like this — We need to do this right away! Why didn’t they do this the first time? [...]

philr Says:
December 2nd, 2008 at 9:04 am
this is a GREAT idea. how do we get it “out there” so that it gets noticed other than by people like me who pore through policy blogs? You should have a links so that people can automatically forward these things to their congressperson

jimcalhoun Says:
December 4th, 2008 at 6:40 pm
the problem is that there is no way of getting the right people to listen. Anybody who reads this is going to say, duh, we should do this. BUt who is reading it? I see a lot of what looks like students and policy wonks but no one who can make it happen

Personal favorite:

bceconomist Says:
January 5th, 2009 at 5:05 pm
anyone see the Globe today? Ed Glaeser was lamenting that no one had come up with an idea to get people to spend their stimulus checks. Those Harvard people have to read this website before they mouth off in the paper. You don’t see us making that mistake.

Fortunately, someone eventually spoke up.

Will Says:
January 21st, 2009 at 3:23 pm
You have overlooked an important fact: MONEY IS FUNGIBLE. (Go look that word up, kids.)

So while soccer moms buy groceries on their stimulus cards, they reduce spending from other sources of income. The net effect of the stimulus card is probably comparable to a stimulus check. At best, you’ve made it minutely more difficult to save the additional income provided by the stimulus.

/self-love

Although gift cards would prevent people from saving the stimulus money, they would not accomplish the actual goal of boosting aggregate demand. Remember: you cannot assume that people will not react to change. They usually do.

Back in the USSR

2009-01-21T09:47:00.005-05:00

McCartney, in a 1984 interview with Playboy, states:

I wrote that as a kind of Beach Boys parody. And 'Back in the USA' was a Chuck Berry song, so it kinda took off from there. I just liked the idea of Georgia girls and talking about places like the Ukraine as if they were California, you know? It was also hands across the water, which I'm still conscious of. 'Cuz they like us out there, even though the bosses in the Kremlin may not. The kids do. And that to me is very important for the future of the race.

Even though the bosses in the Kremlin may not.

I think it is important to remember how invasive the state can become. The Swing Kids movement is another good example of this. It is equally important, IMHO, to do everything in our power to prevent this from happening.

Smart Stimulus

2009-01-21T09:21:00.003-05:00

That's what Bryan Caplan and Arnold Kling are calling their policy recommendation. Check it out and tell me what you think.

More On Stimulation

2009-01-20T08:01:00.005-05:00

In only 53 seconds, Nick Gillespie of ReasonTV offers "two ideas for stimulating the economy even more than John Holmes was stimulated in Saturday Night Beaver."

[HT: Boudreaux]

Describing Zim

2009-01-19T20:15:00.003-05:00

Nelson Banya writes:

[...] prices double every day and more than 2,000 people have died in a cholera epidemic.

Longtime readers of this blog know how the mess that is Zimbabwe breaks my heart. For new readers, I spent 4.5 months in Cape Town, South Africa in 2007 where I met many Zimbabweans and participated in a couple protests/informational meetings with respect to the country.

What is truly disheartening is how Zim went from breadbasket to basket case under the leadership of Mugabe. It isn't that they are incapable (i.e. don't have the resources) of being more prosperous, but rather that the institutional framework perpetuates poverty. Imagine dealing with doubling prices every day. Most of us have not experienced doubling prices in our entire lives. And the last time I saw a cholera epidemic was while playing Oregon Trail.

Josh Hall at DOL has another interesting Zim quote.

Temporary Tax Cuts

2009-01-18T23:08:00.005-05:00

As the NYT reports, House Democrats released a tax plan on Friday with $275 billion in cuts in an effort to revive the economy.

But the tax provision likely to be of most interest is the two-year middle-class tax cut, which will provide up to $500 to individuals and up to $1,000 for couples earning less than $200,000 a year, the overwhelming majority of Americans.

Let's ignore normative questions surrounding the government's role in stimulating the economy and, instead, focus on the economic case: will temporary tax cuts boost aggregate demand?

The short answer is no. As the Life Cycle Hypothesis (developed by Modigliani and Fisher, among others) and Permanent Income Hypothesis (developed by Friedman) suggest, temporary changes in income have little effect on current consumption. The idea is that individuals smooth out consumption over the long run.

Let's make some rough calculations.

Δ Current Consumption = Δ Income/n

where Δ represents "change in" and n is the remaining number of years one expects to live.

Assuming the average recipient is 45 years old and expects to live until they are 78, n = 33. A temporary tax cut of $275 billion increases aggregate current consumption by $275b/33 = $8.33 billion. Of course, if you are anything like me, the word billion after any number reduces the entire value to "a lot". To clarify: a tax cut of $500 per person for two years would boost current consumption by $(500+500)/33 = $30.30 per person. I've had bigger bar tabs.

It might be unfair to leave the discussion at this point, though. The assumption implicit in the Life Cycle Hypothesis/Permanent Income Hypothesis is that individuals save in good times and dissave or borrow in bad times. It could be argued that the government is simply providing short-term credit to those who would dissave or borrow if they had savings to dip into or private lenders willing to make loans. If this is the case, we should expect a larger portion of the tax cut to affect current consumption.

At best, though, I think the government-as-lender idea opens up a can of worms. For example, how does the government know who would be willing to take out a loan? The decision to give tax cuts to everyone "earning less than $200,000 a year, the overwhelming majority of Americans" seems to suggest they don't know with any significant degree of precision. So even if one were to accept this line of thinking, a temporary tax cut is a particularly inefficient modus operandi.

[Please refrain from jokes about two-handed economists, as appropriate as they may be.]

Quote of the Day

2009-01-18T21:57:00.003-05:00

From President-elect Obama:

Despite the enormity of the task that lies ahead, I stand here today as hopeful as ever that the United States of America will endure — that it will prevail, that the dream of our founders will live on in our time.

Dream of our founders? What dreams would that be?

It would be great if, in his inaugural address, Obama reveals his true stance as a strong supporter of minimal government intervention and a commitment to protecting the constitution (including the second amendment). I wouldn't rush over to Intrade, though.

Trivia: Warren G. Harding coined the term Founding Fathers in his keynote address to the 1916 Republican National Convention.

Superb Economic Analysis

2009-01-18T14:41:00.003-05:00

...from a women's studies professor. I was surprised, to say the least. Lynn Comella, a professor at the University of Nevada, Las Vegas, makes the following statement:

"The recession might force the cream of the crop to rise to the top. There's some people who believe that a cleaning out of the market might be a good thing for the industry," Comella said. "2009 might not be all that bad, but it's going to bring the issue of quality to the foreground."

I should point out that she is referring to the porn industry. (I stumbled across this little gem when checking up on the potential porn bailout. BTW: no news, as of yet.)

This is similar to my (rather dismal) opinion on the current economic situation in general. Cheap credit has caused malinvestment. And these investments have prompted individuals to pursue training in areas that are not economically sustainable. We must allow market corrections to discipline us. Attempting to boost aggregate demand with a fancy stimulus package ignores the underlying problem.

What do you think?

Sweatshops

2009-01-18T14:23:00.002-05:00

Unfortunately, the only thing worse than working in a sweatshop for some people is not working in a sweatshop. In the NYT, Nicholas Kristof details where the impoverished of Phnom Penh, Cambodia turn when sweatshops are not an option:

It’s a mountain of festering refuse, a half-hour hike across, emitting clouds of smoke from subterranean fires.

The miasma of toxic stink leaves you gasping, breezes batter you with filth, and even the rats look forlorn. Then the smoke parts and you come across a child ambling barefoot, searching for old plastic cups that recyclers will buy for five cents a pound.

IMHO, Kristof's observations are spot on.

Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children.

He even provides testimonials.

“I’d love to get a job in a factory,” said Pim Srey Rath, a 19-year-old woman scavenging for plastic. “At least that work is in the shade. Here is where it’s hot.”

But this is by far his best line.

I’m glad that many Americans are repulsed by the idea of importing products made by barely paid, barely legal workers in dangerous factories. Yet sweatshops are only a symptom of poverty, not a cause, and banning them closes off one route out of poverty.

ATSRTWT.

[HT: Boudreaux]

Tullock 1, Austrians 0

2009-01-15T15:52:00.004-05:00

I spent a few hours today working in the Tullock archives. Fortunately for all of you, I came across the following correspondence between the new TAE blogger and the old curmudgeon.

(Scribbled on a post-it attached to a paper entitled "Formalism in Austrian-School Welfare Economics: Another Pretense of Knowledge?")

Gordon-
Am I crazy, or are these other Austrians crazy?
Yours-
Dave Prychitko

(Typed on official University of Arizona letterhead and dated August 1, 1995.)

David Prychitko
Department of Economics
State University of New York
Oswego, New York 13126

Dear Dave:

All Austrians are crazy.

Cordially yours,

Gordon Tullock
Karl Eller Professor of
Economics and Political Science

GT : lc

This could be the best Tullock insult discovered as of yet.

Economists on Stimulus Package

2009-01-14T08:56:00.002-05:00

Here's what the skeptics say:

“A stimulus package of this magnitude is likely to contain many projects that are poor investments.”
‐ Alan Viard,
Resident Scholar, American Enterprise Institute

“Government spending does not create incentives for labor, innovation and investment. Instead of
spending $1 trillion in Washington, let Washington forgive $1 trillion in tax revenues to create incentives for
millions of individuals and firms to get the economy going again, one dollar at a time.”
‐ Donald Luskin
Chief Investment Officer, Trend Macrolytics LLC

“I have concerns about a stimulus spending bill. I think there are two criteria that may justify additional
spending: 1. The spending passes a long-term cost-benefit test. That test may be less rigorous now that
we are in a period of extremely low interest rates, but it should still be passed. 2. Alternatively, the
spending can be implemented very quickly and will have a significant impact on employment. I highly
doubt there are $1 trillion of new projects that meet one or both of these tests. I would rather see a
temporary suspension of some or all of the payroll tax.”
‐ Philip Levy
Resident Scholar, American Enterprise Institute

“The only way Congress can spend money is to extract it from the private sector – either by taxing it,
borrowing it, or seignorage. The question then becomes: will Congress spend that money more wisely than
the private sector would have spent it? The answer appears to be no. Congress typically spends
according to its political priorities, not economic priorities.”
‐ Michael Cannon
Cato Institute

“It is time for voters to wake up to the fact that government cannot create jobs. It can only shift jobs from
one part of the economy to the other. It is entrepreneurs who create jobs, and it is consumers who judge
whether those jobs are the best jobs to be created. The government contributes best by establishing a rule
of law and protection of property rights that allows entrepreneurs and consumers to act in their best
interests.”
‐ Antony Davies
Associate Professor of Economics, Duquesne University

“The stimulus plan will most probably turn quickly into pork spending. Marginal rate tax cuts would be a
much more effective way to stimulate demand along with cuts in the capital gains and corporate tax rates.
Evidence shows that marginal tax cut multipliers are much higher than spending multipliers. In addition the
Fed is still not out of ammunition.”
‐ Joseph Zoric
Associate Professor of Economics, Franciscan University of Steubenville

“Fiscal stimulus may have symbolic value and certainly does provide an expedient for distributive politics,
but there is NO evidence that it contributes to GDP or economic growth more broadly.”
‐ Edward Lopez
Associate Professor of Law and Economics, San Jose State University

“The empirical evidence overwhelmingly rejects federal government deficit spending as the best method for
stimulating the economy, and is generally unsupportive of it having any stimulus effect at all.”
‐ Justin Ross
Assistant Professor of Economics, School of Public and Environmental Affairs, Indiana
University

“There is not only the problem that efficient projects are often slow to get to the point where they generate
actual expenditures, but also that once the government starts spending it is hard to turn off the tap when
the stimulus is no longer needed.”
‐ Thomas Mayer
Professor Emeritus, University of California –Davis

“The stimulus plans assume consumption is the source of economic growth. It is not. It is the
consequence of said growth. The ‘stimulus’ is a redistribution of spending, at best, and will do little to help.
The next Administration should avoid large scale programs and experimentation and allow the marketplace
to correct the errors made by the last 8 years of misguided intervention.”
‐ Steven Horwitz
Charles A. Dana Professor of Economics, St. Lawrence University

“Any so-called stimulus program is a ruse. The government can increase its spending only by reducing
private spending equivalently. Whether government finances its added spending by increasing taxes, by
borrowing, or by inflating the currency, the added spending will be offset by reduced private spending.
Furthermore, private spending is generally more efficient than the government spending that would replace
it because people act more carefully when they spend their own money than when they spend other
people's money.”
‐ Richard Wagner
Professor of Economics, George Mason University

“Want to grow the economy without inflation? Cut marginal tax rates, slash the corporate rate, expense
investment in the first year (instead of depreciation), keep tax rates low on dividends and capital gains, and
repeal the death tax. Have the Federal Reserve focus on price stability and a sound dollar, and on not
generating a monetary roller coaster. (That, in part, is what caused the housing and commodities bubbles.)
Rein in government spending to pay for the tax cuts, and trim senseless regulation.”
‐ Stephen Entin
President & Executive Director, Institute for Research on the Economics of Taxation

“Rather than old style Keynesianism we should reduce the corporate income tax substantially. The
problem is not lack of demand, but rather a lack of investment. By reducing the corporate income tax,
among the highest in the industrialized world, we will increase the incentive for companies to invest in new
equipment, technology, research and development, and buildings. This will increase productivity in the
long run, leading to higher GDP and higher wages.”
‐ Gary Wolfram
William Simon Professor of Economics, Hillsdale College

“Government ‘infrastructure spending stimulus’ programs in Japan during the 1990s produced no stimulus,
but rather a vast overhang of government debt. Bridges, tunnels, roads, and trains to nowhere stimulate
nothing. It is productivity growth that counts, and that comes mainly from the private sector – which is why
tax cuts have always been a surer way to economic recovery.”
‐ Lawrence Franko
Retired Professor, University of Massachusetts Boston, College of Management

“There is no convincing evidence that stimulative fiscal policy is either feasible or effective. The recognition
and action lags (ancient terms from the bygone Keynesian era) alone virtually always mean that the
stimulus arrives after the recession is over, thus causing an undesirable distortion that impedes recovery.”
‐ John Seater
Professor of Economics, North Carolina State University

“The evidence that fiscal stimulus works is weak. Why risk such large amounts on a program with
uncertain benefits, especially if the mechanisms to transmit those benefits to the economy are a bunch of
pork barrel, second rate projects.”
‐ Charles Reback
Assistant Professor, University of South Carolina Upstate

“Japan in the early and mid 1990s engaged in major fiscal stimulus focused on infrastructure projects with
deficits equal to 7-8% of GDP and a cumulative Debt/GDP of almost 150%. None of this led to economic
recovery until the late 1990s when the Bank of Japan engaged in quantitative easing of monetary policy
and the Government of Japan finally introduced a taxpayer bailout of the banks. The Fed and Treasury in
the US have already taken such actions. The Japanese experience suggests that additional fiscal stimulus
will only add to the Debt without helping the economy.”
‐ Michael Keran
Retired, Former Sr. VP & Director of Research, Federal Reserve Bank of San Francisco

“Government intervention and ‘stimulus’ in the housing market is largely responsible for the current
economic crisis. History has shown that the Obama team’s proposed ‘stimulus’ is not only going to have
little to no effect in the short run, but will create a larger bureaucratic structure, lead to tremendous
investments in unproductive political lobbying among ‘stimulus project’ wannabes, and dissuade/delay
private investment, recovery and growth.”
‐ Michael Sykuta
Associate Professor, University of Missouri – Columbia

“Common sense dictates that any investment, public or private, must take opportunity costs into
consideration. It’s never a good idea to waste scare resources, but this is often what occurs when
economics gets pushed aside in favor of politics.”
‐ James Garven
Frank S. Groner Memorial Chair of Finance, Baylor University

“Our economy as a whole will [no] benefit from taking money from current or future taxpayers to support a
government spending spree. No doubt, certain interest groups will gain from feeding at the public sector
trough. But losers surely will outnumber winners by a large margin. Our economy as a whole will benefit
from Congress lowering taxes and letting Americans decide for themselves what is worth spending their
hard-earned dollars on.”
‐ David Laband
Professor of Economics and Policy, Auburn University

“A government-spending ‘stimulus’ is a very bad idea. Because government can spend only what it has
taxed or borrowed away from the public, it creates no new demand but merely redirects it. Recovery
depends on profit and loss discipline and public confidence that the basic rules underlying free markets will
be followed. The latter is hurt by government interventions such as ‘stimulus.’”
‐ Howard Baetjer
Lecturer, Dept. of Economics, Towson University

“[T]ax cuts will not create the waste [than] government spending would, because individual households are
making their own decisions about which spending or investment projects are worthwhile for themselves.”
‐ Alan Stockman
Wilson Professor of Economics, University of Rochester

“During recessions, unemployment rationalizes a role for government in creating jobs. But there is no
reason these jobs should be directly working for the government: nothing about a recession justifies larger
government. If we are worried about too few jobs, it makes sense to subsidize private employment (for
example, by temporarily lowering payroll taxes or creating a new tax subsidy for new hires).”
‐ Glen Weyl
Junior Fellow at the Society of Fellows and Post-Doctoral Fellow in the Department of
Economics, Harvard University

“Tax cuts are preferable to spending, especially the many programs that will doubtless result from this
process. Even the designated chair of Obama's CEA finds that increased taxes reduce growth.”
‐ James Butkiewicz
Professor of Economics, University of Delaware

“The current recession was caused by government fiddling with the mortgage market and the moral hazard
created by the illusion of government monitoring of financial markets. Increased government involvement
in the economy is not the solution.”
‐ Henry Thompson
Professor, Auburn University

“An ‘economic stimulus’ program will do nothing to correct the serious price and resource misallocations
that currently exist and are stopping the economy from moving back toward ‘full-employment.’ In fact, they
will likely retard the recovery. They will divert resources from the private sector to the government sector
moving us further away from a free-enterprise economy.”
‐ Gene Smiley
Emeritus Professor of Economics, Marquette University

“There is ample evidence that large deficit spending packages will be counter-productive. We should focus
on tax cuts and on spending proposals where the benefits outweigh the costs. Transferring funds to state
governments avoids asking the cost-benefit question and should be avoided.”
‐ King Banaian
Professor, Dept. of Economics, St. Cloud State University

“Government spending is not the road to real economic prosperity. I am particularly concerned about
government spending misdirecting opportunities for entrepreneurship and private economic growth.”
‐ Henry Butler
Executive Director, Searle Center on Law, Regulation, and Economic Growth
Northwestern University School of Law

“Governments make lots of a bad policy during times of economic stress. A spending package that
approaches $1 trillion is a case in point. Do we really trust the Congress and the Executive Branch to
spend such vast sums wisely, especially after all the bumbling around and ill-advised bailouts this year?
Does the government really have a long list of well-thought-out, cost-effective projects that will help our
economy? I do not think so.”
‐ Scott Bradford
Associate Professor, Brigham Young University

“A spending stimulus will only delay the needed restructuring of the U.S. economy to remain internationally
competitive. Tax cuts will facilitate that restructuring far better than spending and job creation by the
government.”
‐ Stacie Beck
Professor, University of Delaware

“There is no credible evidence that government spending can create jobs in the long run. Government
policies can, however, destroy jobs.”
‐ John Howe
Professor of Finance, University of Missouri

“Japan’s federal expenditures, following their 1989 stock market crash, have had little to no effect on their
recovery. Japan has been left with a huge government debt per GDP ratio and nearly 20 years of little to
no growth. Why on earth would the U.S. want to follow in Japan’s footsteps?”
‐ Gary Quinlivan
Dean of the Alex G. McKenna School, St. Vincent College

“We must first recognize that government officials must be seen as doing something to fix the economy;
however, the plans I have been hearing about, namely developing infrastructure for heretofore impractical
‘green’ technologies, strikes me as an odd approach. Markets still work pretty well and most economists
will tell you that government interference with those markets typically causes more harm than good…
Entrepreneurs will create a much more efficient outcome if the costs imposed upon them by government
are reduced.”
‐ Brian O’Roark
Associate Professor of Economics, Robert Morris University

“Government spending programs like these are political grab-bags whose successes are predicated on
satisfying political interest groups, not on creating value and growth in a market economy; these
government spending programs then often become embedded ‘entitlements,’ crowding out the flow of
funds to private investments in a free marketplace.”
‐ Douglas Houston
Professor, School of Business, University of Kansas

Too high? Too low?

2009-01-14T01:39:00.003-05:00

The media created a frenzy over high gas prices. What do they do when prices drop? You guessed it: more fear-mongering. From MSNBC:

If [the big three's] fears come true, gas prices will be so low when they start rolling out the cars next year that people won’t buy them and all the high-priced research will have gone to waste.

And the solution, as usual, is more government. Hold on to your wallet.

The fear of producing the wrong cars has created a whisper campaign, with industry officials saying they may approach the incoming Obama administration about raising the federal gasoline tax or setting up a system that keeps the price of oil above a certain level.

If nothing else, this serves as solid proof that pro-business and pro-market are not synonymous.

“It makes life very difficult if the market gyrates wildly over the course of several months, and that’s exactly what we’ve seen happen,” Ford Executive Chairman Bill Ford Jr. said in a recent interview with The Associated Press.

[HT: Kate]

W

2009-01-09T06:58:00.000-05:00

Face it: you are going to miss him.

Health Care Reform is Old News

2009-01-08T00:45:00.003-05:00

Ok. Maybe not. But I found some old news of interest. First, Michael Moore blows up over Dr. Sanjay Gupta's report on Sicko.

Then, Gupta goes head to head with Moore on Larry King Live.

Ignoring the issue, two media interviewing strategies are clearly present. Moore attacks. His aim is not to be academic, but to persuade the general public. He does so by making a lot of noise. Gupta, on the other hand, remains calm. He talks about numbers--not just stats pulled out of the air, but where the numbers come from and how data should be collected (CNN, in sharp contrast with Sick, got all of their numbers from the World Health Organization.).

My question to you: which do you find more persuasive? Or, rather, which do you think persuades more people.

IMHO:
Moore certainly won the debate on Blitzer. He makes the average viewer believe that CNN is a scam. But Moore's opponent was not around to defend himself (though Wolfe stood up to defend his colleague to some extent).

Gupta was certainly the victor on LKL, though. He had a strong command over the facts and raised tough questions that Moore refused to answer (e.g., socialized medicine is only free at the point of use).

Is there an optimal strategy for interviewing? Should one be more radical when there is no one to defend the other perspective? Or do experts (Moore is not an expert, only an activist) have an ethical obligation to behave the way Gupta did?

Clothes Off, Hand Out

2009-01-07T17:57:00.004-05:00

The line for bailouts increases, as the porn industry joins the ranks. From CNN:

Another major American industry is asking for assistance as the global financial crisis continues: Hustler publisher Larry Flynt and Girls Gone Wild CEO Joe Francis said Wednesday they will request that Congress allocate $5 billion for a bailout of the adult entertainment industry.

“The take here is that everyone and their mother want to be bailed out from the banks to the big three,” said Owen Moogan, spokesman for Larry Flynt. “The porn industry has been hurt by the downturn like everyone else and they are going to ask for the $5 billion. Is it the most serious thing in the world? Is it going to make the lives of Americans better if it happens? It is not for them to determine.”

Francis said in a statement that “the US government should actively support the adult industry's survival and growth, just as it feels the need to support any other industry cherished by the American people."

You cannot make this up. But they do have a point: Why should the government be picking and choosing economic winners and losers?

[HT: Shruti]

Blockquoting X

2009-01-07T12:04:00.004-05:00

X is Chris Coyne:

If we consider only two choices, both of which exclude the possibility of market provisions—total chaos where life is nasty, brutish, and short, or total harmony in the absence of conflict—we easily reach the conclusion that a compulsive state is needed as an effective enforcement mechanism. The former choice is dismissed on the grounds of continued violence and conflict, and the latter is rejected because a conflict-free society is impossible to imagine. Once the possibility of the market provision of rules, laws, and enforcement mechanisms is admitted, however, the conclusion that the state is the necessary and only source of order is exposed as a misconception.

Do as I say...

2009-01-07T11:39:00.001-05:00

...not as I do.

Mien Financial Kampf

2009-01-06T23:39:00.004-05:00

It appears as if no one is out of reach of a good 'ole bubble bursting...

[HT: Angela]

BART Shooting

2009-01-06T06:55:00.004-05:00

Pete Eyre @ Bureaucrash links to this video on the BART Police shooting.

The young man was clearly unarmed. And even if he struggled with the officers, it does not appear as if lethal force was necessary. Nonetheless, 22-yr old Oscar Grant is dead. The name of the officer who fired on Grant has not yet been released.

The Economist on Economists

2009-01-06T06:41:00.002-05:00

The Economist picks 8 young economists and concludes with this meaty little body of text:

Economics is now defined neither by its subject matter nor by its method.

What, then, unites these eight young stars and the discipline they may come to dominate? Economists still share a taste for the Greek alphabet: they like to provide formal, algebraic accounts of the behaviour they explain. And they pride themselves on the sophistication of their investigative methods. They are usually better at teasing confessions out of data than their rivals in other social sciences. What defines economics? Economics is what economists do—the best of them, anyway.

Is this a pro or con?

Free Knowledge?

2009-01-05T15:36:00.002-05:00

Wikipedia founder Jimmy Wales writes:

You have proven that Wikipedia matters to you, and that you support our mission: to bring free knowledge to the planet, free of charge and free of advertising. You've helped make and keep Wikipedia available for the whole world.

I find it interesting that he still calls it free knowledge just after acknowledging that

Since July 1, more than 125,000 of you have donated $4 million. In addition, we've received major gifts and foundation support totaling $2 million. This combined revenue will cover our operating expenses for the current fiscal year, ending June 30, 2009.

C'mon Jimmy. Wikipedia is not free! And that is ok.

It is free at the point of use, which is quite different than altogether free. In fact, it might be a good example of voluntary income redistribution.

Wagner: Part Professor, Part Prophet

2008-12-15T08:08:00.003-05:00

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

2008-11-17T16:51:00.002-05:00

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

2008-11-16T18:23:00.003-05:00

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

2008-11-14T14:57:00.003-05:00

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

2008-11-11T01:31:00.006-05:00

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

2008-11-04T14:10:00.001-05:00

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

2008-11-04T02:16:00.002-05:00

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

2008-11-04T01:04:00.003-05:00

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

2008-11-03T18:38:00.002-05:00

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

2008-11-03T14:31:00.004-05:00

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

2008-10-31T20:18:00.000-04:00

My favorite story about government meddling. Ever.

Blockquoting X

2008-10-31T16:27:00.003-04:00

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

2008-10-27T16:33:00.004-04:00

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

2008-10-27T14:48:00.003-04:00

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

2008-10-27T02:09:00.007-04:00

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

2008-10-24T17:51:00.002-04:00

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

[HT: Aaron]

From the Inbox

2008-10-17T20:45:00.001-04:00

[HT: Ray]

RSS Feeds

2008-10-17T20:34:00.003-04:00

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

2008-10-17T19:20:00.002-04:00

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?

2008-10-16T23:11:00.003-04:00

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

Presidential Debates

2008-10-16T02:25:00.002-04:00

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

2008-10-14T03:31:00.005-04:00

...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

2008-10-13T20:31:00.006-04:00

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

2008-10-13T10:40:00.005-04:00

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

2008-10-13T10:20:00.002-04:00

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

2008-10-08T04:51:00.002-04:00

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

2008-10-06T00:21:00.004-04:00

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

2008-10-03T18:10:00.002-04:00

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)

2008-10-03T12:59:00.003-04:00

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

2008-10-03T00:42:00.002-04:00

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

2008-09-29T22:17:00.004-04:00

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!"

2008-09-28T17:54:00.008-04:00

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

2008-09-27T01:37:00.001-04:00

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

2008-09-26T23:13:00.004-04:00

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

2008-09-25T12:14:00.003-04:00

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!)

2008-09-24T00:06:00.002-04:00

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?

2008-09-21T19:40:00.003-04:00

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

2008-09-20T03:37:00.004-04:00

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

2008-09-20T02:35:00.003-04:00

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

2008-09-20T02:02:00.005-04:00

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

2008-09-19T13:53:00.003-04:00

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

2008-09-18T17:54:00.003-04:00

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

2008-09-18T05:27:00.004-04:00

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

2008-09-17T00:29:00.003-04:00

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

2008-09-16T23:04:00.004-04:00

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

2008-09-16T13:12:00.002-04:00

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

2008-09-15T22:34:00.004-04:00

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

2008-09-14T23:08:00.003-04:00

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

2008-09-14T03:33:00.003-04:00

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

2008-09-13T23:34:00.002-04:00

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

2008-09-12T23:39:00.005-04:00

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

2008-09-11T13:23:00.002-04:00

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

A New Economics Fable

2008-09-10T16:21:00.002-04:00

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

2008-09-06T17:17:00.001-04:00

John and Thomas, that is.