Tuesday, August 07, 2007

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.

Monday, August 06, 2007

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."


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.


Sunday, August 05, 2007

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!!!

Saturday, August 04, 2007

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."



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!

Friday, August 03, 2007

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.

Thursday, August 02, 2007

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.

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??

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".

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....).

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.

Wednesday, August 01, 2007

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??

I has a butt  purhaps ud like 2 pet it?

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.