Friday, March 31, 2006


George Bernard Shaw

A government that robs Peter to pay Paul can always depend on the support of Paul. -- George Bernard Shaw

I read the above quotation when I was last checking my email. It was a google ad that took me to this page of quotations. Upon reading it, I felt the need to look up some more information on Mr. Shaw. I have heard of him, but never really took the time to learn anything else. So here are some interesting things:

Apparently he hated the name George and never went by it. It was only after his death that people started to use all three names and that is how it has continued.

He was a noted socialist who took a leading role in the Fabian Society. He played a pivotal role with the Fabian Society and wrote a number of their pamphlets. He argued that property was theft and for an equitable distribution of land and capital. He was involved with the formation of the Labour Party. (influenced by Henry George)

His ironic wit endowed the language with the adjective "Shavian" to refer to such clever observations as "England and America are two countries divided by a common language."

Concerned about the inconsistency of English spelling, he willed a portion of his wealth to fund the creation of a new phonemic alphabet for the English language.

Shaw had a long time friendship with G. K. Chesterton, the Catholic-convert British writer, and there are many humorous stories about their complicated relationship.

Shaw is the only person ever to have won both a Nobel Prize (for Literature in 1925) and an Academy Award (Best Screenplay for Pygmalion in 1938).

Shaw stated in a letter to Henry James on January 17, 1909:
I, as a Socialist, have had to preach, as much as anyone, the enormous power of the environment. We can change it; we must change it; there is absolutely no other sense in life than the task of changing it. What is the use of writing plays, what is the use of writing anything, if there is not a will which finally moulds chaos itself into a race of gods.”

Bernard Shaw was a noted vegetarian.

Yeah... so far nothing I have read fits with the quotation above. More at Wiki


Smoke outside, go to jail for six months

From The Liberator Online:

When cities, towns, and states started passing smoking bans -- making it illegal to light up in restaurants, bars, and business establishments -- libertarians asked: What's next? Will busybody politicians eventually ban smoking outdoors?

Well, yes. Effective March 17, the town of Calabasas, California banned smoking almost everywhere. It's now illegal to smoke on Calabasas sidewalks, parking lots, streets, parks -- and even on your home's balcony -- if a non-smoker is nearby. The only exceptions to the law are inside private residences and specially designated hotel rooms. You are allowed to smoke outside, but only if "no non-smoker is present is not reasonable to expect another person to arrive." (It's even a crime to smoke outdoors in the presence of a non-smoker who gives you permission to do so!) Violate the ban and you face up to a $1,000 fine and six months in jail. A court can also find someone guilty of "allowing, aiding or abetting" illegal smoking.

But there's more. If someone smokes in your presence, you can sue them for statutory damages of $250 for each violation. Even better, if you can convince a jury that the smoker was guilty of "oppression, fraud, malice, or conscious disregard for the public health and safety" when he lit up, you can sue for punitive damages. With so many juries eager to awards millions in damages, every cigarette in Calabasas is now one match away from igniting a lawsuit.

That's why Jacob Sullum of Reason (March 8) warns other cities and towns that may decide to emulate Calabasas: "Americans should consider whether they really want to embrace the Calabasas spirit of moralistic intolerance masquerading as 'public health.'"

Indeed. And this new law is bound to make libertarians ask: What's next? Will busybody politicians now ban smoking all together? Stay tuned.


Public Drunkenness includes the bar?

Police in several states have launched crackdowns on drunk driving and public intoxication -- and are now arresting drunk people who aren't driving and who aren't in public.

In at least two states -- Texas and Virginia -- police have started going into bars (sometimes undercover!) to arrest people who fail sobriety tests.

Police say the action is necessary to prevent drunk driving. They also say they don't have to wait until people leave a bar to arrest them for public intoxication, since the legal definition of "public space" includes the inside of drinking establishments.

A few questions: First, why is public intoxication a crime at all? Second, how can privately owned property be construed as "public space"? Third, does the breathalizer force people to give evidence against themselves?

This is simply an outrage. From now on, I'm drinking at home.


If its consensual...

Is the minimum age standard an appropriate regulatory policy for young people? Are minimum driving ages appropriate? Are minimum age requirements appropriate for consensual sexual relationships? What about contracts?

In Massachusetts they are talking about raising the minimum driving age from 16 1/2 to 17 1/2. I wonder what this is actually supposed to solve. It seems like this would do little to increase road safety (and safety of individuals within car) or reduce roadway speeds. Currently, there is no built in mechanism (read incentive) for safety or maturity other than when you get caught. It is just an age requirement. DMV licensing requirements are practically a joke as well. They serve little purpose other than to provide a false safety net for all individuals involved. Here is more on the issue at CSG.

Now for consensual relationships: As most folks have heard there was a couple (15 and 17) where the young man got sentenced to seven years of prison for being involved in a sexual act with the young woman. Apparently if they had done more, it would not have been as strict of a sentence. Instead of focusing on the hypocrisy and the pretentiousness of those laws, I will focus on the logic behind the minimum standard. I believe there are a couple of problems at hand: asymmetric information and coercion, and expectation of risks.

The issue of asymmetric information may very well be a valid argument -- that one individual has more information than the other and can influence the other's behavior. In this case it is then intimately tied to coercion. Because one individual is over an arbitrary age, they have the ability to influence the behavior of another (without that individual explicitly stating their dissenting opinion). However, true coercion means rape and the minimum age law is simply an act of protecting someone from themselves and their potentially risky behavior.

I suppose another argument is that since rape charges are not effectively enforced (according to some) and sentenced, that minimum age laws might limit particular activity below that arbitrarily set age. I wouldn't think so, but I haven't seen any studies on the subject.

Now for risk: I think sexual activities are likely the most risky behavior there is. It's like going skydiving, except you won't die right away. I think if we really took sexual activities into account, then most people really are 'risk loving' rather than 'risk averse'. Okay, now for the expectations of risk. An individual at a young age, is likely not to be as aware of the risks (and rewards) associated with their activities. Does that however, make it good policy to limit the choice of an individual because they don't take into account the full risks? I am of the opinion that this 'command and control' style of regulation can't possibly help individuals realize the true risks associated with that behavior. An alternative is to make the outcomes of that behavior more visible and make individuals more liable for inappropriate and risky activities. Cut subsidies to these socially undesirable after-effects. Although this might not be that popular to some, the subsidies to AIDs research (and others) distort the real risk associated with sexual activity.

Lastly, contracts for minors: Regulation and discrimination based on age is, additionally, unlikely to solve the problems that were stated above. This is pretty much an issue of protecting ourselves from ourselves. It is like a get out of jail free card if you screw up. Now, for a society at large that doesn't seem like a bad idea, but it limits choice and distorts the reality of the situation. It also makes it more difficult for minors to appropriately take on those real responsibilities when they have passed that arbitrarily set age. It makes entering the ‘real world’ much more difficult.

Thursday, March 30, 2006



Do most folks recognize the costs and benefits associated with voting and education in the political realm? I think most economics point out (correctly) the reason so many Americans don't vote is because of the low marginal benefits (and utility) associated with voting and poltical action. I think this is a fair explanation. Additionally, the information costs of understanding political agendas and the expected actions of a politician might cost more than they are "worth". On the margin, citizens (at least in America) don't vote -- and that is not necessarily a bad thing.

I know it is not patriotic or I might "DIE", but it is perfectly rational to neglect to participate in the political game. I suppose you might call it rational ignorance.

Here is a post on the subject.


Fifth Amendment

Fifth Amendment of the US Constitution:

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.

Is the use of DNA in breach of the Fifth Amendment? Is using DNA material self-incriminating? What rights does someone have to deny the use of DNA material and fingerprints? Currently, when you are taken into custody, they take your fingerprints, whether you are charged with a crime or not -- you have no choice to deny the use of incriminating evidence. So you are forced to implicate yourself on any past actions or crimes.

In cases where hidden assets and funds (of a person) could be used to incriminate themselves, the Fifth Amendment has been used. So why not the same rights for DNA and fingerprints?

Yes it is a tool for law enforcement, but it is also an encroachment on the rights of all individuals and their person and property.

The CSG blog is looking at another piece of the Fifth Amendment.

Wednesday, March 29, 2006


Of interest

Some things and stuff...

The governors of Texas, Louisiana and two Mexican states pledged Tuesday to improve their states' collective responses to environmental problems in the Gulf of Mexico. More here.

An independent arbiter sided with tobacco companies Tuesday (March 28) in a dispute over whether the cigarette makers are losing market share and should be allowed to reduce their payments to states this year under the so-called "Master Settlement Agreement." Read more.

Without the gas tax in Oregon. NY Times article.

Demand for teachers up, supply down. I guess they don't understand why....More.

Interesting Paper titled "Does Competition Destroy Ethical Behavior?". Check it out.


Government and Libertarianism

I was reading this interesting headline this morning "Sicily Mafia watches and waits for Italy to vote" and then checked out the article. Apparently the Sicilians aren't as "active" as the used to be -- much more passive in today's political game. Here's the story.

So this got me thinking. In a world without government, would we simply see regional monopolies of power like the classic mob or mafia? Would organized gangs creep up and run the show like government did? It is an interesting thought and one that those advocating the abolishment of government need to work out. Are all concentrations of power, potentially coercive?

Also, Consequentialism Redux. Part 1 and Part 2. Join in the discussion or comment here. Is a Libertarian consequentialist more appropriate or is the rights approach better, both philosophically and practically speaking?

Tuesday, March 28, 2006


The Fat Tax Fallacy

The new idea is to influence the behavior of children and parents away from "junk food". We need to do it for the children!! We must save our children!!

More here.

Interestingly enough, the state of North Carolina already has partaken in this fat tax revolution. We already have a candy and soda tax, and to my knowledge they are working on making junk food exempt from the food tax.

Here it is Canadian style. (yeah, I dunno if our neighbors to the north actually have a style or not)


Of the Day

Caspar Weinberger Dies at Age 88 -- the "Cold Warrior" who served in the Cabinets of Richard Nixon and Ronald Reagan died today.

Bolten to replace Card as new chief of staff -- Andy Card has resigned and will be replaced by budget director Joshua Bolten.

Charges dropped against Enron Execs -- A federal judge dropped three of the 31 counts against former Enron Chief Executive Jeffrey Skilling and one of the seven counts against company founder Kenneth Lay.

From private to public

How to combat "global warming" without destroying the economy.

Al Gore is back again -- When will companies start accounting for environmental costs?

Monday, March 27, 2006


New News

Washington Post article: Toll Road To Fund Rail Line To Dulles

That doesn't seem like a good idea. Perhaps toll revenues should be spent on the road. But I guess it all comes and goes to the same place, when you are living high on the hog.

LA Times article: Study Doubles Estimate of Smog Deaths

With that many deaths, where are all the body bags?

A team of researchers headed by Michael Jerrett, associate professor of preventive medicine, found two to three times greater risk of mortality from heart attacks, lung cancer and other serious illness tied to chronic exposure to fine particulate matter than did previous studies.

None of which have a causal relationship with soot. How exactly is that controlled for?



Here is the SouthPark Scientology Episode.



Thank you for smoking

This is a movie I really want to see. Thank You For Smoking just came out on the 23rd in select locations. Hopefully it will swing around Raleigh at some point in time.

This movie is a parody of smoking lobbyists (also alcohol and firearms) and is based on the Christopher Buckley novel of the same name.

Here is a link to a review

You can get to the trailer through the review or check it out here.

Sunday, March 26, 2006


Professor Sowell

Lessons from the Professor (from his earlier work):

he's made mincemeat of the sloppy methodology and flaccid arguments put forward by mainstream civil right leaders and their liberal sympathizers. He has shown, empirically, that affirmative action does not benefit poor blacks. He has shown, empirically, that political clout is not a prerequisite for ethnic economic advancement. And most importantly, he has exposed the harmful fallacy of using racial and gender discrimination as an all-purpose explanation for statistical group disparities.


Asked why many of these failed ideas, and the black leaders who promote them, don't seem to lose credibility, Mr. Sowell responds that the phenomenon is hardly limited to the realm of race. "You could take it beyond the black leadership," he says. "Has [John Kenneth] Galbraith lost any credibility? I remember 'The New Industrial State'"--the 1967 book in which Mr. Galbraith famously argued that large corporations were immune to marketplace forces--"but since then, Eastern Airlines has gone out of business. The Graflex Corporation has gone out of business. Similarly with all kinds of big businesses. This hasn't made the slightest dent in Galbraith's reputation. We have Paul Ehrlich, who has told us there would be mass starvation in the world in the '80s, and now we find our two biggest problems are obesity and how to get rid of agricultural surpluses." Mr. Sowell's conclusion is a cynical one. "I have a book called 'The Vision of the Anointed,' and there's a chapter in there called 'The Irrelevance of Evidence.'"

Read the article here and get the newest book here.


Featured Article

An article of mine will be the featured article on tomorrow (March 27th)

Please join in and comment or at least check it out and read over the discussion.

Thanks. Find it here.

Friday, March 24, 2006


Brokeback Bucks Back

Well, it looks like Brokeback Mountain is in the news again.

Apparently Randy Quaid says Brokeback really stuck it to him good.
I hope he used protection...

Read more here.


Of Note

News of the day...

Good global warming alarmist article -- New York, London, Hong Kong business hubs to submerge by 2100?

South Park kills Chef.

Furniture antics with Cruise.

The Shores, they are submerging

Poor City Schools of NYC. They need more money.... Isn't that always the case.

Gay Polling. Opposition is declining.


Death Penalty Debate

After a quick perusal of a new paper in the Stanford Law Review, it really does put into question the efficacy of the use of capital punishment as a deterrent for violent crime and criminal activity in general. The authors, John J. Donahue and Justin Wolfers:

We find that the existing evidence for deterrence is surprisingly fragile, and even small changes in specifications yield dramatically different results. Our key insight is that the death penalty -- at least as it has been implemented in the United States since Gregg [v. Georgia] ended the moratorium on executions -- is applied so rarely that the number of homicides it can plausibly have caused or deterred cannot be reliably disentangled from the large year-to-year changes in the homicide rate caused by other factors. Our estimates suggest not just "reasonable doubt" about whether there is any deterrant effect of the death penalty, but profound uncertainty. We are confident that the effects are not large, but we remain unsure even of whether they are positive or negative. The difficulty is not just one of statistical significance: whether one measures positive or negative effects of the death penalty is extremely sensitive to very small changes in econometric specifications. Moreover, we are pessimistic that existing data can resolve this uncertainty.

Although, I have not yet read all of it, I would suggest a look over the introduction if you have the time. The paper can be found here.

Thursday, March 23, 2006



Malpractice awards for pain, suffering limited to $750,000 -- Gov. Jim Doyle signs medical liability cap.

State-funded Bible courses in Georgia -- interesting...

The Death Penalty on trial -- always good for a reevaluation

Colorado and Colorado's Governor Bill Owens have a clear path for smoking bans -- I guess he will just have to take the reins on this one since those stupid little cities and counties don't know what's best for themselves.

Fat vs. Fat: Who's the fatiest?

CCF on CSPI -- that's right!

505 new cameras in New York! Apparently that will help keep an eye on the bad guys. Yeah, I believe that! Does anyone honestly think crime will decrease (holding constant the growth of the criminal state)? Won't we just have a more coercive police "protection". This is a good step forward for Big Brother.

The Canadians want more privatized medicine -- well isn't that a surprise....

A Healthy Economy Can Break Your Heart -- Interesting abstract. Haven't gotten to the paper yet, but this guy from UNCG is good. I have read his stuff before. (might be the same paper - here or here)

A response to Jenna's question about Pre-K yesterday: here. The outcome is mostly mixed... mostly

The Onion: Soup Denial and Gateway Magazine.

Wednesday, March 22, 2006


Re-Education and Stuff

I guess we don't have to worry about re-education -- just start the brainwashing earlier. We should all look forward to pre-kindergarten classes for all children everywhere. We need to have more faith in public education(and of course funds).

And of course Rob Reiner is still a meathead after all these years. Here's the plot.More news on the subject.


We need to continue to question the efficacy of State Clean Air Acts and the Kyoto Protocol... Here's the case in California.
More at the Guardian.

What is interesting is that this study is based on 1999 numbers. So much for accuracy in advocating pollution controls....
Some news on the subject.


Here are two interesting articles from the Minneapolis Federal Reserve Bank's Quarterly Review.

A Wal-Mart Interview and the topic of Eminent Domain and losses in prosperity.

Tuesday, March 21, 2006



This is friggin' awesome. Send a text message to any cell phone from your email account. Check it out here.

Try it out. It's pretty cool.


Happiness Economics

Here is an interesting post by a fella at the Cato Institute. He has this blog titled Happiness and Public Policy. Here is today's post.


Death and Taxes

Here is a nice post by the folks at Catallarchy.

Additionally, a nice picture. Also found here.


Manufacturing Smoke

I woke up this morning at 3:30 and turned on the tele. I caught a story about a cigarette bar that opened up in Chicago. Given that Chicago has outlawed smoking in its bars, this does seem quite odd. However, since they are registered at a cigarette manufacturer, anyone can smoke there. What they do is combine up to nine different types of tobacco and make cigarettes on the spot. Obviously they come at a hefty price ($9.00/pack), but freedom to smoke is getting quite expensive these days.

I thought it was an interesting and a creative business approach. I hope the Triangle gets one of these. It would be interesting if they could do the same thing with cigars. With RJR backing it though, I am not sure how long it will take before it becomes an enemy of the state.


From Big Fish to Shrimp

According to researchers, throwing back the little ones might lead to smaller fish over time.

Any commercial fisher or weekend angler knows to “throw the little ones back.” The idea is to give small fish time to grow up... But that strategy may actually be harming fish stocks. Ongoing experiments on captive fish reveal that harvesting only the largest individuals can actually force a species to evolve undesirable characteristics that diminish an overfished stock’s ability to recover, says David O. Conover, director of the Marine Sciences Research Center at Stony Brook University. The results may explain why many of the world’s most depleted stocks do not rebound as quickly as expected.

Check out Enviromental Economics for more details (and pictures!).

This seems to be a clever prediction of evolutionary theory, but I smell some economic implications too. Will your average fisherman throw back a few of the big fish he catches to mitigate the evolutionary problem? Or will he keep his big fish and hope some other sap throws back his trophy catches? I think the latter.

Such a potential co-ordination failure could lead to smaller fish and unhappy fiserman. Can anyone think of any possible solutions? I have a few, but no good ones.

Monday, March 20, 2006


Hans-Hermann Hoppe

I was listening to a lecture by Hans-Hermann Hoppe titled "Protection and the Market for Security". I think he does a good job of ripping apart the Hobbesian myth of a necessary state and the need for coercion of one individual over another for "order". Since all the state is, is an individual like you and me, he necessarily falls victim to the same conflicts, vices, and incentives as do all the rest of us (same assumptions of desiring more rather than less, self interests, and preferences).

Comical and interesting point that he makes:

The state will do its best to maintain order (to a certain extent). He will not let A rob B or B rob A, for this after all will diminish what he will be able to rob from both A and B.

You can get the lecture from (direct link here) and listen to it when you have a chance. I think you will enjoy his accent if nothing else.


Some Topics

Organs for Sale. A nice discussion on Organ Markets.

Gays in the military....

Abortion debate.

Incentives matter.

The truth about taxes.

Boaz on loving Bush...Gotta love Bush!

The Cost of War.

Oh yeah... I guess those Austrians are also good at basketball. Who would have thought! The Austrian economists on it.


Patriotic Prose

I was listening to a Green Day song the other morning on the way to work. I think it was the American Idiot Song. Now these guys, with the punk background, have plently of politically motivated songs that poke fun at the more patriotic and nationalistic parties in American politics. Anyway, this song prompted me to think about my own particular poltical leanings. Currently, I am being pulled in two different directions.

My folks are rather patriotic conservatives -- stemming from two generations of military. No matter, how hard I try, I cannot break the love of the flag and the american military (I love war movies, especially Patton). My own political leanings are far more radical, yet frequently constrained by feasibility. So, I was pondering this question:

Is there an optimal amount of patriotism?

I do not trust the government, but because there is little I can do to seperate myself from it (even revolution will not), do I admire it and it's history. Or rather, should I admire it for its legends and mythology (as taught to us in school)?

In spite, of everything that is inherently problematic with the existence of a government, I can't help but love it!



A special message from our friends at the(I received this via email):

Only one in seven survive lung cancer. Help us change the odds.

Dear Christopher ,

Some 173,000 Americans will be diagnosed with lung cancer this year. Tragically, within a five year period, nearly 85% of these individuals will die from this disease. Together we can change these grim statistics and save lives.

Right now the American Lung Association is sponsoring major studies on promising treatments that can extend life and eventually cure those who acquire this disease. Learn more about our work.

Did you know that lung cancer is the most commonly diagnosed cancer worldwide? What causes this deadly disease?

>>Smoking is the number one cause of lung cancer. The more and longer you smoke, the greater your risk. But if you stop smoking your lung cancer risk decreases each year.

If you are a smoker or someone you care about is a smoker, help them stop. Learn more about the American Lung Association's smoking cessation programs.

>> Radon is considered to be the second leading cause of lung cancer in the U.S. Radon is a colorless, odorless gas, so you must measure its level in your home.

Help protect your family from radon gas. Get the facts from the American Lung Association.

>> Secondhand smoke involuntarily inhaled by nonsmokers is responsible for approximately 3,000 lung cancer deaths annually in American non-smokers.

Find out more about what you can do to reduce the effects of Secondhand smoke.

Shocking to most Americans is the fact that 10% to 15% of the men and women diagnosed with lung cancer are non-smokers.

More people will die from lung cancer than the next three leading cancers -- colon, breast and prostate -- combined.

Please make a special tax-deductible donation to give us the resources to beat this disease.

We have been working since 1904 to prevent lung disease and promote lung health across the US. Not only did the American Lung Association help conquer tuberculosis, the scientists we have supported during the last century have made important breakthroughs in treating lung cancer.

Let's work together to protect all those we care about from this deadly disease.

Thank you for your support.

John F. "Jack" Sutter
American Lung Association Chair

I will give bonus points to anyone who can figure out the problem with this letter (other than the obvious)!!

Sunday, March 19, 2006


French Rioting

If you've been watching the news, you know that many French are outraged (to the point of rioting) over a law that would allow employers to fire young workers without a reason. This law will remove many young people from the job protection laws that "protect" other workers.

And let me tell you. I wish America's youth were that politically active! After all, it doesn't matter who you vote for (or protest for?), as long as you vote! Vote or Die, remember? Rock The Vote!

Anyways, seriously, I think I'm preaching to the choir when I say that this response reveals some disturbing philosophical and economic assumptions being made by these protestors. It seems they must be viewing employment as an obligation of the employer to the employee, instead of as a mutually beneficial agreement between both parties. Perhaps, this attitude is a result of misunderstanding market activity as struggle between laborers and capitalists. Would protestors demand similar "protections for employers" in the form of anti-quitting laws?

Either way, this protest is essentially about demanding a form of institutionalized prejudice. Jim Crowe for the 21st century. Such a double standard would not only hurt employers, but it would hurt laborers in the long run as these laws only serve as a barrier to realizing the dynamic benefits of a free market system.

Let's hope de Villepin sticks to his guns.

Friday, March 17, 2006


Happy St. Paddy's Day

WSJ on St. Paddy's Day

A is for Anarachy, V is for Vendetta: More WSJ

How can this be legal?

A good new blog on campaign finance regulation. He's got some other good posts and read some of his papers when you have a chance.

Thursday, March 16, 2006


Two Bad Ideas

Michigan just about set on upping the minimum wage. (apparently alternative was worse).

Smoking Ban.



I am only 23 and feel like an old fogie. Technology everywhere and not enough time to chatch up. I just checked out technorati and registered this blog. It is amazing. There is so many different things to do and read and not enough time in the day, week, or month to catch up on all of it. I still haven't quite figured out the blogrolling thing or RSS technology.

Anywho...Perhaps we can get the name of this blog out there and boost our comments. It's worth a shot.

Top blogs and some of interest. For those fairly new to the blogosphere, check these out:

Wonkette, Little Green Footballs, ProBlogger, Hugh Hewitt, Boing Boing, and The Corner.

Wednesday, March 15, 2006


Like...Yeah and Stuff

After a quick perusal through Reason's blog, I found a couple interesting posts.
Here they are:

Ed Meese on Drugs! Caught on Tape!

The Big Tobacco Deal and your State. They actually have a lot in common.

Pimp my ride, Mr. Senator! Tax financed automobiles.

Price Controls and why they are good! Anyone wonder why the drug companies are pushing this?

Oh and something else:

A new poll just out: Tired of having a country? No? Then you are the minority!


Excellent Analysis of Abortion

Julian Sanchez again. This time on abortion. He provides an excellent analysis of the many sides of the abortion debate. He hits the nail on the head with this one. Also, read the comments and "The Famous Violinist" if you have the chance.


Our Free Market Religion

From the Gospel according to Julian Sanchez.

A classic essay on the religious-like adherence to a laissez-faire ideology.
(Newmark's Door)


Beware The Ides of March

In the Roman calendar, the Ides of March represented March 15th. The bad omen that is now connected with the saying, was popularised by William Shakepeare's play Julius Ceasar, which first appeared in 1599.

There are a lot of interesting events that took place on this day in history. You can read for yourself, here.

Don't forget -- It's also International Eat an Animal for PeTA Day!
So, if you have the time, please eat some meat!


For Once

For once, I think the Dems are right. Open the borders. Let workers come in and work. Get rid of the illegal underground economy. An open immigration policy, which Bush is actually closer to than most of the Reps seems like it would be a good thing.

Why are we so afraid of foreigners? Is it just that we are adverse to change?

A compromise in this area of policy, can only screw things up even more. Read on it in today's WSJ.

Tuesday, March 14, 2006


Portfolio Theory

Introduced by Harry Markowitz in 1952 (Markowitz, H. M. (1952). Portfolio Selection, Journal of Finance, Vol. 7, Iss. 1, p. 77-91.), modern portfolio theory, involves "detailing the mathematics of diversification". Markovitz proposed that "investors focus on selecting portfolios based on their overall risk-reward characteristics instead of merely compiling portfolios from securities that each individually have attractive risk-reward characteristics".

More on Modern Portfolio Theory.

A couple of areas of interest:

One interesting application of this very useful theory that I have come acrosss is in an analysis of state revenues and the use of a lottery to diversify the public revenue stream (quite ingenius and due for an update). Theoretically, recognizing the ability for a gaming service (as provided by the state or licensed or taxed) revenue stream to diversify the whole public revenues portfolio might be enough of a motivation for the growth of state-run lotteries in the United States since 1964.

Additionally, I was thinking about this last night -- diversifying the revenues from public and private clients at nursing home facilities. This could easily include hospitals, emergency rooms, and any other medical services or health facilities. Not only is this a big topic currently, with increases in regulation over the nursing home facilities, but it would be an interesting approach used to maximize return while minimizing risks. Due to the growing public funds used in nursing homes (LTC), this would also give policy analysts an idea of the revenue breakdown (expansion of public/private funds, needed to effectively diversify their clientele portfolio).


Economics and Knowledge

Friedrich von Hayek was a brilliant economist and (I think) the only Austrian economist to win the Nobel Prize. Every student of economics is, or should be, familiar with Hayek's "The Use of Knowledge in Society," where he convincingly argues that any attempt to structure a whole society like a firm (socialist planning) will fail because of an intractable knowledge problem: no central planner can ever have the vital specific knowledge of time and place.

But not every economics student knows some of the fundamental differences between Hayek's economics and more mainstream economics.

The natural way to start is with his critique of the perfect competition model. Hayek believed that economic thought had gone too long without trying to answer a simple question: Why do we assume perfect knowledge?[1] From Hayek's Economics and Knowledge:

"...the tautological propositions of pure-equilibrium analysis as such are not directly applicable to the explanation of social relations..."

Click here for more Hayek-like critiques of the perfect competition model.

Perhaps a more important question is: Why have we ignored the nature of knowledge and the meaning of the word "datum"? Hayek of course takes a very individualistic and subjectivistic stance on this fundamental issue. He contends that, in the past, the term "datum" referred to a piece of information that was "given" or learned at the individual level, that is, something far more subjective than we usually mean by "datum." Basically, that the same objective facts can be observed by two different people and they can each come to a different conclusion. Also, the idea of "changes in the data" only has meaning once we introduce the element of expectation.

For example, if the weather were to stay the same from now through the summer, that would not be a change in the objective data (temperature highs?). But in terms of expectations it would definitely be a change, since I expect the weather to get warmer. I hope this illustrates how Hayek's definition of "datum" might be different than, dare I say, you expected.

It follows that it's impossible to know if there's been a "change in the data" since the change can only truly be understood in terms of expectations (subjective data), and it's impossible to know exactly what everyone expects will happen with the objective data.

Hayek has a way of zapping my brain, so I'm going to sleep now. I'll try to follow up on any comments.

[1] Maybe Dallas can chime in here with something on the value of prediction. Also, feel free to make me look foolish by showing that mainstream economics has come up with whole fields devoted to imperfect knowledge: risk theory, game theory, asymmetric information, mono-duo-oligo- poly theory, etc. But here I'm mainly concerned with the perfect competition model, which is used all the time.

Monday, March 13, 2006


Minimum Wages

The minimum wage debate has come up again. I posted the other day about the newest agenda by John Edwards and his Center on Poverty, Work and Opportunity. Additionally, North Carolina's State Treasurer Richard Moore has been pushing his new blog (although it has been quiet as of late) on the same subject.

(BTW, some comments on Edwards)

So here are some goings on in the blogosphere on the same subject, which will be a hot topic come May when the Legislators get up and movin' again.

Opposite Day at MR.

Jane Galt.

Two Econlog posts: 1 and 2

In the news: Michigan and Michigan, the UK, Huntington Beach, and Arizona.

I guess the biggest issue is whether or not this agenda will improve the lots of the workers it purports to help. In the inequality arguments that I previously commented on, Russell Roberts warned about the unintended consequences of these forced equality measures. And although the empirical data is mixed on the subject, I am not sure how the "net effect" of limiting wage choices will improve these individuals’ lives.

Although individuals (on the net) do not become unemployed, new people (those folks whose marginal productivity falls below the price floor) will not be hired. Benefits (and other compensation options) tend to decline or at the very least stay the same, with mandated increases in wages. Additionally, this will make it more difficult for the poor, uneducated, and the young to begin working. The skill-less will have a harder time acquiring skills and experience in the workforce. There will likely be less initial upward mobility (or at least a lag). On a side note, the minimum wage is also good for unions, so that they can price out their competition.

The good thing about the minimum wage is that it will increase the relative wage of workers in the illegal or black markets. So, all of those illegal immigrants could very well see an increase in wages (since that is likely their only form of compensation).

Overall, I can not see how an increase in the minimum wage will have a positive net effect.

Small increases in the minimum wage are likely negligible, so they quite viable as a policy endeavor. However, since they are likely to have insignificant effects, why pursue them? Is there a reason to believe that the labor market “bottom feeders” need assistance to move upward in the labor market? I have yet to see any data, stating that those at the most bottom rung of the ladder can not get a step up (or that the ladder is broken – i.e. systematic institutions of forced poverty). If I saw that, then I might very well jump on board. So far, I am still waiting.


A Couple of Topics

Science, Man, and Free Will...

The Bill on Illegals and the WSJ article titled "All Cops, No Economics".

Milosevic Interrupted

Censure anyone?

Knight Ridder going for $4.5 billion in cash and stock.


International Eat an Animal for PeTA Day

March 15th is Interntation Eat an Animal for PeTA Day.

Here is Mungo on the subject.

The Classic PeTA: People Eating Tasty Animals.

The Carnivegan response.

They have been tracking this for a while. I guess we are in the fourth year.

Support carniveganism!

As always, though...Beware the Ides of March.


The Economist's Voice

For those of you who havn't seen it, please check out The Economist's Voice. It's a fairly new economics "web" journal edited by Brad Delong, Joseph Stiglitz, Aaron Edlin.

It's free to view the articles (just fill out some contact info or fake it) and they have plenty of heavy hitters batting for them.

Last week Richard Posner made a contribution on the Economics of Capital Punishment.

Check it out!

Sunday, March 12, 2006


An Economist Duel

Russell Roberts and Heather Boushey duel it out over the issue of "inequality" in the United States. It is on the Wall Street Journal Blog.

Here is one of Roberts' comments:

Russell writes: My example of the billionaire wasn't to refute the existence of inequality. It was to address your claim that we stand on the verge of a social crisis. In America, the differences between the average family and the upper crust are less palpable and less important than they are in South America or Africa or the Middle East, where the elites often do oppress the rest of society.

Are the differences that remain in America a social crisis? To answer that question, you need some idea of what causes inequality.

Starting in the early 1970s, the divorce rate exploded in America, creating an enormous increase in households headed by women and an increase in the percentage of women in the workplace. Though the gap has decreased over time, women earn less than men. So more women working means more measured inequality. Should we have made divorce more difficult or made it harder for women to work? Both would have reduced measured inequality.

Since the 1980s, immigration has increased greatly. Immigrants, when they first arrive, earn less than the Americans already here, bringing down measured average wages and increasing measured inequality. Should we ban immigration to reduce inequality measured within the borders of the U.S.?

Immigration to America is thriving because people come here poor but do not stay poor. Those people who come want a better life and they find it here. They are less concerned than you are about how much better others are doing.

I want people to get ahead. You seem concerned about people getting ahead of others. But by definition, not everyone can move ahead of everyone else into higher percentiles. That's like everyone being above average.

In recent decades, the lives of both the rich and the poor have improved. But if the rich get richer, fewer poor people can move into the upper quintiles. Do you want to keep people from getting rich in order to reduce measured inequality?

Statistics that cite how few people move from the bottom quintile into the top quintile mask the improvements in the lives of the poor I mentioned in my first post. Yes, as you point out, college is more expensive, but college enrollment is at an all-time high, reaching 38% among the college-age population in 2004. Yes, health care is more expensive, but life expectancy is at an all-time high as well. Poor people are less likely to be insured than rich people, but my guess is that poor people receive dramatically better health care today than they did 30 years ago.

The real social problems in America are barriers to getting ahead that need not be there. The biggest handicap the poor face in America is a government-run school system that does an atrocious job educating their children.

Finishing high school and better yet, finishing college are still remarkably good investments. If we want to help the poor in America, we would do well to get the government out of providing education where it has done such an abysmal job. Improving education in America by allowing more competition would go a long way toward improving the lives of the poor.

It's a thing of beauty

Friday, March 10, 2006



The Minimum wage...The John Edwards phenomenon is up and at it again, trying to rid the world of poverty! Too bad we don't live in Michigan, cause then there would be no poverty.

Topics of Science and how state subsidies and alarmism hasn't gotten us anywhere.

Good smoke -- the positive externalities and benefits of tobacco.

Blind kids mandated to take driver's ed? What? This must be the public school system.


I Can't Drive 55

I know I feel like this on the highway. But some kids from Georgia State University tested it out and submited it to the Campus MovieFest. Here are the Austrian Economists commenting on it. And here is the video.

I CAN'T DRIVE 55 by Sammy Hagar

One foot on the brake and one on the gas, hey!
Well, there's too much traffic, I can't pass, no!
So I tried my best illegal move
Well, baby, black and white come and touched my groove again!
Gonna write me up a 125
Post my face wanted dead or alive
Take my license, all that jive
I can't drive 55! Oh No!

So I signed my name on number 24, hey!
Yeah the judge said, "Boy, just one more
We're gonna throw your ass in the city joint"
Looked me in the eye, said, "You get my point?"
I said Yea!, Oh yea!
Write me up a 125
Post my face wanted dead or alive
Take my license, all that jive
I can't drive 55!

Oh, yea!

I can't drive 55!
I can't drive 55!
I can't drive 55!
I can't drive 55!


When I drive that slow, you know it's hard to steer.
And I can't get get my care out of second gear.
What used to take two hours now takes all day. Huh!
It took me 16 hours to get to L.A.
Gonna write me up a 125
Post my face wanted dead or alive
Take my license, all that jive
I can't drive 55!

No, no no,
I can't drive...
(I can't drive 55!)
I can't drive...
(I can't drive 55!)
I can't drive 55!


Who says...

Who says the economy is not going well. The new Forbes listing would disagree.



There is an article in the Wall Street Journal today about the NFL and how Adam Smith would have appreciated their example of 'enlighten self-interest'. Although I am not sure what Adam Smith's reaction would have been, it seems unlikely that it would have been overly positive. I say that, for a couple of reasons.

The NFL has, since 1960, employed the use of revenue sharing and the salary cap in attempts to maintain a competitive league, where "anyone can win". The reasoning behind this is to try and limit the perennial champions, i.e. domination of one or two teams simply because of their large pocketbooks (...Steinbrenner and the Yanks). Since the NFL pools its funds and pays out capped salaries, more revenue-poor teams can get some assistance on paying the bills.

The author seems to forget, however, that these are businesses. These sports giants get mounds of public subsidies, economic development funds, and continual tax dollar assistance for new stadiums and re-builds. They have also been able to establish a business-level and job-level price ceiling, and provide a price floor on wages. In economics, we would call this collusive operation an oligopoly. Have we conveniently forgotten about the Sherman Anti-Trust Act as well?

So what would Adam Smith be so happy about? Apparently, he would be pleased to view the collective works of the team owners acting in their own self-interest. Oddly enough, it is exactly what the author touts as the ‘love’ of Adam Smith that so many people see problems with Capitalism, i.e. the self-interested actions without any checks on power (Corporatocracy). Additionally, he completely disregards the corporate welfare by localities and the coerced redistribution simply because some owners have more money.

Now I understand that this is a voluntary agreement (at least initially) by the owners and there is nothing wrong with that. However, the NFL has been able to maintain a monopoly (USFL) on professional football in the United States for quite some time – all at the expense of the taxpayers.

Through sports welfare, the NFL has been able to maintain competitive teams for more than four decades, so why couldn’t it work for the United States? Luckily, we have a small testing ground, with which to view the effectiveness of welfare programs. The United States has for a long time running, given generously to those in need (and those not in need) and has not seen very positive results. Poverty levels have increased or stayed the same for decades now and we are starting to become strapped for cash in all of our entitlement programs. Overall, I would not call it a success.

But, I suppose it could work for the NFL, but not likely in the long run.

Here's the article.

Thursday, March 09, 2006


Video Fun

This was a good video, I watched it on Sanders' computer one time. The Liberty Belles provide the link.

Brokeback spoofs.

Another one Sanders told me about, here's Triumph.

Brokeback to the Future and a few others.

Fake Trailers.


Dubai Falls Through

After the vote to install legislation barring DP World from acting on those Ports, Dubai has decided to divest itself of management of those six U.S. ports.

This is a victory for some, but it is a false and empty vistory at best.

It is actually a good example of how to manipulate and coerce the economic markets without any legislation at all. Politicians take note!


Distributism IV

A response to Thomas E. Woods’ “What’s Wrong with Distributism

(From Travis' AntiWalmartarian friend)

"These two figures rightly enjoy great renown throughout the Catholic world for their outstanding writing on a variety of subjects, though of course they had no formal training in economics." -in refrence to chesterton and belloc.

I'd just like to point out that while Chesterton had no formal training in economics he also had no formal training in either history, literature or theology. Yet, he is considered one of, if not the greatest writer of the 20th century and one of only three people in the 2,000+ year history of the Catholic Church to be named a defender of the faith. Not bad for no formal training but lets move on.

"--as if a discipline that is devoted to the application of human reason to the problems of scarcity in the world could actually in itself be antagonistic to the Catholic faith."

When a disipline devotes itself to the application of human reason and does not allow for the inclusion of faith it is antagonistic to the Faith. When a disipline, ideal or method relies solely on human reason (especially today when reason has become so twisted and convoluted that it seems reasonable to allow things like abortion) and does not in the least allow for, ideally ask for and seek the grace, wisdom and intervention of God or seek the wisdom of the Church it can than be considered to be man-centric. This is at odds with the teachings of the Catholic Church as all things should be centered around God.

"It may well be that a man is better able to care for his family precisely if he does not own his own business or work the backbreaking schedule of running his own farm, partially because he is not ruined if the enterprise for which he works should have to close"

Maybe I'm not reading this one right and I mean that in all seriousness (allergys are killing me today so I appologize if any of this comes off as the drug induced writing of a mad man... ****ing benadryl) But it seems to me that he is trying to say that a man who works for someone else is better off than someone who owns his own buisness because if he is an employee and the buisness for which he works goes under he isn't ruined. Does anyone remember what happened when Stanley furniture closed its plant in west end? I met several of the people who worked there while I was at sandhills.
People who had good paying jobs who were now making minimum wage and going back to school at 50 years old in a desperate attempt to get back to a living wage. Now i'm not saying a small buisness owner would be much better off if his buisness were to collapse but don't pretend he'd be that much worse off than people layed off because the company they worked for wanted cheaper labor to turn a larger profit.

"In other words, the price system, and the system of profit and loss that follows from it, forces him to plan his activity in conformity with the expressed needs of society and in the interest of a genuine stewardship of the things of the earth."

Is this guy serious? Okay i'm no tree hugging hippie, i think we can all readily agree on that. But a genuine stewardship of the things of the earth? Have you been to New Jersey? You go smell Jersey and tell me there is a genuine stewardship with the things of the earth.

"The point is, since we know that man has perfectly valid reasons for seeking the highest return on his investment, or earning the highest wage, instead of wasting time on foolish and irrelevant lamentations regarding the greedy people in the world--a matter of moral philosophy rather than economics--we ought to employ human reason...."

Forgive me if I'm wrong but didn't our foolish and irrelevant lamentations regarding the greed of the British Empire and their policy of taxation bring about the American Revolution. Just a thought. And again he attempts to seperate economics from morality and philosophy instead opting to rely on human reason. Anti-God, Anti-Catholic.

Why does he bring up Luther... he was a heretic who broke off from the Faith. He has no place in a discussion of Catholic social teaching.

"The popes have repeatedly observed that it is more difficult for a man to increase in virtue and to save his soul when living in utter destitution..."

As far as I know this is just an out right lie. If Christ said it is more difficult for a camel to pass through the eye of a needle than for a rich man to enter heaven I doubt the Popes are going to contradict Him. St. Francis owned literally nothing and i'd say he did a pretty good job with that whole saving his sould business.

"More recent papal encyclicals, such as Pope John Paul II’s Centesimus Annus, have likewise begun to reflect an understanding of the role of prices, entrepreneurship, and various other aspects of the market economy, thereby acknowledging what educated people around the world have themselves begun to see."

Indeed many of John Paul II's later writing acknowleged the role of the free market and also noted the fact that in its present form and method of operations it is in fact at odds with Catholic teachings. Primarily due to the continuation of immoral business practices. You may think sweatshop labor is okay because it keeps kids from being even worse off but it is an injustice that the Catholic Church will never stand for.

This guy is obviously not a Catholic, or if he is he needs to do some serious soul searching and a lot of research into his religion.

Just thought i'd offer the perspective of someone who actually knows a bit about their faith.

And by the way there are many people in this area that have become involved with community supported agriculture as well as dealing directly with a farm in vass that raises, butchers and sells cows as well as milk, chicken and eggs. It is by far and away the best meat i have ever had. I could get into this more and maybe later i will but right now i'm tired...


Keynes Still Matters

This is in responce to Chris' earlier question concerning why deflation is bad.

Obviously, not all deflation (defined as a fall in general prices) is bad. A large increase in aggregate supply could lead to a booming economy and falling prices. But deflation originating from a sudden and dramatic collapse of aggregate demand could be worrisome because of the potential accompanying recession. "Well, wont this recession be self-correcting? If so, why worry?" you may ask. Maybe not. We can certainly conceptualize situations where the self-correcting mechanisms of the market fail. In this case, The real problem arises when deflation pushes nominal interest rates toward zero. Once nominal interest rates reach their zero bound, real interest rates will start rising with deflation, discouraging investment, worsening the recession and causing prices to fall further. If this continues, “deflationary expectations” could become entrenched in the minds of economic agents, catching the economy in a downward deflationary spiral known as a “liquidity trap”. There will be no self-correcting mechanism to pull the economy into recovery here.

Worse, with nominal interest rates already as low as they can go, central banks lose their ability to affect aggregate demand using traditional open market operations. This could be a situation very similar to the one Keynes described in the General Theory (an “equilibrium” bellow full employment where monetary policy is ineffectual), leaving the door open for the type of counter-cyclical fiscal policies he recommended.

Now, things aren't really this cut and dry and there is still debate over the practical importance of liquidity traps, but I think this is a good theoretical answer to Chris' question. If you are interested in learning more about the modern theory of liquidity traps see this speech by Ben Bernanke for an intuitive introduction or Paul Krugman’s explaination using the IS-LM model. If you would like a more rigorous treatment, check out Krugman’s paper on Japan’s recent deflationary experience.


Dubya, Dubai, and the Deal

Here is the Mises Daily Article on the subject of the Dubai Ports Deal.

Also, the House Appropriations Committee on Wednesday voted to bar DP World. That might put a bit of a damper on the deal. The vote was by 62-2 margin.

Not so good for the supporters of the deal.

The GOP might just be standing in the way. Is this about security or Islam?


Unemployment Rate Drops

North Carolina's state unemployment rate drops to 4.3 percent. The full report, which was just released this morning, stated that the state's average is below the national average and at its lowest point since December 2000. Additionally, it had the largest "month-to-month decrease since February 1978". Here's the details. The full pdf is here.



Sheldon Richman's blog points out the common errors found in many newspapers. Journalists get it wrong sometimes like all the rest of us. Here is Paul Blustein in yesterday's Washington Post.

Some interesting commentary on the movie Crash, which I happen to know is both Sanders' and Coletti's favorite movie. Look how they rant and rave!

A follow-up on my Robin Hood comments from a couple of days ago. Here.

Catholics and Couric...

Walter Williams on pandering to blacks.

Wednesday, March 08, 2006


Lord John Maynard Keynes

70 years ago this year, John Maynard Keynes published his General Theory of Employment, Interest, and Money--(for better or worse) one of the most influential books in economic intellectual history.

A lot of ink has been spilt trying to explain exactly what Keynes was saying in this book. In the Americas, the most influential interpretation has been the one offered by John Hicks. More recently, Paul Krugman written his own very brief summation of the General Theory.

Personally, I have wanted to post about Keynes since Chris invited me to this blog. Even in undergrad I looked up to him as an individual because of the full life he led, and after reading the General Theory last summer (with great help from Hansen's Guide to Keynes) I feel like I have a better appreciation for his contributions to economics. Granted he got a lot of the details wrong (just one example, he seems to have thought interest rates are determined exclusively in the money market), but don't most pioneering economists? Look at Adam Smith and the Labor Theory of Value for an illustration. I'm not an economist so I wont try to gauge Keynes' intellectual impact myself. I will only recommend Krugman's assessment and say that I enjoy his characterization of Keynes as a "savior" of Capitalism.

What do you guys think about Keynes? Any opinions?

I would also recomend checking out Robert Skidelsky(whom Krugman seems to be a cribbing a bit) 3 volume biography of Keynes. I havn't finished them all, but the first volume is wonderful and so are the chunks I've read of the second. Here is a very short bio in the mean time.

Here is an essay by Skidelsky on Keynes and the Ethics of Capitalism.


The Problem of an Implicit Contract

I have previously mentioned the issues and problems of implicit contracts. Specifically, from this post:

Is it a violation of the Libertarian ethic to cheat on your significant other? Since marriage is an explicit contract, I am mostly concerned with individuals who are dating. There would, at least in many cultures, be an implict contract involved with dating -- one implying fidelity or at least limiting any attempts as polyamorous activities. Since it is dating though, there are risks involved with this activity and should all infidelities on the part of a 'significant other' be considered an assumed risk? I suppose if this sort of issue is never talked about, there can only be limited expectations, but there likely still exists an implict contract -- even if it is one-directional. How do we resolve that and is one party deserving of restitution in the case of infidelity?

This also has to deal with the issue of the implicit contract that I stated from Walter Block's lecture (the post).

Getting to my point, in the news the other day, there was some problems at Disney. A Disney employee named Elizabeth Sunde accussed four other male employees of a "gang rape". Here's the initial news. Then it was found out that she was a willing participant in the activity, as evidenced by videotape. More on that.

So, here's the issue: What obligation does an individual have to another by breaking an implict contract. What if she actually did want to stop at any point in time during the sexual activity, does she have an obligation to continue to "fulfill" the implicit contract of finishing the services?

A general approach to an implicit contract says that she would have to continue since she would be in violation of that contractual obligation, or she would be forced to give some alternative compensation/restitution to make those other four individuals "whole" again.

Is there a problem with this? Any takers?


Capitalism. Always.

I love the internet. Where else can you get Capitalism and CCCP shirts? I'm buying this one now:


Tourist Tax Fallacy

I need some help backing this up with data, but here's what I think about "tourist taxes" like the car rental tax and the prepared food and beverage tax:

1) they are mostly paid by non-tourists
2) people actually buy into the arguments that say otherwise (making it a fallacy)
3) local politicians feed on this ignorance

What is the best way to get evidence on the burden of the "tourist tax"? My dad operates a car rental agency and I have seen the people who rent the cars. Most of them are locals, but they still have to pay the combined 11% tax on rental cars.

I have to pay the prepared food and beverage tax every time I go out for lunch, even though I'm not a visitor. The fallacy can be summed up as this: Nearly all tourists rent a car or dine out. Therefore, a tax on prepared food and rental cars will be borne by tourists.

The fallacy could be corrected by admitting that: While nearly all tourists rent a car or dine out, most of the people who do so are not tourists. It follows immmediately that the tax burden in this case is not borne exclusively, or even largely, by tourists.

How can I test whether or not my intuition and anecdotal evidence are right?



In a war against immigrant workers, the LA Times comments on the use of racketeering laws against big businesses, "charging that they deliberately hire illegal workers". So they will begin to collect expenses from these businesses as soon as possible.

Canyon County, a community of about 160,000, is "at the forefront of an emerging national effort to use racketeering laws to crack down on illegal immigration by seeking damages from employers".

Here is a Washington Post article on the growing presence of immigrant workers in the labor force.


Creeping Statism Watch

NYC Mayor Michael Bloomberg got a nice pay day.

In a New York Times Article published today, it is reported that just yesterday New York City announced a settlement with an online cigarette vendor that will allow the city to pursue residents for up to $33 million in unpaid excise taxes.

"A 2000 New York state law banned direct sales of cigarettes over the Internet and by telephone or mail. Tobacco companies challenged the ban, but a federal appellate court upheld it in February 2003." So, they have done a pretty good job of creating the black market and then taxing the hell out of it!

First tax, then ban and outlaw, then tax some more. New York City, with the help of Bloomberg already has a ban on smoking in any public facility, which aptly includes private businesses, bars, restaurants, and anything else. A little more on the taxes:

In a separate effort, Mr. Bloomberg has urged the state to raise the city's share of the state cigarette tax to $2 from $1.50 per pack. Smokers also pay $1.50 in state tax.

That's paternalism at its best. And paternalism pays pretty handsomely.

More on Creeping Statism and the Watch.


Transportation Fallacy

The Detroit Free Press has an article today titled "Granholm's plan for roads means more jobs for state". Need I say more? (I will anyway though)

The state of Michigan will "for the first time ever", help cash-strapped Michigan cities and counties "pay their share of road construction contracts as a way to restart stalled work and create thousands of needed jobs", Gov. Jennifer Granholm said Tuesday.

This will "create" approximately 7,100 jobs over the next two years at a price tag of $400 million. According to analysts, this is not enough. But they concede that it is a start in the "right" direction. Michigan apparently has far more road needs than it can afford -- a $30-billion shortfall over the next two decades, by some estimates.

One question: What the hell have they been doing with transportation over the last few decades, to need $30 billion as a fixer-upper?

This is actually a nice example of what is seen and what is not seen. Bastiat would have greatly appreciated this commentary by the Detroit Free Press and the Governor of Michigan. Like always, we still have to look at what cost to individuals and private enterprises does this $400 million and 7,100 jobs come.

I sometimes wonder if the politicians believe that they are providing a net "good" and simply don't understand the economic reality or if they knowingly deceive the public for their own private gain.

Tuesday, March 07, 2006


Diamond Jubilee

Today is the Diamond Jubille for FEE. They have been around for sixty years, today. Here is Richard Ebeling on the Anniversary.


The South will Rise Again

Here is Tibor Machan on the lawsuit against a Kentucky school district over a Confederate flag prom dress. Remember that?

Apparently, it is going to court in August.
No matter how deliciously white trash (F.G.) it might have been, that is no excuse to ban it.

Here is the article.

I kinda like it actually and I know that Luke, Bo, and the General Lee would have been proud.



Here are two new articles by the folks at Econlib.

Anthony de Jasay's Hostile to Whom?: 'Economic Patriotism' To Resist 'Market Dictatorship'. He covers everything from those Dubai Ports to Pepsico's attempted attack on Danone.


Isben Martinez's Barter and "Magic Realism". He covers the differences between the Russian and Argentinean adoption of barter economies.

Also, from the econlib blog, here is a link to Jeffrey Miron's new blog. Two topics: The Ports and Katrina.


Blogger's Block

I guess I have a bit of a blogger's block going on today. I am printing off some papers on two topics I find very interesting -- smoking and transportation.

This morning I have been checking out a website that has kept up with the smoking bans all over the country by type, location, and whether the legislation is state-wide, municipality, or county-wide. The group is called Americans for Nonsmokers' Rights.

My search for papers started with Travis' comments yesterday that had a link to Wikipedia, where I got the citation for George Akerlof's paper titled The Market for "Lemons". If you couldn't tell by the title alone, it is the formal introduction of asymetric information into modern economics. He won the Nobel Prize for this 14 page paper.

I also found this interesing article titled The Ethics of Smoking by Robert Goodin. Although I do not agree with his initial premise (encouraged use of legislation), I think it will be a good read nonetheless. I still have a ways to go, since it is 52 pages. For those interested, it was in Ethics, Vol. 99, No.3 (Apr., 1989) on can be found on JSTOR.

Does anyone have any good papers to recommend? Reading anything interesting? New topics of interest?

Monday, March 06, 2006


Austrian Business Cycle Theory

Most of the ideas in this post can be found in "Inflation, Recession, and Stagflation" by O'Driscoll and Shenoy, 1976.

Things you need to know for the Austrian perspective to make sense:

1) Changes in the money supply affect real interest rates
2) Interest rates are prices that coordinate plans
3) Without (unexpected) changes in the money supply, interest rates reflect true time preferences
4) Capital goods are not perfectly homogeneous and substitutable
5) Changes in the money supply affect relative prices
6) Inflation refers to increases in the money supply (prices rising is a consequence)

To illustrate Austrian Business Cycle Theory, I need an example: What are the consequences of increasing the money supply (inflation)?

An (unexpected) increase in the money supply lowers interest rates. Those lower interest rates send a signal to producers to engage in production that is farther removed from final consumption, although true time preferences are unchanged (has the same effect as a true increase in the supply of loanable funds, i.e., an increase in savings). It follows from (2) and (3) that any artificial change in interest rates causes discoordination: producers are expecting future demand to be higher because the distorted price signal has told them that people are putting off present consumption in favor of future consumption.

Since (4), producers are incurring the cost of shifting capital to farther-removed stages of production in anticipation of a future payoff in the form of higher demand. Demand does increase for factors of production used in farther-removed stages, since they are made more attractive by the lower interest rates. Meanwhile, demand falls for factors used in stages nearer consumption. This may have the net effect of decreasing overall unemployment or looking like a "Boom."

Despite all this preparation, the higher consumption demand never comes. There is no reason to believe it ever should come, since the change in interest rates did not reflect true time preferences [note: by (5), demand for some consumption goods could increase where the new money is injected, but not in general]. Recession and unemployment show up with the inevitable bust.

Any further inflation will only deepen this spiral and create more discoordination. Sadly, this is the cause of stagflation, where we have both high inflation and high unemployment. The best way out of stagflation is to put an end to the discoordination (inflation), but this is politically unpopular because it causes higher short-term unemployment than just continuing to inflate the money supply.

If inflation is never confronted and continues to accelerate, the result is the complete failure of the currency as it becomes useless or too cumbersome to carry (think of the hyperinflation in Germany after WW I).

P.S. Here's an interesting quote from Rudolf Havenstein, the president of the Reichsbank in 1923:
The wholly extraordinary depreciation of the mark has naturally created a rapidly increasing demand for additional currency, which the Reichsbank has not always been able fully to satisfy. A simplified production of notes of large denominations enabled us to bring ever greater amounts into circulation. But these enormous sums are barely adequate to cover the vastly increased demand for the means of payment, which has just recently attained an absolutely fantastic level....The running of the Reichsbank's note-printing organization, which has become absolutely enormous, is making the most extreme demands on our personnel.
I read it in Murray Rothbard's "Austrian Theory of Money."


Two thoughts

While at my fiancee's this weekend, I was thinking about two issues:

1. The welfare losses of nighttime driving, i.e. the losses of efficiency, declines in safety, and slowed travel time because of headlight usage. This would certainly include those newer mercury/halogen ones that are very bright and the use of high beams that are not always turned off as one comes around the bend.

I was also thinking that this was likely not a significant concern when the highway and roadway systems were initially designed and it seems obvious to me that they did not effectively see the emergence of this sort of issue. When two cars are going in opposite directions on a two lane highway (one in each direction), the use of headlights at nighttime would almost necessarily cause distraction, temporary losses in visibility, and slowdowns. What would be a more optimal design? Neither a one lane seperated nor a two laner with a barrier seems like a good option to me.

2. Rights against vulgarity. What right does someone have not to be verbally offended or insulted? I am under the impression that individuals seem to have a right to life, liberty, and property, and I think the notion of liberty guarantees a certain quality of life. When someone yells a profanity from the top of their lungs, what right does someone have to not have to hear that noise and additionally that vulgar utterance. I know that the First Amendment guarantee on free speech does not cover "offensive" language. Should it? Should it not? And to what extent should rights be allocated? Can we have a Coasian solution here?


Market Failures, Redux: Does the Market have a Purpose?

In an earlier post ("Sometimes, Markets Fail"), some of us debated on what constitutes market failure. Chris followed up by paraphrasing Roy's important question, "How do you define market success?"

I'd like to take it further, by asking simply: What is the purpose of the free market?

In answer to my own question, I'd like to venture that markets have no purpose; they simply happen given a certain set of conditions: property rights and freedom of choice being the foremost amongst them. The market is a spontaneous process, not one that has a predetermined end in mind.

Given that, we can certainly argue about the effects of allowing a free market to flourish, however, we can't claim that any of these effects are really "successes" or "failures," as such. Or, we can argue about the desirability of conditions under which markets operate: i.e. are property rights good?; should individuals make their own choices?, etc.

Planned economies, on the other hand, may have purposes: utility-maximization, "social justice", etc. We could talk all day about those failures.


March 6

A great number of things happend on this day in history:

The famous Dred Scott Case was decided on this day in 1857. Some say that was the "real" cause of the Civil War. Here is some info on the decision.

After a 13-day siege, the Battle of the Alamo ended on March 6 with the capture of the mission and the death of nearly all the Texan defenders. The mythology states that all died, while new evidence from a diary states that some might of instead been executed by order of Santa Anna.

Tom O'Hara beat his own record, beating the four minute mile (broken by Roger Bannister) on March 6 of 1964 with a time of 3:56.4.

The trial of Ethel and Julius Rosenberg began on this day in 1951. Find out more here.

Alan C. Greenspan, Rob Reiner, and Ed McMahon.

John Philip Sousa, Louisa May Alcott, Ayn Rand, and of course Davy Crockett (if the Alamo story is true).

Sunday, March 05, 2006


Sometimes, Markets Fail

If this blog's raison d'être is to expose economic fallacies, then I think we should remember a popular fallacy often committed by we market supporters--we forget that sometimes, markets fail.

I think the Erie Canal might be an example of such market failures. Here is an excerpt from David Gross' review of Peter Bernstein's recent book on the canal: Wedding The Waters.

The canal, which would ultimately follow the path of the Mohawk River from Albany inland, had to negotiate two big sets of falls and a larger set of obstacles. A private corporation chartered to build a canal—the Western Inland Lake Navigation Company—had difficulty raising money.

The Erie Canal was an engineering triumph, to be sure. But Bernstein notes that it was also an economic triumph. This was one of the first great American examples of network effects. Connecting more and more people through a system makes the individuals more productive and capable and makes the network itself a powerful economic force.

The canal made possible the settlement of the upper Midwest and transformed the nation's "primary axis from north-south to east-west." Clinton's ditch turned canal towns into seaports, the Hudson Valley into an industrial zone, and the Midwest into a breadbasket. In the quarter century after the wedding of the waters, the nation's growth rate rose to a whopping 4.6 percent a year, compared with 2.8 percent annually for the period from 1800 to 1825.

Left entirely to its own devices, the private sector likely never would have produced the Erie Canal, the railroads, the interstate highway system, or even the Internet.

Click here for the rest of the review

I don't know if the point about market failure is Gross' or Bernstein's, but I might have to agree. There are three possible reasons I think the market could have failed here.

1) Positive Externalities: Profit Maximzing Firms make decisions based solely on their "personal benifits". For things like a canal, there are social benifits that the firm will not benifit from, and when transaction costs are high fewer canals will be built than "socially optimal".

2) Imperfect Capital Markets: I have my doubts about how well capital markets in 19th century New York co-ordinated decisions between savers and borrowers. But that is a historical question and I might have a poor impression.

3) Hold-Out Problem: The canal is fairly long and after it has been started there is only a few directions it can go. This could lead opportunistic land owners to bid up the price of their land above its opportunity cost, which discourages building a canal. A similar problem can occur even if the company tries to acquire all the land before construction, if the land owners find out the canal firm's intent for the land. The government can get around these problems through the imperfect solution of eminent domain.

I'm not totally convinced about my third point. While Hold-Out can be a problem, there is a variety of ways for private companies to get around the problem. Click Here for a paper on the exageration of hold out problems.


Now I should point out that this doesn't mean that government SHOULD try to pick winners in the investment game. If we look at government programs that try to do this, the NIST Advanced Technology Program for example, we see that this approach can lead to a lot of wasted money. But I think we should recognize the fact that markets are not perfect. Anything less is pure fallacy. :)

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