Wednesday, December 22, 2010
Of course, the ethanol subsidies are a terrible idea, too; it's just interesting to see such hypocrisy without any sense of self-awareness or irony.
Sunday, December 19, 2010
So then I started wondering who's been mentioned more in recent years, and I decided to type in those two figures who towered over economics in the 20th century, Milton Friedman and John Maynard Keynes. Here's what you get. I recommend clicking the link; the graphs below are tiny by comparison.
I think it nicely reflects their roles over the last century, up until the last few years, when Keynes has made a resurgence. The graph doesn't seem to reflect that, at least, not in 2007 and 2008. Hyman Minsky is barely visible by comparison to both of them, so I won't even include that graph here.
I wondered how some other famous economists would compare. My expectation was that Adam Smith would be big, but I didn't realize how big:
Wow. He's surpassed by Marx in the 60s until the 90s (which fits with the times, I suppose, but is nonetheless frustrating), but otherwise Adam Smith seems to tower over the other big names. I was sad to see David Ricardo with so few mentions. For the sake of Austrians out there I threw Ludwig von Mises in, too. Sorry, Austrians; even Paul Krugman is getting more mentions than Mises nowadays (note that the frequency with which an economist is mentioned does not suggest that they are wiser or more correct).
Who are the other big names I should be putting in here? It would probably be best to drop Adam Smith and Karl Marx from any comparisons you do with any modern economists; they are mentioned so often that they make modern economists hard to see on the graph.
Friday, November 19, 2010
Thursday, September 16, 2010
Friday, September 03, 2010
1) I have another objection to Macro: we cannot see the counterfactuals; there are no good natural experiments to test hypotheses. When some states do one thing, and others do a different thing, we end up with lots of different observations that can be used to test a hypothesis. We can see how two similar states that do two different things differ from each other, and this tells us something about the effects of policy. With the U.S., however, there are no other data points--different countries are too dissimilar to make direct comparisons. As a result we cannot know what would have happened if macro policy had been different. What would have happened without TARP, or the stimulus bill? We don't know. There's no way to know. Combine this with the poor predictive power of macro theory in its current state and you get something that is of dubious scientific value. Aside from "Inflation is always and everywhere a monetary phenomenon," there's not a lot of Macro that I would be willing to stand behind firmly.
2) Friedman suggests that insufficient attention has been paid to regime uncertainty--the reluctance of individuals and firms to make costly economic decisions when policy is uncertain. Bob Higgs has been writing about this topic for some time. I blogged about it once. Here's Jerry Jordan, former Fed bank president, making the same point. Here's Don Boudreaux reading James Madison on the subject. Here's Russ Roberts (after an interview with Higgs) on the subject, and again here. Here's Scott Sumnerdismissing the idea. Finally, here's Tyler Cowen on regime uncertainty (he calls it "policy uncertainty"), and not atypically, he takes a muddy position. My point here is that I'm not sure if insufficient attention has been paid to this topic. Lots of economists are aware of it. How much attention should the topic receive? I don't know. Given that it's so very difficult to test macro hypotheses, would paying attention to the topic of regime uncertainty make any difference at all?
Sunday, August 15, 2010
Daniel Gross argues in this piece in Slate that people who oppose subsidies for electric cars misunderstand "the process of innovation, economic history, and the current macroeconomic situation". For someone who is writing with such confidence, I would say Gross is the one displaying staggering misunderstanding. Yes, costs of building electric cars will probably come down with economies of scale, and yes, that process has repeated many times through history. None of that suggests that subsidies are a good idea, and Gross doesn't even begin to justify subsidies. How can the government know that electric cars are the best solution? What about small turbocharged clean diesels, or hydrogen, or some other technology? How can the government know which is the best one into which to sink billions of dollars? It can't. With a subsidy, however, it is making that very expensive bet.
If we want cleaner cars, a gasoline tax is the way to go. Car producers will experiment with a variety of techniques in an attempt to find the cheapest way to reduce gasoline usage. We'll also get responses from consumers, who move closer to work, carpool, and find other ways to reduce fuel usage (thereby reducing pollution). Government subsidies for new car technologies make as much sense as subsidies for, say, new MP3 players or new vacuum cleaners--that is to say, they make no sense at all. Markets are great at technological innovation; rather than ramming one form of innovation down our throats, why not give everyone the incentive to innovate in a variety of ways until we find the best solutions?
Wednesday, June 16, 2010
Frankly, I think it's pretty dry stuff. I initially thought it was going to be about encryption and online retail security, but it seems there's not a lot of economics there, and that particular problem is mostly solved.
Monday, June 14, 2010
Monday, June 07, 2010
This was the book that convinced me that I was a libertarian (and, for that matter, explained to me what a libertarian was). It's also the book that explained what kind of libertarian I was not. I think every libertarian should read the sections at the end on why most simple libertarian arguments about force don't make sense.
Friday, June 04, 2010
Charles Murray has a new review of two recent books about Rand, and it has some great criticism. When I look at the lives of the people who created and tried to live by the Objectivist philosophy, I don't really see anything that makes me want to jump on board. They seem miserable, hypocritical, self-deceptive, and prone to witch-hunts and purity tests that seem more like religion than rational philosophy.
There are plenty of knocks against the philosophy itself. David Friedman points out that her derivation of "ought" from "is" doesn't follow. Bryan Caplan suggests that her philosophy is at adds with evolutionary psychology (the same occurred to me after reading Nathaniel Brandon's biography a few years ago; they seemed to think human nature could be overcome by pure rational thought, or perhaps that human nature was pure rational thought--but evolution selects for reproductive success, not rationality. The results were affairs that ended badly.). Roy Childs pointed out years ago that the logical conclusion of her philosophy is Anarcho-Capitalism, not minarchy. A quick Google search will show you other critiques of Objectivism, although some of them are weak.
(SPOILERS for Atlas Shrugged below)
It has also always bothered me that Galt's Gulch is hidden by some kind of holographic screen, which is a pretty serious public good, yet we're also told that there's no taxation. So who pays for the screen? Surely it's not charity; that would be, in Rand's view, evil. The rest of the economics is pretty laughable, too--even with a motor that pulls static electricity from the air, they could not have a complex, wealthy modern society without heavy trade with the outside world, for natural resources at the very least. They'd be lucky to achieve subsistence. It reminds me of Art Carden's critique of the end of Wall-e: If they decide to try farming, 90% of the population will die within a year.
Thursday, June 03, 2010
How can people miss the obvious parallels between alcohol prohibition and drug prohibition, and if they don't, how can they think drug prohibition is still a good idea?
This article on record teenage unemployment prompts Don Boudreaux to write one of his many letters to the editor pointing out that there was a recent record hike in the minimum wage, which the article's author doesn't even mention. Mark Perry provides a nifty graph and commentary. Here's the They Might Be Giants song, Minimum Wage.
After events like the bungled attack on the "freedom flotilla", I first think about the wonders of free trade, but then I turn to something else: Why are we sending any money to Israel? I don't mean to imply that they don't deserve aid because they're evil, or that I'm taking any particular stance on Middle East politics. Rather, I wonder why we send almost $3 billion in aid each year to a country with a per capita GDP of over $31,000. We're sending aid to a very wealthy country. Do they really need our help? Assuming that aid actually does anything (which isn't so clear, in terms of economic development, anyway), wouldn't those $3 billion do more good in a country that is poor? I can't help but think it would do more good in Haiti, even if half of it were squandered.
Wednesday, June 02, 2010
I think successful car companies like Toyota and Honda have shown that two or, at most, three brands is optimal. For example, Toyota has Scion for the youth segment, Toyota for the mainstream, and Lexus as its luxury brand. Honda gets by with just Honda and Acura. Ford is now down to Ford and Lincoln (with some technological cooperation from Mazda). GM has Chevrolet, Buick, GMC, and Cadillac.
Here's my question: Why did these companies wait so long to clean up their messy brand identities? These problems have been around for years. Did it have something to do with labor agreements and the revisions to them necessitated by the recession? Or was it simply reluctance to kill off old traditions? Why didn't the stockholders force the companies to take these steps earlier? Maybe it was a good idea before, but it's not now--but why? What changed to make badge engineering become a bad idea in the last few years?
UPDATE #1: Nathan Prey suggests it has something to do with dealership legalities (by which I assume he means contracts). Katie Francisco suggests that the thing that allows Ford to kill off dealerships now (as opposed to earlier) is a decline in Mercury sales. I think that's borne out by this graph. I pointed out that this suggests Buick should be killed off, too, but Nathan says that big sales in China will keep that from happening here. I still think it would be fine to kill off Buick here and let them continue in China, if only to avoid the costs of the tweaks to distinguish them from their Chevrolet versions (or the shipping costs, if they're shipped here), but maybe those costs are really low, or maybe the Chinese market success depends on them being sold here for marketing reasons.
UPDATE #2: Autoblog asks the same question, and comes to pretty much the same answer.
Tuesday, June 01, 2010
Tuesday, May 25, 2010
You might also enjoy this Bob Murphy story about his experience in Haiti.
Monday, May 24, 2010
I wonder if the same people think the operators of speakeasies during alcohol prohibition were also moral monsters. Were they evil for allowing people in to drink? I think most people now agree that alcohol prohibition was a dumb policy. What about jaywalkers? What about someone who loses his temper and cuts off one of those "Do not remove under the penalty of law" labels on mattresses? Do illegal immigrant-haters hate those people, too?
Here are two seldom-heard reasons to want a lot more immigrants:
- They tend to be young, and they pay payroll taxes, which means that they would postpone our problems with social security for many years.
- They all need to live somewhere. We have a lot of excess housing. It's not "re-inflating the bubble" if increases in housing prices are the result of more people buying houses to live in!
UPDATE: Hat tip to Art Carden yet again for this great Jeff Miron piece on illegal immigration.
ANOTHER UPDATE: A friend who wants to remain anonymous says:
Another example of law-breaking relevant to the immigration debate is this: in the South before the war, you were BREAKING THE LAW by teaching slaves to read and write. Might this look familiar:
Now, I'm not a racist and I'm all for people learning how to read and write, but they need to do it LEGALLY and not BREAK THE LAW of our sovereign country.
Friday, May 21, 2010
Tuesday, May 18, 2010
In this case, however, I think the bill's supporters have actually managed to craft a reasonable bill. Gun carriers cannot drink in the bar, and bar owners can opt out, banning weapons from their bars as they see fit. If it really is such a terrible idea, then all the bars end up banning guns and the problem is solved. The bill ends up doing nothing.
Perhaps, one might argue, the law would still be inefficient because bars will have to spend money on signage announcing that guns are not allowed; prohibiting guns in bars would accomplish the same goal without any wasteful expenditure by bar owners.
There is a simple solution to this: Make the bill opt-in instead of opt-out. Make the default legal rule "guns are banned in bars", but allow a bar to post signage saying "guns are allowed here". Bar owners could even add stipulations, such as "gun carriers can't drink" or "guns must be checked at the door" or "only guns below .38 caliber allowed" (or whatever). The result would be that only bar owners that actually wanted guns in their bars would have to deal with them. Bar patrons who don't want to worry about guns at bars can simply avoid those that have chosen to opt in. I wonder, would any of the bill's current opponents accept this version? They can't think that bar owners would willingly place themselves at risk (physically and financially) and their patrons at risk (mostly physically, I guess) if guns in bars really are a bad idea. If they still don't support the bill, are they really worried about safety or do they simply not like the idea of people carrying guns?
That last question isn't rhetorical; I genuinely want to know. What are the remaining objections to my alternative version of the law?
Much (most?) policy discussion is driven by this signaling. So, for example, the BP oil platform accident drives one side to suggest banning offshore drilling, and the other side to remain steadfast or even increase its support for drilling. Surely neither side can really mean this--stopping all offshore drilling would be too costly, and no one can really think that oils spills are a reason to be more willing to support drilling. These positions are just posturing to keep the other from getting some advantage.
If they were really interested in the public welfare, they would support some kind of compromise. This is a pretty easy one: Get rid of the limits on liability for oil spills, which causes injurers to take into account the full scope of the damage they could cause. This causes them to take greater precautions against accidents. It doesn't cause them to reduce the probability of an accident to zero; that's impossible, and the closer we get to zero probability of an accident, the more costly it becomes. Given that there's little the injured can do to influence the damage from an oil spill (aside, I suppose, from living on or near the coast), simply making the injurer liable for the full scope of damage caused should give the injurer the incentive to take the efficient level of precaution.
This might upset some conservatives, as it means that some oil platforms might shut down or fail to start up in the first place, due to increased safety or liability costs. It might upset some liberals because it only reduces the amount of drilling and the probability of accidents, rather than eliminating them. But if both sides were really interested in increasing safety and allowing drilling, it seems to me a reasonable compromise. Of course, the limit on liability will not be removed. The two sides are interested in signaling to their constituencies, not in making society better off. Drilling regulation isn't about safety; it's about showing you care about the environment or people driving cars. The same goes for mine safety: tort and civil law won't simply be allowed to sort out who should bear the liability for accidents, because it's not really about safety or business.
Another example is Cap and Trade. Liberals want to limit CO2 emissions with regulation, conservatives do not, due to opposition to the taxation implied by Cap and Trade or carbon taxes. Here's another simple compromise: Replace payroll taxes with CO2 taxes (or CO2 allowance auctions for Cap and Trade). Tax burdens shift but do not go up overall--in fact, a tax that creates a deadweight loss is replaced by a tax that eliminates a deadweight loss. Yet neither side will even propose such a bill, because they're interested in heat, not light (some people outside of government, including Al Gore, have proposed such an arrangement). CO2 regulation isn't about reducing CO2; it's about showing you care about the environment or taxpayers.
Such compromises are not always possible, but the fact that they sometimes are available but unexplored should create some doubts in the minds of anyone with faith in the efficiency of democracy.
ADDENDUM: Robin Hanson talks sensibly about regulation and infrequent accidents. Hat tip to Bryan Caplan at Econlog.
Wednesday, May 12, 2010
The most interesting part of the graph is the section from 2008 to 2009, where the price falls while miles per capita continue to fall. I don't know what's causing this. If I had to guess, I would guess that, unlike the 1970s, we have a greater ability to adapt to gas price changes--by telecommuting, maybe--so once people started identifying such opportunities, they just kept on going. Also, the drop in housing prices may have allowed some people to move closer to work. Finally, the 2008-2009 price, while lower than 2007-2008, is still high by historical standards, so people may still be trying hard to find ways to reduce their high gasoline bills.
One more thing: If we want people to drive less, and use less gasoline, gas prices are the tool to use. Higher gasoline taxes will drive the price up and reduce gasoline usage. Whether or not that is a good idea is a separate question, but if the goal is to force people to use less gasoline, higher gasoline taxes are the most efficient tool to accomplish this.
Tuesday, May 04, 2010
On Facebook, Eric Lease suggested "It's that demon country music!".
Also on Facebook, Art Carden suggested "They finally released Johnny Cash's American VI, so Nashville has apparently outlived its usefulness.
My own suggestions: Tennessee failed to make it illegal for gays to adopt last year (Nashville being the seat of the state government).
What do you think? What horrible sin has Nashville committed to deserve divine wrath?
Some of the pictures below are panorama stitched together from several pictures. Combine the terrible quality of the camera with stitching and the result is a pretty bad image, but you can at least get an impression of the water levels. Be sure to click on the pictures to enlarge them.
Here's Morgan Park. That big body of water is supposed to be a big open grass area, with a baseball diamond in one corner. The auto stitching is particularly bad here. I had some images to the left, too, but the change in perspective made them unstitchable.
More pictures after the jump.
Sunday, May 02, 2010
We went for a walk to take some pictures this afternoon (all of the pictures below were taken by my wife). The Salemtown/Germantown neighborhood seems to have fared pretty well. Here's a view of Morgan Park from the river side, looking back to the west toward the community center (visible on the right). The park itself is flooded.
Friday, April 30, 2010
I have two problems with this (they're closely related to each other, but I think they're different enough to call them separate arguments). The first is well-summarized here with an example:
For example, before 1996, certain initial public offerings of stocks were subject to merit review in certain states, where the state decided if a security is a "bad" investment and thus not appropriate to be offered to its citizens. In fact, this is exactly what happened to Apple Computer when it first went public in 1980. Massachusetts prohibited the offering of Apple shares because they were "too risky," and Apple did not even bother to offer its shares in Illinois due to strict state laws on new issues. What if federal bureaucrats had had the power to impose their judgment on a "risky" financial product (such as an IPO) on a nationwide scale, or every state followed Massachusetts' lead?That's taken directly from Marginal Revolution, which quoted it from Paul Atkins. This is a great example of my first problem with this kind of reform: Financial instruments are really just contracts, and every one is new and different. New financial instruments are created all the time, with new and different terms. Every new financial instrument is a new contract. Can a review board really review and approve all of them in anything resembling a timely fashion? The only way I can imagine that they could do so would be to restrict financial instruments to a set of standardized forms. Issuers are allowed to change a few things--the interest rate, the time period, etc.--without needing approval. Changing anything else would require approval.
Yet this would almost certainly leave some value-increasing exchanges foregone. There must be some value in allowing new and different financial instruments that don't follow strict forms; they can't all be schemes and frauds. Arnold Kling would probably argue that we can do without the complexity and do fine with simple forms, but I'm no more comfortable with that than I am with governments deciding if an innovator like Apple should be able to issue stock.
My second problem with this kind of reform has to do with the FDA. Economists (particularly Robert Higgs) have long suspected that the FDA tends to be too reluctant to approve new drugs. The reasons for this are straightforward: The incentive to approve new drugs is low, and the incentive to deny them is high. If a drug is approved, and someone gets sick as a result, the public and Congress are going to blame the FDA. If a drug is approved, and it works wonders without getting anyone sick, then no one is going to sing the praises of the FDA. Furthermore, the people who could have been saved by a drug that is not approved are usually not a vocal interest group (a notable exception being HIV/AIDS victims), and their suffering is not visible to most of the public. As a result, the FDA tends to require drugs be tested for a long time before approval.
I would expect the same problem to occur with financial instruments. The regulatory approval body would have an incentive to reject most instruments, or at least subject them to lengthy reviews that delay their implementation (leaving many potential users of these instruments without them for some time).
To add my usual caveat, I'm not an expert in finance or macro, and my opinion on this subject is not as valuable as the opinion of such an expert would be.
Wednesday, April 28, 2010
Real injuries in soccer are usually intensely painful, but brief (particularly shin and other lower-leg injuries--even with pads, they can still hurt). An injured player may briefly be in agony, but it ends quickly and the player can get back up.
This means that it can be difficult for a referee to tell a real injury from a fake one. If the referee is fooled, the penalty to the "offending" team is the same whether an injury is real or faked, so it pays to fake injuries. Furthermore, there's no disincentive to fake an injury--the referee is not going to penalize a team for trying to make the other team look guilty. Even if the referee wanted to do so, he'd have to use replays to reliably find the truth, and soccer fans cannot tolerate the delays that would be associated with replays. Maybe they could fine players after a game upon reviewing a recording of the game, but I suspect the fines would have to be really big to change player behavior.
So to sum up: In soccer, faking injuries is pretty much all benefit, no cost. Again, this is merely an armchair just-so story. I'd be interested in hearing other just-so stories, too!
Friday, April 23, 2010
Last night while driving I heard the host of the show explain that there is a law against futures trading for onions in the U.S. I was excited because I had actually learned something new from this show that so frequently annoys me. I was delighted when the host pointed out that prices in the onion spot market are more volatile than in other agricultural markets. It turns out that both statements are correct, too.
Then, of course, I was let down, as the host said (and I'm paraphrasing) "It just shows that you never know what to expect from a market". This is an indication of incredible ignorance of economics. Increased volatility is exactly what economics predicts should happen if futures markets are eliminated. Why? Because futures markets allow people to bet on future prices. If I look at weather data and conclude that onions are going to be in short supply in three months, I can sell a promise to deliver onions then (at what will be a high price) and buy a promise from someone else to give me onions (at today's low price). The result is an increase in the demand for onions now, and an increase in the supply onions later. What happens to the price? It goes up now, and down in three months. Prices are smoother over time because speculating in futures markets allows planning for the future. It's intertemporal arbitrage. (This does not mean that speculative bubbles cannot occur; it just means that we should generally expect prices to be smoother over time.)
This is not a surprising result. Econ 101 students should understand this intuitively. It's disappointing that the creators of a much-listened-to radio show do not seem to understand this.
Tuesday, April 20, 2010
Friday, April 16, 2010
It is my understanding, however, that the earth has been in a lengthy period of remarkably stable climate for some time, and that sometime "soon" (I'm not sure what that means in climatological terms--it could mean a thousand years from now as far as I know) we're due for some a cooling cycle. I can't find any nice summaries of the science on this, so let's just ignore my ignorance and suppose that we found out that global cooling was about to happen in the near future. Suppose also that this cooling would have serious implications for humans and for species around the world.
What would environmentalists want to do in this case? Would they be in favor of letting the world cool down, possibly leading to human suffering, and the extinction of many species? Would they be in favor of trying to warm the world somehow (not necessarily by increasing CO2 emissions--they might not like ocean acidification or some other side effect)? I don't know what their answer would be. Maybe different environmentalists would answer differently. I think the answer says something important about the opinions of the person answering, though.
I think economists would be in favor of doing whatever cost-benefit analysis supports, even if that means trying to manipulate global temperatures to avoid the costs of accommodating rapid climate change.
Wednesday, April 14, 2010
Art Carden makes a lot of points from our forthcoming piece in Economic Affairs, The Truthiness Hurts. You can read a pre-print version of it here. I was disappointed to see that Art didn't mention that my wife came up with the name for "Stick-It-To-the-Man Bias", but then, his time was very limited. In fact, the editor seems to have cut out some of his remarks (which is a shame, as I thought he was more interesting than the other speakers).
Sunday, April 11, 2010
Here's something that an industrious undergrad might be able to pull off (although he or she might need a partner). Go to a local supermarket and sit near the checkout lines. Record the gender and race of each employee in the checkout line and each customer that goes through the line (you probably ought to ask a manager for approval first). Also record the number of people that go through each line in, say, an hour. Repeat this at some other grocery stores.
This data should allow one to determine:
- Whether customers are more likely to go to an employee of the same race or gender than pure chance would predict.
- How much customers are willing to pay, in time, to go through a checkout line operated by someone of the same race or gender (assuming a same-race or same-gender preference exists). That is, you can find out how much they are willing to pay to indulge their racism or sexism.
Wednesday, March 17, 2010
Tuesday, March 16, 2010
Monday, February 15, 2010
Thursday, February 04, 2010
Now for some basic math, using a revenue formula (for record labels) of 70 cents per digital track and an average of $9.25 per album. The results: 2009 digital track revenue grew about $62.3 million while album sales revenue fell about $503 million. That’s a net revenue loss of more than $440 million.
So clearly digital track sales are not fully replacing lost album sales revenue. In fact, during 2009, digital track increases offset less than 15 percent of the revenue lost from shrinking album purchases.
Wednesday, February 03, 2010
- Do you think Republicans hate poor people?
- Do you think Republicans want to harm poor people?
- Do you think it is wrong for a business to make a profit?
- Are prices of goods and services set by agreements between businesses? (This question needs work--there ought to be a way to get at the question of whether prices are determined centrally by colluding firms or by decentralized market processes).
- Does an increase in the minimum wage raise cause some workers to loser their jobs?
- Can we clean up the environment at no cost to consumers by forcing stricter emissions standards on car producers?
- Do you believe Freedom of Speech should protect racist speech, too?