Sunday, July 31, 2005

Who stole the show? 

Was it...
... Mark Kennedy?
... John "I'm not Karl Marx" Hinderaker?
... Strommie's cigar?
... the guy with the tricornered cap?
... or was it...
This is Buttercup, who according to some was the reason nobody seemed to want to come down into the ampitheater. (Heat, schmeat.) If you saw her, that nice kid on the other end of this dog was Littlest Scholar, with Mrs. S no doubt nearby (hers is the loudest voice.)

Thanks to all who attended -- except for eating all the food, since I got none -- and for the hilarity of the third hour. Thanks to the Patriot and our sponsors for giving us a great venue, good advertising, and a huge crowd. We had a blast. See you at the Fair.

Can someone get the dog away from my computer, please? First she steals my fans...

Saturday, July 30, 2005

Our family outing 

...will be at The Patriot Appreciation picnic at Staring Lake Park in Eden Prairie. Yes, my two reluctant travelers, Mrs. and Littlest, will be in tow, along with Buttercup the Micturating Menace. The NARNies will be on live at our usual time, noon to 3pm. We're making a day of it; why don't you come join us? Bring a blanket or chair, spread out on a nice warm summer day, and enjoy the festivities. They start at 11 (you can enjoy Strommie for the first hour).

As everyone else is warning you, if you are comingr from the northwest, 494 is closed today for repairs. 169 to 212S is your best bet (and, given the work on the bridge out by Corcoran on the Crow Wing River bridge, you might want to slide down from St. Cloud on Highway 10. Allow yourself an extra 20 minutes if you're meeting up with friends.)

Friday, July 29, 2005

If this is a bad GDP report, what does a good one look like? 

The markets are soft today after the GDP report came in with 3.4% growth. But buried in the report itself is good news.

The real change in private inventories subtracted 2.32 percentage points from the second-quarter change in real GDP after adding 0.29 percentage point to the first-quarter change. Private businesses reduced inventories $6.4 billion in the second quarter, following increases of $58.2 billion in the first quarter and $50.1 billion in the fourth.

Real final sales of domestic product -- GDP less change in private inventories -- increased 5.8 percent in the second quarter, compared with an increase of 3.5 percent in the first.

As my dad would say, "in English, please?" It means that in real terms, businesses who had stockpiled lots of inventory over the previous six months sold it all off in the previous quarter. It seems unlikely that they would continue to disgorge inventories (already at the 1.3 benchmark as a ratio to sales), so production should pick up again in the next quarter. A 5.8% growth of final sales is the best since the second quarter of 2003.

This report also showed a turnaround in net exports, with imports decreasing 2% in the quarter. This and the Chinese repeg of the yuan might mark the end of that drain on GDP growth going forward.

The bond market has reacted towards the notion that the Fed would continue to increase interest rates by increasing yields at the long end of the yield curve. The market is already prepared for a 4% Fed funds rate by year-end; it's beginning to put non-zero probabilities on a 4.25% rate.

Public goods and the desire for bright lines 

Craig has responded to the public goods post, and I think we're agreed on the economics of this. He argues though, that the political dimension of the debate might not allow as nuanced an analysis as my previous post offers.
I�m convinced the King is correct, but �King�s can opener� is that he assumes his argument will also convince the likes of state-wide smoking ban sponsors Ron Latz and Doug Meslow, new urbanists that live and breathe for light rail and legislators that never saw bonding for a stadium, a civic center or a par-three golf course that wasn�t a great investment. Until those folks see the light, I�ll stick to a problem characteristic approach -- at least to a point.

Yes, those folks do exist. And as I argued in my post, you have to be aware of the incentives of the people to whom you give advice. I have some bruises from good advice badly used in Ukraine and elsewhere.

But the problem with trying to draw a bright line that says "these are public goods"/"these are private goods" is exemplified in the comment made by regular reader Michael on my post.

Ok, so... what about roads? You say they are a public good, but too many of them will create diminishing returns right? We don�t want to pave all of Minnesota.

Isn't in the public interest, in the long run, to have enough public roads that are well maintained plus alternatives to roads like tollways and mass transit?

Isn't it putting the cart before the horse, so to speak, to create an alternative if the main public good is not well maintained?

We don't have a public good called "roads". We have roads which are publicly maintained and others which are privately maintained. We sometimes contract out for a road and sometimes not. Some roads are subject to tolls and some are not.

And even then it's not so clear. A private road for a townhome association still has city provision of some services along it, such as garbage pickup, yet might be snowplowed by the association, or contracted to the city to plow.

Each case is unique. Each has the possibility of a variety of institutional arrangements for the provision of the good, each of which has a set of benefits and costs. Craig wants a bright line in order to say "hands off" to the 80% of goods in which government should never intrude.
A product characteristic approach (legislation is the �product�) puts the burden of proof on the sponsor of legislation to show why/how the legislation is a �public good� rather than (as is currently the case) making the burden of proof fall on those that oppose legislation to show why it is bad.

Craig's hurdle would be met time and time again by the supporters of larger government; Michael's line of reasoning gives rise not only to public transportation but land restrictions and environmentalism. All from the start that "roads pass the Fishsticks test". But a theory of Leviathan government would argue for something that doesn't admit the possibility of the 20%.

A deeper problem in this method Craig uses is that it seems quite consequentialist. If the social welfare is improved by public provision, then we use the tax power of the state, even if for a substantial minority of the populace the tax is a confiscation to which they would never have agreed. I find that position difficult to accept ethically. I prefer instead to think constitutionally, to ask what are the rules by which a taxpayer, who is sometimes a beneficiary of one of these decisions and sometimes not, can control the confiscatory powers of the state. I find it dangerous, as a political rule, to imagine that we would write a constitutional rule that says "if X is found to be a public good, you may tax for its provision." Who does the finding? If you say "if X has externalities, ..." you have the problem of not knowing where the relevant scope of externalities are. If you say "if X is indivisible,..." over what range of taxpayers does the indivisibility have to extend? Since this discussion is really about "what is the proper scope of government action in the allocative function of an economy," those questions are vital and lie at a state's constitutional foundation.

I think, btw, that TABOR is a fundamental change that puts that discussion at the fore, in much the same way that Prop 13 did so for California 25 years ago. If Craig wonders how to make my concerns practical to live in the world we are in, TABOR is an answer. We cannot avoid the grasp of Leviathan with any set of bright lines defining what are and are not public goods. Even if the lines could be drawn -- which I contend they cannot, logically -- Leviathan would ignore them.

Two problems in Ukraine 

The press both in Ukraine and outside is making a big deal about the lavish lifestyle of Andriy Yushchenko, son of President Viktor Yushchenko. The short story: The press investigated his use of a BMW M6 that is quite rare and quite expensive in Ukraine, and his possession of a platinum-shell cellphone popular with the oligarchs of Ukraine and Russia. His father is rather put out by this and lights into the press at a conference, using rather harsh words to tell them to butt out of his family's private affairs. Letters of protest and explanation (not an apology) are exchanged.

It's pretty rough stuff, and undoubtedly part of it is the stress that Yushchenko pere is feeling with his struggles in government. As Taras Kuzio noted in testimony to Congress on Wednesday, it's imperative that Yushchenko remain seen as somehow different than the politicians of the Kuchma era. He has tried to appear above the fray,

Meanwhile the government continues to act like it needs a lesson in principles of economics.
Yulia Tymoshenko stated that 2005 harvest grain will be exported by state traders " State Reserve Committee and JSC Khlib Ukrainy. The objective of this is to minimize involvement of intermediaries who buy grain from farmers at very low prices and sell it at world prices. "The government is not looking to pressure grain traders," added Economy Minister Serhiy Teryokhin. "We are simply creating a system that will not allow a number of major grain traders to dictate prices to producers." On this issue, Tymoshenko and Teryokhin have the same position as the Agrarian Policy minister, Socialist Party member Oleksandr Baranivskiy, who has recently had serious arguments on other issues with the two officials. SPU leader Oleksandr Moroz also insists on holding the price through the state acquisitions: "If the government does that, the grain traders will not lower the prices lower than the state. Farmers should be given an opportunity to sell grain to the state at the price they like."
Scott Clark correctly calls this a big part of the problem. Has nobody in Ukraine learned the word monopsony? I might have chalked up things to a bad appointment in the privatization minister, but these analyses suggest something far worse.

And now there's a report of an attempt on Tymoshenko's life. Plus ca change...

Thursday, July 28, 2005

And a man shall lead them 

There's much handwringing over the appointment of a man to chair the women's studies program at the University of Washington (link only for subscribers to the Chronicle of Higher Ed). It's the first male to run a women's studies program that has a PhD (there are ten of those) and perhaps only the second overall. He is not a member of the department's faculty.
Nancy J. Kenney, an associate professor of women's studies at Washington, said that while Mr. Allen is "a wonderful man," she found the decision to name him chairman "somewhat depressing." She said she lamented that "after all of these years, there isn't a different alternative out there."

"There simply aren't enough women of the right type and interest to take over this position," she said.
Mr. Allen, the new chair, suggests that men can work on women's issues as much as whites can work on antiracist issues. I think maybe women are smart enough to know that being department chairperson is a thankless task. My guess is Mr. Allen will find it particularly so.

The rental price of textbooks and music 

I needed a book for some work I did earlier last week. I was going to do this out of town; I discovered Tuesday last week that my copy of the book had been, um, borrowed. So I fire up Amazon to get another copy, and it's not in their warehouse. But, aha! there's a copy in a private seller's store in North Carolina. I expedite shipping and it arrives Friday. Crisis averted.

As Hal Varian notes, used goods are now 23% of sales at Amazon. Book publishers cringe at this, but Varian notes that the spread of the used market may in fact help sales of new books.
When used books are substituted for new ones, the seller faces competition from the secondhand market, reducing the price it can set for new books. But there's another effect: the presence of a market for used books makes consumers more willing to buy new books, because they can easily dispose of them later.

A car salesman will often highlight the resale value of a new car, yet booksellers rarely mention the resale value of a new book. Nevertheless, the value can be quite significant.

This is particularly true in textbook markets, where many books cost well over $100. Judith Chevalier of the Yale School of Management and Austan Goolsbee at the Chicago Business School recently examined this market and found that college bookstores typically buy used books at 50 percent of cover price and resell them at 75 percent of cover price. Hence the price to "rent" a book for a semester is about $50 for a $100 book.
I see another example of this here in St. Cloud. My favorite music shop, Electric Fetus, keeps a nice collection of used CDs. They advertise that they buy, sell and trade, unlike Best Buy or Media Play here in town. I get fairly decent value for my CDs, somewhere between $2.50 and $4 (occasionally $5), which combined with the cheap storage of ripped MP3s gives me the opportunity to buy and keep some additional music I might not otherwise. I no longer need 8 or 9 of 10 songs to be good. I could buy one where five songs I like, rip them and sell back the CD. (I don't think anyone has ever claimed that one loses the copyright to the MP3 you made from your own CD if you lose or sell the CD, right?) Combined with some nice discounting from the store and my relationship with the staff -- which might fetch a slightly better price in selling my used stuff as well as their holding me a copy of something they know I want -- the cost of my music love is reduced.

What about the used books and CDs, though? Do they displace sales of new? Varian says not, citing this study. A 10% increase in new book prices only raises used book sales by 1%. Amazon is gaining revenue from selling used books as well as new, even though a used book generates less than 60% of the profit of a new one.

H/T: Liberal Order.

Wednesday, July 27, 2005

The spectrum of public goods 

It seems like Craig Westover and I speak more often than I speak with other bloggers, because we have a good deal in common. This includes a relatively libertarian view on social issues and in the main on economic issues as well. So when Craig first sent me an email over the weekend outlining the positions he takes in this post, I realized here was another chance at some education.

My own education on public goods comes from a series of people who studied at the University of Virginia in the 1960s. Over time three of them -- Craig Stubblebine, Tom Borcherding, and Tom Willett -- instructed me in public finance, public choice and public policy; I read a great deal of James Buchanan, Gordon Tullock, Geoffrey Brennan and other writers of the school. Oddly enough, the assistantship I turned down last to take my fellowship at Claremont was from UVa. So it seems to have been predestined that I would fall into that camp.

Stubblebine was my public finance professor, and he first got me to think about the nature of public goods. When I said what I said on the air, it was his teaching that was in my mind. He's of course not to blame for my misunderstanding of his teachings, if I have. But I think I have this right.
King did however, make one statement that surprised me; that is, King stated in passing that there is no such thing as a public good. To the pure libertarian, that's true, but sticking to that "truth" as a matter of policy leaves the door open for politicians to step into the vacuum and define �public good� anyway they want to -- with usually disastrous political and economic repercussions.
Now part of me simply doesn't care about shading a "truth" in order to be sure that public policy isn't hosed up by political repercussions, but since Buchanan and Richard Wagner wrote Democracy in Deficit -- a wonderful, slender book that argues that Keynes let the genie out of the bottle by providing intellectual cover for deficit spending -- I can't let myself off so easily.

Let me clarify what this is not: This is not about my taking a pure libertarian position. That is, one could argue that public goods do exist as a unique, objectively determined category and still argue as a matter of morality that one cannot support the state. Nor am I arguing for an anarcho-capitalist state or a minarchy. (One of these days I will come back to minarchy, because Craig believes himself a classical liberal but I do not think he's a minarchist. I'd like him to explain the difference. Call this a marker for another debate.)

Stubblebine did have us read Buchanan's Demand and Supply of Public Goods, which makes the case I'm making. Buchanan has a response to the criteria which Craig, borrowing from Charles Murray (for whom I share Craig's respect and admiration), promulgates:
  1. A public good must be non-exclusive, similar to second criteria above. A public good benefits everyone or anyone. Think national defense. Everyone benefits.
  2. A public good can be consumed by one person without diminishing its availability to others.
  3. A public good has a substantial neighborhood effect that is difficult to charge for. For example, roads benefit people that do not drive in that most goods delivered to retail outlets arrive by truck. Therefore, using general fund dollars to pay for roads can be a �public good.�
I remember reading this in Murray and thinking it wrong, and I want to set Craig on a path awy from Murray in this regard.

One major problem Craig has, and the point I was trying to make (too quickly) with David Strom was that exclusivity and divisiblility isn't an either/or proposition. Buchanan offers this graph to explain the spectra of public goods that are available. Along the vertical axis is divisibility, and along the horizontal axis is the size of the group negotiating for provision of the good. A very large group negotiating over a good that is indivisible -- the second of the Murray/Westover criteria -- would be characterized as a pure public good, and near the point 0' on the graph. A pure private good would be near 0 -- there's a great deal of divisibility and excludability (the latter a statement about technology more than anything else) and the interacting group is quite small.

I used a rather silly example on the radio of liking David Strom's shirt as an example of an externality. It certainly is (though think: Mini-skirt) and I certainly could negotiate with him to wear the shirt more often in return for some small payment. Does that externality make it a public good? But doesn't the shirt generate a "neighborhood effect" as Craig lists as criterion 3? What's the size of the neighborhood needed to make the case to collectively provide the good? Should there be a "Strom shirt district" consisting of those in close enough contact with David that David could tax to get enough money to get him to wear that particular shirt?

There are other, less silly examples though, as characterized by points 2, 3, and 4 on the graph. Buchanan describes them:
(2) Partially divisible goods and services, with interactions limited to groups of critically small size For a good or service that may be classified in this way, there must be some substitutability among consumption units, as among separate persons, but this is not one-for-one. If the total supply available to the group is fixed, the increase in consumption by one person will reduce the amount available to some other person, or persons, but not precisely by one unit, as in the purely private-good case, and not by zero, as in the purely public-good case. The "nonprivateness" extends, however, only over a relatively small number of persons. As the group size extends beyond these limits, all publicness elements vanish.

Examples of goods and services falling in this classification are those that involve small-number externalities. Fire extinguishers may be an illustration. A transfer of a fire extinguisher to my neighbor does not reduce my own fire protection from the extinguisher to zero, as would be the case with a purely private or divisible good or service. My neighbor's possession of the extinguisher continues to reduce somewhat the probability of fire damage to my property. However, this interaction is limited in range. The transfer of a fire extinguisher to someone who lives three miles from my house does reduce my own benefits from that extinguisher to zero, in which case the exchange becomes equivalent to that of a purely private good.

(3) Partially divisible goods and services, with interactions extending over groups of critically large size This category includes the large-number externalities, or Pigovian externalities. There are both publicness and privateness elements in a good or service, but the publicness or indivisibility elements extend over a group that is critically large in size. An example is inoculation against communicable disease. The securing of a shot provides me with some privately divisible benefits but, also, it provides some benefits to all other potentially exposed persons in a large group. By comparison with the small-number interaction, in this instance many persons are effectively my neighbors. As we shall demonstrate later, the organizational-institutional differences between goods and services falling in (2) and (3) may be significant.

(4) Fully indivisible goods and services, but with interaction limited to groups of critically small size This includes those goods and services that are characterized by the fact that there can be no increase or decrease in the quantity available for one person independently, so long as we are limited to groups of small size. Outside the common-sharing group, however, this pure publicness does not hold, and among separate small groups there may be no publicness elements at all.

Examples for this category are drawn from club-like arrangements, which provide the organizational norm for this set of goods and services. Swimming pools may be mentioned. The single pool may be equally available to all members of the swimming club, provided only that the size of the membership is limited.
So where does light rail go? It is certainly not a pure public good, and limiting the size of people on the train is critical to prevent overcrowding.

The purpose of broadening the classifications, Buchanan argues, is not to create a five-part rule or a ten-part rule, but that one simply can't use characteristics of goods to describe their publicness.
Any positive approach to this question must proceed on a case-by-case basis and provisional conclusions reached only after careful comparison of institutional alternatives in the broadest sense. The descriptive characteristics of a good or service, the technology of common-sharing and the range of such sharing, are important determinants of organizational efficiency. Care should be taken, however, not to presume that these characteristics, taken alone, allow a priori judgments to be made. The pound of ceteris paribus must be used with caution here, since other things are not at all likely to remain equal over the institutional variants that may be examined. The predicted working properties of the institutional structures, imposed as constraints on individual behavior, must be evaluated.
That is to say, the decision to provide some goods collectively because "market failure" would lead to non-optimal provision of the goods cannot be decided a priori. You must compare market failure to government failure. We don't decide to let David set the number of times he wears his colorful summer shirt because the externalities are de minimus. We do so because the optimal amount is closer met (at lower cost) by private market decisionmaking than collective decisionmaking. If a set of private market institutions would underprovide light rail by 50% (however you would measure this) but public provision leads to 100% oversupply, does it matter too much to the discussion whether light rail is category 2 or 3, or 5? Wouldn't that be the right way to handle the question of what is a "public health" problem, ratherthan the list of problem characteristics Craig offers?

As Stubblebine often said in his class, "a thing is neither good nor bad save the alternatives make it so." The argument over the alternatives isn't about the characteristics of goods, but the choice of institutions.

Sites of the day 

I don't write often about military issues or our foreign policy in Iraq and Afghanistan, not because I'm disinterested but because there are few places where I have anything to add to the conversation that hundreds of other bloggers can't say. But I do read, and a new site pointed out ti me by the Public Affairs Office of the U.S. Central Command is a website providing "up-to-date information on what the Coalition is doing in Operation Iraqi Freedom and Operation Enduring Freedom." The "what extremists are saying" page is worth a visit all by itself. I will put them in the blogroll, along with a link to T.W. Budig's Capital Roundup, which is good as exactly that, a quick roundup. Good on him to remember Dave Kleis' first attempt at the St. Cloud mayorship.

Oh hey! 

Margaret's got that WordPress thingy working. Check out her and David's new digs...

UPDATE: Speaking of new digs, I have to wonder what Hugh paid for this. Hubbahubba.

Ask me why my forehead's so flat 

And why I have a headache.

LONDON (Reuters) - The word "fail" should be banned from use in classrooms and replaced with the phrase "deferred success" to avoid demoralising pupils, a group of teachers has proposed.

Members of the Professional Association of Teachers (PAT) argue that telling pupils they have failed can put them off learning for life.

A spokesman for the group said it wanted to avoid labelling children. "We recognise that children do not necessarily achieve success first time," he said.

"But I recognise that we can't just strike a word from the dictionary," he said.

The PAT said it would debate the proposal at a conference next week.

Taranto, come home. Oddly Enough is calling. Sheesh.

ABoR has a major win in Pennsylvania 

Douglas Bass points out to us that the Pennsylvania House has passed a resolution that calls for hearings
to examine the academic atmosphere and the degree to which faculty have the opportunity to instruct and students have the opportunity to learn in an environment conducive to the pursuit of knowledge and truth at State-related and State-owned colleges and universities and community colleges in this Commonwealth.

Douglas notes that he and I don't particularly like this; this preamble with "pursuit of knowledge and truth" belongs in a comic strip rather than a legislative resolution. The opponents, alas, don't sound much better. Inside Higher Ed reports on a letter sent to the PA House by William Cutler, president of the faculty union at Temple University.
To be a forum for the exchange of ideas of all kinds, a college or university must be free from the threat of oversight by those with a particular cultural or political agenda. This is not to say that a public institution of higher education should be unaccountable for how it spends precious tax dollars. Far from it. But it is to say that the intellectual climate on college and university campuses will be far less open if students and professors feel that their work is being monitored by those who answer to a particular group or set of constituents.

Yet some students and professors already feel their work is being monitored, by other faculty who wish to make war on those who do not support the dominant paradigm of the radicalized modern American campus. I continue to argue that the proper forum for investigation of those grievances should be the campuses themselves who commit themselves to a vision of academic freedom such as that offered by Stanley Fish in Save the World on Your Own Time.

We are in the pursuit of truth business. All other agendas need to be put aside.

Do student employees have fewer rights? 

A new case FIRE is pursuing involves a student at William Patterson University in New Jersey, who objected to receiving an invitation to a film described as a "lesbian relationship story." FIRE has posted both the email the student received and his private reply to the faculty member. The student is in his sixties, and also works at the university, and received the email from the campus' announcement email list. The university placed a letter of reprimand in his permanent employee file, claiming that calling the film a "perversion" was harassment of the faculty member who sent the annoncement.

Wendy McElroy writes about the case:
First, the entire weight of the state's legal authority is being directed at quashing Daniel's personal response to an unsolicited e-mail � an e-mail that invited feedback by instructing recipients on how best to do so. The university obviously feels the need to draw a big gun on this little man.

Second, Lukianoff refers to Daniel as a student; both Speert and Harvey call him an employee. Daniel is legitimately both, but in the capacity of student he undoubtedly has more established procedural "rights" against the university. The attorney general's office clearly wishes to reduce the "rights" it needs to recognize.

But as Lukianoff states: "Even in a workplace, it is ridiculous to conclude that a one-time e-mail constitutes unlawful discrimination and harassment. It is especially ridiculous to apply such a policy to a working student at an institution of higher education that has a special responsibility to ensure academic freedom."
Indeed. And the state's attorney general has decided to permit the university's claim to due process protection and ignore the student's First Amendment rights.

There's lots more here.

Am I a consumerist? 

Doc Palmer thinks he spends too much money, perhaps because of low interest rates. He's developed a quiz to test me.
  1. How many books have you bought but not read (yet)? It depends. Some books I buy are for reference; I know I'll need them some day for my research -- books on central banks, or econometrics, for example -- but they might sit for months before I use them. If that was included, you could be looking at 40 or so. If it's simply books I intend to read sitting in the pile behind my recliner, that pile has 11 books right now.
  2. How many unopened CDs do you have? 6. I just looked. Since I buy online and get volume and shipping discounts, I think this makes sense. I play one CD over and over until I feel the need to open the next.
  3. How many times have you bought a book or CD, only to discover you already own it? Three times -- two CDs and one book. One was intentional to have the CD both at home and in my car.
  4. How many unopened DVDs do you have? None. I really don't buy many DVDs, owning maybe ten.
  5. How many tools or appliances have you bought in case you might "need" them and not used yet? Traditional tools? I'm of the Red Green school of repair -- I only own duct tape. Even that, I don't use much. I just go buy a replacement. Appliances for the house, no, because Mrs. S is adamant about not having clutter. Extra computer stuff, OTOH, I'm bad. A closet full.
Think about, however, whether this is economically rational. As David Altig points out here, the flipside of corporations being slow to invest out of retained earnings in this phase of expansion has been that business savings in America is up. This additional savings might be keeping interest rates low and generating investment in real assets. Those traditionally are houses and land, and precious metals and jewels, etc. But these items John describes above also items that do not lose value over time. I recently found in a drawer a CD I must have bought years before; if anything, opening and playing it now has been even more enjoyable.

If real interest rates are low, purchasing assets or even consumer goods with little depreciation even when used seems to make some sense.

A school's military service 

Peter Swanson writes about the opting-out of high school students from military recruitment. I have a suggestion. Let's have the Minneapolis School District create a phone line like the one we call for opting out of commercial phone solicitations, and any high-schooler who wants not to get called simply calls that line, leaves a name, Social Security number and phone number, and the school district can pass that on to the recruiter.

Of course, this would probably lead to a levy vote to pay for the phone line. So your school district property tax could rise to make it easier for students not to be recruited to the military. But that's a good thing, right?


Can someone also please explain the connection of the following quote of a school board member?
"Everyone knows military recruiters are going after students that are poor and students of color. That's many of our students," Board Member Peggy Flanagan said. "When I talk to students, it's what they're passionate about."
What are the students passionate about? That only poor students are being called? Could it possibly be because that's the group with a lower reservation wage?

A picture is worth a thousand words, except when the words are Hayek's 

Craig Westover posts an analysis of the dueling conservatives on the pages of the STrib. (I can almost imagine the editorial board's glee over this; one might call it a Boydgasm.) Craig writes:
In his essay �Why I Am Not a Conservative,� Friedrich Hayek notes that conservatism traditionally lacks any agenda other than to resist progressivism. Consequently, any time conservatism compromises with progressivism the end result is movement to the left.
Link added by me, and all I wish to contribute is this graph showing the change in the cost of government (computations here used this document for previous years, and then the fiscal staff analysis of the tax bill HF 138 to add on the new taxfeechargeotherrevenue.)
You can wave your hands and say "hey, it's just two cents on a Hamilton" if you like. I hear you can get a baseball stadium for around that price. But the point made by Eibensteiner and Hinderaker, that
... Pawlenty has been spectacularly successful in containing state spending. In his first year in office, he closed a $4.5 billion deficit -- without raising taxes by a nickel. Beween 1994 and 2002, spending in Minnesota ballooned out of control, rising an average of 13.4 percent per biennium. Under Pawlenty's leadership, the rate of growth has been cut nearly in half, to 7.3 percent per biennium, bringing it in line with population growth and inflation.
...isn't the case when what one is grading against instead is the share of Minnesotans' incomes that government takes. That means, in fact, that the government isn't just taking population growth and inflation, it's also taking its cut of the productivity gains we create as well.

Are we doomed to state and local government in Minnesota perpetually costing us $.16 of each dollar we earn? That downward tail on the graph is the projection that we're told will come in the 2008-09 biennium, and we're to believe it will be created by the re-election of Tim Pawlenty,
What about the tax increase on cigarettes that prompted Wigley and Strom's attack? It constitutes a mere 1.3 percent of the state's budget. Perfection is great, but it is hard to achieve when the tax-and-spend party controls one house of the Legislature.
...who's sold as Governor Straddle.

Monday, July 25, 2005

Limited connectivity messing up my day 

Thanks if you came by today and still came back tonight. I've had very little access from the remote site we're at today and tomorrow, so posting will have to remain light until tomorrow late PM or Wednesday morning. I can connect now but am simply too tired to say anything useful. Sorry.

UPDATE: Did at least get the message about a baby Frater. Congrats, Chad!

Friday, July 22, 2005

Two, two, two Kings in one! 

I get double duty on The Patriot tomorrow. David Strom has invited me in the 9am hour on Taxpayers League Live. I'll be the one with less coffee. Then after a break, NARN is back at noon. Probably some yuan talk and I might finally give an opinion on Judge Roberts; we're still angling on the guest at this moment. If no guest, it may well be an "ask the economist" hour, so call the station with yours. (Not in radio range? Catch the stream.)

Probably a post or two over the weekend this weekend, as business will probably keep me from much blogging Monday and Tuesday. I may have to ask Captain Ed where to rent one of those guest writers...

The kind of people who listen to the Beeb 

Who do you think won the BBC's poll of the World's Greatest Philosophers?

Karl Marx.

Stumbling and Mumbling thinks it's because the anti-Marx vote was split, but it's hard to find a coalition that would work to knock him out.

(h/t: Mahalanobis)

Charts that bug me 

I got this from Chart of the Day. I'm not in the slightest sold on the prefatory "due in part to currency manipulation". I once heard Barry Eichengreen form the question "is the exchange rate a price or a promise?" (I cannot figure out who made that formulation first.) China up to now had promised to convert RMB to dollars at 8.28 to the dollar, and honored that promise. Yesterday they decided no longer to honor that promise, and to manage the external value of the yuan using a target band and a basket of currencies. Which exchange rate regime constitutes manipulation to you?

That's not to argue against the central bank's actions yesterday. It is simply to say that words mean something, and that calling China's fixed rate "manipulation" is more than a little misleading.

Thursday, July 21, 2005

See ya, Joe 

The headline in the local paper was that state representative Joe Opatz is resigning from the legislature to take an interim post as president of Central Lakes College. Joe is an administrator at SCSU, though his post as associate VP for academic affairs has largely been one of helping provide the university with information from St. Paul.

Interestingly, under the rules in MnSCU, he cannot become the permanent president at CLC. He says, "I'm hopeful that there will be more opportunities in higher education after this." One possibility could be right back here, as current President Roy Saigo has had the position for some time and is approaching his 65th birthday.

So it is possible that all three St. Cloud legislators could turn over in the next 18 months, if Senator Dave Kleis wins the mayor's race here in the Cloud and Jim Knoblach gets the Republican nomination for the U.S. House race. As the article notes, those three have been our legislators since January 1995.

People ask me about Opatz, and I have to say I've liked him as a colleague (and an occassional reader here). He is interested and thinks a good bit about higher education policy, and while we disagree some on funding and aid issues those discussions have always been pleasant. He has largely been faithful to the DFL caucus in the House and thus I'm not as happy with him as a legislator. But St. Cloud is a funny place: We're considered a conservative town, yet Opatz and Ellenbecker have been elected here several times (in the latter case only once as mayor, but was a top candidate in city council elections for years before). It's anybody's guess who will replace him.


The Chinese yuan, long pegged to the U.S. dollar at RMB8.28=$1, was revalued by 2.1% and will now be allowed to move withing a 0.3% trading band. The U.S. Treasury secretary, John Snow, seems quite pleased:

I welcome China's announcement today that it is adopting a more flexible exchange rate regime.

As we have said, reform of China's currency regime is important for China and the international financial system.

I particularly noted China's objective of allowing the market to fully play its role in resource allocation as well as "to put in place and further strengthen the managed floating exchange regime based on market supply and demand."

We will monitor China's managed float as their exchange rate moves to alignment with underlying market conditions.
But as many writers are noting, such as Nouriel Roubini, this is a very small move, and the tightness of the trading band means that all we've gotten is a small decrease in the rate of growth of Chinese exports. Bond prices slumped this morning, but I don't see much else in the way of impact on the U.S. There needs to be another, larger move before we feel anything here.
The impact on China is quite large, however. David Altig, blogging with Roubini above -- you'd do well to read back to their conversation throughout the day, as I've been -- links to William Polley's finding that the Chinese decided a few days ago to loosen up capital controls. Polley notes that it should have been the tip that the exchange rate move from the Chinese was coming, because free trade, free capital flows and fixed exchange rates are not supposed to exist side by side. This "unholy trinity" (named by Benjamin Cohen in 1993, I believe) is often cited as a reason for floating exchange rates. But work done with Tom Willett and others (to which I've made some very minor contributions) suggest that there are intermediate regimes that can in fact work. The question is whether China (and later in the day, Malaysia) has in fact found one that will work. Like Tom, I think optimal currency area approaches to this question work best, and on that basis the current strategy at least isn't harmful.

My guess is that in the short run, if the exchange rate is going to be allowed to appreciate further, China will first allow the trading band to widen from the 0.3%, and less frequently chane the mix of currencies in the new basket against which the exchange rate of the yuan will be set.

It's worth noting that so far the credit rating agencies aren't downgrading Chinese debt. That may well be because of the small size of the appreciation. A larger exchange rate move along with freer capital markets in China could have caused a downgrade.

Amateur economist of the day 

I almost should make this a daily event: Find the best blog post of the day that illustrates a point in economics, written by a non-economist. Fellow NARNie Chad the Elder would win more than one, and today's entry on pay for non-profits and Mike Hatch's pursuit of a lawsuit against director pay levels would be a winner.
In some respects, the need for a strong board with high caliber members is greater at non-profits than at regular businesses. There are no shareholders with a stake in the business to keep tabs on the board and bring pressure against it if results don't meet expectations as there are at for-profit companies. There is no stock price to use to gauge performance (however imperfect that measurement tool can be). It's in the best interests of non-profits like Medica (and their customers) to put together the best board they can. And that usually doesn't come cheap.
If you hear refrains of our discussion on Q-Comp and merit pay from yesterday, pat yourself on the back.

Omigod, there's a movie meme too? 

Phil Miller wants me to blog about movies, forwarding a meme started I believe by Tyler Cowen. I should ignore him because he spells my name worse than KAR, but what the heck? It sounds like fun. I'm qualifying this list by movies I saw in first run, not ones I found later on scavenging NetFlix. Thus no Casablancas or Gone with the Winds. The only one I might violate the rule for is The Fountainhead. This list is chronological as well because I'm thinking which movies I like best at various stages of my life.

Battle of Britain (1969) -- imagine going to this movie in a big theater in the middle of the afternoon with your best friend the fellow war geek. It was the first favorite (beating out Green Berets, largely because my dad took my brother with us and he was scared to death and ruined it). My grandfather slept in the pickup and waited for us.

Patton (1970) -- early on, I'm heavy into war movies. Unlike the other, this one has staying power. If it's on, I'm not moving until the jeep crashes.

The Groove Tube (1975) -- inexplicably, I take a girl out on our second date to this movie. I had never laughed so hard at a movie before. There was no third date, and I didn't care. I know this movie will be on nobody's list. I enter college this year.

Wizards (1977) -- not that LoTR wasn't good too, but this is the best Bakshi for my money. Stays with me longer than anyting Fritz Lang or Terry Gilliam did (though, see below).

Apocalypse Now (1979) -- last great war movie I saw until Saving Private Ryan which doesn't make this list because for some reason I never saw it in a theater. I also liked Gallipoli, but it's not in this class.

Brazil (1985) -- best. dark. comedy. ever. The hole in this list is graduate school and my first marriage.

Tucker (1988) -- a much better film than ever given credit for. I go back and forth between this and The Hudsucker Proxy, but I think this one's better. Both of them are great, underappreciated films by great directors.

Other People's Money (1991) -- I'm sure I've blogged about this movie before. Where have you gone, Penelope? I still use in class the scene from this stockholder meeting, rather than the one in Greed.

(1996) -- I cannot tell you how much I love this movie. Prague, music, the Velvet Revolution, the apartment and the despair. Best Czech movie ever, with Divided We Fall a distant second. A good friend of mine with whom I can talk an hour about baseball began lunch one day saying he saw this, and we never got to baseball.

Life is Beautiful (1997) -- movie is beautiful.

Enemy of the State (1998) -- a more frigtening movie that that A. Something Shamalamadingdongdude ever made. Whatever happened to Tony Scott?

The Big Lebowski (1998) -- came out while I was in Indonesia one summer and I bought a copy on the street. Must have watched it 20 times in three weeks.

The Three Seasons (1999) -- the one movie on this list you've likely not even heard of. Vietnamese film, beautifully filmed, and you can even get yourself to like Harvey Keitel. There aren't many movies like that, now are there?

Billy Elliott (2000) -- every teen can see himself in Billy, and no teen would want to admit it. Got a teen? Pop this in.

Snatch (2000) -- I have no idea why I like this movie; I want to smack Brad Pitt out of that accent. But this is a great movie. Every good role actor seems to be in it.

Lagaan (2001) -- a Bollywood musical, three hours long, about cricket and unfair taxation. Think "Seven Brides for Seven Tax Collectors." OK, don't. Just watch it. There's even an intermission.

(2002) -- I'm not sure this is my favorite Egoyan film, but it's the best and most meaningful. (The closest thing to it for relating to my heritage is Elia Kazan's America, America.) I'm awfully fond of Calendar as well, but this blows that out of the water.

Sideways (2004) -- OK, so shoot me, but I identify with Paul Giamatti. Except I still drink merlot.

I've decided tagging is the blog answer to chain letters, so readers can decide if they want to pick this up for themselves.

Parents, what your Macalester tuition buys 

Their children are getting quite a bargain. I was at a meeting in its campus center and as I came down a staircase I look up and see this hanging on the wall. (I've shrunk the image to keep any possible offensiveness to a minimum. You should open it to believe what you're seeing.)I actually got to the bottom of the stairs before I thought, "what the hell was that?", turned, and went back to take another look. It is part of a large quilt of the usual liberal totems: "love your mother earth", "stop hate" (to which I say, as soon as the Yankees slide into the ocean), "no war with" (insert name of your favorite dictatorship), etc.

To be perfectly honest, I was dismayed that this wasn't at SCSU. It should be; we're suppose to be the epicenter of this kind of nonsense.

I went outside and a friend who'd also seen it suggested I go back and take a picture. He reads here, and I'm sure he wanted to see this, so you have him to thank for this lovely image.

Wednesday, July 20, 2005

Graph of the day 

From a new report on children's well-being in America, a graph on teen pregnancies by race. The convergence of black teen pregnancy to other levels should be of great importance. So what does the AP writer emphasize? Hispanic kids less likely to have health insurance. Way to go, muttonhead.

Scotty beamed up 

He was 85? I now feel a little older.

Improved Westover column points up economic arguments 

Good writers are good editors of their own work. Craig Westover has revised his original notes on Q-Comp into his "hobby column" in the Pioneer Press and it's much, much better. This point need amplification:
The "Professional Pay System" was negotiated outside the Education Working Group in closed-door session among Gov. Tim Pawlenty, Commissioner of Education Alice Seagren, Senate Education Policy Chairman Steve Kelley, D-Hopkins, and House Education Finance Chairwoman Barb Sykora, R-Excelsior.

Notable by his exclusion was House Education Policy and Reform Chairman Mark Buesgens, R-Jordan, one of the most reform-minded members of the working group, a frequent and effective counter to Kelly's protectiveness of system status quo, and co-author of the "meaningful school choice" legislation that was one of Pawlenty's big four proposals in return for the cigarette tax.

Neither Buesgens nor the co-sponsor of the school choice legislation, Sen. David Hann, R-Eden Prairie, had discussions with the governor about school choice legislation during the special session. Nor, they say, did the governor's staff return their phone calls. Meaningful school choice, it appears, was never a meaningful option. When push came to shove, it was children who were pushed aside to shove more compensation to adults for improving their resum�s.

Compared to the (at least) two-year planning and implementation cycle before students receive any benefit from their newly "developed" teachers, meaningful school choice would have had an immediate impact on children and the state budget. According to the fiscal note prepared by the state, the Hann/Buesgens legislation would have cost the state an additional $2 million in 2006 and returned a net savings to the general fund of more than $8 million in 2007 (compared to the $78 million cost of the Alternative Pay System).

"Government can't fix the system. That's a silly concept," Buesgens said. "Markets and people make education decisions."

He's right. Merit pay is reward for performance set by whom one serves, not self-determined, vague criteria with no objective reality. Parental school choice � the ability to opt out of the system if dissatisfied � creates a very objective reality.

"We squandered a lot of money," Buesgens said. "And we didn't get any reform."
The failure of Pawlenty and Seagren to consult Hann and Buesgens, let alone include them in the working group, is simply inexcusable. These people represent the concerns of a fair number of people working on education policy. They are part of the base that helped elect Pawlenty. Did they not deserve at least a hearing and an explanation of why the Q-Comp went the direction it did? And here was a plan that could have saved the state money and reduced the need for the cigarette tax increase.

Buesgens understands incentives. In a comment on my post on this topic yesterday, Michael (whose blog, alas, has been shuttered -- a pity, that) thinks teachers who respond to financial incentives are per se bad teachers.
Teaching is a calling, not a job. Great teachers are born, not made and economic incentives don�t work for teachers. There is only one incentive that works on teachers. FREEDOM!

Freedom to explore and create is the only thing that will excite good teachers. It is the only thing that will turn children into students.

Soooo, if you want great teachers, offer them an economic incentive program and fire all the ones that accept it. Give all the ones who don�t 20 kids in a class and let them go to college in the summer for free to learn more about anything they want. Pay them a middle class wage and ask them occasionally what they are up to. That is how you will get the best teaching force. (Bold in original; italics added by kb)
I suppose you expect me to snark, but let's not. I am perfectly willing to believe, based on what I know about Michael and his teaching and what his students have written about him, that he would teach for love of teaching alone (as long as he can afford Perrier.) I don't doubt he loves his job, and I'll even venture to guess he's a very good teacher. And I'll stipulate to the notion that Michael will not be affected by a merit pay system because he's already busting his ass for his students, and that he has no more ass to bust. AND I'll stipulate that Michael travels in a circle of fellow teachers who do the same because they share the same interest in good teaching.

But he's still missing the point, which is this: How do you find more Michaels when you have more students? There is not an infinite supply of Michaels in the world; there are competing claims for their time and talent outside of teaching. We don't pay finance professors double what we pay history professors because the finance professors are any better; we pay them that way because there are more competing claims willing to pay more for a talented PhD in finance than for a the talented PhD in history.

Michael may not see this because he assumes everyone is like his circle of friends. And he may wish that others acted like that circle. But it cannot. The market operates on teachers whether or not Michael likes it. If he wants more talented people teaching around him, he should support economic incentives.

Tuesday, July 19, 2005

It's a race now 

The speculation can end now: Dave Kleis has decided to join the mayoral race against incumbent John Ellenbecker.
Kleis, 41, said he made his decision today after getting lots of phone calls from people urging him to get in the race. Kleis said he plans to file at 4 p.m. today.

Kleis, a Republican, has been in the Senate since 1994 and he defeated Ellenbecker, a Democrat, in 1996 for re-election.

One man's trash 

...says the son of parents who've made a living the last twenty years by speculating on other people's stuff at a yard sale and putting it antique malls in New England. All economic exchange is about getting goods from lower-valued uses to higher ones. Thos who interfere in the process do so at risk of reducing human happiness. Such a case is found in this review of a book about rubbish.
The classic case is the fridge mountain. Your old fridge used to be taken away by the supplier of the new one, refurbished and sent to Africa. This brought benefits to the consumer, the exporter and the Nigerian housewife, with no apparent harm to the environment.

But then we found out about CFCs and the hole in the ozone layer. In 1998 the EU announced that with effect from January 2002 old fridges could no longer be exported and would only be allowed to go to landfill after 'controlled substances' were removed. Brussels took three years to answer a query about whether it was just the cooling-motor or the insulation as well that had to be stripped out before disposal. Whitehall did not see fit to prepare local authorities for both contingencies, with the result that we were not ready when the ban came into force. England's green and pleasant land became dotted with piles of rusting white goods.

So instead of recycled refrigerators in Africa we have piles of garbage in the UK, still with CFCs.

(h/t: Arts and Letters Daily.)

Craig's right, I'm wrong 

Craig Westover and I have been conversing by email on the merits of the Q-Comp proposal that passed in special session. After reading the bill and Craig's analysis, I'm going to retract my support for Q-Comp. They gutted it at the last minute, which is why the ed borg has not roared.

That said, let me add a little economic reasoning here. We know that people respond to incentives and that applies to teachers as much as anyone else. Whether or not Q-Comp is a replacement or a supplement to lanes and steps, which Craig criticizes greatly, isn't very important to me: If the supplement is large enough, and if it is reward for the right kinds of behavior, it's fine by me to leave lanes and steps in place.

Nor should it be an issue whether the borg roars or not: Teachers need to buy into the fact that they are going to be rewarded for something that is objectively measured and something that their efforts can in fact control. That is important: The problem teachers have, from the ones I speak with, is that the accountability tests on which the performance is based measures something over which the teacher has little influence. I don't see that as being an unreasonable position to take; proponents of more accountability need to show the connection between teacher effort, teacher reward and student achievement. If it's just more achievement-->more reward, reward might simply go to teachers who luck into better students. (Twenty years of teaching college students has taught me that classes don't begin with the same level of students. My last two classes have had absolutely wonderful students; a class last fall in principles had a number of ill-prepared students. That line about making chicken salad applies here.)

This is not to deny that Craig's right and I'm wrong. Craig's right because of this analysis (quoting from the legislation and his commentary):

Struck from the original was all language that referred to �replacing� the step and lane salary schedule and years-of-service-based pay replaced with the following --

(3) reform the �steps and lanes� salary schedule, prevent any teacher�s compensation paid before implementing the pay system from being reduced as a result of participating in this system, and base at least 60 percent of any compensation increase on teacher performance using:

Okay, here�s where the rubber meets the road, or rather where the program spins out of control. Teacher performance can be measured using --

. . . school wide student achievement gains under [MCA�s] or locally selected standardized assessment outcomes, or both.

In other words, �teacher performance� means whatever a district or site in conjunction with the teacher�s union says it means. A list of six items follows that �clarifies� the latter with more obscurity. It is basically an outline for professional development at taxpayer expense, not pay for performance. Number (6) is especially interesting in a �merit pay� program� --

. . . encourage collaboration rather than competition among teachers.

The problem is, once again, the misunderstanding that labor competes with labor and firms or school districts compete with other firms or school districts. It is this part, and this alone, that convinces me Craig is right. A union is a cartel; it acts to restrain competition among laborers within a firm (and often those outside). A merit pay system by its very nature encourages competition among teachers.

A teachers' union which wanted to show its professionalism and its concern for students would allow competition among teachers. But for a union, that's an argument against interest. The answer, of course, is real school choice.

Bound to be a HURL class project soon 

At Washington State University, university funds used to purchase tickets for students to attend a play and heckle it. FIRE reports that it was quite an exercise.
It then allowed the hecklers to repeatedly disrupt the musical through shouts and threats of violence. Washington State�s president later defended the hecklers� behavior as a �responsible� exercise of free speech.

�Students have a right to leave a play, protest outside of the theater, and condemn a play in the newspaper. But they do not have the right to obstruct and censor other students� protected expression,� remarked David French, president of the Foundation for Individual Rights in Education (FIRE), which has intervened on Lee�s behalf. �Washington State�s defense of this vigilante censorship will encourage students to unlawfully silence others whenever they feel offended.�
The president of the university, Lane Rawlins, argues that a provocative play like this one, Passion of the Musical by student playwright Chris Lee constitutes a public forum and therefore heckling was a free speech right.
Interestingly, the same office that bankrolled the hecklers at Passion of the Musical sponsored Washington State�s 2005 production of The Vagina Monologues. Washington State also played host in April to Tales of the Lost Formicans, in which a cast member simulated masturbating into the American flag. Washington State called that play �a whimsical look at the idiosyncrasies of human interaction� and promoted it via a university press release.
Sounds like a job for Testaclese.

Chris Lee says he is going for a South Park or Dave Chapelle kind of humor, and the show sounds pretty much like, well, a student trying to sound like SP or Chapelle. It's inelegant humor. But we're not defending the musical's qualities as much as criticizing the use of campus funds to disrupt a student's attempt to learn how to write plays. Erin O'Connor, noting the story, makes the right point.
There is a difference between choosing not to witness or endorse expression one finds personally offensive and choosing to try to prevent others from witnessing, endorsing, or expressing it. This distinction has, for the moment anyway, been lost at Washington State.

He should never walk alone 

Not only is John Ellenbecker running for mayor (and maybe not U.S. Congress), but he may not be challenged by presumed opponent state Senator Dave Kleis. Dave Aeikens of the St. Cloud Times reports,
Kleis has been considering it, and he has until 5 p.m. to decide if he wants to challenge Ellenbecker in what would be a rematch of the 1996 Senate race between the 11-year Republican senator and the first-term DFL mayor.

"At this point, I have not decided," Kleis said. He just returned from a few days in Canada after completing a legislative session that went into overtime and ended Wednesday. Kleis' Senate terms expires in 2006. In his 2002 re-election campaign, Kleis said his current term would be his last because of a self-imposed 12-year term limit he promised when elected in 1994.
Kleis is a local entrepreneur, running a driving academy, and it's farily well-known that he'd like to get back to the private sector. The mayorship is supposed to be a part-time job, though Ellenbecker says it takes much more time than he realized. Part of that, in my view, is because Ellenbecker is quite activist as a mayor.

This could be a strategic move on Kleis' part: If Ellenbecker runs unopposed and then runs for the Sixth District Congressional seat, there could be a special election for mayor in which Kleis would be a heavy favorite if he wants the job. And he might yet run this time around. But, and this is pure speculation on my part, Dave Kleis reminds me of nobody as much as Warren Rudman, a deficit hawk and someone who became increasingly frustrated with government. I could imagine Dave running the Concord Coalition -- indeed, doesn't this look like a copy of that? He's not been as anti-tax as Phil Krinkie; he's much more an efficient-government type of Republican. More Bob Dole than Newt Gingrich. And it's possible he's just burned out and wants nothing more to do with government.

Still, somebody needs to run an opposition to Ellenbecker. There should be objection to his heavyhandedness, to the expansion of the public sector in St. Cloud, and, thinking strategically for the Republicans, someone to lay down markers if he runs for Congress next year. Someone to make John get on a stage and hopefully say something you can use in the 2006 campaign if he runs. And if you beat him, which anyone outside of Kleis would have a hard time doing, that could make the Republican primary in CD6 the real election in 2006. (Though First Ring now thinks it's possible that Tinklenberg has raised enough money to make the Republicans focus and other DFL hopefuls perhaps stand aside??)

Monday, July 18, 2005

Ukraine: "Not a Clean Break" 

I think The First Ring has misanalyzed the situation in Ukraine. He think the problem with Yulia Tymoshenko is simply antipathy with ethnic Russians. It's far more, far worse than that. First Ringer says:
Tymoshenko�s dedication to reform and democracy aren�t in question, but Ukraine�s hot version of Margaret Thatcher has isolated a number of eastern Ukrainian voters who are culturally Russian. With concerns of secession in the region preceding and following the second vote, a Tymoshenko presidency would have been a gallon of gas to the smoldering embers of the 2004 vote. Tymoshenko has made efforts to reach out to the east, even traveling there immediately following Yushchenko�s victory, but the wounds are simply too fresh.
I've written earlier this year that the Tymoshenko cabinet has not moved forward on economic reforms. Anders Aslund sounded the alarm this May. He notes that Tymoshenko has engaged in pure populism, increasing taxes and giving public sector workers and pensioners 60% raises. Inflation is on the rise. Ariel Cohen last week amplifies the point that property rights are routinely violated in Ukraine. It has a socialist privatization minister (take a moment to get your mind around that concept) who thinks we've had enough privatization. James Sherr argues persuasively that Tymoshenko is not a good friend of Yushchenko's and is not averse to arbitrary use of power.
Between his inauguration and the recent oil crisis, President Yushchenko tended to act more as the spiritual than the political leader of the country. He also made twelve trips abroad. When the oil crisis reached the point of peril, he intervened with wisdom and firmness, but it is not clear whether he will now exercise direct and active authority. His Prime Minister, Yulia Tymoshenko, an electoral ally but a personal rival, is not averse to confrontation and seems determined to exercise authority without limit. If Yushchenko has confused leadership with inspiration, she has confused it with control and, to the astonishment of many in Ukraine's business sector, these controls are taking the form of Soviet style 'administrative measures' which extend to the micro economy.
Sherr also makes a good point that these actors come from an authoritarian regime and are used to working within it, both having held positions in the previous government of Leonid Kuchma. "It represents a principled break from the past, but not a clean break."

One has to wonder, contrary to First Ringer, whether Yushchenko's health really is fine. His hands-off approach is certainly fitting the style I remember he had at the National Bank, but broad guidelines were often followed with concrete steps. And laissez-faire was not his style in running his government when he was prime minister. Given that the power of the presidency is to be reduced next year under the constitutional reforms agreed at the conclusion of the Orange Revolution, the time is now for Yushchenko to take charge. (Tammy Lynch offers the same sentiment; as noted by Robert Mayer.)

UPDATE: The economic slowdown is making one Orange Revolution promise harder to keep, according to a new report.

Ukraine's economy grew just 4 percent in the first six months of 2005, the government announced Thursday, a sharp downturn from the white-hot growth registered by the former government over the same period a year earlier.

The slowdown poses another hurdle for the new pro-Western government which took power after last year's Orange Revolution amid promises to boost living standards and create 5 million new jobs.

Yushchenko believes last year's nubers were doctored to improve the government's chances. I believe that's probably true, but it makes the 5 million new jobs even harder to make, if the old jobs number was fudged.

First Ringer has updated his post and says the results are consistent with consensus-building. I suppose this is true; the Orange Revolution needed the consensus to succeed. But it may take the next parliamentary elections in 2006 to solidify the gains and move forward. As to Yulia, unquestionably she is angling to succeed Viktor some day, but winning that parliamentary election appears to be the nearer-term goal.

Because nobody has sex on a keyboard 

That's the answer to the question "Why do people still have sex in libraries?", according to Thomas Benton.
I have heard that one of the rites of passage for undergraduates at Harvard University is to have sex in stacks of the vast, labyrinthine Widener Library. It's sort of an academic version of joining the "Mile-High Club."

I suppose sex in the stacks is meant to lampoon the library's aura of high-minded seriousness and Puritanical chastity. Harvard used to keep Leaves of Grass in a locked case in order to guard the moral virtue of undergraduates. And that was in the days before Harvard admitted women.

That copy of Leaves is now in the Houghton Library. The more erotic passages have been underscored and commented upon by James Russell Lowell, the very man who promised one concerned parent that he would "keep it out of the way of students."

...For the record, I have never had sex in the stacks, and -- even after many years of lurking in several major collections -- I have never had to discreetly avoid anyone else in flagrante delicto. But I have had many moments in stacks of great libraries that were almost erotic in their intellectual intensity.

I have had moments in reading a text -- an ordinary one that might now be found online -- when I noticed a minor reference in the margins that sent me a few shelves down to find a much more obscure book that was packed with unexpected clues that changed my project entirely.
The library at Claremont was like this for me: I would grab books on economics, which were in the basement of Seeley-Mudd library. In those days you could take them out into a courtyard in the basement unaccessible from the street. You could also smoke there (yes, Viriginia, I used to smoke cigarettes. Bicycling to work after moving off campus disabused me of the habit.) One day I'm reading a first edition of Paul Samuelson's Foundations of Economic Analysis, which was his dissertation. There are notes, the handwriting of which I recognize as one of my professor's. Now these didn't lead me to more obscure books like in Benton's story, but they did lead me to learn the story of this professor's interactions with Samuelson when they were classmates at Harvard. (To make a long story short, they competed for the affections of a female classmate; my prof won -- it is said this drove Samuelson to work harder on his dissertation.)

A roommate used to hang around the Sir Francis Bacon Library, which he took me to once where I met this woman who spent her entire life around these books that would have thrilled Bacon. It's now out at the Huntington Library in San Marino, one of those truly special places for historians and lovers of flora and fauna (for the gardens around them.)

I was thinking about something Saint Paul said during the book meme tour, that he didn't own many books and was rather fond of journals instead. I had two thoughts. I still adore those days when I can wander into a library and just browse the journals section. The internet makes this easier with services that tell you which articles everyone is downloading or new journals appearing, or whatever. But for some reason I like the tactile sensation of turning pages in a journal, and really looking at an abstract and the flow of an article. It's not duplicated by mouse clicks.

Do parents ever drop their kids at libraries any more, to work on homework for a few hours? I don't think we would with the LS, given its location and the fact that homeless will sleep in there. It seems a shame; the old Manchester public library is a memory with me for life. Benton concludes his piece,
I am grateful that my graduate alma mater had browsable stacks. That was the foundation of my education. The books were more important, by far, than the superstar scholars who, like books in an off-site warehouse, were available for consultation only with great difficulty. In the future, I will encourage more of my students to consider universities with open, centrally located library collections -- such as Chicago -- above other comparably prestigious institutions with different priorities.

I wrote this column on a computer in a room filled with books. In five years I will have a new computer on which most of my old software and storage media will not run. The books will still be here, and my children will be able to read them. And so will their children.
My son is named after a book title, just as the title is named after the author's son. (Given my heritage, you should be able to figure this out. This will drive Mitch nuts.) His gift for one important birthday was the book. I don't imagine Saint Paul will bequeath his Weekly Standards or Atlantics.

Is this sort of thing done? 

Unrelated to anything this blog normally discusses: I'm driving home from dinner out with my family, and I see some poor guy pulled over by a cop getting a ticket in the opposite lane. Two people, apparently out with their dog, have stopped to watch the proceedings. Isn't this considered rude? Can't a guy try to talk his way out of a ticket in private??

Inquiring minds want to know.

A rewarding and aggrevating day? 

Can you have both at once? Yes, when dealing with bureaucracy. I won't bore you with the details, but it could have a happy ending. Off to get dinner, and I'll post some items afterwards.

Friday, July 15, 2005

Asking questions you can't ask 

Many years ago I had a friend, a political science professor with whom I would jog in the mornings, and Mrs. and I visited with them often. He is Jewish. One time while running he tells me the story of visiting a state university in the South. Now, my friend certainly looks Semitic -- think Dolph Schayes with a beard -- and his last name doesn't disguise anything. But still they are curious. Obviously you cannot ask straight out the question, so he tells me they hem and haw a little bit until someone gets a bright idea. "So, what do you do on Sunday mornings?" they ask. He says he reads, and, understanding that they want this information and not wanting it to get in the way of his interview, he tells them he's Jewish. "Oh? We have a Jew here in [name of town]. We'll introduce you to him." So sure enough, the next day they introduce him to "the town Jew."

I was laughing so hard I could not run any more. (He does a much better job telling this story and, like me, when he jogs and tells a story his hands are absolutely everywhere at once.) The punchline: They offered him the job. Unsurprisingly, he turned it down. I guess he didn't want to ruin the fame of the town Jew.

The same sort of thing happens to conservatives, though it's not quite so funny. FIRE's David French explains:
I spent two years as a lecturer at Cornell Law School. During my second interview with the director of the program I was applying to join, she asked the following question: �I note from your CV that you seem to be involved in religious right issues. Do you think you can teach gay students?� How many gay applicants at Cornell have been asked: �Do you think you can teach Christian students?� The question (coming from someone I came to deeply respect and admire) came not malice but from ignorance � both of the legal standards governing hiring and of the beliefs of evangelical Christians.

Nor was my experience with ignorance and prejudice limited to faculty hiring. One of the most disturbing aspects of my experience at Cornell Law School was the year I spent on the school�s admissions committee. I saw a Christian student once almost get rejected despite tremendous academic qualification because members of the committee were wary of his �God-squadding� and �Bible-thumping.� He was admitted only after I raised strong objections to the committee�s obvious anti-religious prejudice. I also saw some Latino and African-American candidates receive less affirmative action assistance because their perceived politics or career interests (such as an interest in finance) were deemed �less diverse� than other applicants with an obvious interest in �social justice.� Moreover, some applicants of color who indicated interest in the world of commerce were said not to have �taken ownership of their racial identity.�
I agree with French in this regard: Most of the reaction I get to being a right-libertarian on campus isn't malicious but ignorant. Not to say prejudice doesn't exist against conservative, but it's limited, particularly when one is open about his political views and able to defend them with both vigor and humor or grace. One of my best friends here at SCSU has said more than once he likes talking politics with me because he "gets a unique perspective." Well, why do you suppose that is?

Two side points, quickly. First, we should keep Dan Drezner's caveat about being untenured in mind when deciding to leave your conservative bona fides out for all to see. And second, sometimes one's openness leads to use as a "token conservative" on academic committees. I'm on a committee looking at academic freedom at SCSU right now. I've not felt in any way a token on that committee -- the people on there, who probably have voted against me in every election since 1976 if they were old enough, are very good people. But there's a nagging sense that whatever comes out of that committee, some will say "it must be ok if Banaian's on the committee," or "what are you complaining about? King says it's OK." This has happened before.

"Oh, you're a conservative? We have one of those. We'll have you meet him." People with a diveristy mindset, sometimes, just can't help themselves.

Taking it back 

When I first heard of term limits and other measures that would quickly terminate legislators' tenure in office, I thought it was a breach of contract between voters and legislators. I'm still relatively agnostic on term limits, but two senators, Sean Nienow and Dave Kleis, have decided to create a website that would both cut off pay for legislators in special sessions, and immediate recall for all legislators if the budget isn't passed by the Constitutionally required date.

Is this going to help? It's not clear which side would be harmed in a budget showdown with the possibility of snap elections. The stronger side, that might be able to get the agreement with some negotiating, might try to force a shutdown to gain more seats in the quick elections. If the Kleis bill had passed, do you think the Republicans or DFL would have gained seats? It might have forced even higher taxes as the Republicans were not prepared at that time to go to the voters.

The pay cutoff, however, strikes me as a good deal. Rather than that, give everyone an annual salary and a global cap for per diems in the biennium. If they finish early on the budget and want to come back to discuss, say, a new Twins stadium, I don't have a problem paying per diems. But if they come back now, as some are suggesting, that doesn't seem right.

UPDATE: Reader/commenter Nathan Bissonnette:

No per diem. Manditory dormitory.

Condemn the Sears store across the street, gut it, install hundreds of cots, stay in continuous session until everything is done. Every member must sleep there every night and eat cafeteria food every meal, no different from a freshman dorm.

Oh, and no private cars allowed, no reimbursement for taxis. Must go everywhere by city bus.

With urine-caked drunks. This is brilliant!


How do you know when you've scored, Saint Paul asks? He and Craig Westover show that Mark Yost's last column has not only shined a flashlight on the media, but made the little buggers squirm and squeal. The fatwa has been issued.

UPDATE: (7/17) I had a link to Day by Day which seems to have gone dead, so with no permission whatsoever I'm copying the comic; click to expand:

Student papers in summer -- not good 

I have not posted anything from our student newspaper this summer -- it's running, but nobody seems to have updated the website since May. Probably just as well. Randy Wanke, a MSU-Mankato grad, sends this gem from their student newspaper from two weeks ago, when the Minnesota partial government shutdown was imminent. It began
Pending major progress in the Congress's special session,...
Um, sirs, it's not a Congress. That's the federal institution. Ours is a Legislature. See?

But it gets worse:
Though the tax-freeze has been upheld with the best intentions for Minnesotans, it's important to acknowledge that a slight increase in income tax for higher-income households has nowhere near the impact of a state worker forced to stay home because of the shutdown.
It wasn't a slight increase that was proposed. It was $800 million in new taxes on 43,000 people. As it turned out, less than 5,000 workers had to burn some vacation days.

But it gets worse:
Of course, maybe there's something to be gained by a temporary shutdown. There are so many state-provided services that we take for granted; services that provide us with health care, safety and better living. All of these services are worth every penny we pay to taxes. Some, as we may unfortunately find out, are simply priceless.
What?? The jobs were already deemed "non-essential", not only by the Pawlenty administration the Legislature (not Congress) but also by the far-too-meddlesome state bench. What makes for better living isn't government but the economic freedom people have. The ability to choose. Government reduces choice, because government is force.

"Hugh, you don't have to tax something" 

Bogus Doug noticed it as too: I think some of us have been upbraided by Hugh Hewitt on his show tonight. He had Governor Pawlenty on and discussed the budget situation. Seems like Hugh doesn't mind cigarette taxes. Here's the audio for the following transcript.

HH: Now, the last time I looked, Governor, your government was shut down.
TP: [laughs] Well, it's back on, Hugh. We had, I'm not proud to say the first government, the first partial government shutdown in Minnesota over a dispute with the Democrats over tax and spend issues with the Democrats. It was very ugly and slow but we finally found some common ground. But we had to it under kind of a crisis situation.
HH: How did it resolve? Did you raise taxes?
TP: Well, we raised what I call a "health impact fee" on cigarettes but some are calling a tax. But it's a voluntary activity if you smoke, and we're putting the money into a dedicated account to help pay for health costs in large part...
HH: You know, I actually have no problem with that. I don't care what the anti-tax hard core says, I believe in taxing the heck out of cigarettes because of externalities and [unintelligible]. It's good economics.
TP: Well, you know, I don't, I'm not a big fan of growing revenues through new mechanisms like this as I hope I've proven as governor but the bottom line was we had a historic government shutdown we had to find common ground and compared to the alternatives of the Democrats wanting to tax everything including income and business taxes and a variety of other things. This was the least offensive. And the good news is other states have done it and smoking has decreased dramatically, and so this has a health benefit as well.
HH: You know, most the time they want to tax breathing and not just smoking and so you've held the line there pretty well. How much revenue is raised by the cigarette tax?
TP: For a two-year period it's about $400 million in the context of a $31 billion budget. So. But it's about $400 million and it will probably decline as smoking decreases.
HH: And that was it? That was all it took to get the deal done? Because that's not really that much money.
TP: Yeah, that was basically it. There was some other miscellaneous items but it was kind of a classic tax-and-spend fight. And the Dems wanted to go much higher on spending and of course raise taxes to pay for it, and of course we didn't, and we had to fight to the mat, and unfortunately it went into a first ever shutdown in Minnesota and the public did not react well to that as you might understand, they were very frustrated with everybody.
HH: Well, they blamed Newt and everyone in the Legislature when it happened at the federal level and hopefully they'll blame the DFL in Minnesota...
There are four points to be made here. First, "finding common ground" is hardly what I'd call offering a deal of breaking the tax pledge in return for some reforms that did not materialize. Is the governor really going to make his case that he had to compromise and decided taxing smokers is "the least offensive" revenue generator versus a new tax rate on high-income earners and business tax credits? It's the least offensive to the Chamber of Commerce, perhaps. But to the average voter who smokes, the position itself will seem offensive. Democrats are already lining up to bang the "regressive cigarette tax" drum.

Second, all actions are voluntary. Including earning income. The reason we tax cigarettes rather than, say, perfume is not that it's voluntary but that it's unlikely people will change behavior in the short run in response to the increased tax. (I.e., demand for cigarettes is price inelastic.) If you want to make money from this tax, you better hope so. Either it reduces smoking and doesn't raise revenue, or it raises revenue but doesn't change smoking behavior. The effect is to reduce smoking more in the long run, certainly, but we're pretty certain that, since demand is inelastic (in most studies -- I've seen some that think it's "unit elastic", or a 1-for-1 relationship between percent change in price and percent change in quantity sold.)

Third, this notion that the externalities are so large from smoking has been disputed. David has been citing Kip Viscusi's analysis, which argues that states are compensated for medical and nursing home costs from smoking already. There's a benefit to smokers dying younger -- they don't burden Social Security, they don't linger in hospitals in their 90s by and large. Cruel logic, sure -- they don't call us the 'dismal science' for nothing! -- but if you are going to add up all the external costs, you need to also add up the external benefits of reduced longevity.

Last, if the budget deficit was as small as Hugh figures out -- and he's right -- why do both of these smart conservatives go right past the other solution, the one the tax pledge was supposed to produce: REDUCE SPENDING. In a $31 billion budget, you couldn't find $400 million of cuts? Why accept the level of spending as fixed??? And they're not cuts, they are simply reductions in the rate of increase in spending. This budget is for $30.5 billion (to be precise); the 2004-05 budget was for $28.2.

An hour after TPaw, James Lileks speaks with Hugh (audio).
HH: You heard your governor on this program about raising taxes. Don't tell me that the right-wing anti-tax people are mad with him for slapping a little tax on cigarettes, are they?
JL: Yeah, that's their job. Of course they are.
HH: Are you upset with that?
JL: No.
HH: Good, OK, just checking. I mean, it's a normal ... you got to tax something, tax smoke!
JL: Well, you don't have... Hugh, you don't have to tax something ... Once you admit that, then for heaven's sake let's tax the very molecules of air we inhale into the cilia of our lungs.
HH: No but you know there are negative externalities to quote the Economist from smoking that are not recaptured by the cost of cigarettes or returned to the public by those who smoke them.
JL: As much as I like the anti-tax pledgers there are some times when you have to bend and if you want to stomp your feet and run away and read your Ayn Rand again, I mean that's fine, but politics is not about purity sometimes it's about getting
things done.

Getting things done with other people's money, you mean, $2.3 billion more of it this time than the last biennium.

Thursday, July 14, 2005

Sucks to be European 

...wherein output growth is projected to slow noticeably.:
On unchanged policies and with population ageing the euro area's potential output growth is set to decelerate over the next decades and eventually stabilises at around one per cent per annum by about 2020...
That would be down from the current rate of 1.6-1.8% per year. Mahalanobis notes this would widen the income gap with the United States.

In the GRIP of idiocy 

In an editorial last Sunday in the local newspaper, I got to read a former congressional candidate here in St. Cloud string together economic fallacies in an amazing chain of confusion while arguing for "livable wages". I know some of her colleagues in GRIP but not Anne Nolan, and I'm not likely to have a good meeting after I'm done with this. But somebody has to do it.

Although the cost of living in our area is 10percent lower than in the Twin Cities metro, our median wage is 20 percent lower, according to JOBS NOW Coalition. To meet a bare-bones, basic needs budget in our region, a two-earner family of four needs to earn $23.06 per hour � $11.53 per hour for each worker. In Central Minnesota, 40percent of jobs pay less than $11.53 per hour.
What is meant here by "needs to earn"?

Communities often use business subsidies such as tax increment financing, which originated as an anti-poverty tool. But are these subsidies being used wisely when they create poverty-wage jobs or very few jobs? Or when they pit one group of taxpayers against another?

Tax-increment financing originated as an anti-poverty tool? Says who? Not the Legislature. TIF is to be used to

It is better thought of for use for the affordable housing project you people are goofing up than for creating new jobs. Government, as we said yesterday, doesn't create jobs.

In exchange for a promise to create two full-time and seven part-time jobs paying less than $7 per hour and one job at $11 to $12.99, St. Cloud provided $414,976 of tax increment financing in 2000.

In exchange for a promise to create nine jobs paying $11 to $12.99 per hour, without health insurance, Waite Park provided $2,430,000 of tax increment financing � or $270,000 per job.

In exchange for relocating from one community to Sartell with no promise of new jobs, multiple local and state tax benefits were provided, worth about $400,000.

Have we lost sight of the original goals of economic development dollars?

But wage-jobs aren't the purpose of TIF. TIF is designed to develop or redevelop property to bring up its market value and increase the flow of property taxes from it. You are borrowing against the increased value of the property. Does the new property repay the monies forwarded by the financing or not? That's the test of the use of the money, not the number of jobs it creates.

You won't have much problem convincing me that businesses are capturing much of the benefits of TIF money from government. You won't have much problem convincing me that a good deal of it is inframarginal, meaning that it doesn't affect the economic decision of building new businesses or relocating others, just changes the profit and loss situation of the actors. But the proper answer to this is to reduce the corporate welfare that TIF often becomes by eliminating it. TIF gives municipalities an ability to bribe firms; there's no reason to support this.

But for Anne Nolan, that would defeat the purpose. She doesn't want to get rid of TIF at all; she needs it to engage in her little bit of social engineering. She wants to muck with markets as much as the city of Sartell did in the last example. She wants to muck for a different group.

Bringing new poverty-wage jobs to the community can lower overall average wage levels and increase employees' dependency on social services � food stamps, Medicaid, housing and utility assistance.
All services you insist on providing. So, you now use the welfare state as a stick to force increased wages?

Creating too many tax breaks without a fair return on the subsidy investment can deprive the state and community of the resources needed to maintain the infrastructure and educational systems that support a high-quality work force.
One last time: You got a return from having higher property taxes on the developed land. Which you spend on roads and schools.

The Minnesota Business Subsidy Accountability law says that if a community wants to grant job creation subsidies � things like low-interest loans, TIF or the big tax breaks that come with locating in JOBZ zones � then that community first must adopt legally binding criteria to say which businesses are eligible, including a specific wage standard.
In other words, this law is a back-door minimum wage law at a local level to be applied against any company receiving a government subsidy. So what's it been like? I looked at the latest report from the Department for Employment and Economic Development. In 2003, the last year reported, $29.4 million was spent on local business development through TIF, loans, subsidies and the like. This was planned to create 1,187 jobs, for a cost of $24,768 per job, and 74% of these jobs were promised to pay $11 an hour or more. They actually created 528 jobs, or $55,682 each, of which 76% are paying over $11/hr.

Why do you suppose that is? Because the money isn't about job creation. It's about rent-seeking. And rather than stopping the rent-seeking by eliminating TIF and reducing taxes so that local governments get out of the financing business, the GRIPpers want to keep the rent and redistribute it.
GRIP decided to ask our cities and counties to work together to develop common criteria for business subsidies, including a living wage standard. Together, our communities could move from competition to cooperation and benefit from one
another's best practices.
As Thomas Sowell points out, living wage standards are simply a municipality trying to impose a higher minimum wage. We know where that leads. As research from Deere, Murphy and Welch points out, these lead to job losses in particular for older families. The research on living wages per se in other states -- usually imposed on governments or those contracting with them -- show relatively poor results. See Yelowitz and Toikka, Horowitz, and MacPherson.

I noted during the introductory economics lectures that firms do not compete with labor for wages. They compete with other firms. And workers compete with other workers. Minimum wages are the suppression of competition between workers seeking jobs. They discourage firms from competing with each other to find workers. Firms will adjust by reducing the number of hours worked, which tends to be the larger problem for low-skill workers than the wage paid. I find once again Russ Roberts well worth quoting, this time discussing WalMart wages.

Wal-Mart doesn't offer health insurance or pay more than they do because they've found that they can attract enough workers with the pay package they currently offer. Period. For other companies, they have to offer health benefits to attract workers. They reason they offer health insurance isn't because they're socially responsible or kind or altruistic. They find that to compete for workers they have to offer it.

Paradoxically, Wal-Mart doesn't determine what it pays its workers or what benefits it offers any more than you can set the price of your house when you want to sell it. Suppose houses of similar quality and location sell for $500,000. You're free to set any price you want, but if you set a price of $1,000,000, you're going to wait a long time for a buyer. Oh, you might get a slight premium above $500,000 because you did such a nice job renovating your kitchen. Or maybe a little less if your taste in kitchen's is real different from most people's. You don't set the price of your house.

Wal-Mart is in the same situation. They don't determine the compensation of their workers in any real sense. The compensation of their workers is set by the market for people of a particular skill level and the alternatives in the work place available to workers of that skill level. What Wal-Mart does have some control over is the level of customer service and knowledge and skill used by their workers.

At the beginning of her editorial, Nolan notices that our median wage in St. Cloud is 20% below that of the Twin Cities. What she does not note is the difference in skill levels of workers here versus there. Our firms pay less because they use a mix of labor and capital that requires less skill in our workforce than theirs. One evidence of this is the difference in education levels that Rich MacDonald and I noted in our last Quarterly Business Report.

U.S. Census data show education levels in the St. Cloud-area work force have improved since 1990 but remain lower than the nation as a whole, based on high school and college graduation rates. More than 24 percent of the nation�s work force had at least a bachelor�s degree in 2000, compared with 21 percent locally. Educational limitations could prevent St. Cloud-area workers from benefitting as much as other parts of the nation from the introduction of computers.
Since jobs with computers typically pay a premium over those that do not use them, that will account for at least some of the gap in pay. This will not be overcome by people with good intentions. What GRIP needs to ask, instead of...
Remember, we are only talking about applying a wage standard to subsidized businesses. And we are talking about job creation subsidies that our communities are already using. All we are asking is that our communities decide together what will make businesses eligible and hold them to high standards. "what can we do to encourage firms to choose to use a higher set of skills, and induce workers to increase the skills they possess?" GRIP can certainly help with answering this, I do not believe government has a role in that answer.

How porous is an airshed? 

I guess not at all, if you read Paul Douglas' NowCast today, wherein the meteorologist pretty boy of KARE 11 has a Goregasm.
Portland, Oregon has dropped carbon emissions below 1990 levels, at the same time their local economy has boomed. Minneapolis now supports the Kyoto Treaty, joining a growing list of American cities acknowledging the obvious: something has changed.
"Minneapolis now supports the Kyoto Treaty"??? How? Did it sign it? Is it erecting giant fans to blow soot towards St. Paul

h/t: Chad the Elder, who foolishly thought the idea of Nowcast was to give the weather.

Creating moral monsters 

I used the phrase above about eight years ago in a discussion of creating a "democratic citizenship" course here at SCSU. My issue was the fad of "service learning" which was the rage at the time. My problem is that the service projects that are likely to be approved by faculty as a learning project will be those that forward the radical left agenda that dominates campuses. I was persuasive at the time that the democratic citizenship course not require a service learning component, though I think the point that won the day was the practicality of creating projects for 2300 students a year.

An example of what I was talking about appears in today's St. Cloud Times, wherein students have organized a protest of the name of the De Soto Bridge that crosses the Mississippi in downtown St. Cloud.
During a rally Wednesday, more than 50 people held signs that read "Discover the truth," and chanted "De Soto has got to go" on Division Street as a constant stream of traffic passed.

Some wore white T-shirts with a red circle around De Soto's name and a slash through the middle.

...A St. Cloud State University human relations class taught by Suellyn Hofmann started the coalition of 15 members June 15 as part of an assignment to create an anti-oppression project, said Brigette Baird, a member of the coalition and class.

Horton-Rosten, a senior at St. Cloud State and a member of the Manitou Rapids Ontario band of Ojibwe, brought the idea to the class in early June.

Since then, the class has researched De Soto's life, American Indian history and the construction of the St. Cloud monument, Baird said.
Unsurprisingly, they found out De Soto mistreated American Indians. (Side note: Is there any evidence of any Spanish explorer who treated Indians well?) I get no sense from the article the degree of harm done by DeSoto, who to most writers was a treasure hunter who had no qualms about using force to get gold from Peru and later the U.S. He's not a loveable guy.

But course credit? Prof. Hoffman teaches two courses this term, one called Practicum on Social Empowerment, and the other Change Agent Skills.

HURL 491/591. Change Agent Skills
Study of the theories of social empowerment and the development of practical skills for producing institutional and personal change.

HURL 492/592. Practicum in Social Empowerment
Experiential practicum. Application of theory and research to constructive institutional and social change.
Course for teaching how to run a protest. These are "professional development courses" that " give students the opportunity to develop skills relevant to the practice of social responsibility in a variety of practice settings." Another example is W.I.L.D. Week from a couple of years ago.

In the good old days, kids who led protests dropped out, hung around the school. Now they are getting degrees for becoming professionally developed protesters.

Wednesday, July 13, 2005

Get on home 

The Legislature has done it: Passed a health impact fee tax increase, spent the money, and gone home.

It's safe to live in Minnesota again.

Items meriting some comment:

The new abortion provision will require doctors, before terminating a pregnancy at least 20 weeks old, to tell the mother if anesthesia could eliminate fetal pain and then administer the anesthesia if requested. Doctors who fail to do so could be sued for damages.

"I am faced with a decision about which group of my constituents I am going to disappoint here," said Rep. Jim Knoblach, R-St. Cloud, adding that he believes the bill will prevent abortions. "If I am forced to choose life or taxes, in this case, I am going to chose life."

I think space just opened up between Knoblach and Phil Krinkie, who took a walk on the tax. Given the other players in this field for the House race, I think that space is to Krinkie's advantage. Knoblach appears to move towards Michele Bachmann on this one, but she's entrenched.

Despite a special session-long debate over whether the charge was a fee or a tax, Pawlenty in the end insisted that it be described as a fee in law and that it appear in the health bill rather than the tax bill.
That sound you hear, Governor, is the frying pan flung off your head as a thank you for being such a nice guy to compromise with the Democrats. Being seen peevish won't help your ratings. Oh, and those four things you had to have two of? Please tell us which two you got. (To your credit, you seem to have won on the education parts of QComp and Get Ready, Get Credit, but I'm still waiting to hear on school choice.)
...the tax bill contains another $232 million in revenue increases, including nearly $100 million from repealing scheduled reductions in liquor and car rental taxes. Another $38 million comes from up-front payment of sales tax on car leases.
I'm surprised that wasn't in the transportation bill.
Nine cities were given the power to create or expand a local sales tax if voters approve in a referendum: Rochester, St. Cloud, Mankato, Albert Lea, Bemidji, Proctor, Willmar, Winona and Worthington.
I actually believe the reason Knoblach voted for the tax bill was this one; the heat on him to get this thing passed was tremendous. Ellenbecker must be smiling somewhere tonight.

Who won? A picture's worth a thousand words.

At least they are adjourned now. Don't let the door hit you where the good Lord split you, dear legislators. Get on home.

UPDATE: David has some unkind words for the Governor as well. Like "cynical". insisting that the "fee" remain in the Human Services bill, he made sure to split the fiscal conservative part of the Republican base from the social conservative part. Either vote pro-life, or vote anti-tax.

When asked to allow the two votes to be split so conservatives could vote their conscience--and keep their promises to their constituents--he essentially said "tough luck."

It is simply not true that the tobacco tax could not have passed as part of the tax bill or on its own--they would have gotten the votes. But by insisting that his allies walk the plank Pawlenty was sticking it to the very members who have stuck by him through 3 tough years--all to try to get cover for himself. ("After all, even fiscal conservative X voted for the cigarette 'fee'"). Many democrats were more than willing to see the bills separated, but of course getting their opponents to take a bad vote was a bonus round.
And the guy caught completely in the split was Knoblach. If he's routed in the primary in CD6, this will go down as the day his campaign started to sink.

UPDATE 2 (7/14): Craig Westover thinks I give Pawlenty "too much credit" for the education initiatives that passed. Let me defend myself somewhat. First, I was grading him in that passage for at least getting things he decided he wanted in QComp and Get Ready, Get Credit. That is, he actually made a conditionality stick, which he didn't do with the Two Out of Four Ain't Bad list. I'm (faintly) praising political skill rather than education policy here. My impression of QComp is different from Craig's but I haven't seen the final bill yet (if you have it, Fishsticks, drop me a copy please), so I'll wait to see his longer column and the bill before passing judgment.

Second, I think Craig and I will disagree on GRGC. Students arriving in my university from Minnesota public high schools saying they've had college prep classes who are simply unprepared. We spend far too much time on remediation; GRGC should reduce that. Of course I'm a university professor and partly I'm expressing my own bias towards having college freshmen actually ready for college. Craig and I simply have different priorities here.

Humphrey terminal at MSP evacuated 

About 2.5 hours ago, according to WCCO:
Two separate K-9s stopped near two vending machines in different areas of the terminal, airport spokesman Pat Hogan said.

About 200 passengers on a Sun Country flight were affected, Hogan said. Outgoing flights were delayed and incoming flights were diverted to the Lindbergh Terminal.
Humphrey is the smaller airport that handles Sun Country and many charter flights. I'm in Humphrey maybe once every other year, while I fly through Lindbergh roughly once every other month. Chances are this isn't holding up traffic too much.

Related point: One of the light-rail trains near the airport struck a car, injuring two people. (Noted from Hugh Hewitt's show.)

UPDATE: Ed notes the location of the vending machines.

UPDATE 2: The machines have been hauled outside with a forklift, and it turns out the alarm was false. Littlest Scholar asked if it was just bad candy. Turns out one machine's an ATM, ruining her theory.

Kings or mathematicians? 

Not Kings.

I tell ya, I get no respect.

Labor supply curves are funny things 

Russell Roberts notes that, unlike many people's beliefs, Americans are actually working less hours than before. I have heard this argument for years and it annoys me no end. Why do people work more? HedgeFundGuy explains:
creating jobs is trivial, nature does it for us. I have many jobs wanting my attention at home and at work, it's just a matter of my priorities and limited time. The real difficulty is discovering jobs where the benefits outweigh the costs, broadly conceived to include opportunity costs, and where benefits are often best determined by what other people are willing to pay.
In many sectors real wages have risen dramatically, which leads to two effects: higher wages induce more work (because an hour of leisure is more costly, you do "less leisuring"); but more income induces less work and more leisure. When we say that the Bush Administration has created a (little less than a) million jobs so far in 2005, it might mean we've changed the tax system to induce more work -- though I doubt it. It more likely means that investment has been induced enough to create capital that needs labor to grow, so labor is being bid out of leisure. It's the result of individual decisions, as Roberts says in a later post,
The lesson here is to avoid metaphors taken from physics and engineering that are inevitably cause and effect metaphors and think instead of metaphors from biology where results emerge from the actions of multiple interactions in a complex system. Think rain forest not engine.

At least I said in that earlier post that the economy "grows" jobs. Sounds something like a rain forest. But the problem isn't the verb. It's the noun "economy" doing the growing like a farmer growing wheat. The economy can't do things. It is the result of individuals "doing."

He who gives, gets 

Tim Worstall, writing on the Adam Smith Institue blog, wonders whether or not America isn't already meeting the 0.7% Live 8 aid target. While we only send $16.3 billion in official development assistance, this study shows that there is $113bn additional spent from private sources. Worstall posits,
We can argue about whether each specific category really counts as "aid" but to insist that none of it is would be obtuse, for all of it adds to the wealth of the developing nations. There has not yet been a similar study on how charitable Europeans are via private methods so we cannot do a strict comparison but it certainly seems that the US is meeting the 0.7% of GDP target when private and public assistance is added together. Why aid only counts if it is spent via the international bureaucracies, or when given to governments, when we know very well that private individuals spending their own money leads to more efficient outcomes, well, it�s just one of the mysteries of the age I suppose.
Which really is the problem -- the recipient governments don't get to control much of the money that comes in privately. The ability of the government to extract resources from private money is harder than for official aid. Some of them will erect capital controls to prevent or at least retard private direct investment by foreigners (I'll separate out the capital controls on portfolio or "hot" investment -- there's a different case to be made there); others try to control through financial repression the money sent in remittances by people who've left the country for better fortunes in employment.

One of the commenters to Worstall's post suggests we're not comparing apples to appeals because we don't know private flows throughout the world. In fact we do. The only country even in our ballpark is Saudi Arabia, where a large number of Filipino and other Asian workers are used in the service sector.

While Africa gets a huge amount of official development assistance (as a share of GDP, it gets much less FDI and its share of remittances is below those experiences in much of South Asia and the Middle East. (See also Bernard Wasow's analysis.) There has been an explosion in remittances elsewhere but not Africa. Why? I wish I knew.

An excuse for the Atomizer 

"Are moderate drinkers more likely to give to charity? A worthy question, so I did a bit of analysis and found that, indeed, moderate drinkers tend to be more charitable than nondrinkers. For example, 54% of nondrinkers contribute to charity each year, giving away an average of $1,100. In contrast, 62% of those who take one to two drinks per day have an average annual giving level of $1,200. The alcohol effect has diminishing returns, however: Just 40% of people drinking five or more drinks per day are donors, and they give only $230 per year on average. (So once you get past two or three, you have to stop claiming you're 'doing it for a good cause.')"

Source (for WSJ subscribers only. Art Brooks notes as well that drinkers give $50 to $100 more each year to charity even after controlling for income, education and religion. "But stop at two and don't forget to write the check," he concludes.

Tuesday, July 12, 2005

Never enough 

That's my reaction to Steve Kelley's whine about the new funding for education in the budget agreement.
"Based on what we were hearing from school districts, the 4 percent and 4 percent [raises] might have a number of districts still cutting teachers and programs because of their efforts to catch up on the last three years of flat funding," said Sen. Steve Kelley, DFL-Hopkins, and a member of the House-Senate working group.
Let's understand what's in this bill besides the 4/4 raise in base funding (details provided by email from Eliizabeth Mische of Parents for Choice in Education.)
So what the hell is Kelley yapping about? But it appears he's getting his way on the expansion of education vouchers, which I don't see in any bill at present. Mische says it has some chance still.

So much money 

The economy is awash in tax revenues both at theFederal and state levels. This is the problem we always find with budget deficit forecasts: They do not reflect correctly the part of the deficit that is due to the structure of the budget versus the deficit caused by low output. Two good years of economic growth have helped greatly in getting Mr. Bush's modest proposal to halve the budget deficit (as a share of GDP) become reality, as Jed Graham notes, but things could be a lot better.
while the economy's momentum has led to a surge in tax revenues, progress in reducing the deficit depends on spending restraint. On that front, some remain disappointed.

At the moment, Congress is spending the money almost "as fast as it comes in," Riedl said.

Through the first nine months of fiscal 2005, federal spending rose $128 billion, or 7.4%, to $1.85 trillion. Spending on defense and nondefense has risen at similar rates, CBO says.
(Here's CBO's latest projection.) The standardized budget deficit for 2005 is projected to be $310 billion. If we come in at $325 it means the rest has to come from government reductions in spending or tax increases.

Thus the debate on whether the current wave of tax collections is evidence of supply-side economics or just fortuitous timing.

A few good men 

Too bad the state pseudoshutdown kept Mark Yost from putting up this column on the Fourth of July. It's the story of how he went from sailor to reporter to journalist:

I decided to become a journalist when I was a soldier. I was in the U.S. Navy in the early and mid-1980s � "the glory years," as I like to say, a reference to President Ronald Reagan. As part of my duties, I went to some of the world's hot spots.

While sailing in the South China Sea, my ship picked up some refugee boat people on a rickety raft that I wouldn't take out on Como Lake, much less try to float across the Pacific Ocean. One of the survivors, shortly after coming up the accommodation ladder dripping wet, grabbed me (the nearest sailor), hugged me as tightly as his strength would allow, and could only murmur "thank you" through sobs of joy.

I'd then come back to the U.S. and read accounts of places I'd just been � in papers like the New York Times and Washington Post �that bore no resemblance to what I'd seen. There was one exception: the Wall Street Journal editorial page. I began reading a column called "Thinking Things Over" by Vermont Connecticut Royster, one of the legends of that august page. He would later become a mentor � a God, really � and I eventually worked there.

I'm reminded of why I became a journalist by the horribly slanted reporting coming out of Iraq. Not much has changed since the mid-1980s. Substitute "insurgent" for "Sandinista," "Iraq" for "Soviet Union," "Bush" for "Reagan" and "war on terror" for "Cold War," and the stories need little editing. The U.S. is "bad," our enemies "understandable" if not downright "good."

I know the reporting's bad because I know people in Iraq. A Marine colonel buddy just finished a stint overseeing the power grid. When's the last time you read a story about the progress being made on the power grid? Or the new desalination plant that just came on-line, or the school that just opened, or the Iraqi policeman who died doing something heroic? No, to judge by the dispatches, all the Iraqis do is stand outside markets and government buildings waiting to be blown up.

It's not hard to find these things out. Even if you don't want to read the Wall Street Journal or the good news series from Arthur Chrenkoff, you could go to official sources like USAID's Iraq office, or that the World Bank and the UN are hosting a conference this week that is raising about $1 billion for Iraq. Heard of it? No, because you're too busy watching Live 8. (Did you even know that Iraq's Saddam-era debt has been 80% cancelled?)

A joy of the job I do is hearing stories of how students find their way to a degree in economics. The best stories are from non-traditional students; their life experiences move them to think about how to find their way in the world. A student this morning had been motivated to return to school and learn economics by being around local entrepreneurs. When Mark came on NARN two weeks ago, his time in the Navy was part of the discussion. It clearly was a life-defining experience. I hope that Mark's experience can serve as an example to others as they return from the armed services: Your views have never been more needed in the press than now.

I am awed by the fact that Yost had Royster as a mentor, by the way. He and Robert Bartley were two of my favorites in reading the Wall Street Journal.

NAACP shakedown 

Paul Mirengoff writes that the NAACP is now getting into the business of shaking down private businesses for reparations.

The money will come from shareholders who had nothing to do with the "peculiar institution," and whose ancestors probably didn't either. In many cases, the ancestors weren't even in this country during the time of slavery, and themselves suffered from various forms of discrimination when they arrived here.

The money will benefit individuals who were never slaves and whose parents and grandparents weren't either. These individuals cannot show that they are worse off today than they would have been if, for example, a southern bank had not owned 100 slaves for a time as collateral on a loan. Nor can these individuals show that they are worse off today than they would been if the institution of slavery as a whole had not existed.

Moreover, these individuals presently are the potential beneficiaries of racial discrimination through public and private race-based preferences in college admission, employment, government contracting, etc. For all of the talk of "diversity," these preferences are best viewed as a form of reparation.

Right, but they do not put money in the pockets of big black interest groups like the NAACP. Shaking down businesses is done because, like Willie Sutton puts it, that's where the money is. Molotov at the blog Booker Rising makes the point that the Kelo decision has led to
"The Man" (mostly White - business class) can come in and use local government to confiscate private property that Black people have waited generations to acquire - and build the "White Man's Mall".
So when will governments be sued by the NAACP to pay reparations for that mall? Well they can't, it turns out, as is explained in the original article:

The Rev. Wayne Perryman of Mount Calvary Christian Center Church of God in Christ agreed that pursuing the federal government is not a fruitful option. The Seattle minister has filed two reparations lawsuits against the Democratic Party, saying its role in defending slavery and opposing civil rights bills during the Jim Crow era deserves an apology.

"One of the problems in courts is that ... you have to show ... the government official who participated in it," Mr. Perryman said. "With the federal government the real problem is that it has never had a totally pro-slavery position, the Democrats did and supported it, while the abolitionists and Republicans did not."

Has the NAACP thrown in now with this lot?

Marriage is good 

This paper examines an accumulating modern literature on the health benefits of relationships like marriage. Although much remains to be understood about the physiological channels, we draw the judgment, after looking across many journals and disciplines, that there is persuasive longitudinal evidence for such effects. The size of the health gain from marriage is remarkable. It may be as large as the benefit from giving up smoking.

It's not altogether clear why, but one item the paper rules out is the notion that marriage reduces risky behavior. Even if two men engage in the same risky behavior such as drinking, the married man will live longer and have better health. (Still no luck convincing Mrs. that I can have a motorcycle.) Some of the studies say men gain more; more say there's no difference in the size of the effect.

Another way of looking at it, the paper concludes, is this: People with better social networks get fewer colds.

(h/t: my colleague BR.)

Monday, July 11, 2005

Context, Senator, context! 

Captain Ed has posted about Hillary Clinton's statements about the cost of oil fluctuations to the economy, and proceeds to engage in some debunking. He's right, and here's why.

Hillary Clinton says,
"Ours will be the last generation to rely so exclusively on fossil fuels," she said, adding that the "ups and downs of the global oil market cost the U.S. economy $7 trillion last year ... almost enough to pay off our entire national debt."
Let's get some context: We're in a $11 trillion economy, meaning fluctuations must have cost about 63% of a year's GDP. That probably isn't right. National debt is indeed $7.8 trillion, so we need to believe that she really thinks this number is right. If she meant billions, as commenters on Oliver Willis' blog suggest, the line about the national debt would be wrong.

But she must have the order of magnitude wrong here. So how much should we think it is? I'm no James Hamilton, but here's a back-of-the-envelope guess:

In the late 1970s oil prices doubled, somewhat less than they have today (and to a higher level, in inflation-adjusted terms, than today). GDP fell by $114 billion (in 2000 dollars) in the 1980 recession. (Here's a link to the Bureau of Economic Analysis' data server for GDP data. Have a ball.) Even if you assign all the blame for that recession to oil -- which isn't right, because we had Carter's ill-fated interest rate ceilings at that time too, which have to bear some of the blame -- that's far off the mark. And the economy is much less dependent on oil than it was at the time. Probably half as much, maybe even less than half. So it seems unlikely the size of the effect of this one is even $70 billion. I'd make it somewhere between $35-50bn (at 2000 prices -- mark that up about 10% to get to today's dollars) as the best guess, meaning it's probably shaving about a quarter of one percent from GDP growth.

My point is really that "tens of billions" is the right order of magnitude. Which doesn't help Hillary very much get out of her mistake.


  1. Four years for Jay Reding, now d/b/a Single Malt Pundit. My Isle of Jura never looked that good.
  2. Ditto Patrick Ruffini, save for the template.
  3. Me and Mrs. Scholar: 17 years ago today, in the family room of her parents' home here on the south side of the Cloud. She could make prune juice look inviting. Muted celebration tonight, as we've decided to take the best part of our marriage to dinner with us, namely the Littlest. Back at you tomorrow.

But would you do it again? 

Jeff at Quid Nomen Illius? is not at all pleased with this column from the Chronicle of Higher Education describing how academic blogs are being used by hiring committees, more as an exclusionary than an inclusionary screen.
Thank you, "Ivan Tribble," whoever you are, for reminding me why choosing not to pursue an academic career was one of the best decisions I ever made. Thank you, "Ivan Tribble," for personifying the petty tyranny that I am newly grateful to have avoided. Thank you, "Ivan Tribble," for confirming that I was right to spend the past seven years working, traveling, and writing rather than leaping through hoops to please fickle and cowardly hiring committees. Thank you, "Ivan Tribble," for showing that there are few rewards, spiritual or otherwise, in scholarship and pseudo-collegiality predicated on the fearful question, Gosh, what if some fool expresses his personal opinion?
The Chronicle piece is a classic "precautionary principle" example: Someone who blogs some day might say something bad, so you don't want to hire them. Dan Drezner shows how slippery that slope is.

That said, I am a little, well, apprehensive about Douglas Bass, a frequent reader and commenter here, chronicling his denial of tenure on his blog. It is a remarkably honest assessment of his activities and what probably got him into trouble with the tenure committee. If someone Googles his blog later when he applies for another job, at least he got the story out there on his terms, but it doesn't read with the same force and direction that it would had he written it in his application letter for another post ... and I would appreciate the honesty of someone sending me an app letter saying "yes, I got turned down for tenure, here's why" rather than having to find that out for myself. "Ivan Tribble" might not like it so much.

Timothy Burke leaves a comment I agree with, that if Douglas' family is adamant about moving from the Twin Cities -- a feeling I can certainly understand, given his family size -- it's going to be hard to stay in academia. Erin O'Connor has an open discussion of the situation as well, but the discussion there seems to be more about what lead to his denial of tenure rather than where to go from here. A few comments:

Confirmation Whoppers the name of a new blog created by St. Cloud blogger Gary Gross. He intends to follow Hugh Hewitt's advice to create a one-stop shop for all the distortions likely to occur in the confirmation process. Gary is a frequent caller to NARN; we're still waiting for Quentin to get his own blog.

I conference in the wrong places 

I got no offers like the one Robert Lawson received in Las Vegas. I wonder if the price goes up for economists, who are notoriously the cheapest conventioneers. John Palmer is quoted on an economist joke page:
Back in the mid-1970s, I attended an ASSA/AEA convention in Dallas. During the third day of the convention, one of the bellhops at the convention hotel asked me who the people attending the convention were and what we did for a living.

"We're economists," I replied. "Why do you ask?"

"I don't know..... no women, no drugs, just booze, booze, booze."

And your problem is...?

Change a grade, go to jail 

Here's a story of a student who went online to change her grades along with several other students last March. She's been sentenced in a plea bargain to six months jail time.
The university�s grading system, eGrades, is an in-house program that professors can access via the Internet to submit and alter students� grades. eGrades uses UCSB NetID, a campuswide authentication system, to check a user�s identity. If a user forgets their password, they can reset it by entering their Social Security number and date of birth...

... Ramirez (Nancy, the student --kb) worked for the Goleta branch of Allstate Insurance, where she had access to the personal information of two UCSB professors who were insured with the company. Ramirez reset their passwords using private information she obtained from her job,

...Ramirez, who could not be reached for comment after repeated phone calls Tuesday evening, changed her grade in one class from a B to an A, Signa said. She also altered the grades of her roommate from an F to a B+ in one class and from a B to an A+ in another class, ...
You know, this could happen to someone who is asked for ID to cash a check at a local store, even. I wonder whether this automatic reset of passwords is common on campus grading systems. Many systems, including MnSCU's, uses birthday/SSN data for default passwords.

Friday, July 08, 2005

Where the rest of that week went 

The best part of my job is seeing a student get that "got it!" moment in class or in office hours (or sometimes a nice email.) The second best is the conference session that goes so damn right. Yesterday I had one of those -- a session on measuring for political economy that had four papers that fit better than I could have hoped. Absolutely wonderful time, and we ended up in a Starbucks in excited discussion for two hours after it was done. Eight of us talking about the same thing, surprised and delighted to find others doing the same thing I'm doing.

It's much like finding good blogs and linking and crossposting, but it's also quite different. A long unplanned private chat with seven really smart people (and me). Just awfully cool.

Later in the day went to dinner and to see Beach Blanket Babylon. Two friends have insisted I go for years. They were right. If you're in SF and like musical comedy, particularly topical humor, you have to see this show. The send-up of Barbra Streisand was worth the show all by itself.

Today was wine country for the day. I thought about wineblogging, but it would have slowed me down. A few thoughts:

I am flying back late tonight on a red-eye, which is how I'll show up on NARN tomorrow. Hope you'll listen in!

Wednesday, July 06, 2005

What does the Fed look like after Greenspan? 

There was a panel discussion here at the Western Econ meetings in SF this morning which included Milton Friedman, Anna Schwartz, William Poole (president of the St. Louis Fed) and Lee Hoskins (past president of the Cleveland Fed). Fascinating talk. Here's a copy of Poole's remarks. Here are some other notes I took.

Friedman went first, as he should. While complimenting Alan Greenspan greatly, he asked whether Greenspan is so special? Ccharts for inflation for NZ, AUS, and UK showed that the reduction of inflation in the US was matched elsewhere. "What we need isn't fancy rules or better econometrics but the will to impose a penalty for central banks to fail to provide for price stability." Those interested in these types of contracts would do well to read more on the topic from Carl Walsh.

Anna Schwartz (who co-authored the Monetary History of the US with Friedman) proceeded to offer a set of questions to ask the new chair (who should be installed around the end of January 2006.) She argued that the Fed is quick to lower rates in time of crisis (or one forecasted) but not to raise them later when there is a need to either slow the economy or withdraw liquidity inserted for a forecasted crisis that didn't happen. She also believed the Fed relies too much on interest rates right now.

She went on to discuss with Poole the types of statements made by the Fed when policy changes are made. Poole argues that transparent communications are important, though he fears what happens when the Fed makes a statement that it will raise interest rates at the next FOMC meeting (six weeks later -- FOMC is the committee that actually sets the targets) but events make it change its mind over that time. I wondered if the Fed should have a blog? Some outside the Fed are trying, and at least one inside economist offers insights as well. Schwartz was much more negative, saying she would ask a new Fed chair, "Will it be a priority under your leadership to communicate to the markets and the broader public the facts and also in depth analysis and explanation of what led to Fed decisions?"

All the participants thought the Fed could and should directly target inflation; Lee Hoskins was the most negative, saying the Fed could do it now without legislation but wouldn't for fear of annoying Congress.

The question that hung out there is whether post-Greenspan, the inflation performance we've had will survive. The new chair will have a good Board of Governors, a good baseline for inflation and a great deal of credibility as anti-inflation left by Greenspan (whether deserved or not). Where it goes from there is anyone's guess. As came out during the discussion, it's not like the demand for the inflation tax -- "the only tax you don't have to pass legislation for" in Friedman's terms -- has gone away.

Tuesday, July 05, 2005

Can you trust a European? 

Hindrocket has linked to the story of Tony Blair's call for a summit on Europe's social model. John thinks that while the issues Blair discusses are economic, the root of them are ideological. I'd argue it's more sociological, and for support I turn to this study of Russian attitudes (h/t: Scott Clark).

Would you trust a stranger on a train to look after your bag while you run to the toilet?

Probably not if you're Russian. Seventy percent of people in Russia believe "you can't be too careful in dealing with people," while only a quarter agree that "generally most people can be trusted," according to a poll of 1,500 Russians conducted by the Bashkirova & Partners market research firm last month.

The lack of trust does not just translate into a greater air of suspicion, it also carries a heavy price that weighs down the entire economy.

In the absence of effective mechanisms that enforce contracts and protect property rights -- what economists broadly call "legal institutions" -- trust is left as one of the few informal pillars of economic activity.

Although the costs of mistrust are indirect and hard to quantify, they undeniably take a heavy toll on economic activity. Insecurity forces companies into unprofitable businesses to secure supplies, confines entrepreneurs to dealing only with close partners and deforms the whole structure of the economy.

White this doesn't necessarily go into the rest of Europe (you can cut up the data here and decide for yourself,) it certainly appears to. The European model has long been built on suspicion of private motives: A social welfare program that replaces private charity; supernational institutions because of fear that national institutions lead to war; monetary policy delegated to a supernational organization because of fear of inflation and currency depreciation, &c. The US in contrast moves more and more towards reliance on substitutes for government action and there's outcry when the government moves into private areas (see Kelo.) I do not know if that is the direction where Blair sees the conversation he's trying to start. But it should.

Welcome to SFO! Where's Starbucks? 

I made it to the conference. Everyone warned me that the traffic to MSP would be bad on the Fourth of July, so that I left 45 minutes early ... and arrived at the airport 45 minutes early. Not as clear as a Saturday morning NARN run, but pretty close. Flight was uneventful, even peaceful, but the airport at the other end was miserable because the shuttle service I used 1) didn't show up for forty minutes; 2) had a driver who went fast or slow, no medium; 3) took some guy to the Mission District first, and then drives past every adult bookstore in town, and 4) picks up a Latina who speaks no English and goes in search of someone who speaks Spanish. Flight arrival time: 11:40pm. Hotel arrival time: 1:50am. The guy behind the desk, perhaps looking at the clumps of hair in my hands, pours me a shot of tequila that I guess greets new guests. I'm going to like that place.

A young scholar and I agreed to meet after my session and lunch (thanks for the sandwich, Edi!) and, since we both have laptops in search of connectivity, went to look for a Starbucks. The young one does not have the usual male apprehensions of asking for directions (he'll make a good husband) and so asks four or five people "Where's Starbucks?" Each answers "There's one on every corner." Yet we sit now ten blocks from where we started, finally in one. It's odd that we perceive Starbucks is so omnipresent and yet we will walk blocks to find one. Why is that? If we indeed are that attracted to brand, why put one everywhere?

Off to find some news. Back as I can.

Monday, July 04, 2005

Conference blogging this week; Happy Fourth 

I will be leaving soon for San Francisco for the Western Economics Association annual meetings. LS and I had to light off some fireworks last night because I had to go today to be on a panel tomorrow. Posting will likely be lighter this week; with any luck there will be some wine blogging on Friday as I roadtrip for the day with some friends from SCSU. I'm not a sommelier or anything, but I can recite lines from Sideways.

Sign us up 

At the kind invitation of Steven Taylor at Poliblog, SCSU Scholars is joining the TTLB community The Academy. 'Tis a daunting group, with Profs Taylor, Reynolds, Althouse, Newmark, Kleiman, all the Conspiracists, and others whom I admire as fellow bloggers. And like Althouse, I think the concept of communities that N.Z. Bear has created will do much to push along the blogosphere. If The Academy does a tenth for me that the Northern Alliance has, it will be a rewarding association. Thanks for letting me join.

So when does his career blow up? 

I was going to try to write something about Ward Churchill, but it'd be easier to just send you to Pirate Ballerina. I'm surprised there has not been more outcry over these statements Churchill made in Portland about killing officers.
...for those of you who do, as a matter of principle, oppose war in any form, the idea of supporting a conscientious objector who's already been inducted [and] in his combat service in Iraq might have a certain appeal. But let me ask you this: Would you render the same support to someone who hadn't conscientiously objected, but rather instead rolled a grenade under their line officer in order to neutralize the combat capacity of their unit? That kind of resistance....

You cannot maintain a military projection or force in the field when your own troops are taking out the line officers who are directing them in combat. It is as simple as that. Conscientious objection removes a given piece of the cannon fodder from the fray; fragging an officer has a much more impactful effect.

Jim has the mp3 of the talk up at PB -- follow his links.


John Ray reports that somebody is trying to Googlebomb Steve Milloy's Junk Science website.
Something nasty is happening to the Google listing of Steve Milloy's "Junk Science" site. See here. It looks at first like an ordinary Googlebomb but Steve's site does not come up among the top listings at all. The googlebombers must have linked heaps of sites as well as their main spoof site. Oddly enough, when I Google directly from Australia, Steve's site comes up first -- as it should. The above link uses an anonymizer so Google cannot tell where the query is coming from. That makes it look a bit as if Google themselves are involved in the prank. Anybody reading this who has a site should immediately link to Steve to help him out. Just reproducing this post would do the trick.

Consider it done. Milloy's site is quite useful in the debate over global warming.

The government never closes anything 

Two disparate thoughts that I'd like to join this morning. Reader jw sends an article in the STrib on the possible futures of the UM-Crookston campus. A consulting firm has come in to study what to do with the 1200 student campus, suffering from lower applications and a very low six-year graduation rate.
� Transforming the campus into an institute that eventually would emphasize education for college juniors and seniors and specialize in issues of rural vitality. The campus would act as a magnet for scholars and people of all ages who want continuing education on issues that face the northern plains. It would increasingly rely on funding from summer programs, research, partnerships with business and continuing education rather than tuition and state appropriations.

� Making the campus a "broker" for higher education by helping students plan education programs that suit their interests and free them from individual campuses. Under such a program, students who plan their program through Crookston might spend their freshman year at Bemidji State University, head next to Crookston, go the Concordia College in Moorhead and then finish their degree at the University of Minnesota-Twin Cities. Crookston would be paid through agreements with other campuses and would look for the best service, education and price it could find for students.

� Becoming a specialized training ground for government agencies focused on agriculture, natural resources and environmental protection. Crookston would become a direct supplier of employees for those agencies. The campus also would offer workshops and conferences aimed at professional staff of those agencies.
Each of these has problems attached. How big a market is there for programs that "emphasize rural vitality"? I suppose there might be some, but not enough to turn around a whole campus. It sounds like nothing more than a big department that does the rural counterpart of an urban studies program. The second idea would put UMC in competition with the area community and technical colleges. It would do nothing for the institution's prestige. And the community colleges are in league with the state universities like Bemidji, Moorhead or St. Cloud. The last idea creates a professional school for government bureaucrats. I doubt that does much for alumni, though the school is likely not to have many and those that do probably don't care too much.

As you read the article though, the one question you keep coming back to is, why is this place even open? Who's great idea was it to create a campus out in northwestern Minnesota? Part of it is certainly political -- there are representatives out there that become swing votes for bills passed by Metrocrat legislators versus suburban Republican legislators. The cost per student out in any of these smaller institutions will be higher. Does MnSCU really need 32 institutions in 46 places? Probably not, but each of them is somebody's baby.

Craig Westover, in critiquing a Nick Coleman column on the abortive opening of Veritas Academy, makes the same point in a different context.
The market said there is no demand for this type of education in this area at this time. If Veritas Academy were a public school program would likely have been pushed through anyway, huge amounts of money expended while it functioned ineffectively on its way to an expensive demise. Veritas died rather cheaply.
Just as I think Crookston is today, a government institution hastily conceived, ill-planned and not in search of either a new mission or closing. The difference between the Veritases of the world and the Crookstons is that someone has to take a risk in a profit-and-loss system in the former case, while the losses in the latter are passed back to taxpayers. Without the threat of losses, as Craig points out, is that misallocated money in private or charter schools diminishes education just as much as it misallocated money in a public system. But only in the former case is the harm done by misallocated visited upon those doing the harm.

Friday, July 01, 2005

Maybe this will speed up the clock 

I'm not going to speculate on the succession of Justice O'Connor or filibusters or the like. I'm sure you'll hear some of that talk tomorrow on NARN, coming live again from the White Bear Lake Superstore where there's going to be a Fourth of July party going on. But for conservatives in higher ed, O'Connor's departure is a good thing because it's worrying the left in academia no end.
Her departure is being lamented by many lawyers working on higher-education issues, who saw her as a voice of moderation and pragmatism at the Supreme Court. Her retirement could lead to a bitter fight in the Senate over her successor....

Justice O'Connor's biggest impact on higher education may have come through the majority opinion that she wrote in the Supreme Court's 2003 ruling in Grutter v. Bollinger, in which the court voted, 5 to 4, to uphold the use of race-conscious admissions by the University of Michigan at Ann Arbor's law school.

In that opinion, she concluded that the educational and societal benefits of a diverse student body justified colleges' consideration of the race or ethnicity of applicants, but she also cautioned that colleges needed to consider race-neutral alternatives to such policies and to consider applicants as individuals. She suggested that such policies may be much harder to defend in court 25 years down the road.

She is portrayed as a champion of gender equity, including expansion of the use of Title IX in a flip-flop of an opinion she gave a year earlier, and she's the author of Adarand v Pena decision. While I am not a court-watcher, I think it's likely her successor is going to get a great deal of scrutiny over gender-equity issues; it's a less visible litmus test than Roe, but cuts on the same bias.

Scholar Dave, now in comfortable retirement, reminds us of O'Connor's bizarre sunset provision for race-based admissions policies.

Anyway, the show should be fun tomorrow. We're collecting items for Operation Minnesota Nice, and we'd like to see many of our listeners come out and support our troops. If you can't make it, tune in.

Diversity piatiletka 

I mean really, a "Five Year Diversity Plan"??? How absolutely ironic. The irony was not lost on one faculty.
The controversy surrounding the University's Five Year Diversity Plan shows no signs of dissipating, as professors threaten to leave the University if the current draft is approved, while the American Association of University Professors wrote a letter criticizing the administration for allegedly bypassing the standard set of faculty committees while drafting the plan.

...Mathmatics Associate Professor Alexander Kleshchev said he has heard of other professors who might leave but says it is too early to tell.

�I did consider leaving, and if anything like this plan will be implemented I will continue to think very hard about this,� Kleshchev said.

Kleshchev, a Russian immigrant, says the plan conjures up memories of his former homeland.

�Look, I am personally not going to be interrogated about my thoughts, and I am not going to go to reeducation camps either,� said Kleshchev, alluding to the Five Year Diversity Plan's requirement that faculty participate in a summer diversity seminar.

�I've had enough of that in my previous life in the Soviet Union, and I just will not have this again. I tried freedom now; I liked it, and I am not about to give it up,� Kleshchev said.
(h/t: Joanne Jacobs)

Back off Batman 

LS and I finally got to see Batman Begins; it was the best movie she's ever seen, she says. I think it was better than any superhero movie since XMen, and I might actually like it better. I don't do movie reviews, though; see Chumley's at Plastic Hallway, which agrees with my assessment mostly. (I am extremely jealous of him seeing it at IMAX.)

Shawn Sarazin was at the MOB Road Show and said he doesn't get his politics from his movies. Me neither. So what the hell is with these people?

Specifically, we learn that Thomas chose to disassociate himself with Wayne Industries - the family business - and instead pursue the more noble profession of medicine. During one scene, he grins at his wife and tells young Bruce that he has left running the company to "more interested men." Viewers later learn that he does have at least one role within the business - spending its money. The butler informs Bruce that Thomas nearly drove Wayne Industries into the ground financing a massive public transportation system that Thomas claims would "bring the city together" during a time of economic depression.

While there is certainly nothing wrong with philanthropy, the implicit message is that such actions are morally and economically superior to running a successful industry. Wayne Industries is presumably the largest employer in Gotham, but never once is the firm's success or failure mentioned as a determinant of economic stability. Bankrupting the company by pouring money into a monorail is hardly the best way
to benefit those in need of jobs and security.

In fact, as Ludwig von Mises explains in The Anti-Capitalistic Mentality, "Nobody is needy in the market economy because of the fact that some people are rich. The riches of the rich are not the cause of the poverty of anybody. The process that makes some people rich is, on the contrary, the corollary of the process that improves many peoples' want satisfaction."

This misunderstanding of how capitalism functions carries over into the movie's depiction of Wayne Industries itself.

Yet Wayne Industries is a private company that never appears to approach bankruptcy -- taking it public is one of the subplots in the story -- and it was Thomas' money to do as he pleases. He is under no obligation to "benefit those in need of jobs and security", as I thought folks at the Mises Institute would understand. Choosing to delegate day-to-day operations to those more interested is not unreasonable if one thinks that others can create wealth out of inherited capital (Thomas was not the founder of Wayne Industries) better than oneself. Thomas never required anyone else to pay for his light rail.

I find libertarian critique of Batman misguided for this point as well: Batman is an individualist. His fight with the League of Shadows is a fight against a moralistic group that wishes to impose its will on society; Batman seems unconcerned over personal freedoms that give way to licentiousness. At the end of the movie (I don't think this is a spoiler) the good cop who helps Batman says (I'm paraphrasing from memory), "I never did say thank you." Batman's reply is straight out of Ayn Rand: "And you will never have to."

"God, I'll have to sit through Stardust Memories again" 

I gotta do some work. Put these three links together and see if you can get into the mood I'm in this morning.

Lileks' screedy on Woody Allen's interview in Der Spiegel.
Bryan Caplan's
The Economics of Woody Allen
Monty Python's
"not funny" skit.


Britain has its loons, too 

You have got to love the PC police. They can make a story for anything, even the word "brainstorms".
David Brent would never approve. 'Brainstorming', the buzzword used by executives to generate ideas among their staff, has been deemed politically incorrect by civil servants because it is thought to be offensive to people with brain disorders.
Instead staff at the Department of Enterprise, Trade and Investment (DETI) in Belfast will use the term 'thought-showers' when they get together to think creatively. A spokeswoman said: 'The DETI does not use the term brainstorming on its training courses on the grounds that it may be deemed pejorative.'

Sources inside the department said there was concern that the term would cause offence to people with epilepsy as well those with brain tumours or brain injuries. (David Brent link added by kb)
My apologies to the irritable bowel community for using the word "shitstorm" last night.

Sandy could not be reached for comment.

(h/t: The Cranky Professor)

The rump Bolsheviks 

AFT, a teachers union that also represents faculty on some campuses, isn't happy with the joint statement on academic freedom made by numerous higher education organizations (as I discussed here). Inside Higher Ed reports:
AFT leaders say that the statement will invite Congress and legislatures to weigh in on higher education in inappropriate ways. In addition, they worry that the joint statement gave legitimacy to Horowitz, whose views have offended many academics.

Lawrence Gold, director of program and policy development for the AFT, said that if the House of Representatives endorses the associations� statement, as many expect it will, �it will involve the government describing how the academy should protect academic matters,� adding, �we don�t think the government has any business here.�
Of course, there has been no statement from the proponents to get the House's approval; neither would it be anything more than a "sense of the House" resolution.
Terry W. Hartle, senior vice president of the ACE, said that the statement was not written for Congress or Horowitz. �We have been hearing from college and university presidents that they felt exposed because there was not a statement that they could point to as what they work for,� and this statement provides them with a set of principles to use.

Hartle said that while he wasn�t seeking to have Congress endorse the statement, it was likely that the House of Representatives was going to adopt some resolution this year, and that it was important for lawmakers to have an alternative to the Academic Bill of Rights. �If we have something that we wrote and that is broadly acceptable to the higher education community and something we didn�t write and that we have serious concerns about, I�m going to go with what we wrote,� he said.

As to whether Horowitz gained legitimacy from the associations� statement, Hartle said that Horowitz�s influence in some circles made him a force already, regardless of what one thinks of his ideas. �David Horowitz is already legitimate,� Hartle said. �The notion that some people think he isn�t given great weight and attention by policy makers is just wrong.�

As for Horowitz, he said that the unions should be embracing his efforts, and those of the groups that issued the joint statement last week. In an e-mail interview, he said, �The American Council on Education statement merely recognizes the fact that in the present academic and political climates it is important to reiterate the university community�s commitment to intellectual diversity and pluralism and to nondiscrimination against anyone in the academy � student or professor, left or right.�
The Christian Science Monitor's lead editorial this morning supports the statement. And Horowitz responds with this point on the AFT's view of laissez faire:
The AFT's stated objections to the statement by the American Council on Education that this would invite government intrusion into academic affairs doesn't pass the smell test. When has the AFT objected to government guidelines on sexual harassment or racial diversity on college campuses? Why then object to a resolution on intellectual diversity, which is fundamental principle of American society?