The other shoe....

From the BBC: Venezuelan President Hugo Chavez has confirmed that he will try to change the law to allow him to remain in power indefinitely.






Just like Cardoso (Brazil), Fujimori (Peru) and Menem (Argentina) before him, Hugo has decided he's just too important to leave. Something tells me though that he will be around a lot longer than his Latin American constitution changing predecessors.

Oh and one more thing, is anyone besides me surprised that Putin hasn't done this?

Tasty Mashup

How about 1 part Jamaican dub and 1 part Sufi Qawwali?

More specifically, the sublime Nusrat Fateh Ali Kahn posthumously remixed over dub beats from producer Gaudi entitled Dub Qawwali. You can read about this "collaboration" here (as always, please don't ask me how I know about this link!).
Nusrat doesn't really need any remixing to keep my attention though. If you are not familiar with his music, I'd suggest the two CD set Nusrat Fateh Ali Khan and Party: The Supreme Collection, Volume One as a good starting point.

I'm on the Pavement, thinkin' 'bout the Government

In a fascinating post Dani Rodrik says there are two genres of economists: first besters and second besters.

From my understanding of his post, the first besters always trust the market and "their take on the issues of the day are driven by a straightforward, almost knee-jerk logic." Dani puts Gary Becker, Tyler Cowen, Greg Mankiw, and Brad De Long in this category.

The second besters, who include Joe Stiglitz, George Akerlof, Bob Shiller, Alan Blinder and Paul Krugman, argue that "that market outcomes can be improved by well-designed interventions", and eschew straightforward free-market prescriptions as hopelessly oversimplistic.

Tyler has now weighed in to say "I think of myself as a better-than-first-best economist" and that "An oversimplified version of my view is that anything good is underprovided at the margin."


I think that one could perhaps better frame this debate as how economists view the government. In this case the first besters would be those who tend to uncritically view the government as a benevolent externality corrector (or at least that it would be if we could just elect the right people). The second besters would be the Public Choicers (the Bob Tollisons, the Gordon Tullocks); people that view government agents as acting in their own interest and thus amenable to aiding narrow monied interests.

Me? I think that any real world market outcome could hypothetically be improved mainly for the reasons Tyler gives, but that starting from where we are now, the actual outcome of turning our government (further) loose on any given outcome would most likely make things worse.

We have made a bollix of the tax system, we are moving towards making more mistakes in our economic relationship with China, we are probably going to continue to give protection to domestic steel for no good reason, we just passed a truly disgusting farm bill, we continue our surrealistic approach to social security, the reform of earmarking lasted about 5 minutes, our alternative energy policy is being run by the corn lobby; its hard for me to see an area in economic policy where new government action is making things better.

What about education? Starting from where we are now, would you favor more government spending and regulation or more competition and market based experiments? I'd opt for the latter.

I'm not a no government guy, I don't favor private money or private law. I think our government has gotten many big things approximately right (anti-trust, rule of law, protection of individual rights, compulsory education). I just think the supposed naivety of the Rodrikian first besters about the market is only surpassed by the naivety of the those who assume the best when it comes to the government!

The relevant comparision has to be between the current market outcome and the most likely result of further government activity as predicted from a positive model of its behavior. We cannot simply assume that government will implement what we consider to be the optimal policy intervention.

Markets in Everything!

An interesting result, for the court case Porter v. Bowen (decision). At a minimum, state laws against political vote "trading," as opposed to outright selling or bartering for goods or services, are now questionable.

Excerpt from decision:

Whatever the wisdom of using vote-swapping agreements to communicate these positions, such agreements plainly differ from conventional (and illegal) vote buying, which conveys no message other than the parties' willingness to exchange votes for money (or some other form of private profit). The Supreme Court held in Brown v. Hartlage, 456 U.S. 45, 55 (1982), that vote buying may be banned "without trenching on any right of association protected by the First Amendment." Vote swapping, however, is more akin to the candidate's pledge in Brown to take a pay cut if elected, which the Court concluded was constitutionally protected, than to unprotected vote buying. Like the candidate's pledge, vote swapping involves a "promise to confer some ultimate benefit on the voter, qua...citizen[ ] or member of the general public"--i.e., another person's agreement to vote for a particular candidate. Id. at 58-59. And unlike vote buying, vote swapping is not an "illegal exchange for private profit" since the only benefit a vote swapper can receive is a marginally higher probability that his preferred electoral outcome will come to pass. Id. at 55 (emphasis added); cf. Marc Johnandazza, The Other Election Controversy of Y2K: Core First Amendment Values and High-Tech Political Coalitions, 82 Wash. U. L.Q. 143, 221 (2004) ("There can be no...serious assertion, that anyone entered into a vote-swap arrangement for private profit or any other form of enrichment.").

Both the websites' vote-swapping mechanisms and the communication and vote swaps that they enabled were therefore constitutionally protected. At their core, they amounted to efforts by politically engaged people to support their preferred candidates and to avoid election results that they feared would contravene the preferences of a majority of voters in closely contested states. Whether or not one agrees with these voters' tactics, such efforts, when conducted honestly and without money changing hands, are at the heart of the liberty safeguarded by the First Amendment.

Commentary from Rick Hasen here (he also produced the link for the decision, above)

Some background, from ELB:

Who says the 2000 election is over? Last Friday the Ninth Circuit heard oral argument (audio) in Porter v. McPherson (formerly Porter v. Jones and likely to be retitled Porter v. Bowen). At issue was the decision of then-Callifornia Secretary of State Bill Jones to threaten litigation to shut down websites that allowed individuals in different states to agree to "trade" votes. These sites were set up by people who wanted to make sure votes for Nader did not lead to a Bush victory in 2000. An example of the kind of exchange that the site would facilitate would be a Gore voter voting for Nader in California in exchange for a Nader voter in Florida voting for Gore. This would help give Gore Florida's electoral votes and give Nader his 5% of the popular vote to be entitled to public funding in the next presidential election.

Plaintiffs argue that barring the facilitation of discussions between voters in different states that could lead to exchanges violates the plaintiffs' (and their users) First Amendment rights of free speech and association. (They also have an interesting statutory interpretation argument---that the exchange of political benefits is not "vaulable consideration" under the California statute---and a dormant Commerce Clause argument that I don't really understand.)

The Ninth Circuit heard this case first in 2003 (opinion), which decided the district court erred in abstaining in the case. My earlier coverage is here. The case is now back before a new panel on the merits (Fisher, Clifton and District Court judge Martinez, sitting by designation).

The issue is a fascinating one, about whether the unenforceable exchange of political benefits may be prohibted by the state in the name of preventing vote buying.

(Nod to Chateau)
(And, acknowledgement to Tyler for the title)

Actual Text of Levitt Correction Letter

Here is the text of the Levitt "correction" letter.

(Nod to JL)

Multiple Choice on Housing

A multiple choice quiz:

Should you believe....
a. the results of surveys
b. the conclusions of Robert Frank
c. neither

Answer: c

When I See Garbage, I Think of You!

I recently opined, on EconLib, about recycling.

Got home from Santa Fe, and my lovely wife immediately went and got an article she had been saving, from the Raleigh paper. Turns out people are "recycling" a heck of a lot of iron, steel, and copper because they love the earth. NOT! It's because it has value. People are actually scouring the hinterlands for old tractor parts, radiators, and so on.

An excerpt:

An 80-year-old man with heart trouble spends his days bouncing over the Johnston County back roads, hunting for rusty farm equipment....

Blame the invisible hand of scrap metal economics, which drives a global hunger for recycled junk that stretches to bridge-building in India and apartment construction in China. The tiniest, rustiest bit of metal discarded or stolen in the Triangle is wrapped up in a powerful global market that connects junkmen, recyclers and thieves with a construction boom in east Asia.

This week, TT&E Iron & Metal in Garner will send four 50,000-pound loads of scrap metal to China. Last week, Raleigh Metals Processing got an e-mail message seeking up to 2,500 tons of scrap for construction projects in India, Dubai and Singapore.

The demand means that old copper pays about $2.85 a pound in the Triangle -- up from less than a dollar just five years ago.

"You used to see people bringing stuff to landfills; now they bring it here," said TT&E's Scott Thompson, who has seen daily customers rise from 150 a day to 250. "Right now, there doesn't seem to be any end to it."

...Sixty percent of the average car is recycled metal, said Chuck Carr, spokesman for the Institute of Scrap Recycling Industries in Washington.

Nationwide, the industry recycles 150 million tons of scrap each year, sending 25 percent overseas but keeping massive amounts for construction at home. It's cheaper and cleaner to recycle metal, and in China's case, there isn't much raw metal on hand.

"We're the Saudi Arabia of scrap," Carr said. "We produce far more than we can use."

(ATSRTWT)

No, there is "no end" to the incentive to reuse and recycle things, so long as you can make money by doing it. And, the fact that you can make money doing it means that you are saving resources. I love recycling! And I love my wife, for saving the article.

Later, I gave her the silver necklace, with turquoise and lapis lazuli, I had purchased for her at the Santa Fe street market. It was made by Frank Chee and his wife, in Vanderwagon (They are Dine Navajo).

And I said, "Dear, when I see jewelry, I think of you!"

Her response was, "Dear, when I see an article about garbage, I think of YOU!"

For some reason, this appeared to amuse her considerably. But the necklace had the desired effect on her, so I have no complaints.

1 Fish, 2 Fish, Red Fish, Blue Fish

Stanley Fish has a problem. He thinks the problem is that he has to stir his own coffee. I think it is that he last lost his mind. Yes, the Stanley Fish, the literary theorist, the "Davidson-Kahn Distinguished University Professor" at Florida International University, formerly at Berkeley and Duke, author of 10 books has been to Starbucks and DIDN'T LIKE IT!!! But why don't I let him tell you his own self?

It turns out to be hard. First you have to get in line, and you may have one or two people in front of you who are ordering a drink with more parts than an internal combustion engine, something about “double shot,” “skinny,” “breve,” “grande,” “au lait” and a lot of other words that never pass my lips. If you are patient and stay in line (no bathroom breaks), you get to put in your order, but then you have to find a place to stand while you wait for it. There is no such place. So you shift your body, first here and then there, trying not to get in the way of those you can’t help get in the way of.

Finally, the coffee arrives.

But then your real problems begin when you turn, holding your prize, and make your way to where the accessories — things you put in, on and around your coffee — are to be found. There is a staggering array of them, and the order of their placement seems random in relation to the order of your needs. There is no “right” place to start, so you lunge after one thing and then after another with awkward reaches.

Unfortunately, two or three other people are doing the same thing, and each is doing it in a different sequence. So there is an endless round of “excuse me,” “no, excuse me,” as if you were in an old Steve Martin routine.

But no amount of politeness and care is enough. After all, there are so many items to reach for — lids, cup jackets, straws, napkins, stirrers, milk, half and half, water, sugar, Splenda, the wastepaper basket, spoons. You and your companions may strive for a ballet of courtesy, but what you end up performing is more like bumper cars. It’s just a question of what will happen first — getting what you want or spilling the coffee you are trying to balance in one hand on the guy reaching over you.

Stanley: pay attention. This is for your own good. Just stay home, have an Ovaltine, and stop boring the crap out of us.

kthxbye!

No Child Left Behind!

Students at the University of Oklahoma are super stoic. They accept their fate with little whining and soldier on. When I taught at Tulane, it was not so. Many had the "my dad is rich so I'm gonna pass no matter what" attitude. I had a student threaten to accuse me of harassment if I didn't change her failing grade to a pass. I declined to change it, but rather than going after me she had her father get the grade changed administratively somewhere way up above my pay grade as they say.

All this is by way of introduction to the lovely story in the NY times of the girl who couldn't (wouldn't) do algebra.

Indira Fernandez "missed one-third of the classes, arrived late for 20 sessions, turned in half the required homework assignments, failed 11 of 14 tests and quizzes, and never took the final exam" in her intermediate algebra class at the High School of Arts & Technology in Manhattan

She then produced a Doctors note that covered her absences up until March 15 (the final was June 12th), and she and her mother convinced the principal to let her re-take the final. The principal was so moved by the tragic story that she had a different math teacher tutor Indira for two days before the retake. She still failed, and when the original teacher (who had refused to allow the retake and has since quit his job and left the state) re-gave her a failing grade the principal, Ms. Anne Geiger, simply changed it to a passing one.

"Colleagues of his (the original teacher) from the school — a counselor, a programmer, several fellow teachers — corroborated key elements of his version of events. They also describe a principal worried that the 2006 graduation rate of 72.5 percent would fall closer to 50 or 60 percent unless teachers came up with ways to pass more students."

Gee I wonder if anyone named Fernandez is remotely embarrassed by this unseemly turn of events?

Samantha Fernandez, Indira’s mother, spoke on her behalf. “My daughter earned everything she got,” she said. Of Mr. Lampros (the teacher who quit) she said, “He needs to grow up and be a man.”

C'mon Karma, do ur stuff!!!

Overheard at a Liberty Fund Conference....(II)

A. At a dinner, nice restaurant. Talking about dessert down at our end of table. Young woman, looking over at two older men (who have not heard our conversation about dessert) at other end of table: "So: You two getting any?" Loudly.

Stunned silence, at neighboring table also. Then laughter begins to leak out through every pore. Young woman covers face with hands. It takes several minutes to restore decorum.

B. In hotel bar, midnight, Latino native speaker, reading from Crackberry: "Hugo Chavez praises champagne!"

Rest of us: "What?"

"Champagne! Hugo praises champagne, for service."

"WHAT?"

"CHAM PAIN! THE ACTOR!"

Order is never restored. We had to leave the bar, to stop laughing. (story)

C. Walking in crowded Santa Fe street, during large festival. Young woman walking five enormous standard poodles. She gets tangled in leashes, drops one. Dog stands, patiently. Woman is nearly completely immobilized, with four leashes wrapped around her legs, reaches for handle of fifth leash. Dogs lick her hand, keep her from reaching it.

Man on sidewalk: "Hey, lady! One of 'em's loose!"

Young woman: (sigh)

D. Walking in same crowded Santa Fe street festival. Tall young woman wearing t-shirt with lots of writing on it, in what appears to be Spanish, written with a Sharpie. She is talking animatedly on her cell phone: "So, we did some mushrooms, and acid, and then watched a Teletubbies tape. I was so scared I didn't sleep for two days. It was horrible."

Stuck inside of Norman with the Mahale blues again!

One of the coolest places to visit on earth has got to be Mahale Mountains National Park on the shores of Lake Tanganyika in Tanzania. Access is by boat only (no roads at all).








It's very isolated, we stayed in funky cabanas on the edge of the forest by the beach





It's one of the few places left in the world where you can see Chimpanzees in the wild!!!




Very Idyllic!!

Consider the Kiwi

As the Doha trade talks continue to flounder on the impossibility of the US and EU significantly reducing farm subsidies, and as our Congress passes another whoppingly grotesque farm bill, it is perhaps instructive to consider the Kiwis.

In 1984, more or less cold turkey, New Zealand cut its farmers loose. No more subsidies.

According to the NY Times:

The farming community was devastated — but not for long. Today, agriculture remains the lifeblood of New Zealand’s economy. There are still more sheep and cows here than people, their meat, milk and wool providing the country with its biggest source of export earnings. Most farms are still owned by families, but their incomes have recovered and output has soared.

“Farming in New Zealand is now a cold, hard business,” said Mr. Lumsden, who at the time of the farming revolution was president of Federated Farmers in the Waikato region, the heart of New Zealand’s dairy country. “I think we have benefited hugely.”

one particularly perspicacious Kiwi put it this way:

“When you’re not going to get paid for what the market doesn’t want, you have to get off your backside and find out what they want,” said Charlie Pedersen, who, when he is not raising sheep and beef cattle on his farm north of the capital, Wellington, is president of Federated Farmers of New Zealand.

Amen, brother Charlie, Amen!

Overheard at a Liberty Fund Conference....

I'm in Santa Fe, NM, at an LF conference.

At the bar, a young woman asks for a dirty martini.

Bartender: "How dirty?"

YW: "Britney Spears."

Bartender: "You want it shaved, then?"

Chinese: We LOVE American Free Trade

I was one of the thousand who signed the "Don't be protectionist!" letter sponsored by Club for Growth.

It has been interesting to see the reaction in China. There's this, which is a little icky:

This week in Washington, short-term politics won over long-term economics and basic humanity when the Senate Banking Committee voted in favor of a protectionist bill, joining a long list of bills aimed at China.

There is a race to the bottom among American politicians to determine who will get the honor of leading the lynch mob that blames China for every real or imagined economic ill. These political leaders are competing for short-term political gain at the risk of the global growth that is lifting billions of people out of poverty around the world. Worse still, they know exactly what they are doing.

On Wednesday of this week, 1,028 economists signed a petition to members of Congress, advising them of the immense benefits of free and open trade in goods, services, and capital, and warning them of the grave risk to growth and stability, both in and outside the US, from escalating protectionist measures that could lead to a global trade war.

I actually don't mind that Chinese workers and taxpayers are being asked to subsidize cheap stuff for me to buy. (Can one you guys come over and mow my lawn?) But for China to complain about U.S. protectionism.....wow. Balls, John Rutledge, balls.

There was also this, for example.

Protectionism is a tax on domestic consumers. "Encouraging" exports is subsidy for consumers of trading partners. Neither makes any economic sense. And both hurt growth, over the course of decades.

Bobby Mugabe has got it goin' on!

Zimbabwe currently has an annualized inflation rate of between 4,000 and 10,000 percent. The IMF is forecasting 100,000% inflation for next year. Now, I am not meaning to insult anyone's intelligence but this of course means that all prices in the economy will be going up very very fast and everyone will complain that prices are going up faster than their incomes.

Bobby M, who has singlehandedly created this situation has also proposed its cure: cutting many retail prices in half and freezing them at that level by law. Beautiful, no?

Except of course, now stores are pretty much 100% empty, and it seems when government inspectors do find merchandise and enforce the bargain pricing, it is government employees and military personnel who somehow find themselves in the front of the line. The Economist reports this week that roughly one third of the population has fled the country!

Mugabe, now 83 years young, has been the head of state in Zimbabwe for over 27 years; the exact same length of time that Zimbabwe has been an independent country. My sincere hope for Africa is that he is the last "president for life" an august group that included Daniel Arap Moi in Kenya (1978-2002) , Julius Nyerere in Tanzania (1964-1985), Mobutu in Zaire/Congo, (1965-1997), and Félix Houphouët-Boigny in Ivory Coast (1960-1993).

Idiot Wind (don't cover up the truth with lies)

AAARGH!!! Foreign Policy, the People magazine of international affairs has produced a column entitled "5 Lies my Economist Told me". The problem is, they are either not really lies or else not really what a professional economist would say!!


1. High productivity and low unemployment make us all better off.

This is clearly false in the sense that not every single person in the USA is better off than they used to be, but it is bizarre. Would FP advocate lower productivity and higher unemployment as the key to personal improvement? They offer stagnant wage growth in the face of solid productivity growth as their evidence, but this ignores non-wage payments (health care!!) and the massive improvements in everyday life for even the poor in the US.

2. It’s hard to grow without good banks and private property

I really don't get this one. It is clearly, obviously true!! FP gives China as the damning counterexample, but (a) China didn't grow before introducing a form of private property and (b) one country doing it doesn't mean it is easy, does it??


3. Capital must always be let free to flow

If anyone flat out says or said this with no qualifications, then I guess it would be a lie, but economists pretty much never recommend corner solutions, most papers now are about under what conditions increased capital flows improve growth. FP gives the Asian financial crisis as the damning counterexample, but really, are those countries worse off than if they had never enjoyed capital inflows at all? Would you rather be S. Korea or say the Congo? I think there are a lot of countries in the world who'd be thrilled to have a financial crisis because it would mean they had experienced some foreign investment.

So, how about "its better to always have free capital flows than to always have total capital restrictions".


4. The Euro will never work.

This is just confused. It depends how you define work. Compared to an optimal monetary policy for each country, the Euro clearly is not "working". If working = surviving as an institution, the Euro is working. FP quotes Friedman as saying that fixed exchange rates are a bad idea, not as saying that the Euro will become extinct. There are a lot of bad ideas with a long long shelf life (payroll taxes, the AMA....).

5. Japan—no wait, China—is going to take over the world economy

This one is stupid and insulting. I don't know of a single serious economics paper arguing the truth of either of these positions. It is clearly true that a lot of people think (thought) like this and fear (feared) China (Japan) but the impetus is NOT coming from the economics profession. No way.

Hat tip to Dani Rodrik for the pointer.

I'll bet its the transfat!

From Der Spiegel online edition comes the shocking news:

Fatty Knut Put on Strict Diet

Knut, the world's most famous polar bear, is off the scales after eating too many snacks and has been put on a diet. The Berlin Zoo said Knut's handlers have been told to stop feeding him extra rations of croissant, fish and meat.

Is this a great country or what??

Caplanian deep thoughts, part deux

Wow, from reading just one sentence from Bryan's book, I haven't been able to think of hardly anything else the last couple days (good thing I didn't read more or I probably wouldn't be able to sleep!!). To recap the sentence in question:

“I see neither well-functioning democracies nor democracies hijacked by special interests,” Mr. Caplan writes. “Instead, I see democracies that fall short because voters get the foolish policies they ask for.”

so, here I go again:

First, what has been the policy trend since world war II? To my reading of history it has been increasing trade, freer and freer flows of capital, tons of private sector innovation. I don't think this just happened in a vacuum, we lowered tariffs and capital account restrictions, we subsidized R&D, allowed (after a fashion) large changes in the composition of the economy. America has almost completely remade itself in the last 50 years, hasn't it? So maybe, just maybe, (a) people in general don't ask for foolish policies or (b) our political elites have done a fantastic job giving the people what they need while pretending to give them what they want. I'd also say that from my point of view, organized interests have done more to block this liberalizing, modernizing process than have the irrational average joes of the world.

Second and more subtly, how do we know the "foolish policies" asked for by the public are really foolish? Here I refer to the economic theory of the second best, the oft ignored bete noir of reformists. Simply put, if the polity contains multiple economic distortions, there is no way to guarantee that removing or reducing one or even a subset of them will raise welfare.

We now return you to your regularly scheduled programming.

Sasha for next American Idol?

The VC (actually, Eugene) post a bit of YouTube with Sasha doing an a cappella version of this song:

We're doing battle with statists
Across the USA,
'Cause everybody's reading Hayek,
The man from Austri-ay --
In spontaneous order
We let the market play,
With the writer Fred Hayek,
H-A-Y-E-K.

We use the signals of prices
And then we'll be O.K.,
'Cause no one knows what's efficient
Unless they have to pay;
If we replace that with planning
Like once in Russ-i-ay, [pronounced "Rush-Eye-Ay"]
We'll take the road to serfdom --
Serfdom USA.

[Backup singers should at this point start singing, "Serfdom, serfdom USA, Friedrich H-A-Y-E-K."]

We still have government bureaus,
Just like the FDA, [replace with three-letter agency of your choice ending in A]
But the welfare state mindset
Will soon become passe.
Ayn Rand said he was evil,
Which makes him A-O.K. --
Friedrich August von Hayek, H-A-Y-E-K.

(Nice singing, Sasha. Nice dig on Rand, there toward the end. And thanks to Eugene for finding that, and outing Sasha.)

Caplanian testability?

Let me start with two confessions: (1) I like Bryan Caplan very much, (2) I have not read his book. However, I take the following as his central thesis:

“I see neither well-functioning democracies nor democracies hijacked by special interests,” Mr. Caplan writes. “Instead, I see democracies that fall short because voters get the foolish policies they ask for.”

and wish to speculate on how these three points of view might be discriminated between empirically.

My own work, mostly joint with Mungowitz, shows that interest groups systematically give money to legislators best positioned to support their causes, and that the amount an interest group can raise and spend depends on both the potential gains they may receive and the costs of overcoming free riding in their particular interest class. We also predict and find that the economic interests of voters serves to influence the price that specific legislators would have to charge to provide services to an interest group. So I guess we would say that interest groups get what they want subject to (a) their ability to organize, (b) the constraints that having to face voters in periodic elections puts on legislators, and (c) the institutional structure of the government (committee system, term limits, etc.).

I guess the biggest problem for me in the Caplan quote (sorry for going all Rand-ian on you guys) is defining terms. How do we know a well-functioning democracy when we see one? To me, if power changes hands peacefully and fraud is not rampant, then we pretty much have a well-functioning democracy. That is to say, I'd judge democracy on the process and not on the outcomes. I don't know of any proofs of propositions like "well functioning democracies produce efficient economic outcomes". In fact proofs of the opposite are somewhat prevalent, aren't they?

I also find it interesting that a lot of left leaning political scientists (and yes there ARE other kinds as well!!!) bemoan exactly the same alleged phenomenon claiming that poor and middle class people foolishly and repeatedly and mistakenly vote Republican against their own personal economic interests (right, Mungowitz?? Bartells and them guys).

Note that I personally am a very small government kind of guy. I'd like to cap spending at say 10% of GDP, virtually do away with our military, privatize social security, increase competition and ease entry into medicine, law, etc. I am just not sure how effective Bryan's argument is in reaching this kind of conclusion (which I freely acknowledge has probability zero of ever happening).

I guess I should actually say something about what this post is supposed to be about, the testability of Bryan's thesis, so here goes. I don't see any way to actually test between the three positions outlined in the original quote. Anyone?? Anyone?? Ferris??

4th Amendment Rights: Illegal Seizure?

Chief Justice John Roberts has suffered a seizure and is hospitalized in Maine, the Supreme Court says.

The funniest thing I've read in a long time

Originally written June 10 by Lydia Polgreen in the NY Times and repeated today in the Gray Lady by Mike Nizza:

A journey between Abidjan, the government seat, and Bouaké, the rebel capital, reveals a nation eager for reconciliation but caught between war and peace, its once-mighty economy hobbled, its cosmopolitan image sullied, its place as a symbol of stability and progress long gone.

Lets start with "once-mighty economy". According to the Penn World Tables, per-capita gdp in the Cote d'Ivoire was around 11% of the US in 1960. It peaked at 13% of the US in 1977, and in the last year available, 2003, stood at around 6.5% of the US level. hmmmmm......

Anybody want to take a crack at the "cosmopolitan image" part? They do speak French so I guess that counts for something.......

"Symbol of progress"?? Sure, there's the Asian Tigers, China, India and Cote d'Ivoire, right??

Does everyone who writes about economics at the NY times smoke crack??

Pride of the Celtics!

So Kevin Garnett is now a Boston Celtic. The Celtics will have Paul Pierce, Ray Allen and KG on the floor with pretty much no one else. Even in the east, I don't think its enough but they should at least make the playoffs now. Reportedly, KG had refused going to Boston as recently as last month, so I also wonder exactly what is up now. On the other side of the deal, the T-Wolves are heading directly to the lottery for the forseeable future. Ex Celtic greats Larry Bird, Kevin McHale and Danny Ainge have not exactly covered themselves with glory as NBA executives, have they?

Lott v Levitt settles

John Lott appears to have gotten no money, but considerable satisfaction, from the settlement terms, if in fact these terms are correct (and I got them from John's own forward of the article quoted below, so they must be!)

In documents filed on Friday in federal court, the two parties outlined a settlement that requires Mr. Levitt, who is a professor of economics at the University of Chicago and a co-author of the best-selling book Freakonomics: A Rogue Economist Explains the Hidden Side of Everything, to send a letter of clarification to John B. McCall, a retired economist in Texas.

Mr. Lott's lawsuit alleges that Mr. Levitt defamed him in a 2005 e-mail message to Mr. McCall. In that message, Mr. Levitt criticized Mr. Lott's work on a special 2001 issue of The Journal of Law & Economics that stemmed from a conference on gun issues held in 1999.

By some measures, Mr. Lott appears to have won little from his 15 months of litigation. No money will change hands, and the settlement does not require a formal apology from Mr. Levitt.

But on certain points of reputation and pride, Mr. Lott might take some satisfaction. Mr. Levitt's letter of clarification, which was included in Friday's filing, offers a doozy of a concession. In his 2005 message, Mr. Levitt told Mr. McCall that "it was not a peer-refereed edition of the Journal." But in his letter of clarification, Mr. Levitt writes: "I acknowledge that the articles that were published in the conference issue were reviewed by referees engaged by the editors of the JLE. In fact, I was one of the peer referees."

Mr. Levitt's letter also concedes that he had been invited to present a paper at the 1999 conference. (He did not do so.) That admission undermines his e-mail message's statement that Mr. Lott had "put in only work that supported him."

In his letter of clarification to Mr. McCall, Mr. Levitt said, "At the time of my May 2005 e-mails to you, I knew that scholars with varying opinions had been invited to participate in the 1999 conference and had been informed that their papers would be considered for publication in what became the conference issue."

ATSRTWT (if you are a Chronicle subscriber)

Jury Duty: Legit, or a Taking?

There may be problems with the jury system that we all understand, such as the cottage industry that has grown up around selection and manipulation.

But KL writes with a straight-up objection that is interesting. He was prompted by a piece in the NYT:

"Ann Blakely, the clerk of the Superior Court in Lee County, said sending
deputy sheriffs to find jurors at random was done very rarely, and only when
a judge was about to begin a case without enough jurors...Courts across the
country have been going to extraordinary lengths to get people to report for
jury duty, which many people would do almost anything to avoid." (July 29, 2007)

As KL goes on to say, in his email:

The Constitution states that private property cannot "be taken for
public use, without just compensation." Given that "time equals money", the
current (trivial) compensation policy for jury duty arguably constitutes an
improper taking. Meanwhile, it is entirely possible that the cost-benefit
ratio of the current jury system is worse than the cost-benefit ratio of
alternative mechanisms of due process.

Reference is the 5th Amendment, of course:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

It is interesting that there is a trend, at the federal level, to rule against "commandeering" of state government officials for use by Federal agencies, or statutes (New York v. U.S., 1992, and Printz v. U.S., 1996, for example).

So, can local governments "commandeer" the time of private citizens for jury duty? Is this like a military draft (which presumably has some emergency justification, so there is a sufficient state interest to justify the "taking" of the body of soldiers), or is it something else? Why isn't jury duty commandeering, and subject to a bar as a taking?

Good one, KL.

(Postscript: Yes, I know commandeering in NY and PRINTZ is a 10th Amendment issue. But commandeering is also a form of taking; why isn't jury duty a taking, for that reason? We can force people to serve as jurors, but we have to offer fair compensation.)

Why Doesn't Rwanda Have Better Growth? Because We Don't Give Them More Money!

UN reports make pretty amusing reading, if you can stomach the cant.

Why isn't Rwanda doing better economically? Is it because of a dysfunctional government, a nonexistent financial sector, and insecure property rights that prevent the poor from borrowing against their meager assets.

NO! It turns out the biggest problem that Rwanda has is: Rich people! Too darned many of them, going around buying stuff and investing. If we could get rid of those darned rich people, everything would be okay.

According to the report, Rwanda's recent growth has bypassed the rural poor leading to a concentration of wealth at the top of the income distribution bracket - a situation that could lead the country to exhaust its ability to reduce poverty rates through economic growth alone.

At the same time, Rwanda has been finalising the Economic Development and Poverty Reduction Strategy.

The strategy estimates that total investment of approximately US$140 per capita per year is needed for MDG-related interventions. With the extent of poverty and the small size of the private sector, the bulk of these investments would have to come from the public sector.

"Rwanda needs to increase investments in development sectors, mainly in agriculture," James Musoni, Rwanda's Minister of Finance and Economic, planning told reporters during the 26 July launch of the report. He also expressed concerns over high population growth.

According to official statistics, life expectancy in Rwanda now stands at 51 years, partly because of efforts to reduce HIV/AIDS related deaths; while the number of people relying on agriculture is projected to drop from 90 percent to 50 percent by 2020.

"In some sectors progress has been recorded but the target is still to be met," the minister added.


ATSRTWT

The "target"? Sounds like it was written by John Edwards, who hates all rich people except himself. And I even think he hates himself, sometimes.

Another Congolese Tragedy

As I may have mentioned a few hundred times by now, Robin & I just got back from our trip to Tanzania and Rwanda where we were lucky enough to see mountain gorillas in the wild. It was a wonderful experience, but it makes the shocking news of recent gorilla massacres in neighboring Congo even more disturbing. There are about 700 mountain gorillas and 6 billion homo sapiens in the world but some are not content with even that ratio as seven gorillas have been killed so far this year in the Congo.





One can find more details here, along with information about how one can help to protect these magnificent animals.

Plunk Biggio

Fundman sends this suggestion, regarding the HBP thing I mentioned last week.

As the blog says, it is:

Dedicated to Craig Biggio and his (probably unintentional) Quest to break the all time major league career record for getting hit by pitches.

So, the current standings are:

Hughie Jennings 287
Craig Biggio 285
Tommy Tucker 272
Don Baylor 267

Projected HBP total for Biggio, at end of season total = 287
And, end of season matters, since Biggio is retiring.

C'mon, pitchers, you bunch of pussweilers! Plunk Biggio. He is in the Hall anyway, but all time HBP leader is quite a feather in your cap. Or, quite a bruise on your boom-boom.

(Gratitude to Fundman. An excellent tip.)

LOLATTYGNL!!

Ize in ur chamber............

...........stickin' to mah storie!!!!

For philosophy, they'll pay you!

From today's NY Times, public universities are more and more charging different tuition rates for different majors. Business, engineering, chemistry and journalism (really, journalism???) are the premium priced majors cited in the article and the University of Wisconsin, Kansas U, Arizona State U, U of Nebraska, U of Illinois are cited as price discriminators. Among the stated rationales are to offset high professor salaries in the premium fields and to help purchase specialized equipment.

No one quoted in the article appeared to be happy with the practice, which to me just kind of makes sense. A bureaucrat from U of Kansas put it this way:

“Where we have gone astray culturally,” he said, “is that we have focused almost exclusively on starting salary as an indicator of life earnings and also of the value of the particular major.”

(Is there a better single proxy for life earnings than one's starting salary??)

Mark Kushner, dean of Iowa State's engineering college weighs in thusly:

Mr. Kushner said he thought society was no longer looking at higher education as a common good but rather as a way for individuals to increase their earning power.

“There was a time, not that long ago, 10 to 15 years ago, that the vast majority of the cost of education at public universities was borne by the state, and that was why tuition was so low,” he said. “That was based on the premise that the education of an individual is a public good, that individuals go out and become schoolteachers and businessmen and doctors and lawyers, that makes society better. That’s no longer the perception.”

If that was the perception of the past, I don't think its very accurate to emphasize a significant public good dimension of higher education. It really is all about the Benjamins, isn't it?

Coincidence? Ouch.

At baseball camp yesterday, week long thing at a local high school, my son Brian (nickname at camp: Fluffmaster Flex, and no I have no idea why) got hit by a sailing fastball. Right in the left arm. Left bloody stitch marks on his tricep. Pretty cool.

Then, final game of regular season last night....first at bat....bases loaded. Brian's up. Kid throws a curve that didn't. (Curve, that is). Brian does as we have often discussed, with the bases loaded, and flinches just enough to make it look good. Hits him right in the tricep. HBP, take your base, RBI. Other team fusses a little, but nothing much.

Next inning, he bats again. First pitch (again), curve that doesn't. He actually tries to get out of the way. Hits him right in the tricep.

Fourth inning, he comes up. Two at-bats, two PITCHES, two HBP. First pitch is a fastball on the inside. He crushes it. Line drive, hits three feet in front of the 335 sign in left on the fly....six inches foul. Hit it plenty hard enough to go out, just foul and a little too much on the nose instead of getting under it. Second pitch of the at-bat....HITS HIM SQUARE ON THE LEFT ARM.


Four pitches, three HBP for the night so far. I'm yelling at the catcher, who is an old family friend, and who at 16 is an inch taller than I am, and very solidly built. "I know where your car is, Carl! I'll meet you in the parkin' lot, boy!" The ump is hiding his face in his chest pad, laughing.

Top of the last inning, we are up by one. Could use some insurance. Men on first and third. Brian comes up. And the pitcher nails him right in the butt with a fastball, first pitch. The ball park goes crazy. The Latino parents behind are screaming and laughing, "Cuatro veces! Cuatro veces!" Brian's coach, coaching third, has his hands on his knees and is obviously shaking with laughter. Carl the catcher yells to me, "I'm not callin' those. I am NOT callin' those!"

We score two runs and shut them down in the bottom of the inning, win the game. Brian has big bruises on his arm and butt cheek, and has been the main character in a night to remember.

His batting line for the night:

AB: 0 H: 0 W: 0 HBP: 4 RBI: 1
SB: 2 R: 2 SO: 0 Total Pitches Faced: 5
Avg: undefined Slg: undefined OBP: 1.000

I've never seen anything like it.

Made me wonder about HBP records. (My older son holds the career record for HBP at his middle school. You get on base. And the pitchers are throwing in the high 50s. Why not?)

The career leaders for the Majors?

Hughie Jennings--287
Craig Biggio--282*
Don Baylor--267

*still active

How about for a single game?

The record is 3 times in a game, record held by many.

How about for a single inning? Four guys have two HBP in an inning.
AL Brady Anderson Baltimore 05-23-1999 1st Inning
NL Willard Schmidt Cincinnati 04-26-1959 3rd Inning
Frank Thomas New York 04-29-1962 4th Inning
Andres Galarraga Colorado 07-12-1996 7th Inning

So, Brian takes his place up there among the immortals. 4 HBP in a one
seven-inning game: Well done, son. Way to take 4 for the team.

The Worst Book I Ever Read

When I travel, I am paranoid about running out of reading material. Especially on a trip like the one we just took where we are out in the bush with little night life. So, rather than chucking it after the first 25 pages or so, I read the entire hideous mess that is The Kite Runner.

Holy Crap, where do I begin? First, it is a first person account of a great writer written by a crap writer. Example: "All my life had been spent in the company of men, but tonight I would learn what it is like to lie with a woman". In the words of one of my heroes (John McEnroe), you cannot be serious!!

Second, every single plot advancement is done by means of a virtually impossible, melodramatic, coincidence. I am not joking. Every single one. For example, the protagonist's life goes awry when he fails to prevent his servant/friend/half-brother from getting buggered by a blond haired, blue-eyed, Afghani neo-nazi boy who has just happened to trap his friend alone somewhere in Kabul on the most important day of the protagonist's life. And when the protagonist returns to Kabul to rescue the son of said friend, the head Talibani in charge is the SAME NEO-NAZI guy. And HE'S BUGGERING THE BUGGEREES SON!!!!! Its really quite mind boggling.

This book has over 1900 customer reviews on Amazon with a 4.5 out of 5 star rating. I just don't see how that is possible.

GOOGLE This

I am the lead plaintiff in a suit filed today against the state of North Carolina. Represented by NC Institute for Constitutional Law, the real moving force.

Some background on the GOOGLE bribery....um.....incentives package.

Just as Google has pushed the boundaries of its Internet business, it plays the real estate game aggressively. Beginning with an anonymous approach in late 2005, the company elicited a stream of promises from local and state officials in North Carolina, all frantic to lure a major tech company, even before they knew which one. During months of negotiations over Google's shifting requirements, the company never failed to remind those officials that it could go elsewhere. In the end, the North Carolinians agreed to a package of tax breaks, infrastructure upgrades, and other goodies valued at $212 million over 30 years, or more than $1million for each of the 210 jobs Google said it eventually hoped to create in Lenoir.

Had a press conference today, and some press even showed up. We'll see what happens.

Some early ink here and here and here.

My own view, summarized briefly:

This statement is Michael Munger’s alone, and does not necessarily represent the views of the other plaintiffs, or the views of the NCICL.

*****************************************************************
I. Why is this public payoff to GOOGLE the wrong thing for NC?

1. No public purpose. Private economic benefits to GOOGLE, and private political benefits to North Carolina’s elected officials. Nothing here for the businesses and taxpayers of NC. Government shouldn’t be in this business. It violates our constitutional principles, and violates a long tradition of separation of business and political activities. GOOGLE is being used as free political advertising for politicians, and taxpayers are being used as unwilling subsidizers of GOOGLE’s stock price.

2. Equal protection. You can’t single out a business for bad treatment, and tax them extra to benefit everyone else. But then you can’t tax everyone else just to benefit one business.

3. These programs don’t work. It’s a waste of money. Few jobs are created, at enormous cost. The cost to taxpayers will be double the “salary” of the “new” workers. And, more generally, businesses don’t make location decisions based on these kinds of subsidies. It’s just a pure political payoff.

II. Why do businesses make location decisions, over the long haul?

My work in economics and politics has convinced me that businesses make location decisions on three factors: (a) transportation system, (b) education system, and (c) the burden of taxes and regulation in the state. North Carolina is a wonderful place for business. We have good roads, a very solid primary and secondary education system, and our burden of taxes and regulations are better than that of many other states. People are moving to North Carolina from all over the nation, in fact all over the world.

Let’s let businesses focus on what is good about North Carolina, ALL of North Carolina, and not make political payoffs to a few high-visibility companies that aren’t going to produce many new jobs anyway.

I'll be writing about this pretty often, in the weeks to come.

And, welcome back Angus!!!!!

My favorite things Tanzanian

Robin and I are back from our trip to Tanzania and Rwanda, so let me sincerely flatter my blogging godfather (and marriage matchmaker) Tyler and tell you about our favorite things in Tanzania

1. Lake Tanganyika. The water, at least around Mahale Mountains National Park, is crystal clear, safe for swimming and turquoise like the Caribbean. We puttered around on a motorized dhow, and saw hippos wading under the boat, crocs on the shore and beautiful sunsets. The lake also has a fascinating military story from World War I that is well told in the book, Mimi & Toutou's Big Adventure, which I highly recommend (written by the guy who wrote Last King of Scotland, which was made into a movie where Forest Whittaker dazzled as Idi Amin).





2. Swahili. What a fun language! Phonetic, poetic and according to some Tanzanians we talked to, there are approaching 100 million Swahili speakers. Sweet! Wapi tembo leo?

3. The great migration. The books say 1.5 million wildebeests, but the guides we talked to swore that it is more like 3-4 million at this point. When we got to the western corridor of the Serengeti, the herd had split into thirds, but what we saw was stupendous. Mile after mile of wildebeests and zebras. The crocs on the Grumetti river were so fat when we got there, they were kind of just going through the motions, though we did see 3 wildees go down at their hands.

The one more academic/economic impression that we picked up was that people are well aware of corruption as an important issue and are pleased with their current president's anti-corruption stance. Several people told us stories, more or less unprompted, about previous types of routine corruption that had been eliminated or reduced due to government action.

From the Mouths of Hoosiers, Ye Shall Learn the Truth

From the Journal-Courier..., in West Lafayette, IN, an article by T. Craig Ladwig, of the Indiana Policy Review Foundation.

It is in Indiana's geographic good fortune to be surrounded by some of the nation's highest-taxing, biggest-spending, most anti-business states.

But Indiana government, even during the recent Republican years, has become the enemy of economic growth, the enemy of its citizenry.

Cecil Bohonan, reviewing recent Statehouse decisions, makes clear that leaders in both legislative houses, abetted by an arrogant judiciary, protect a tax structure ruinous to our families', friends' and neighbors' fortunes.

Why? They have no concept beyond personal ambition of what they want to accomplish. They lack the political courage to risk that ambition even in the interest of what they know to be right.

Hard words. We chose them carefully. Our tipping point came last session when the Legislature, instead of passing a bill to finally cap taxation of private property at constitutionally prescribed levels, raised taxes -- on the very segment of our society that defines economic growth, business and industry.

Why a government becomes an enemy of its own people is a mystery that won't be solved here. We can only note that this nation's founding documents consider it a recurring challenge, that there are times when government must be ... yes, revolutionized is the right word.

ATSRTWT

Please, Reach Me the Way I Want to Be Reached

From the NYT:

AT a planning meeting I attended earlier this summer, a legal pad was passed and we were each asked to write our name and our “communication preference.”

Some people prefer e-mail, some prefer cellphones, some want to be sent a text message on their cellphones,” the leader of the meeting said. “We want to reach you the way you want to be reached.”

Time was when making contact meant finding someone’s phone number and dialing. You might connect with your party; you might leave a message. But you had done all you could.

Now contact means decoding the quirks of the person in question, the better to predict how to actually get your message through. And if you misread your target, it means the risk of a frosty response, or sometimes deafening silence.

Does he or she hate e-mail, letting it build up in the inbox, but quick to answer the cellphone on the first ring? Does the person refuse to carry a cellphone, but grab the office line through the Bluetooth that is literally attached to one ear? Is it solicitous or stalkerish to send an e-mail message, then leave an office message, then try the cellphone just to be sure?

ATSRTWT

(Nod to Anonyman)

Hard to Make Predictions...

...especially about the future.

In 2005, Amerihaters were puffed up with pride about Airbus.

How's that working out for you? Airbus? Hello!

Well, I can answer, since Airbus seems to have lost its voice: the demise of Boeing was somewhat exaggerated.

(Nod to WD)

Markets in Everything: Growth in Islamic Accounts

Islamic accounts: the ad seems to recognize that Islamic consumers expect to pay high fees if they want to get around the problem of interest.

But there is a market response:

Do Islamic Accounts have to mean additional costs?

Surely not. Our prime ambition is to show you that additional costs are not necessary. The present situation in the world of investment has made us wonder why this type of practice is acceptable. Social, cultural and religious beliefs should not be taken advantage of. This is exactly what we would like to present you with.
Due to the growing interest in Islamic accounts, we have decided to introduce investment accounts compliant with the Shari’ah or Islamic Law. What this means is that these accounts will be swap free and that no interest will be charged neither for investors nor against them.

What does this mean?
Commission free accounts.
No swap points debited or credited for investors.
Widened spread on the FX market by only 1 pip.
Regular spread for all other instruments.
10 USD daily charge per lot for every transaction held through the weekend.

Examples:
1. 5 lot transaction opened on Monday and closed on Thursday. No charge.
2. 1 lot transaction opened on Friday and closed on Tuesday. 40 USD charge.
3. 0.5 lot transaction opened on Wednesday and closed on Tuesday. 30 USD charge.

In case of any questions don’t hesitate to contact – we speak Arabic, too: Omar Arnaout

(Note: "MiE" is a registered trademark of MR)

Angii in the Mist

(Posted remotely, by Angus)

OK people, if the Grumeti river gators or Rwanda Airlines haven't gotten us, today we will be in Volcanoes National Park in Rwanda, mountain gorilla trekking!!

The park contains 5 dormant volcanoes, Sabyinyo (3.674 m), Gahinga (3.474 m), Bisoke (3711 m), Muhabura (4.127 m), and Karisimbi, the highest volcano with an altitude of 4.507 m.

They look like this (that is Sabyinyo):
And we are hoping to see a lot of this:
If you prefer your images to move, try this youtube video

France....Always France

From DW-World:

The 13 EU members of the euro zone agreed in April to balance their account books by 2010. Though Sarkozy voiced his commitment towards that goal in Brussels, he also stressed it could only be achieved if France's economic growth was higher than it has been so far.

In other words, he gave himself the go-ahead to violate the EU's budgetary rules that lay down that the budget deficits of member states should not exceed 3 percent of GDP.

Does anyone but me wonder why "grow really fast" and "have huge domestic fiscal deficit" are synonyms in the minds of politicians?

ATSRTWT

Money by Fiat, Razors by Choice

Interesting post by Tyler, on the rupee/razor blade black market "exchange rate."

Even the comments are interesting and pretty well informed.

Money is usually a very cool but dangerous topic. It is easy to say dumb things about it. One of my favorite things to do is just listen other people talking about monetary theory or policy. The things that pass for knowledge, I just dont' understand.

Not Surprising, And Yet....

Interesting finding.....

"This paper studies the influence of mass media on U.S. government response
to approximately 5,000 natural disasters occurring between 1968 and 2002.
These disasters took nearly 63,000 lives and affected 125 million people per
year. We show that U. S. relief depends on whether the disaster occurs at
the same time as other newsworthy events, such as the Olympic Games, which
are obviously unrelated to need. We argue that the only plausible
explanation of this is that relief decisions are driven by news coverage of
disasters and that the other newsworthy material crowds out this news
coverage...News biases relief in favor of certain disaster types and
regions: For every person killed in a volcano disaster, 40,000 people must
die in a drought to reach the same probability of media coverage. Similarly,
it requires forty times as many killed in an African disaster to achieve the
same expected media coverage as for a disaster in Eastern Europe of similar
type and magnitude...to have the same chance of receiving relief, the
disaster occurring during the highest news pressure must have six times as
many casualties as the disaster occurring when news pressure is at its
lowest, all else equal. Similarly, a disaster occurring during the Olympics
must have three times as many casualties as a disaster on an ordinary day to
have the same chance of receiving relief." [News Floods, News Droughts, and U.S. Disaster Relief, (Thomas Eisensee and David Stromberg), Quarterly Journal of Economics, 122(2), 2007.]

ATSRTWT

From the paper:

In May 1999, a storm struck India, reportedly killing 278 people and affecting
40,000. On the same day, a 15-year-old sophomore shot and wounded six classmates at the Heritage High School in suburban Atlanta. The two events competed for news time. Since this was just a month after the Columbine high school tragedy, the events at the Heritage High School were extensively covered by the U.S. television network news, while the Indian storm was not covered. About one year earlier, a storm of similar size struck India (killing 250 and affecting 40,000 people). At that time, there was less other breaking news around, and the storm was covered by the television network news. Two days later, the U.S. Ambassador in India, Richard F. Celeste, declared this storm a disaster, and its victims consequently received U.S. relief. He did not issue a disaster declaration for the first mentioned storm and its victims received no U.S. government relief.

Question: Is this supply driven, or demand driven? As Russ Roberts at CH noted, Adam Smith's thoughts on this are instructive.


(Nod to KL, who covers everything)

Barbara Rohde's new site

A good friend, Barbara Rohde, a very talented artist and painter, has just put up her new web site.

I love her watercolors, and have one hanging in my living room. Here are some examples:




























She is not interested primarily in big, sweeping views of things. Barb focuses on the beautiful details, in her life and in her art.

Words from the Front Lines

From an email, from a friend who works for a large important organization.

"I was recently rebuked for actually calling someone instead of using email. Appearently if someone wants to be important, then they can't bother answering the phone, they need to type."

Emailing, and AntiTrust

As an old FTC guy, I do appreciate the problem here:

I used to tell clients that they had a mistaken image of FTC lawyers as impartial regulators interested in nothing more than truth and justice; in fact they were eager and ambitious litigator/prosecutors looking to put notches on their holsters. These notches would lead to advancement in the agency or to lateral partnerships at Wall Street firms. Some of my best friends advanced this way. So that when you gilded the lily by overstating or misstating the reasons for an acquisition in some ill-chosen memorandum (usually written by the investment bankers), you were creating good old-fashioned understandable evidence.

In this case, the Whole Foods CEO sent an e-mail to the board listing as the top two reasons for the acquisition: "Elimination of an acquisition opportunity for a conventional supermarket" and "Elimination of a rival." Two reactions: (1) Damn! You can do all the training and prophylactic work you want with your business people, but CEOs still write these damn e-mails (which constitute 4(c) documents) without showing them to you, the general counsel; and (2) I could re-write the two reasons to say almost the same thing without the incendiary effect: "Enhance our ability to compete against the more powerful and resource-laden supermarket chains who are bound, in view of the low barriers to entry, to provide the kinds of natural and organic products we do" and "Achieve cost, marketing, and sales synergies through rationalization of locations, more efficient advertising budgets, and other efficiency moves."

General Counseling 101: If the CEO had sent the draft e-mail to me, we would have had the following conversation:

Lipshaw: "The e-mail is fine if that's what you really mean, but I think you are using loose language and it comes out contrary to your intent."

CEO: "Huh?"

Lipshaw: "You have made it sound like you are trying to eliminate competition, when in fact you know that Kroger, Safeway, Meijer, and Winn-Dixie could crush us tomorrow in one fell swoop. Marsh in Indianapolis is already taking share from us with their organic and natural section. So "eliminating" Wild Oats wouldn't do a damn thing."

CEO: "That's true."

Lipshaw: "So why write it that way? It's red meat to the FTC carnivore! You don't need this puffing to persuade the board it's a good deal."

CEO: "How would you do it?"

Lipshaw: "Doesn't this sound more like why we are REALLY doing this deal?" [Reads bullet points from above].

CEO: "Yeah! That's good. Read again to me slowly so I can get it down."

Absolutely right, on the "notches on the holster" bit. It may be "notches on the lipstick case," but still. In 1984, at the FTC, I was an economist, and my (at that point, future) wife was an attorney.

I spent my time thinking of reasons why mergers enhanced competition. And she and her lawyer pals spent their time thinking of ways to kill all the economists. You only get experience litigating by...litigating. FTC lawyers did NOT take that pay cut so they could sit around and serve the public.

(Nod to Mr. Zorro, who knows a lot of stuff he can't say)

Is It Okay to Ask Questions?

From yesterday's NYT:

For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention: Those who doubt the naturally beneficial workings of the market are considered either deluded or crazy.

But in recent months, economists have engaged in an impassioned debate over the way their specialty is taught in universities around the country, and practiced in Washington, questioning the profession’s most cherished ideas about not interfering in the economy.

“There is much too much ideology,” said Alan S. Blinder, a professor at Princeton and a former vice chairman of the Federal Reserve Board. Economics, he added, is “often a triumph of theory over fact.” Mr. Blinder helped kindle the discussion by publicly warning in speeches and articles this year that as many as 30 million to 40 million Americans could lose their jobs to lower-paid workers abroad. Just by raising doubts about the unmitigated benefits of free trade, he made headlines and had colleagues rubbing their eyes in astonishment.

“What I’ve learned is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate,” Mr. Blinder said.

And free trade is not the only sacred subject, Mr. Blinder and other like-minded economists say. Most efforts to intervene in the markets — like setting a minimum wage, instituting industrial policy or regulating prices — are viewed askance by mainstream economists, as are analyses that do not rely on mathematical modeling.

ATSRTWT

Blinder makes two claims: economists oppose all government regulation, and the economics profession hates words, favoring equations.

I just don't think the first claim holds up at all. Redistribution is quite an intrusive form of regulation, and far and away most economists I know favor it strongly. (and, yes, I know a LOT of economists.) Most economists are registered Democrat (although it is true that the Republicans are hardly free market, either).

But it is clearly true that the profession scorns qualitative or "imprecise" analysis for published work. The harder to understand, the better. The less connected to real applications, the more "fundamental" the work.

Which may explain why I have been in Poli Sci for 21 years, yes?

(Nod to NeanderBill, who questions EVERYTHING)

Designated Hitter: A Disease With No Cure

Interesting paper, showing the endless diversity of academic interests.

(nod to Tofe, who actually prefers the Junior Circuit, with the DH pathology)

Indian Food, Hold the Growth!

From Business Week, a review of B.M. Friedman's THE MOREAL CONSEQUENCES OF GROWTH

The title of Harvard University economist Benjamin M. Friedman's new book, The Moral Consequences of Economic Growth, might seem a bit off-key. After all, politicians and economists typically focus on the material benefits of growth -- more and better jobs, higher gross domestic product, larger incomes, and more money available for government programs. And companies such as Wal-Mart Stores Inc. () typically point to economic benefits, such as low prices for consumers and jobs for workers, when they want to justify their business policies.

But the narrowness of the public discussion is exactly what Friedman wants to address. "Our conventional thinking about economic growth fails to reflect the breadth of what growth, or its absence, means for a society," he writes. "Growth is valuable not only for our material improvement but also for how it affects our social attitudes and our political institutions -- in other words, our society's moral character."

The real benefit of growth, Friedman argues, is that it encourages a wide range of social virtues, including dedication to democracy, tolerance of diversity, social mobility, and commitment to fairness. By contrast, he writes, "when living standards stagnate or decline, most societies make little if any progress toward any of these goals, and in all too many instances they plainly retrogress."

...Friedman has scored a dead-center hit on the critical question: Why do we value economic growth? The usual argument is that a bigger GDP -- more goods and services -- leads to happier, more satisfied citizens. But that apparently simple proposition turns out to be far more complicated. As Friedman notes, there is plenty of evidence that people judge their well-being by comparing themselves to others. As the average income in a country goes up, so do expectations. As a result, the level of GDP per person in a country, taken alone, doesn't necessarily say much about the level of happiness....

[But] Friedman argues that economic growth has a key additional benefit: As long as people see their own income rising, they worry less about doing better than others. And that in turn creates a more favorable environment for political and social advances. To demonstrate this point, he draws on economic studies and historical examples, both American and global. In the 1700s, he points out, it became accepted that the rise of commercial and trading activity was a force for positive legal and institutional change. Adam Smith, for one, believed that moral progress went hand in hand with economic progress, as voluntary exchange replaced the use of force.

Friedman points to the the Ku Klux Klan in the U.S. and the Nazis in Germany as examples of what can happen when growth vanishes. And he worries that "rising intolerance and incivility and the eroding generosity and openness...have been, in significant part, a consequence of the stagnation of American middle class living standards during much of the last quarter of the twentieth century."

Friedman is forthright about admitting that the New Deal doesn't fit his argument. He says the hard times of the Great Depression brought forth a virtue: a generous public response. But the New Deal was "exceptional," says Friedman, arguing that rising incomes in general make people more willing to help others.

The link between economic growth and democracy also works on a global level. The movement toward civil liberties and open societies, says Friedman, has been most successful in countries with rising incomes: He predicts China will take this same path...

I don't see why the New Deal doesn't fit. FALLING incomes, and prices, might well elicit a sympathetic response. And most "New Deal" programs were payoffs to specific interest groups, as Tom Ferguson documented in his "Normalcy to New Deal" paper in International Organization. (link for JStor subscribing institutions only)

Downside

The downside of the possibilities of integrating music videos and movies.
Middle Earth Metal

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This is the worst. The worst video in all of history. Ever.

That's the problem with innovation. You can get videos like this.

UPDATE: John Q. Public nominates the Hoff as competition for worst video ever.

And, on watching....okay, he's right.

So, Dragonforce gets "Worst Video, Amateur Division."

The Hoff wins "Worst Video, Professional Awfulness."

Better?

Recycling....gives you a bigger winkie!

Mea culpa! Should have put this link up before, so loyal fans can do what loyal fans SHOULD do. (Podcast here, for the listening public)

A bonus: one kind reader, the fine folk at Am Econ & Curmud, linked the podcast and the essay. Thanks!

But, thanks even more for having Google Ads on your site.

Since the post was about (as far as Google could tell) recycling, the ad they put up was about recycling! And if you click through, it contains this gem:

Clean Up the Way You Recycle
With an ecopod in your home or office, you will change the way you recycle. Place aluminum cans and plastic bottles into the top and step on the easy-step compaction system to store 50 or more containers. Place glass and other recyclables inside the top bins and you'lll benefit from clean effective recycling that your friends will admire. Order your ecopod today!

Presumably, this kind of exchange takes place, daily:

"Say, Alfred, isn't your penis bigger since you started recycling? I really ADMIRE that!"

"Why, yes, Trip, it is. Thanks for noticing! It's all due to my new ecopod!"

Notice the reason you should get an ecopod. It doesn't say you can make money, save space. It just say, "your friends will admire" you. Wow. Just wow.

To Find Monopoly, Count the Number of Firms

Preach, Don. Preach it.

As an old FTC hand myself, I find most antitrust "policy" remarkable.

The Sherman Act is just fine, if interpreted narrowly. But interpreting the Sherman Act narrowly requires interpreting the definition of "industry" broadly.

When I was at the FTC, my old friend Mike Smirlock proposed to me a definition of monopoly, or monopolize, as used in the Sherman Act.

1. ASSUME THE MERGER TAKES PLACE.
2. Define the industry. Include close substitutes in the defintion of "industry."
3. Now, rank the firms in the industry (post-merger) from largest to smallest.
4. Starting with the largest, count the number of firms in the industry.
5. If the number is "1", the industry is a monopoly, and the merger should not be allowed.
6. If the number is "more than 1," the industry is NOT a monopoly, and the merger SHOULD be allowed.

The good Boudreaux makes a persuasive argument for why THIS merger should go through. ATSRTWT, please.

But I think the Smirlock test is the one we should use. The considerations raised by Don B only arise because we are doing something else.

For enthusiasts, I give you the Sherman Act, the only anti-monopoly legislation you will ever need:

Section 1. Trusts, etc., in restraint of trade illegal; penalty
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

Section 2. Monopolizing trade a felony; penalty
Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

The other sections, which are either obselete, purely technical, or (IMHO) shaky, can be found here.

(I should note that my own view is quite centrist, compared to that of my good friend Gary Hull. Check this out!)

Solow on Growth: A Retrospective

From Robert Solow's Nobel Address, in Stockholm, 1987:

The "neoclassical model of economic growth" started a small industry. It stimulated hundreds of theoretical and empirical articles by other economists. It very quickly found its way into textbooks and into the fund of common knowledge of the profession. Indeed that is what allows me to think that I am a respectable person to be giving this lecture today. Nevertheless I must summarize the outcome in a couple of sentences, so that I can move on to the more interesting questions about what is still unknown or uncertain and remains to be found out.

Just allowing for a reasonable degree of technological flexibility accomplished two things. In the first place, the mere existence of a feasible path of steady growth turned out not to be a singular event. A range of steady states is possible, and the range may even be quite wide if the range of aggregative factor-intensities is wide. There are other ways in which an economy can adapt to the Harrod-Domar condition, but it still seems to me that variation in capital-intensity is probably the most important.

Secondly, it turned out to be an implication of diminishing returns that the equilibrium rate of growth is not only not proportional to the saving (investment) rate, but is independent of the saving (investment) rate. A developing economy that succeeds in permanently increasing its saving (investment) rate will have a higher level of output than if it had not done so, and must therefore grow faster for a while. But it will not achieve a permanently higher rate of growth of output. More precisely: the permanent rate of growth of output per unit of labor input is independent of the saving (investment) rate and depends entirely on the rate of technological progress in the broadest sense. (emphasis mine)

Technological progress is a problem. They don't sell it in boxes. Policies designed to focus on saving, or consumption, don't accomplish much, except to keep politicians and pundits in business ("Vote for me, folks, and you'll soon be farting through silk!!")

Hard for politicians to admit, "The best thing we could do is create a setting where innovation flourishes, and is rewarded, and get the hell out of the way!" Even the word, "progress," has been stolen by those Luddites who call themselves "Progressives" but who in fact try to protect industry and hold back economic change. "Progress" is not building roads. Progress is individual humans thinking of new ways to use roads, and new products to move along those roads.

I am excerpting Solow, of course. Much of his real view has to do with stimulating effective demand, Malinvaud's famous theory of disequilibrium. But I do have to give Solow some credit for the way he concluded. A nearly Austrian riff, though he seems to approve:

When I read Robert Frost's lines from "The Black Cottage":

Most of the change we think we see in life
is due to truths being in and out of favor

it occurred to me at once that they sound altogether too much like economics. Some of that feeling is inevitable, and not necessarily to be regretted. The permanent substructure of applicable economics can not be too very large because social institutions and social norms evolve, and the characteristics of economic behavior will surely evolve with them. I believe also that part of the changeability of economic ideas on a shorter time-scale is our own doing. It comes from trying too hard, pushing too far, asking ever more refined questions of limited data, over-fitting our models and over-interpreting the results. This, too, is probably inevitable and not especially to be regretted. You never know if you have gone as far as you can until you try to go further.