To all our readers,

As 2006 comes to a close, I hope you will find many high points that you will recall with joy and happiness. May 2007 bring you the best of everything and may your bumps in the road be only bumps over which you can pass and move forward.

Happy New Year.

PS - for those non-Minnesotans, we finally got our snow!!!!

NARN ends at 5pm, not 3.

And we're live tomorrow. Tune in.

James Hamilton takes up the debate on WIN buttons and Ford's economic policy, arguing that David Altig (and I suppose me too) are wrong to say Ford didn't do badly with the hand he was dealt. Mostly, Hamilton skewers Arthur Burns for being a proponent of creating political business cycles. The quote he had of Burns from the 1960 election is familiar to me, as I am pretty sure I used it in my dissertation ... on political business cycles.

But my question back to Hamilton is which Arthur Burns was he discussing? Christina and David Romer have a nice table in a Journal of Economic Perspectives article on policy views of Fed chairs in which Burns holds seemingly three different views during his eight years in office. First he's a Phillips curve believer but with a very low natural rate. So he believes monetary policy can be tightened in to rein in inflation, but he doesn't feel it necessary since unemployment is often above the natural rate and therefore inflation expectations are dropping. He then seemingly gives up on that view because, he says, inflation isn't obeying the relationship at all. The Romers cite Burn's Congressional testimony in July 1971 (just before the wage-price controls are put in place and the gold window shut):

A year or two ago it was generally expected that extensive slack in resource use, such as we have been experiencing, would lead to significant moderation in the inflationary spiral. This has not happened, either here or abroad. The rules of economics are not working in quite the way they used to. Despite extensive unemployment in our country, wage rate increases have not moderated. Despite much idle industrial capacity, commodity prices continue to rise rapidly. And the experience of other industrial countries . . . shouts warnings that even a long stretch of high and rising unemployment may not suffice to check the inflationary process.

A guy that believes that -- and it appears he wasn't alone in this view at that time -- is likely to decide monetary policy will not use a measure of general prices or inflation as its ultimate goal. But he then reverts back to the Phillips curve explanations by early 1974, along with upward revisions to the natural rate estimates. By October of that year Burns says:

For many years, our economy and that of most other nations has been subject to an underlying inflationary bias that has merely been magnified by special influences. . . . governments have often lost control of their budgets, and deficit spending has become a habitual practice. In many countries, monetary policy has supplied an inflationary element on its own, besides accommodating fiscal excesses.

Now I would agree with Hamilton that it appears the abandonment of the Phillips curve framework -- flawed as it was -- provided a convenient reason to juice the economy before the 1972 elections. That doesn't necessarily mean, though, that the abandonment of the framework was done because of that. It's hard to ascribe motives to behavior.

A new book by Herman Badillo is discussed on the Taste page of the WSJ today.

Although his book covers many topics--including immigration--its most important audience is the parents of Hispanic kids, 50% of whom don't graduate from high school. His advice: Don't leave education up to the schools, which pursue such failed policies as 'social promotion' (said to create self-esteem despite failing grades) or 'tracking' with other minority children into deceptively named 'academic courses,' while kids marked for success study a more rigorous curriculum. Get involved and demand that your children be prepared to participate fully in the American dream, through college and beyond.

Imagine that. Hard work, education and achievement, the book's promotional page says, are the traditional values that solve the problems of poor Hispanics, just as they have every other immigrant group that has risen to success. Do you call it the acquisition of "cultural capital" or do you call it selling out?

Since it's the holiday season and I have some time off, I looked through a very long set of comments on the SCTimes chat board on the usual nonsense of the season, the public display of nativity scenes. In times when people have real civil liberty concerns like the Patriot Act, or violation of private property rights like smoking bans, it's somewhat hard for me to get worked up about someone displaying a stable with figurines on a public square. But when I read this from the ex-Mayor, John Ellenbecker, I had to laugh. He first states (it's a long comment thread, so go to comment #77):

I had court in Long Prairie on Tuesday. I drove back through Holdingford (as I always do - it is not out of the way) and found that the nativity scene is again in front of City Hall - in violation of the Minnesota Constitution and the Constitution of the United States.

That's a nice drive, I guess, if you assume the ex-mayor likes the back roads of Todd and Stearns counties. (Here's a map.) The way most of us go is up I-94 to US 71. A later poster (at comment #123) points out you have to detour offI-94 to drive by the Holdingford city hall. Now, he could have said something like "I took the scenic route on CR-17" or something like that. But no. At comment #130:

When I drive through cities I often drive through their downtowns to see what is new - and I am usually looking for what is new in places to eat and drink. That is why I "detoured" through downtown Holdingford - not that I ever have to justify any of my actions for a twit like you. Tuesday I did drive by their City Hall just to see if the nativity scene was there again.

So let me understand this: On the day after Christmas, driving back from doing his work as a lawyer in a Todd County courtroom, the ex-mayor of St. Cloud decides to detour off I-94 for the expressed purpose to see if some small town has put a creche on public property. As the fellow discussing this with the ex-mayor said later,

[This] reminds me of the old maid that called the cops because she was upset that her male neighbor would walk nude in his apartment without pulling the shades.

The cops came and stated they can't see his window. "Oh you can," she said as she pulled a chair tight in the corner. "Stand on this and look sharply to your left"

There has been a sharp discussion around St. Cloud about neighboring Waite Park having a nativity scene in a city park -- paid for by private money, but erected and taken down by city employees with the other holiday decorations -- but until now nobody has caused the city of Waite Park to stop putting the display out. I'm certain the park will be on the next ACLU Solstice tour, with the ex-mayor taking tickets. "Be vewy kwiet. Cweche twacks..."

The editorial in the Washington Times has fun with the Young America's Foundation list of the twelve most bizarre college classes.

There seems to be dissension in the ranks of the leftist faculties at Occidental College -- we told you to keep your children away from this one -- and Mount Holyoke College in Massachusetts. No. 5 on YAF's list is Occidental's "Blackness," which dissects the intellectual nuances of "new blackness" and "post-blackness." At No. 7, however, is Mount Holyoke's "Whiteness: The Other Side of Racism." Maybe the Occidental and Mount Holyoke departments should forge an intercollegiate course titled "Whiteness: It's the New Blackness."

Unlike the editorialist, I'm not at all bothered by a course on "taking Marx seriously." It was taken seriously for a long time, and any discussion that could shed light on the millions killed by communism is well worth a student's time. Besides, campuses have many people who do still take it seriously, and it's worth keeping those people preserved like fossils in a museum of natural history.

A course titled "Sex, Rugs, Salt and Coal" at Cornell didn't make the list except as a "dishonorable mention." It would have made mine.

Description: Everything is for sale today- but has it always been? We'll look at the history of various commodities to explore the changing cultural and environmental impacts of market forces. Why are "oriental" rugs collector's items? How did we come to keep salt shakers on our dinner tables? When did coal start replacing wood as a fuel source? This course will cross multiple boundaries of time and space as it examines both case studies and broader theoretical perspectives, allowing us to draw connections between our culture of consumption and the social forces wrapped up in production. How was the taste of sugar linked to the slave trade? Is prostitution really "the oldest profession?" What goes into your daily cup of coffee besides half and half? And what was western society like before everything had a price?

Um, poor. Again, a course taught in an X-studies program. If you're making one of these lists, that's the vein you mine.

When I was an entering freshman at St. Anselm in 1975, the school had orientation weekend. We all got to stay in the dorms overnight -- even those of us, like me, who were "mill rats" commuting from home in Manchester -- and we went to some information sessions. Registration consisted of asking two questions: which science, chemistry or biology? and which language, French, Spanish, or Latin? (Chem and Latin, if you must know.) We all got English I, we all got intro to philosophy, and math. The process took less than ten minutes, leaving plenty of time to check out all the new females who didn't know me from high school. (Don't ask.)

I imagine it's a little different now, though looking at their core curriculum makes me think not too much different. (I see math is gone from the BA core -- that's a shame IMO.)

Universities today are of course much different, and after discussing Diogenes' search for a good university a few weeks ago I got into discussions with my two siblings, one of whom has a daughter going to college next year and the other in Fall 2008. The latter one is an athlete who likely gets a scholarship somewhere. That and an email this morning about our new First Year Experience program at SCSU got me to thinking what we're doing to get students a better education. FYE is an attempt to use peer pressure to keep kids in school, creating friendships and programs. But at a school our size -- with about 2000 entering first-year students -- creating 70-100 cohorts of 20-30 students each means you're going to get a list of different themes that are not all created equal. Some of them are program-based, with offerings in business and engineering for example that make sense. You get introduced to your fellow majors (or those likely to do so) earlier. This doesn't work so well in economics because, as I'm sure I've said before, few students know they want to be economists upon leaving high school, particularly among the population of students that go to large state universities.

But others are theme-based, and get a load of some of these themes:

• From Surviving to Thriving: Connecting Lives to Social Change. This learning community takes an interdisciplinary approach to the exploration of race, class, gender, and sexuality with a thematic focus on social inequalities, self-transformation, and purposive action to bring about positive change so that students can begin claiming their education.
• Musical Roots of America. This community provides an exploration of race in America through the musical genres of rhythm and blues, rock and roll, country, folk and rock.
• Journey to Planet Earth. Students will study the relationship between people (communities, societies, countries) and the physical environment in which they live, the impacts they have on their environment and how their environment also impacts their lives.

Note as well that this was the best we could come up with for the 2nd year pilot program for FYE when we had 400 students in the program. Some people are coming up with ideas in science and engineering, but those would cover no more than 120 students.

What is an 18-year-old and her parents to make of these kinds of choices? You will notice the common multi-culti theme in these. Compare it to the core at St. A's I linked above. One of these schools offers a discounted price subsidized by tax dollars. The other has to attract people who pay their own money. Which one do you think provides greater value?

Wouldn't it make more sense to send your child to a place where the university had an idea of what the student would become, rather than helping the student become whomever he or she wants at that time?

At 18, I wanted to be a doctor. And a rock star.

It's an annual event. As temperatures dip in Eurasia, Gazprom gets the itch to increase its revenue stream in Russia. It has had Russian foreign policy as its biggest ally in the past -- witness the last two years' fights with Ukraine or the row with Georgia -- but now has decided to apply thumbscrews to its friends. And not just its nominal friends nearby like Azerbaijan, but now they are trying to stick it to Belarus, the most Russophilic of its neighbors. Captain Ed thinks Gazprom's heavyhandedness will lead to Belarus playing footsie with Europe, but Gazprom is arguing that it has enough already stockpiled in Europe to meet the EU's needs, and the EU isn't making any noise over the Russia-Belarus dust-up just yet. In short, the EU isn't too happy still with Lukashenka after the disastrous elections last March. Sorry Ed, but you seldom play footsie with someone who calls you a "scar on the face of Europe."

Gazprom may recognize that Belarus has less leverage here than Ukraine or Georgia, and has decided as a business matter to use its power for short-run gain. For what reason does Belarus get the same subsidized rate (about a fifth of the European rate) as do Russians themselves? It has always been about politics. If Belarus has no leverage with the West -- and I hardly expect they will until Lukashenka has a warmer home address than Minsk -- it emboldens Gazprom to seek further concessions. Indeed, the Europeans disinclination to engage in any real policy towards developing democracy and civil society in Russia's near abroad strengthens Gazprom's hand. US weakness after the midterm elections cannot help either.

Arthur Brooks (subscribers' link) discusses the negative elasticity of private charity with respect to government largesse:

One large nonprofit organization that helps the poor in New York state illustrates this point. The agency was relatively small a few years ago, but provided a critical service in several cities. The state, taking notice of the organization's good work, began pouring money into operations, doubling and tripling its budget. The staff was focused on managing and spending the public dollars, and allocated less and less of its time to private fundraising -- which, predictably, vanished. When the state, facing budget cutbacks, began to reduce the organization's subsidy, it led to service cuts and layoffs because there were no private funds to fill the gap. Ironically, the organization and its clients were worse off than they would have been had the nonprofit received no government "help" in the first place.

This experience is hardly unique -- indeed, nonprofits and their communities all across America are exposed in the same way when government funding grows as a source of support. According to the National Center for Charitable Statistics, a quarter of human service charities in 2002 received at least 50% of their income from the government. This represents a lot of risk, because public funding is pro-cyclical: It increases or decreases more than changes in the economy, and thus can destabilize nonprofits. In contrast, charitable donations stabilize charities because they fluctuate less than the economy as a whole. For a charitable organization, relying on government funding as the main income source is like investing your 401(k) entirely in biotech stocks: You might do great -- for awhile.

But the problem with government money goes beyond just its volatility: Studies by economists over the past decade have demonstrated that government spending on nonprofit activities actually lowers private charitable giving. In the case of social welfare services, a dollar in government funding to nonprofits generally suppresses private giving by 25 cents or more. Part of this is due to a lower perception of need among charities when they get public money. There is also evidence, however, that charities spend less effort fundraising after governments give them money.

As Brooks and many other researchers in that area (including two of my colleagues, Patricia Hughes and Bill Luksetich), the crowding out of private charity is usually not dollar-for-dollar. (See for example, this short summary by Brooks a couple years ago.) Some areas it is higher, others lower -- and a few papers might even find crowding in for relatively small charities who were constrained from advertising and fundraising by a lack of funds. What Brooks points out here isn't just the volatility and the crowding out, but that government funds cause an increase in administrative expenses that reduce programmatic expenditures. That's a testable hypothesis.

One such paper by my colleagues finds that the impact of government funding on management expenditures is relatively small -- maybe a $.03 increase for each dollar of government funding provided for performing arts organizations. Where the money seems to go is into excess revenues. If the money from government to charities is pro-cyclical, and charities know it, wouldn't they rationally save that money for recession periods to smooth program expenditures? Both authors are away this week, so I'll have to ask them when they get back.

Michael is having fun over another blogger's declaration that he is Minnesota's worst political person.

A commentor at Democratic Underground posted this comment:

"Brodkorb is the reason for birth control!"

You know they're just trying to protect their own, Michael. I say let a thousand Brodkorb Babies bloom.

After posting on Felix Salmon's point yesterday about the benefits of having the poor pay a nominal amount for mosquito netting, I see this morning that he's changed his mind, based on some evidence.

Curious! The point of having the poor pay isn't to say that they only take care of things for which they pay. What you want to find are incentives that line up between the donor and the recipient. We give mosquito netting to stop the spread of malaria; the poor who buy nets might not use them for that purpose. Indeed, given they've paid for them, they may feel no obligation to use it as intended. If I have Littlest buy a golf club from me for $1 she may use it to, say, chase Buttercup around the house. If I spend $200 on a nice driver and tell her to use it to learn golf, the expenditure might put some obligation on her to make the right use of the club.

Salmon argues that the donor and recipient both want the same thing: to prevent mosquito bites. Thus their incentives align. But why would the expenditure of fifty cents, say, change the recipients' preferences for how to use the net? Salmon doesn't say, and I can't see that either. But neither can I explain the paper's finding of greater use of free nets.

(Substantial update below.)

So how does academia remember President Ford? The Chronicle of Higher Ed leads off its coverage with this paragraph:

Liberal academics may best remember Gerald R. Ford, the 38th president of the United States, unfondly because of the pardon he granted to his former boss, Richard M. Nixon, over Mr. Nixon's role in the Watergate scandal.

So much for conventional wisdom. Wait until they remember that Ford's chief of staff was Don Rumsfeld first, and then Dick Cheney!

Not that I am a big fan of Ford -- I often use an old WIN button for a prop in discussing stagflation -- Alan Greenspan ended up being a fan of his. Greenspan, it should be remembered, headed Ford's Council of Economic Advisors. From a recent article on Ford's economic policies:

While I felt fairly close to his general point of view on economic policy problems, my initial impression was that he was not really capable of abstractly articulating a philosophy. Because of that, I sensed that he wasn't fully in control of the general framework of the policy decisions he was making on a day-by-day basis. But if you began to look at the concrete decision making process, what came through was a very sophisticated and consistent framework. Within perhaps a year, maybe even less, I was able to forecast how he would come out on individual issues with virtually zero error. I then began to conclude that this was not an accident. So, while he was not consciously or verbally in control of a general philosophy toward economic policy, he nonetheless had a fairly sophisticated view.

(Worth noting -- at the time Bob Woodward's bio of Greenspan, Maestro, came out, there was a second book by Justin Martin that covers the Greenspan-Ford relationship.) It's hard to go back and find the policies that would have whipped inflation in 1975-76 given how buggered the economy was under Nixon's wage and price control policies and the ending of Bretton Woods. There's little question that Jimmy Carter's misery index lines in his stump speech helped push Ford out of the White House (I have never thought it was just the pardon.) But the misery index rose under Carter, a point Ronald Reagan used to devastating effect in 1980.

UPDATE: I think Doc is right. The guy who did the least as president might be the best. At least pre-9/11.

UPDATE 2: Bill Polley's appreciation and later agreement. I am rather amazed and not very amused with the less-than-gentle treatment he takes from some. PGL's post discussed in the first comment is here. It's worth remembering that at that time the targeting strategy of the Federal Reserve was different than it is now. That is, the whole concept of reputation and credibility was absent in the discussion of monetary policy. In this recent summary of a St. Louis Fed volume, a clipping from the Wall Street Journal came out six days after Paul Volcker changed that strategy to one closer to what we now know:

Among those who are skeptical that the Fed will really stick to an aggregate target is Alan Greenspan, president of Townsend-Greenspan & Co., a New York economics consultant. Mr. Greenspan, who served as chief economic adviser to Presidents Nixon and Ford, questions whether, if unemployment begins to climb significantly, monetary authorities will have the fortitude to “stick to the new policy.”

I think what Ford was asserting in the point PGL pulls from the Ford inflation plan was the existing consensus in monetary policymaking: it had both real and nominal targets. Thus Ford was not asserting anything new in monetary policy in saying unemployment wouldn't get out of hand, or that interest rates would be managed. He was expressing the status quo. Allan Meltzer makes the point in that St. Louis volume:

[Fed chair Arthur] Burns resented White House interference and pressure, but he did not often resist it. He took over a Board most of whose members had been appointed by Presidents Kennedy and Johnson. To varying degrees, a majority preferred to continue inflation rather than increase unemployment. If inflation could be reduced at an unemployment rate of 4.25 or 4.50 percent, they would accept it. But they did not want any higher unemployment rate. There was a minority that wanted more restrictive policy and more action against inflation. The few consistent anti-inflationists, such as Hayes, Brimmer, and Francis, were exceptions. They gained support when inflation rose, but only until unemployment rose above the level the majority would accept. [Andrew] Brimmer explained at the time that if fiscal policy was the way it was, you would have to tighten monetary policy to the point of inducing a recession. He added that the Federal Reserve “didn’t promise a tradeoff [of easier monetary policy]…if you get a tax bill but we came pretty close to it.”

Given that constraint from an independent Federal Reserve, what were Ford's choices?

Felix Salmon hits this beautifully and succinctly:

Is there any empirical evidence that giving bed nets away is more effective than selling them? Sachs knows full well that the reason for selling bed nets is not "a short-sighted ambition to promote markets" – there's no market in bed nets. Rather, there is quite a lot of evidence that Africa's poor value things they pay for, and don't value things they get for free. As a result, bed nets which have been paid for get used more, and more effectively, than bed nets which have been given away.

Similarly, there's little evidence that Africa's governments have the infrastructure and institutions in place to effectively and equitably distribute malaria medicines which have been given to them for nothing. I worry that if the world signed on to Sachs's plan tomorrow, the net result would be $2.5 billion per year being spent on bed nets and medicines which would end up stockpiled somewhere near an international airport. A system of payments for these things creates an incentive to get them to where they are needed. Neither USAID nor anybody else wants to make money from these programmes. But before we give up on the small payments which do exist, I'd want to see some concrete evidence that doing so results in positive outcomes in practice.

Cf., bang for your aid buck.

St. Cloud has always been indifferent to its waterfront. My office looks out on the Mississippi, sitting on a very nice piece of land on a bluff over the river across from Munsinger Gardens. The gardens are one of four city parks that abut the river. There are no shops along it, though, and the only other place than SCSU which uses the river to enhance its business is the Kelly Inn next to the civic center. Even there, you do not look at the river from the restaurant. Having grown up near boardwalks on the coasts of Maine and New Hampshire, I have found the indifference of St. Cloud to the river bewildering.

I'm not so bewildered by the complaints of those just to the south of us in Haven Township, who are worried about development on their lands. What they want is to prevent other people from using their property as they see fit. This is a very basic leftist tradition -- I get to tell you what to do with your land -- and they use government power to keep it so.

"We do feel that it's not really a valid reason for changing the rules, just because of expansion and developmental growth," resident and river advocate Jane Korte said. "We feel that the river continues to need protection."

The township board of supervisors passed a resolution last week calling for the DNR to keep the existing rules.

However, the DNR has been working to update the river's management plan since the late 1990s.

The plan in place hasn't been changed since it was adopted three decades ago, and officials say it no longer accurately reflects the St. Cloud area's rapid growth.

The problem with government rules on land use is that when relative values change the rules are difficult to adjust. Without the Dept. of Natural Resources' rules, developers and landowners could reflect changing use values through the property market. Now they have to plead before county commissioners and state bureaucracy, where property owner A can use force to prevent a transaction between owner B and developer C.

You have to wonder, how many other projects that might have happened along the riverbank in St. Cloud are held up by such arrangements?

Victor Davis Hanson:

I live in one of the poorest sections of one of the poorer counties in California, but consider: there were near riots to get the latest PlayStation 3 video games nearby. I was looking at a 4-wheel drive truck recently, and passed up all the “extras” offered by the salesman—leather seats, GPS, DVD player, extra chrome, multiplayer CD—but that extravagant Toyota Tundra was snapped up by a family on welfare in the booth next to me. With a zero-interest loan package, and no money down, apparently almost anyone can walk into a showroom and drive out with a $40,000 monster-sized truck.

Then I drove into the local shopping center and walked through Office Max, Wal-Mart, and Food4Less where there were more signs of America's new encompassing wealth. There were new Camrys and Accords all over the parking lot, nearly everyone was on a cell phone. Nearly everyone was also speaking Spanish and no doubt a first generation immigrant (legal or not from Mexico). But in terms of traditional notions of poverty and the ability to acquire material goods, food, communications gear, transportation, etc. they were hardly poor.

Perhaps this new prosperity that encompasses almost all social classes in America is due to the miracle of science that now gives us such cheap appurtenances, or the addition of 1 billion Indian and Chinese fabricators to the world’s work force that results in endless consumer goods; or the ability of low interest and almost universal instant credit.

...This summer I bought on sale an old-style color television, 32-inch screen (the kind with the big tube in the back and curved front) for about $130. A decade ago it would have cost $500. The surprise was that the clerk laughed about what he thought was the idiocy of wanting one of these now obsolete, but perfectly fine, televisions. He probably made about $10 an hour, but would never have apparently stooped to such sacrifice. Again, any discussion about this surreal world is entirely lacking in the current political debate.

Menzie Chinn looks at a recent speech by San Francisco Federal Reserve president Janet Yellen discussing inequality and argues at the end that building a consensus for free trade might require "laissez-faire adherents to jettison objections to measures that minimize economic uncertainty." But the data Chinn and Yellen use do not reflect the reality of what Hanson sees in his neighborhood shops and parking lots.

Additional thought: While wages may not grow as much as we'd like, perhaps this spending is fueled by expectation of returns from skill investment. We too often treat labor in macro studies like an already-formed piece of equipment.

A note on Phi Beta Cons tells of Cal State-Northridge creating a new major in Central American Studies. This is nothing new. When I visited at Pitzer College in the early 1990s, there was a mild dust-up over the creation of an Asian-American studies program at a relatively small college that had an Asian Studies program already. Like CSUN's, the rationale for this program was that the "experience" of the Asian-American was not reflected in the Asian Studies curriculum.

George Leef thinks "that a college education should focus on mastering bodies of knowledge rather than studying 'experiences,'" and he's right but for more reasons than just giving a student a better education. Focusing on the experience allows the faculty member to ignore any disciplinary or professional standards. Economics as a field is more than just "studying the economic experience". It has a scientific standard; it works from some very basic assumptions about how people decide, and the natural social condition of transacting. Those who find the logic that follows those assumptions leading to conclusions that don't feel good -- that give them a bad experience -- reject the whole idea that there is a discipline. (I feel an A is A moment coming on, hang on a second while I get coffee.) It grants charlatans the cover of grayness by blurring any distinctions. I'm aware that this happens in other disciplines as well, and those that have not held fast to scientific standards have been more susceptible to the blurring.

Thomas Sowell has long argued that reforming the university could be greatly helped by striking down all departments with the word "studies" in their name. A few good ones might be tossed out with the bathwater, but most of those could be absorbed back into the disciplines that their faculty properly belong.

Anyone with sons or daughters in the military understands the desire to be home for the Christmas holidays. Sometimes Mother Nature and humans cooperate, sometimes they don't. As many of us have seen, the recent snowstorms in Denver put a real crimp in people's ability to get home, including some Marines.

A heartwarming story of four marines shows Americans at our best - this time, taking care of our soldiers. The four were hoping to get to Denver, then suburbs to celebrate Christmas with their families. The blizzard grounded all planes, incoming and outgoing. They were comiserating on their bad luck when a stranger approached them. Turned out, Paul, the stranger, said he could rent a car (the Marines were too young to rent one), obtained a Windstar Van and they were on their way. The 23 hour drive encountered some rough storms but the Windstar, Paul, and the Marines all made it to Denver with a couple of days to spare.

In most settings, one would think twice (or even more!) about taking into one's car four unknown young male stangers. But the risk assessment becomes much different when it is young men in American military uniforms. Let's remember this during this season. 'Tis not the case in many parts of the world.

To those who just celebrated Hanukah, I hope it was meaningful. To others, Merry Christmas or Happy Holidays - whichever applies.

Here's hoping that your Christmas makes you laugh, fills you with joy, and keeps you by the ones you love. The best way I can show you that is a picture of me with the one who makes every day a blessing.

Off to church. Merry Christmas!

This dog has been partying so hard she forgets where she is. But she's an honest dog. Unlikes some football players, she'll tell you if she has had an unfortunate discharge.

A slow morning today, but you'll find more stories for today below after lunchtime. Buttercup and her accident stay here for the rest of the day.

Powerline has reprinted a letter sent to the Columbia University community by its president, Lee Bollinger. Scott Johnson calls the message "incredibly pompous and verbose," which when said by a lawyer is pretty harsh, but when said to a university president is unsurprising. It is a long letter, but the part that should draw focus is this:

Second, we all understand that student groups should have the widest possible latitude in conducting activities and inviting speakers consistent with their own personal interests and beliefs. But along with the right to have controversial speakers on campus come several responsibilities to the overall University community. In order to better facilitate these rights and responsibilities, we have now reorganized University governance of student organizations. This change should enhance the coordination of student activities and improve the functioning of future student-sponsored events.

Additionally, we are implementing event planning and staging procedures to better accommodate events, no matter how controversial they may be. We are, for example, instituting uniform procedures for engaging speakers or groups from outside the University community. This will include an express agreement in advance of any event--between the University, the sponsoring student group, and the speakers or groups--about how the events will be staged and who from outside the University will attend.

That should be viewed as censorship. It says that the university is not an open forum for outside speakers. It also says that there will be additional controls placed on student organizations. It of course does not say what the controls will be. It of course is released on the Friday before a three-day holiday weekend when the campus is practically deserted. As FIRE points out, this is likely an attempt to fly under the radar. Which for university presidents is quite, quite usual.

I cannot comment in any great detail on the internal politics of Turkmenistan following the death of Saparmurat Niyazov, or Turkmenbashi, as he preferred to call himself. Captain Ed and the guys at Registan have done a fine job covering much of that. See also TOL: Turkmenistan's speculation of the succession.

Let me make two points, however, that others might be missing. First for the mundane: The reverberations of this in the energy world cannot be overstated. The Russians have done a fairly good job in making any discussions in Europe over energy supplies go through Gazprom, and Gazprom and Russia have placated Kazakstan and Niyazov enough to keep Gazprom's position as market maker secure. Having Turkmenistan now in play will make for a source of intrigue. And it won't be only Russia, as pointed out in this interview with an energy expert: China and Iran will have reasons to make overtures to the new political class that is in Turkmenistan and its leaders-in-exile.

Such discussions are strengthening, in my view, Russia's hands in dealing with its near neighbors as well. Contained in an article discussing a meeting between Vladimir Putin and Ukrainian president Viktor Yushchenko in Kyiv,

The dictator's death may affect energy supplies to Ukraine, which is currently importing a mixture of Russian and cheaper Turkmen natural gas for a price of $95 per 1,000 cubic meters. Russia and Ukraine still have to decide on the gas price for next year, and Turkmenistan said before Niyazov's death it would charge Ukraine $130 in 2007.

There's reason to believe the price might be driven higher with Niyazov's death, a fear felt in Ukraine. Such discussions would also happen in the other countries of the Caucasus and in Moldova, all of whom use Turkmen gas to get cheaper prices than they might pay on the open market. I think this is going to be a bigger deal than most other people are saying so far, and it bears watching in 2007.

Second, a friend who has spent time in Turkmenistan made the comparison between Niyazov and Romania's Nicolae Ceausescu, and he regretted that Turkmenbashi had not met with Ceausescu's fate. He was a pretty brutal guy by all accounts, and the comparisons of a strongman who uses Islam as a tool for personal political gain will look very familiar. Its economic freedom is very poor as well. But for the most part this guy was a two-bit self-aggrandizing dictator (take a look at the photos someone took there and imagine the costs of these monuments to his ego!) We'll have to leave his final judgment for someone else, but we won't miss Niyazov even if it does cause greater instability. That was bound to happen whenever he died.

UPDATE: As if to prove the point, Russia is already angling at nemesis Georgia's gas supplies:

Gazprom, the Russian natural gas monopoly, agreed Friday to continue supplying natural gas to Georgia, but at double the price, the latest increase for a pro-Western nation on Russia's border.

Aleksandr Medvedev, Gazprom's deputy chief executive, said three Georgian importers had agreed to buy gas at the company's asking price of $235 for 1,000 cubic meters, or 35,000 cubic feet, close to the prices paid by industrialized nations in Europe. Gazprom is insisting it will raise prices to European levels throughout the former Soviet Union.

The latest contract is considered short-term on both sides. Gazprom notes that the contract does not cover all of the country's needs and that it could still cut off supplies. And Georgia said that it was close to obtaining an alternative supply from a BP-run natural gas platform off the Caspian Sea coast of Azerbaijan, Georgia's eastern neighbor.

If the Azeri deal comes off, and that's a big if.

UPDATE 2: Poisoned?

Armenians and Armenian diaspora got an interesting surprise today when Armenian defense minister Serge Sarkisian wrote in the Wall Street Journal (subscriber link) that the Armenian government is willing to speak to Turkey about normalizing relations without any preconditions.

Over the past few months, attention in Europe has focused once again on the genocide of the Armenian people. The debate in the European Parliament over whether Turkey's recognition of the genocide should be a precondition for membership in the European Union, and the French National Assembly's bill criminalizing genocide denial, have put the spotlight on this tragic period of Armenia's history.

...Turkish-Armenian relations and the genocide are, of course, important factors that need to be considered during Turkey's negotiations for EU membership. It is important to remember the past to ensure that such crimes against humanity are not repeated. Nevertheless, Armenia has a very straightforward and practical position in terms of future relations with Turkey. We would welcome starting normal diplomatic and other relations -- without preconditions. That includes not tying the establishment of diplomatic relations to recognition of the genocide. More importantly, we want to profit from such diplomatic relations as a means to overcome the issues that burden our relations. We cannot expect solutions to come before we start talking to each other. Solutions will only arise when we work hard for them, starting by establishing an open dialogue.

Emil Danielyan summarizes the article, pointing out that

The comments highlighted the differing positions on the issue of official Yerevan and the Armenian Diaspora. The influential Armenian community in France is particularly vocal in opposing Turkish entry to the EU, saying that the bloc should not even consider Ankara’s membership bid as long as the latter refuses to acknowledge the 1915 Armenian genocide.

President Robert Kocharian argued in October that the accession talks will put Turkey under growing Western pressure to normalize relations with Armenia and reconsider its long-running policy of genocide denial. “In that sense, we don’t see any dangers in that process. Perhaps quite the opposite,” he said.

When I sent this to some family and friends, my father wrote back that he thought Sarkisian was "soft" but that maybe it is needed. I am scheduled to speak at a conference on the economic benefits of opening the border. We're still putting final touches on the paper, but suffice for the moment to say the costs of blockade are substantial in our view. Thus it comes as little surprise that the Armenians in Armenia itself would be more favorable to some normalization with Turkey than would the diasporan Armenians who bear none of the cost of continued estrangement and conflict for making genocide recognition a precondition.

Finals have been graded. They no longer even send you a form to sign -- you just log into the university computer, enter your grades and a password and off they go. More students needed my long final than ever, and took it. (A few who should have didn't.) So grading was longer than usual, and I'm more tired.

Before heading off for the night, a few words about another sports team and the end of a quietly very good career. Buster Olney blogged (ESPN insider only link) about Brad Radke's retirement from the club. What caught his eye was not Radke's matter-of-fact goodbye, but the way the club handled it.

But if you want to understand some of the reasons why the Twins have been successful over the last decade, in spite of their modest payroll, in spite of once being a theoretical target for contraction, take some time to watch a videotape of Radke's press conference. Listen to how the organization shares, particularly when general manager Terry Ryan takes the microphone (about six minutes into the event).

Using notes that he apparently jotted down, Ryan tells the story of Radke's career. He mentions the draft, and all the players taken ahead of the pitcher. He mentions the area scout who followed Radke. He mentions the team's minor-league director, Jim Rantz. He mentions Radke's managers, his pitching coaches, his catchers. He talks about Radke's wife, Heather, and his children.

If you didn't know better, if you didn't know that Radke was an All-Star who won 148 games and averaged more than 200 innings a year and made more than $60 million in salary during his career, you'd think you were watching a company picnic. The press conference for a Major League Baseball team somehow had all the intimacy of a farewell picnic for a 40-year employee at the local hardware store.

This kind of culture means something. You can't put a number on it, you can't quantify it, you can't always recreate it. But it means something.

A guy that went 20-10 on a team that was 68-94 (1997 -- Buster was generous with that decade of goodness) deserves more than just being sent off to the Hall of Very Good. I compare it to how the Red Sox let Dwight Evans go spend one last, wretched season in Baltimore rather than have him retire in Boston -- the only other guy with 2500 games as a Red Sox was Yaz -- and I agree with Buster that the Twins do many things right.

On a week when teams trade their superstars for pennies on the dollar and others allow their players to spit on opponents, it means something.

This year the American Economics Association has instituted a means by which job seekers can signal two employers of their preference to work for them. The cost of applying for jobs has gotten so low that we routinely receive 125-150 applications for a position -- more if the position is rather broadly defined -- but some of them are from applicants who likely will have better offers. Some schools will decline to use scarce interview slots at the AEA meetings, which is the usual first round interview spot for all jobs in our field in academia (and many in government), on candidates that are unlikely to accept later on-campus interviews because they got better offers. So some applicants might use the signal to tell someone like me, a chair at a mid-level masters-granting institution, that they are keenly interested in the program. The catch is, each job applicant can send no more than two signals.

A new blog devoted to rumors about the economics job market has a post on such signalling. Of the comments on that post, many reported not receiving interview invitations as a result of the signal. (We got one such signal, and I will interview that person ... but it's not clear to me the signal was important in our decision.)

So I'm trying to think about how one would use such signals strategically. One commenter said he or she signaled to a school because of co-location issues. Another indicated he was signalling to schools he thought were good candidates, where he might be on the margin. How one knows that is beyond me, actually. My thought was that if I thought a school might think I was just fishing and not serious about a school -- because they may perceive themselves as below the level I could find a job at -- I would use the signal to tell them I was serious. So nobody would signal a top-50 program, but lots of Directional State Universities would get signals. Your alternative hypotheses invited...

Anyway, some second-year grad student in econ has a fun dissertation topic here, if they can get the data on what types of candidates signaled which schools.

Two rather esteemed economics professors made a video for the departmental website to welcome new PhD students to the program. The video is, well, God-awful. Inside Higher Ed reports that two spoofs of the video were shown at a "department holiday skit party" have fared much better. Anything linking Marvin Gaye to economics will be funny to most, but I laughed harder at the second one when a very large mathematical expression is read off in perfect deadpan and declared to be "clearly positive." It would be a personal thing for us who took micro theory at Claremont in the 70s.

Guy writes an article dissing blogs as all latching onto the same story; article goes to top of Memeorandum.

Somewhere Charles Mackay smiles.

Iraq's economy is booming. Who would have guessed - after all, what we have heard for years is only the negative, negative, negative. The fact that many Iraqis are experiencing a prosperous economy and a rising standard of living in the face of sectarian violence and instability is a very important perspective to include in all evaluations of the decisions we make.

Why is this boom happening now? Truth be told, it's been building for the past three years.

Iraqis received two of the biggest gifts humans can give other humans - hope and with hope, comes opportunity. When a nation loses its control-freak leaders, its bullies and thugs, fear declines, decisions start getting made, trust begins to see the light of day.

The naysayers (read MSM) and the hard left refuse to acknowledge this - they want control, control, control. (Note that the sources of this article are MSNBC and Newsweek.) America has given hope to a nation of historical barterers (Iraq). They are smart enought to take advantage of it. Too bad it took the MSM years to reluctantly admit that what we have done, are doing, and hopefully will continue to do actually helps people get back on their feet. Who knows how many lives would have been saved had the MSM actually supported the removal of an anti-American, thuggish dictator, Saddam, from the beginning.

Freedom is addictive. If people have the chance to develop trust and security, they can do anything.

America's gifts to the world are: hope and opportunity - freedom. We need to remember this.

Christmas always seems to bring out the articles about some Scrooge-like economist who says giving gifts destroys value. Joel Waldfogel had to wear that crown for awhile, in return for a high-visibility publication that argued gifts destroyed 10-35% of the value of the money spent on them. Jonathan Chait seems to have picked this strand up, arguing yesterday in The New Republic that the destruction could be much greater:

Christmas spawns industries devoted to useless goods like fruitcake and flavored popcorn. More commonly, it forces us to pay for things we like, but whose cost exceeds their worth to us. Suppose a box of chocolates costs $15. I don't buy chocolates for myself, because they're worth only $5 to me. You choose not to buy $15 cologne because it's worth only $5 to you. Swapping chocolates for cologne penalizes each of us $10. Yes, sometimes you can buy somebody a gift he would buy for himself. But the more likely this is, the higher the likelihood that he actually has it already. OK, so gifts detract from our material welfare. But, you point out, they still provide psychological benefits--goodwill, etc.--beyond their tangible value. The problem is, you can use that argument to preserve any inefficient practice.

Chris Dillow syas the result somewhat depends on the way one asks the question of what is the value. I tend to take the side, though, that the value of the gift to the giver is what is of importance in explaining gift-giving. Waldfogel's later article reminds us in its conclusion that gift-giving could be a means for the giver to demonstrate how keenly they know the recipient's preferences, or be a means to induce a stronger relationship between the two, or otherwise provide social signals. (It might also be that the giver has some unique ability to find things for giving, but that's unlikely to be a reason why gift-giving is prevalent.) Imagine the chocolate-cologne exchange to be between husband and wife: How possible is it for one to say to the other "Let's not destroy $20. Skip giving gifts this year." It becomes a prisoner's dilemma of sorts -- if you abide the agreement and your mate does not, you lose perhaps more than the destroyed value of the gift you purchase for him or her.

I remind one, then, of the value of cash. I have taught monetary theory using Waldfogel as an example for the value of money as a medium of exchange. My parents like to go out to eat but tend to be rather cheap. Thus a gift certificate to a restaurant (but not an expired one to the Cheesecake Factory like that Chait tried to fob off on his girlfriend as a re-gift) provides the most likely means of not destroying value, while demonstrating that I care about them having time out together as a couple.

My wife has solved the problem by identifying only two gift types she will be happy to receive from me at any time -- perfume and jewelry. My pastor sends his siblings animals from the Heifer Project. Etc. In a repeated game of reciprocal gifting, there will be agreements made in the name of family tradition that reduce the welfare loss of Christmas.

It appears my youngest niece -- a few months older than Littlest Scholar -- has understood the theory. I got a note from my brother last week notifying me that she had "researched all the different gift cards on the Internet" for finance charges, wide use, and lack of expiration -- she wishes to avoid gifts that become seigniorage -- and concluded the American Express card would be just dandy, thanks. One could hardly say no. Yet my brother had also told me, the month before, that he had seen his daughter on the award stand for a cross-country race proudly wearing a track suit I had purchased for her the year before. Did she think of her uncle at that time? If so, that would have generated real value to me. If it's more blessed to give than it is to receive, it's not least because I only have control over the first activity.

Turns out my last name has done me well:

Faculty with earlier surname initials are significantly more likely to receive tenure at top ten economics departments, are significantly more likely to become fellows of the Econometric Society, and, to a lesser extent, are more likely to receive the Clark Medal and the Nobel Prize. These statistically significant differences remain the same even after we control for country of origin, ethnicity, religion or departmental fixed effects. All these effects gradually fade as we increase the sample to include our entire set of top 35 departments.

Why do you suppose that is? The paper explains that alphabetical ordering of authors on jointly-authored papers may be the source of this problem.

A surname with a first letter that is earlier in the alphabet is correlated with several proxies for professional success in the economics labor market. We suspect that the accepted norm in economics of alphabetical ordering of credits in collaborative work may play an important role in creating this “alphabetical discrimination.” It is essentially the only institutional structure creating asymmetries between market participants with different surname initials.

...There are several possible channels by which the alphabetical ordering norm can produce alphabetical discrimination.

First, when referring to a paper with more than two authors, it is common to mention only the first author and then to use “et al.” for the rest. Thus, the work of first authors, with surname initials earlier in the alphabet, may be easier to remember.

Second, the fact that first authors appear first on every mention of their collaborative work (even when all the coauthors are listed), as well as the fact that reference lists are normally ordered alphabetically, may draw attention to authors with lower average surnames. In fact, this sort of influence on attention appears to be heavily exploited in the realm of advertising.

Source. (h/t: Greg Mankiw.) And here I thought it was all my hard work.

Here's a trivia question from the past. Who won more votes in 1996 in California: The California Civil Rights Initiative, ending favoritism in public education admissions, or incumbent President Bill Clinton?

Answer.

That move to put similar amendments on nine state ballots in 2008 is looking smarter and smarter ... but only for the candidate that uses it. There's no guarantee the initiative helps elect Republicans, at least not those like Bob Dole.

(h/t: Discriminations.)

Captain Ed writes a couple of articles yesterday and today on the question of aid for developing countries. First, writing about tsunami aid in Aceh, Indonesia, he notes:

The problem with foreign aid for disaster sites is the prevailing political structure of the country or area. When the government is corrupt, the aid will not go to its intended recipients but instead to support the corrupt government. Massive amounts of cash only serve to allow these regimes to keep and extend their grip on power. In this case, some could be forgiven for forgetting the lesson, given the random and acute nature of the disaster, but it shows that even in these circumstances aid will get diverted to purposes other than those intended.

In the second piece this morning, Ed discusses Bono's frustration with the Democrats in holding up promised money to go to Africa that President Bush had pledged earlier (probably during one of those Bono-John Snow lovefests on tour of the continent). Ed suggests that it wouldn't be a bad thing for the Democrats to get stingy with aid.

That's both right and wrong. It's right insofar as Bono seems to equate more money with more effectiveness. William Easterly debated Hilary Benn, the UK secretary of state, over the point and marks the similar problem.

...there is an unfortunate tendency in the white paper to talk of aid promises being kept simply by spending more aid money. Alas, we have 50 years of experience that tells us that aid spent does not equal aid received by the poor. Aid money spent is the cost, not the benefit. Would General Motors tell its shareholders that it had achieved a breakthrough with consumers by setting a new record for production costs? Mr Benn, could you please break the pattern—could you introduce a permanent moratorium on aid money spent as an indicator of success? Far better to redirect our energy and concentration entirely to the other side of the ledger—evaluate what benefits have been achieved for the world’s desperately poor.

It's not clear to me, though, why Ed would think distribution of DDT would be any more efficient than distribution of mosquito nets. The profit in the chemical distribution, because it could be centralized, would most likely be greater and therefore provide a greater opportunity for corruption. DDT isn't cheap, and mosquito nets are. The benefit cost ratio for netting in sub-Saharan Africa was estimated by the Copenhagen Consensus at greater than 10 to 1. The advantage of the netting is that it is under individual control. Distribution of drugs to combat diseases as well tend to be very cost-effective. Distribution can be performed by NGOs or volunteer aid organizations. I'd go so far as to argue that the lack of sexiness of mosquito netting makes it more desirable. (Angelina Jolie and Sharon Stone notwithstanding.)

The Bush administration has tried to make aid more results-oriented with its formation of the Millennium Challenge Corporation, an aid-granting agency that acts outside the usual rules that govern State Dept. aid programs. But even MCC has had major difficulties with establishing sufficient controls to assure money given to targeted governments reach their intended goals, and there has been a question over the use of quantitative criteria (this is a research interest of mine, and so as not to bore you I won't go into that here. Write me if interested.) The MCC's operation is a continued matter of discussion, and I will be interested to see what happens to it when the Democrats take charge next month. If Ed is correct that on this one the Democrats have it right, it should strengthen the commitment of MCC to evaluate the poverty reduction performance of its investments to improve the initiative that Bush began four years ago.

P.S. This note from Political Calculations tells how science might help target the aid for malaria. But a political calculation has to ask whether or not political actors will have an interest in delivering that aid.

A little background - I was a high-school athlete in a city that had no school sponsored sports for women. I swam on an AAU team sponsored by the YMCA (yes, YMCA). It was a terrific experience.

In 1972, Title IX gets signed into law and sport options for women explode. I thought it was great. Then along came the "equality" crew. College sports programs had to be "proportionate". Give me a break - I like opportunity but when feminists force "proportionality" in a college with a football team, it makes it difficult to continue support for smaller male dominated sports - like wrestling (which has taken a real hit since "proportionality" has been forced on universities).

As with most laws, the intent of Title IX was not to force proportionality but to provide opportunity. Now the feminists have decided that college female basketball teams should no longer be allowed to practice against guys- because it does not represent "gender equality". Feminists, I have soemthing to say to you, "We are not physically equal, never were, never will be."

My husband and I attend the U of Minnesota women's basketball games. The team is quite good and has had some terrific years. For someone like myself, going to the games is pure joy - as the old commercial said, "You've come a long way, baby." The skill level is so much more than anything I ever considered in high school. It is wonderful seeing the change over the years. And yes, every year the MN women bring the guys they practice against onto the court for a public half-time "thank you."

To young girls, I say, "Go for it." To the feminists, I say, "Shut up. Let them play, improve and enjoy the benefits they have."

The Grand Forks Herald reports that the trial between the NCAA and the University of North Dakota over the latter's use of the Fighting Sioux logo will not start until Dec. 2007. The temporary injunction allowing the Sioux logo despite the NCAA's ban on Native American mascots will be in place in the meantime.

In a phone conference Friday, attorneys from both sides said the amount of preparatory work for the case would make even the December trial date difficult to manage.

"We don't relish the thought of the injunction staying in place that long," said Wick Corwin, a Fargo-based attorney who is part of the NCAA's legal team. "But a September trial would require very aggressive work."

Peter Billings, an attorney hired by the Attorney General's Office to assist on the case, said his team intends to fly across the country to take depositions from all 20 members of the NCAA Executive Committee.

The judge suggests reworking the logo or nickname. I'd rather watch the NCAA continue to twist slowly in the wind on this ill-advised venture.

There's a debate raging in the economics profession over the decision of the profession's national organization's help-wanted publication to remove some language from ads that discriminate in favor of groups historically discriminated against. Inside Higher Ed reports:

When professors at the University of Vermont sent information about a job opening to the American Economic Association this fall about a tenure-track opening, they didn’t think their notice was unusual. After describing the position, the notice said that the university “welcomes applications from women and underrepresented ethnic, racial and cultural groups and from people with disabilities.”

Those words never made it into the economics group’s job notice list because they were deemed discriminatory by the association. That view has angered enough economists that the association’s board will be meeting next month to consider changing its policies on job listings, but for now economists are trading charges of discrimination, censorship and insensitivity.

I am a member of the AEA, as are most people in the field, and our university places ads in the JOE. The organizaiton's longtime secretary-treasurer, John Siegfried, says “We have taken the position that we do not want to help anyone discriminate in any way, shape or form,” and I agree with that. Our ads notify that we do not discriminate, and that we look for faculty able to "to teach and work with persons from culturally diverse backgrounds."

That apparently isn't good enough for some people, as Clark Patterson notes. Some people absolutely need a statement that they in particular are encouraged to apply. That is, they want some signal that the deck might be set in their favor. An EEOC lawyer calls this practice a "proactive measure".

It is common now for candidates I interview to have looked at our website and seen what our department looks like. I would view the "encouraged to apply" statement as inframarginal to a candidate really concerned about whether we are sufficiently committed to diversity. (Besides, we're ground zero.) It's a testable hypothesis: Someone should see whether more minority applicants are encouraged by particular statements about diversity commitment, ceteris paribus. It would make someone a nice masters thesis, if they had the data.

UPDATE: Turns out they did alter our ad. The sentence "...we invite individuals who contribute to such diversity to apply" used to have a list of the kinds of people who contribute to such diversity.

We bemoaned on the air Saturday the decision of new Congressman Tim Walz to make the minimum wage his first piece of legislation. I argued that this harms the future lifetime incomes of young workers, particularly minority workers. (Michael's post on the item is here, and here is something I wrote last year.)

Not satisfied with that attempt to control prices and quantity at the same time, Rep. Walz and others now sally forth into student loans.

To help pay for dropping interest rates on student loans from 6.8 percent to 3.4 percent, many Democrats are promising to back pay-as-you-go budget rules that would force members of Congress to identify tax increases or spending cuts to fund any new spending.

Some Democrats, including Sen. Edward Kennedy of Massachusetts, the incoming chairman of the Senate education committee, also say the government could save money by making college loans directly, relying less on private lenders.

Minnesota Democratic Rep. Betty McCollum, a member of the House education committee, and whose district includes 32 higher education institutions, said that Congress should target subsidies to oil companies to pay for the plan.

The plan to lower interest rates that lenders can charge students is part of a broader Democratic effort to make it easier for students and parents to pay tuition by increasing Pell Grants from $4,050 to $5,100 per year and expanding tax credits, among other things.

...Democratic-elect Rep. Tim Walz of Minnesota, a teacher, said the plan to lower interest rates is a good step but only "one little piece of the puzzle."Since I was in school in '89, less than 20 years ago, 70 percent of college costs were paid by grants," Walz said. "Today 70 percent are paid by loans. So there's a broader issue here of how we finance public education."

There is no longer even the pretend-reasoning used in the 1970s of needing to lend money to students to get more people in science and engineering and math for national defense purposes. (Full disclosure: I received $4700 in such National Defense Student Loans in the 1970s with 3% interest. At the time they were created, 3% was not a bad rate, but by the time I was in college the rate was negative in real terms. P.S. The loan was all paid back.)

Ted Kennedy's point is actually the most valid of the bunch: If the government can borrow funds to lend to students at a lower rate than private banks can (even with the backing of Sallie Mae) there might be some justification. But to flat-out guarantee a rate below the rate we receive from the government when it borrows money from us certainly means that Congress wishes to subsidize students. It also means that such loans will be allocated by something other than price. Credit to college students will be rationed by government rules rather than the market.

Betty McCollum illustrates what I said on the air Saturday: If she wanted to give money to students through a tax increase there would be accountability, but she instead chooses the close-a-loophole dodge. By what principle does one tax oil companies to give money to students?

A peaceful dogblogging Friday to you! By now your Christmas cards are either a) done or b) screaming like heck to be done. This means you are either a) exhausted or b) exhausted and harried.

Buttercup makes for a good sleeping companion; there is competition in the house for who gets to "take a cuddle" with BC. The only one she will not sleep with is me. It's mutual: I don't much care for waking with a dog's backside in my face, and I suspect she feels the same.

Happy Friday! New stories below.

Craig Westover argues about the lack of value in consensus.

A mandate to produce consensus for its own sake is also no way to solve problems, much less run a state.

Gov. Pawlenty has said that perhaps the reason Republicans took an election drubbing is they didn't get the job done. More than a little truth there, but Pawlenty, a disciple of Maharishi McCain (Sen. John) and a pilgrim on the path of transcending politics, seems to be seeking Nirvana in a mantra of consensus. What is consented seems to be of secondary importance.

I of course remind you of Lady Thatcher's view of consensus. But perhaps a few more words are in order.

James Surowiecki's The Wisdom of Crowds helps us understand why some types of consensus decisionmaking will work and others will not.

There are four key qualities that make a crowd smart. It needs to be diverse, so that people are bringing different pieces of information to the table. It needs to be decentralized, so that no one at the top is dictating the crowd's answer. It needs a way of summarizing people's opinions into one collective verdict. And the people in the crowd need to be independent, so that they pay attention mostly to their own information, and not worrying about what everyone around them thinks.

...Essentially, any time most of the people in a group are biased in the same direction, it's probably not going to make good decisions. So when diverse opinions are either frozen out or squelched when they're voiced, groups tend to be dumb. And when people start paying too much attention to what others in the group think, that usually spells disaster, too. For instance, that's how we get stock-market bubbles, which are a classic example of group stupidity: instead of worrying about how much a company is really worth, investors start worrying about how much other people will think the company is worth. The paradox of the wisdom of crowds is that the best group decisions come from lots of independent individual decisions.

I think Surowiecki's insight tells us exactly why this sudden love affair with consensus is doomed to failure. In the case of the Iraq Study Group, the critique most telling is the lack of diversity in the group that made the decision (Jed Babbin's referring to the committee as the "fabulous Baker boys" is trenchant.) It also suffers from the problem that there isn't an objectively determined 'right answer' to the situation in Iraq. In his book Surowiecki writes:

...the idea that the right answer to complex problems is simply "ask the experts" assumes that experts agree on the answers. But they don't, and if they did, it's hard to believe that the public would simply ignore their advice. Elites are just as partiasn and no more devoted to the public interest than the average voter. More important, as you shrink the size of a decision-making body, you also shrink the likelihood that the final answer is right. Finally, most political decisions are not simply decisions about how to do something. They are decisions about what to do, decisions that involve values, trade-offs, and choices about what kind of society people should live in. There is no reason to think that experts are better at making those decisions than the average voter. (269)

In the case of the Minnesota Legislature and its relation to the governor, it will be that too much attention will be paid by the DFL to what Pawlenty thinks and vice versa. It would be very nice if they could make policy without regard for 2008, but it's tremendously naive to think it can happen. Consensus does exactly what we don't want -- we want competition between politicians, because we want to be able to punish them when they make bad decisions. The problems the GOP faced in Minnesota stemmed from its representatives wanting to avoid competition from the DFL.

This is why, to return to Craig's point, we cannot focus on compromise -- and it is not consensus when one side compels the other to surrender its principles. Crowds work to solve problems of cognition, coordination and cooperation. They do not solve many of the big problems political institutions face. What we need are more Maggies who are conviction politicians, not consensus politicians.

The U.S. Mint has issued new rules to prohibit the melting pennies and nickels. This is the result of sharp increases in the prices of copper, nickel and zinc (it's worth remembering the early 1980s, when the copper/zinc ratio was changed to reduce the metal cost of pennies.) The government currently loses 3.34 cents on each nickel produced and 0.73 cents on each penny.

Monies can be divided into two categories: fiat and commodity. Fiat is money by government decree; commodity money is something with intrinsic value that's generally accepted as a medium of exchange. Pennies and nickels have now, thanks to the rise in metals prices, traversed from one category to the other. I find it interesting that the U.S. government would rather lose seigniorage and keep these coins in circulation than withdraw the penny and nickel.

Worth noting: even in 2004, when prices for copper, zinc, and nickel were much lower, the operating profit margins on nickels and pennies were less than 10%, compared to more than 60% for other coins. (Source: US Mint annual report.)

A high school facing budget cuts makes the choice to eliminate some advanced placement courses. That can have a cost on the school's seniors when they apply to selective colleges. So in one case, the school's guidance counselors sent letters to the colleges explaining the situation.

The letter of explanation that Westwood officials are sending to ... admissions officers tells them to "be aware that we experienced substantial budget cuts last spring which significantly impacted our course offerings for the 2006-2007 school year."

"We encourage all of our students to build a solid academic record in preparation for college by taking four years of all their academic subjects," the letter continued. "A number of seniors who would have continued on with a fourth year of science, social studies, and/or foreign language, or combination were unable to take the recommended courses because they were not offered."

The school cites rising utility bills and special education as the cause of the cuts, accompanied by no budget increase the previous year and a 4.6% increase this year. The article does not give us an idea of what alternatives there were to cutting these courses. It does note that for one school "rigor of curriculum" is the largest factor in admissions, while another says they cannot "penalize a student for classes that aren't available." So we know the classes cut had a cost to the students of some kind, but not how much and without against which to compare that cost.

(h/t: Chronicle news blog)

American soldiers are the greatest fighting force in the world. But their fierce discipline and mighty power are tempered by the love they show for those who are weak or needy.

As in years past, our soldiers are