Saturday, June 30, 2007

Immigration Bill Thoughts, #1 - Complexity 

After listening to Norm Coleman on the Final Word, (AM 1280 today (3-5), it appears he finally understands what Americans want regarding immigration. He acknowledged that Congress, in particular the US Senate, has lost the trust of the American people and one way to regain it, is to pass something that enforces border security.

One word used by Congress when dealing with large problems, is "complex." Most problems are not complex, they may be very large as the immigration issue is, but it is not complex. We have 12,000,000-20,000,000 illegals in the USA and borders that leak like sieves. What to do?

1 - Close the borders
2 - Enforce the laws on the books
3 - Find the illegals and identify them and make them carry identification cards
4 - Determine what to do about the situation.

As stated, this is not complex, merely large. If we can track a pound of hamburger back to the cow it came from and when, we can track humans. By refusing to use the term "complexity" as an excuse to perform a simple (but large) task, maybe we can get around to solving the problem.


Friday, June 29, 2007

SCBA gathering (Updated!!!) 

We are having a gathering of the St. Cloud Bloggers Association (containing both MOB and non-MOB members) at 5pm this Friday at Granite City Food and Brewery here in the Cloud. It is our second visit to GCFB, which was great last time and had wireless capacity for us to use. We expect some elected officials to attend. Please contact Gary Gross from Let Freedom Ring so we can give the restaurant a head count.

Jeff from View from the Cloud invites attendees to then come to the Veranda Bar in downtown St. Cloud to hear his band play. He'll be the guy on the harmonica.

GCFB is at the corner of Highways 15 and 23. If you are coming from the Cities, take I-94 to exit 167B, Highway 15. Come to the first stop light (just past the "Welcome to Saint Cloud" sign) and you'll see GCFB there on the corner. You'll need to make a lefthand turn, then turn into the parking lot where you see Bed, Bath and Beyond and Chipotle.

Note: The MOB gathering comes July 14 at Keegans.

UPDATE: The guest list grows! Rep. Laura Brod has confirmed her attendance; we are "efforting" even more distinguished guests.

UPDATE 2: And we're live from GCFB! We have the following blogs in attendance:
We have Representatives Dan Severson, Steve Gottwalt, Laura Brod and (pleasant surprise) Matt Dean as well as House district 15B candidate Josh Behling (needs website -- promises to do so soon) here with us as well. There's lots of political talk around here. Jeff Lee and I have taken some pictures from here.

While it's a little noisy inside here, and Drew hasn't come with the cigars yet, we are hopeful that we will have a few more people show up later. Still, we have over thirty here. We will need a ruling for the blogs listed here not in the MOB to be admitted as a sanctioned event attendee.

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Put down that beer, let's go to the movies 

Tim Harford points out a benefit of violent movies:

This argument [of a link between movie violence and violent crime -- kb] assumes that the effect of a violent film is to provoke more violence. That is not clear. I understand that when people watch violent images in laboratory experiments, they become more violent...

But what you are not considering is this: when the local bully-boys are in the cinema watching UltraDeath III: the Revenge, they are not drinking lager or getting into fights. A new piece of research from economists Gordon Dahl and Stefano DellaVigna shows that when a violent film is on at the multiplex, violent crime falls during the evening and stays lower until the next morning. If a slushy romance is screened, the thugs go to the pub instead and mayhem ensues. Dahl and DellaVigna reckon violent films prevent 175 assaults a day in the US.

Here's the research.


Not so icky after all 

The core inflation measure used by the Fed as its gauge of underlying inflationary pressures came in around expectations. The PCE core rate for the last twelve months came in at 1.9%, in line with the Fed's implied target of 2%. That should soothe the savage market beast for today, contrary to my expectation yesterday.

Whether this will help provide a "convincing demonstration" of a reduction in inflation risk remains to be seen. Consumer sentiment and the purchasing manager indices both beat expectations, indicating the economy is still a little stronger than we might have guessed. Given that the Fed staff at least is looking at constrained supply factors as its rationale for rising inflationary expectations, you might think inflation is still there for the worrying.


Thursday, June 28, 2007

Let's make it 500 

Bad press is better than no press, says Evan Coyne Maloney, director of Indoctrinate U.
Most of the [New York Times review] was spent addressing cases that weren�t in the film, rather than addressing what was in the film. The author also claims that �professors, administrators and students say the national picture is far more complicated than that pictured in �Indoctrinate U,�� although I don�t know how they could know that, because none of those people actually saw the film.
Off the IU website you will see that Minneapolis is currently second on the list of people who have signed up to see the movie, with 248 people. That doesn't include, I'd guess, folks like me up in St. Cloud. But, I want to have Minneapolis be number one. So, if you are a Minneapolis-based reader and you want to see this movie -- and after listening to this Final Word interview with him, you will -- click and sign up. Then we can watch it and give it a real review.

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This'll be icky 

The Federal Reserve held rates steady, but the markets will not like the references to inflation here:

Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

The statement appears to be unanimous. Data revisions announced today on PCE inflation -- the Fed's preferred measure -- moved up the rate beyond the assumed target of 2%. The WSJ Economics blog points to tomorrow's statement on May PCE as key.

The comment on "high level of resource utilization" appears to be the staff pushing back on the board, at least if you believe this story.

The Dow was up 50 when the news broke; I'd bet that won't last.

UPDATE: William Polley calls it nothing new and shouldn't move the market (around 2:24 when the Dow had rallied back to about +25.) Close: -5. He notes, I think correctly, that the bond market is leading the stock market here. (See also James Picerno's note on the yield on indexed Treasuries relative to GDP.) I'll agree with him that there's no sign yet, but if tomorrow's PCE numbers are bad, it will be icky. Or ishy, if you're from central MN.


Thank you, Chief Justice 

The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.
From Parents Involved in Community Schools v Seattle School District No. 1. The Chronicle of Higher Ed characterizes the opinion as narrow, leaving both Grutter and Gratz in place. Still, that sentence from the Chief Justice will be valuable when perhaps a better case comes before the Court.

SCOTUSblog reports
that Justice Stevens believes the vote for this would have been 0-9 rather than 5-4 if the Court of 1975 had heard this case. I wonder what he thinks thirty-two years of history has taught us about race-based preferences.


Why does the Twin Cities care about JOBZ? 

Another lawsuit has been filed against the state for its JOBZ program.

Former state Rep. Rob Leighton says JOBZ discriminates against other businesses that don't get those tax breaks. Leighton is an attorney representing ten businesses and individuals who believe they've been harmed by competitors in the JOBZ program.

"The JOBZ program permits them to not have to pay real estate taxes, income taxes, corporate taxes. And you can imagine that if your trying to compete with a fellow business that's in the same area of business you are that would be a big disadvantage. So, each of these plaintiffs feel they've been directly harmed economically because of it. And they believe they should be treated equally."

As Leighton works for a St. Paul firm, I will venture a guess that his plaintiffs are in the metro area and thus ineligible for JOBZ. A different lawsuit failed last year because the plaintiffs -- also Cities-based, did not have standing to sue, nor could show harm in the form of higher taxes. I see nothing to indicate yet how this suit is different.

It's interesting: The argument goes that a metro area firm's tax burden rises because the government is making tax expenditures to support outstate economic development. If that sort of thing passed, could towns that did not qualify for, say, local government aid sue because they did not have access to that crack kit? Where would such logic take you?

If I was a lawyer trying to stop JOBZ, why wouldn't I find plaintiffs instead in areas that DO have JOBZ, but firms that had not been able to get access to JOBZ-designated properties? Then one might argue that local business property taxes rose because JOBZ had taken other property in the city off the tax rolls.

(Noted: I'm not a fan of the program. See here and here.)

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So where does the value of an iPod come from? Hal Varian tries to figure it out.
Here�s a hint: It is not Apple. The company outsources the entire manufacture of the device to a number of Asian enterprises, among them Asustek, Inventec Appliances and Foxconn.

But this list of companies isn�t a satisfactory answer either: They only do final assembly. What about the 451 parts that go into the iPod? Where are they made and by whom?
It turns out that for $110 of the $299 price, we don't know where those factor payments -- largely labor -- go.

The globalization of production creates real problems for statisticians. For example, Varian notes, "[e]ven though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about $150 to our bilateral trade deficit with the Chinese," because final assembly is done in China. Yet China's value added to the process -- the $150 minus the value of all the inputs used to make the iPod -- is only $4.

As to Apple,
The real value of the iPod doesn�t lie in its parts or even in putting those parts together. The bulk of the iPod�s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.

Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that�s what really matters.
Apple gets $80 for the idea of the iPod. It's safe to say as well that nobody at Apple actually knows how to build an iPod from scratch. But that's true for pencils too.


Wednesday, June 27, 2007

How do you read this? 

Longtime GOP Rep. Steve Sviggum is leaving the Minnesota House to become the commissioner of labor and industry. Certainly after spending 29 years in the Legislature, one can want a change in place. And at 55, he might have been planning to retire soon at any rate. But if he thought the odds were good that the GOP would take back the Minnesota House in 2008, would he make this move? I don't know, but I'm not taking that as a good omen for the GOP.

I'm positive Michael will disagree.

At any rate, Rep. Sviggum has been a great legislator, and his knowledge of the institution will be missed by both GOP and DFL representatives.

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Private channel to Ahmadinejad 

Mahmoud, buddy.

A wise man once said, "You can control prices, or you can control quantity. You can't control both."*


Angry Iranians have torched petrol stations in protests against the sudden imposition of fuel rationing in one of the world�s most oil rich nations.

Protests rage over petrol rationing in Iran
Youths set a car and petrol pumps ablaze in the capital

The rationing was announced on Tuesday only three hours before it was due to begin at midnight, leading to long queues at service stations as Iranians rushed out to fill up before the clampdown kicked in.

...Iran has to import more than 50 percent of its petrol needs because of its low refining capability, despite being the second biggest exporter in the Organization of Petroleum Exporting Countries (OPEC).

To make matters worse, consumers are being forced to use smart cards to keep track of their purchases but problems in distributing the cards have delayed implementation of the plan, while pumping petrol into vehicles is only possible when the smart card is inserted into the pumping machine.

The price of gas is still controlled at $.10 per liter. (The story has some questionable conversion rates; they report 1000 rials/l., and the rial/dollar rate is 9276, the rial/British pound rate is 18,527.) The use of smart cards as a rationing device is rather new; the likelihood of cash black markets is quite high. These protests won't last long, only until the clever subjects of your country work out the new black market arrangements.

Mahmoud, my friend, the best rationing device in the world is the price system. Of course, that would reveal to your compatriots the cost of ignoring the West as it comes through sanctions that cripple your ability to refine oil. Tough choices, but that's why they pay you the big rials.

(h/t: Captain Ed)

*--I'm pretty sure I heard Art Laffer say this first, but I'm betting he got it from somewhere else. It's too common in economics to not have been around a long, long time.


Is this unusual? 

Via Bloomberg:
Federal Reserve policy makers disagree with their own staff economists, and a growing chorus on Wall Street, who say the U.S. economy can't expand as fast as it used to without pushing up prices.

The split, signaled in the minutes of May's Federal Open Market Committee meeting, may reflect debate over whether a slowdown in U.S. productivity is permanent. ``Many'' FOMC members were ``somewhat more optimistic'' than lower-ranking officials about the economy's speed limit, the records showed.

An interesting paper by Lawrence White -- OK, maybe just interesting to me -- points out that the staff of the Federal Reserve tends to have a status quo bias. Particularly for Board of Governors' staff, turnover is low and there's a tendency to protect the institution:
To repeat Fettig�s (1993) characterization of Milton Friedman�s view: �if you want to advance in the field of monetary research . . . you would be disinclined to criticize the major employer in the field.�

These incentives and filtering mechanisms may produce a result as if the Federal Reserve were deliberately subsidizing research that takes the institutional status quo for granted. This should not be surprising, nor is it scandalous. We naturally expect the research that any organization sponsors to tend to promote rather than to undermine that organization�s interests. When (say) the insurance industry sponsors a report on the advisability of federal subsidies for terrorism insurance, the sponsorship alerts cautious readers to scrutinize the research methods and findings for pro-industry bias. Raising the question of the Fed�s status quo bias alerts us that the same sort of scrutiny is appropriate to monetary policy research, to avoid employing a double standard.
If a particular Board of Governors (or perhaps more appropriately, a particular FOMC) should create extra inflation, it may not damage that board in the short run but it reduces the reputation of the institution in the long run. The Staff is more likely to safeguard those. The proponents of the more optimistic view (which is a little weird in this case, since as Barry Ritholz argues, that optimistic view on rates includes a higher probability of recession) can be wrong without bearing too much consequence, and if they are right their next jobs will have more prestige and more money. If they're wrong, they go back to, well, academia.

Though when I look at housing (say, as James Hamilton and Mark Zandi did last week), I am tempted to think the "optimists" are right.


Tuesday, June 26, 2007

Where is the line? 

In an update to the story yesterday about the MnSCU board spat, I identified Mr. Kimball as not being a student. In this I could only rely on information I had in my control, such as the student directory and the online email list. He was not found in either one. I took that to mean he was not a student on the campus in 2006-07. Students not registered for classes have their email accounts suspended by the university's computing staff.

Shortly after my 10pm update, Mr. Kimball emailed me from a student account here on campus. I confess at first to being surprised. He indicated he was enrolled in classes. The only way this can happen, as best I can surmise, is that he is enrolled for a class or more this coming fall. (Here's the automated way he can do that.) Due to data privacy issues, there is no way for me to tell that someone is an incoming student (or returning after some hiatus) unless they identify themselves.

When I decided in 2004 to join the NARN as a radio personality, I resolved that it had to be clear that I spoke on the air in a personal capacity. I try hard to avoid the impression that a listener thinks I speak on behalf of the university. I thought I had taken due care in establishing, within the rules of data privacy, that he was not a student and therefore unlikely to be seen as someone with whom I might have any professional responsibility.

Had Hal identified himself as a returning student before our Saturday broadcast, I would have hesitated on running the story and would certainly have been more tempered in my discussion of his role; I can understand the confusion it causes to think I may be criticizing him as a professor. Again, he has never been my student and given his course of study (identified publicly as a masters program in social responsibility) he likely never will. But my line is a little further out than that; the potential that criticism of a person is seen as my speaking officially to a student is over that line.

My obligation is to the university in this regard. To them, I apologize for any confusion I may have caused in mistaking Hal as an ex-student. While I believe I took due care to ascertain his status, it is nevertheless my mistake for which I will take responsibility. I have communicated my regrets to Hal, who has been gracious in his reply. I will write no more on this matter, and I will clarify my mistake on the air next Saturday.


Monday, June 25, 2007


A man returns to his bride. Well done, good and noble servant. We pray for a very quiet few months for you both to reacquaint yourselves with each and other and your new lives.


Let's review 

On Saturday's show, we did a rather obscure story that I'd like to review now and provide some background.

A seat is available on the MnSCU Board of Trustees for a student from one of the four-year universities in the system (one of which is SCSU.) The current holder, Michael Boulton, goes off on June 30.

Chapter 136F of the Minnesota Statutes governs MnSCU and specific provisions are provided for the selection of trustees. 136F.04 covers the student board members' selection, assigning them "the responsibility for recruiting, screening, and recommending qualified candidates" to the board. They can recommend between two to four. The statute explicitly states that the governor "is not bound by these recommendations." The student association covering the four-year universities is the Minnesota State University Student Association (MSUSA.)

During the show we reviewed first the case of Luke Hellier. Luke is a graduate of St. John's University, has been active in Republican politics both on and off the campus, and has experience in SJU student government. I met him while he was at SJU and active with Students Fostering Conservative Thought; I have spoken as well to the campus' College Republicans chapter. Luke says he is enrolled for classes this fall at MSU-Mankato for a masters degree in public administration. He tells that upon speaking with Boulton, and realizing he met the requirements for the position, he decided to apply for the post. Using the Open Appointments process meant he filled out a form. He reports that last week, he was interviewed for the position. Nothing on that form indicated to him that he should speak to MSUSA for screening, nor did anyone from the governor's office when they interviewed him.

We also interviewed Adam Weigold, a candidate who went through MSUSA screening. When I asked how he knew of the post opening, he reported that as someone affiliated with MSUSA he was aware of the process anyway. How was the position advertised? I asked. He replied that it was up to campus student government presidents to make the position known to people on their campuses. While Adam was very supportive of Luke's candidacy, he felt that Luke should have known this process by finding the statute.

That's a fair enough point. But what I would ask is, when the statute says (136F.02) that "Three members must be students who are enrolled at least half time in a degree, diploma, or certificate program or have graduated from an institution governed by the board within one year of the date of appointment." (emphasis added), it clearly contemplates the applicant pool to include a student entering school. Nobody disputes this. And this would appear to be the case: The entering student would be a graduate student coming to a MnSCU school. We do not offer doctorates (yet) and master's programs typically take two years. So it's most likely that if grad students are contemplated to join the board, they would most likely join it at the very beginning of their enrollment in a program. Without the provision I italicized, it is unlikely that graduate students could gain the 4-year student seat on the MnSCU board.

Yet the system by which MSUSA announces the process it uses is exclusionary to those who would enter a program a few months after the announcement of a vacancy. It puts candidates like Luke at a disadvantage to insiders within MSUSA and the seven campus student governments.

If you think that's fair -- that there should be preference for current over incoming students, even if the incoming student has experience in student government from a non-MnSCU school -- you're welcome to argue that point. Please indicate how you read that into current Minnesota statute.

Enter last week's folderol from the leftist blogs inspired by Hal Kimball. Long-time readers of the Scholars are familiar with Mr. Kimball. He is a past student government president. During his tenure his student government helped get a man elected homecoming queen, interfering enough with the campus' student finances that its student finance committee quit en masse, and causing enough ruckus with the student newspaper to have its editor make Kimball the focus of his valedictory editorial, including these famous words:
Kimball is a whiny, two-faced, corrupt liar- all of the personality traits of a politician. He probably has a good career ahead of him.
The career path was rather evident early on. The year before Kimball became president of the student government, SCSU's students voted to remove themselves from MSUSA. To do so requires legislation, so the vote was to bind student government to seek that legislation. Throughout early 2004 the debate raged, and when Kimball won election that April, he indicated he would still abide by the students' preferences.
Kimball and [VP Bianca] Rhodes [who also tried to quit as Kimball's VP during the finance flap in 2/05 but was persuaded to stay] intend to keep the pressure on, they said.

"We will still be working on the MSUSA issue," Rhodes said. "That is very important to the students and student government."
But in the greatest about-face since Gomer Pyle, Kimball not only does not press for SCSU's departure from MSUSA, he becomes its chair. In a scathing editorial of Kimball's tenure, the campus newspaper notes that this is "similar to President Bush becoming the head of the United Nations after his term."

So those who think I might have been a little over-the-top last Saturday on my show should review this fellow who you have followed into your calumny over Luke Hellier's legitimate candidacy for the MnSCU Board. Is it really about protecting the recommending authority of MSUSA -- a body that Hal Kimball has both said he wanted SCSU students out of, and then became chair of -- or is it in fact about the politics of Luke?

After reading the facts above, and reading Hal's post, you decide: Does this look like the post of a 35-year-old adult that should serve on a board of MnSCU to you?

UPDATE: Michael looks at the reporting and finds it lacking.

UPDATE 2 (10pm): Since some people are missing key points, let's review again:
  1. I don't really care if Mr. Hellier wins or loses the Board seat. I think he is qualified, but it is reasonable to assume all three candidates are. Having not interviewed one and having only talked briefly to the other two, I'm in no position to pick. Nor is that my job: It's Governor Pawlenty's.
  2. Mr. Kimball is not a student at SCSU at this time. Having left the university, he is not subject to any special consideration from me as a faculty member. I checked this before agreeing to do the story on the show by establishing he no longer had an email account at the university. He has never been in one of my classes and his resume indicates he left the university in 2006.
  3. Reporting on his past at the university goes to motive. Mr. Kimball is a political actor in this issue; the post I offered of his above shows a political argument disqualifying his contention that the issue is about the MSUSA recommendation. Even in his questions he would ask of Mr. Hellier, he makes Hellier's work with the Bachmann campaign an issue. There is no political qualifications or disqualifications for a Board position. And his inconsistent position on MSUSA ("it's not your daddy's MSUSA") should call his judgment on the MSUSA recommendation into question. The target of his post is not Hellier but Pawlenty, and his willingness to smear Hellier with misrepresentations to get at Pawlenty is in fact part of a pattern of behavior.
  4. We are grateful for the listenership of the leftist blogs to our show. We are glad you found it entertaining. That is, in fact, what we do. We both inform and entertain. If leftists could figure this out, maybe they'd draw more than a 9% share of the talk radio format.

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Do students have the right to advocate illegal acts? 

It would appear not.
The Supreme Court tightened limits on student speech today, ruling against a high school student and his 14-foot-long �Bong Hits 4 Jesus� banner.

Schools can prohibit student expression that can be interpreted as advocating drug use, Chief Justice John Roberts wrote for the court.

...�The message on Frederick�s banner is cryptic,� Roberts said. �But Principal Morse thought the banner would be interpreted by those viewing it as promoting illegal drug use, and that interpretation is plainly a reasonable one.�

"We hold that schools may take steps to safeguard those entrusted to their care from speech that can reasonably be regarded as encouraging illegal drug use," Justice Roberts wrote. "We conclude that the school officials in this case did not violate the First Amendment by confiscating the pro-drug banner." (Also from an AP report on the WSJ website, subcribers only.)

My only reservation in the Court's decision is this notion that public school students are "entrusted to the(ir) care" of the school's administration. Truancy laws lead to a duty to attend school. When one is compelled to attend, can we really then attribute to the parents and administration some contract that involves a trust? While I have in the past advocated for a return to in loco parentis in universities, even public ones have to sell themselves to students and their parents. High schools do not have this requirement.


A wise man says 

Jim Knoblach, former state representative from here in St. Cloud and former chair of the MN House Ways and Means Committee -- meaning, the guy who knows the budget as well as anyone in MN -- has a Your Turn in today's St. Cloud Times (which, unfortunately, is not up on the Times' website. UPDATE: Randy Krebs, the opinion editor, acted fast and got the article up. Thank you Randy! Link is updated) In it he points out that if the DFL wants to have inflation figured in budget forecasts it need only do one thing:
I said at the beginning that some legislators want to have their cake and eat it too.

What did I mean? Simply this: If big-spending legislators want to have inflation included in current forecasts, all they need do is pass laws mandating that all programs get automatic inflationary increases.
So why, do you think, doesn't the DFL do this?
Personally, I think this would be a terrible idea. Yet even big-spending legislators are unwilling to propose this, in part because they might have to make unpopular spending cuts the following year if there was not enough tax revenue.

It is far easier to advocate for a forecast that assumes everyone gets an inflationary increase, than to have to make the tough choices that might come if you pass laws that actually give one.
And to those who think having inflation would the budgeting easier, Knoblach also has some tough words:
Most recipients of state tax dollars assumed they would get an inflationary increase, and then added their wish list on top of that assumption when presenting their budget request.

In addition, determining the actual budget base for an agency was confusing. Legislators weren�t always sure if the base budget numbers they received were the amount an agency was legally authorized to spend, or authorized spending plus inflation.
Having no inflation in the expenditure forecast, except for those spending items indexed by law, provides more rather than less clarity.

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Sunday, June 24, 2007

Camels on the Tundra 

In school most of us learned that camels are able to store water in their humps, thus enabling them to traverse long stretches of desert without liquid intake. Saturday, we experienced our third encounter with dogsled training locations. What we learned was absolutely fascinating.

There are two premier dogsled races: The Yukon Quest run from Whitehorse, Yukon, Canada to Fairbanks, Alaska (AK), USA; and the Iditarod, run from Anchorage to Nome, Alaska, USA. These races challenge mushers and their dogs and are a reminder of the strength of the human spirit exhibited by pioneering people of the past.

We absorbed the sights, sounds, and stories of three dog training teams: Susan Butcher, a multi-year Iditarod winner; Jessie, a musher and trainer from the Riverboat Discovery Tour; and Jeff King of Husky Homestead, a consistent top 10 finisher and multiple time winner of the Iditarod and the Yukon Quest.

These dogs love to run. You can feel it in the air: when they are hitched to ATVs for practice runs, when their trainers unhook them from their private dog territory. At the Susan Butcher training home, the ATV was parked with a dog team relaxing in place in front of the ATV. After we were told some of the basics, one of the trainers walked to the front of the dog line - they became exuberant, jumping up and down, pawing at the ground! The trainers hitched each dog to its respective place on the team line. The musher returned to the ATV and these dogs were raring to go. All others not hitched were excited, too. "Take me, take me," each seemed to be saying. Once the command to "go" was given, they shot out of the compound.

We learned from each meeting with a musher. These lean dogs weigh 40-70 pounds, think of marathon runners, not sprinters. They love to train. They consume about 1500 calories on a regular non-racing season day. When they start winter race-training, their consumption increases to 4000-5000 calories per day. On the trail during a big race, they can consume up to 10,000 calories a day! Their needs come first, period.

We asked about water - these dogs have a biological process whereby they convert the mushy race meals (comprised of dog food, protein, fat, water, etc.) into a "liquid" that can be drawn down during their running between the checkpoints on the racing trail. Hence, the title, "Camels on the Tundra."

Saturday, June 23, 2007

Alaska Trip, Soldiers 

Friday, June 22, we took a 13 hour guided tour to one of the most interior sections of Denali National Park. Initial viewing was low due to clouds, fog, and in parts of the park, smoke. We were fortunate that the clouds, fog and even smoke eased by the middle of the afternoon and we could experience again, the immensity of Alaska.

Our guide was delightful, informative, and an excellent driver. Much of the single, two-way gravel road through the park is one lane wide. The only access for most people is via a sponsored bus. The drop off on the outer edge of the road was incredibly steep at times yet being able to see the vast valleys carved by glaciers, the numerous runoff streams, hundreds of the 1000's of free-roaming caribou, 11 grizzlies, some with cubs, red fox, Dall sheep, and numerous smaller animals in their habitat abated the fear of white-knuckle driving. It was a truly magnificent journey.

We were provided with a substantial lunch of individually packaged items. Humans being what we are, ate the fruit, cheese, gorp, cookies, candy, sandwich buns and some of the tuna. However, many left (or could not easily open) the reindeer sausage and jerky. As the driver collected the leftover food, we separated the jerky and sausage for shipment to our guys overseas. When we told people why we were culling through the food bag, not only did they give their approval, but those who had kept their jerky and sausage for later personal use, gave it to us.

People want to help - often they just don't know how. Every time I have explained about shipping packages overseas to our guys, Americans have responded positively.

Friday, June 22, 2007

More and less of me 

First the more: Because someone apparently has trouble with the concept of gravity (he can explain later), I'll host Taxpayers League Live tomorrow at 9am. Better, I will interview John Lott a second time. (We didn't get through all my questions last time.) Even better, because only one in the crib is gravity-challenged, I will have Margaret Martin with me. Phil Krinkie figures to come by in the 10am hour; maybe he can explain this silliness with the new House tax bill to me.

After that I have lunch at an undisclosed location, then Michael and I plot the Final Word at 3pm.

Sunday, I'll be on Race to the Right with Tony Garcia on KNSI, talking about blogs in Minnesota. That show begins at 1pm. Tony might keep me on for awhile, or I may annoy him enough to be shown the door by 1:10. We'll see. If I were you, I'd not be late.

Now the less: You may tell I am posting less on here right now than before. I had it in my head for some time there should be four posts a day (ideally, two AM and two PM.) Four. Why that number, I do not know. But if I didn't hit that number I felt I had shorted the pot.

While most people think summers are less busy for professors, for me at least summer is my busiest time. It's specifically the time I get to write professionally. And with a contract for a book in hand plus a number of obligations to journals and other outlets, hitting four is getting to the point where I feel pressures both to post and not to post. And when that happens, the blog has to get less attention.

So I've decided that, for now, the two morning posts will have to go, and the two afternoon posts will be most of what you see for the foreseeable future. If it costs readership, that'll have to be.

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Interesting two sentences 

Our initial findings are that athletic scholarships have a public good -- they provide geographic diversity, ethnic diversity, economic diversity. But whether they make more students come to our institutions is a question that will require a lot more study.
From an interview with Charles Ambrose, chair of the NCAA Division II Presidents Council, in answering a question on whether D3 programs could save money by offering athletic scholarships. The interview (for Chronicle of Higher Ed subscribers only) talks about the loss of membership in D2 due to "ticker envy". Phil Miller reports on how costly that envy can be to once-prosperous D2 programs who try to jump up.


Thursday, June 21, 2007

Alaska - Road to Denali, the Kenai and Other Spots 

We just drove from Anchorage, Alaska (AK) to McKinley Lodge, just outside Denali National Park. This drive was after the previous week's travels from Anchorage to Cooper Landing, about halfway down the Kenai Peninsula and some tourist trips around the Kenai.

AK drivers are incredibly polite! There is minimal speeding anywhere - inside city limits, on remote roads, etc. Heading south, signs saying: "Illegal to delay five cars - must use turnout" are posted frequently. In other words, if you're holding up traffic, please get out of the way. I've driven tens of thousands of miles (honest) in this great country and I've never seen such a common sense sign.

The road to Denali, drops to two lanes a bit north of Anchorage. The turnout signs are not there but drivers, especially RV drivers, seem quite aware of their actions on the road - it is rare there are more than seven or eight cars backed up behind any vehicle. However, on this road, I experienced my first time driving in ruts - I kid you not - part of the two-lane road literally had ruts where cars were driving.

The immense areas of this state continues to amaze me. You have forests for miles on each side of the road, not 100' of planted trees to protect a view but miles and miles of uninhabited land. We have become so conditioned by our encounters with other people that it seems almost impossible to envision these vast stretches of land with next to no humans.

This post is a bit of an anecdote. The fish stories have to wait until I return and develop some photos from a disposable camera - if they turn out, well, let's say, I hope the true stories with them are interesting to you as to those of us who experienced the events.

Fools know Latin 

If they see it in a movie, that is.

David Strand, who describes himself as a DFL activist in Aitkin, asks in Latin where Governor Pawlenty is taking Minnesota.
At the election of Minnesota Republican Party officers, Governor Tim Pawlenty boasted about using vetoes 55 times during the 2007 Minnesota legislative session. It is remindful of the tale of the Roman Emperor Nero who played the fiddle while Rome burned.
Been a long time since we heard "YOU'RE SCHOOLS ARE BURNING!!!" But we have in Mr. Strand someone else who thinks the measure of how much society cares is how much money it takes from taxpayers.
It might be appropriate to put the question "quo vadis," Latin for "where are you going?" to Governor Pawlenty. Since he claims that his vetoes saved Minnesota from the taxing and spending Democrats who control both state houses, where does the governor think he is taking Minnesota?

There is much evidence to answer the question. First, the size and scope of government is normally determined by public policies.
Utter and complete hogwash. Gordon Tullock describes how little of government spending goes to provision of public goods, and how much is caught up in rent-seeking. Unless one feels the size and scope of government is determined by how much redistribution it does, there is little in the data to support this claim. Research in the international field by Alberto Alesina et al. (2000) , and those referenced by Dan Mitchell also show that after a point, government spending is a drag on growth.
All evidence shows that larger public sector resources translate into success of public policy goals. For example, nations at the high end of public spending have the best rates of most critical measures of human decency. Examples are poverty, homelessness, infant mortality, teen motherhood, abortion rates (especially for teens), violent crime, public school graduation rates, K-12 test scores, election participation, prison incarceration, average life span, energy consumption, modern public transit and economic mobility, the direct measure of how equal opportunity really is.
Did you notice what was left out?

Wealth creation. About this, Strand offers not a strand of discussion. He attempts to say that if you oppose giving government more "resources" makes you in favor of greater poverty, lower test scores, etc., a logical fallacy. It never seems to dawn on him that before you can have additional "resources" someone must create them. How do you expect to get them? By deciding that the engine of progress is to be chained?

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Principals, agents and journalists 

Everyone and his mother-in-law, it seems, is linking to the MSNBC story of journalists who made political donations. While it seems fashionable to bash a particular journalist for giving money -- and, no surprise, mostly to Democrats -- Ed Morrissey asks a probing question.
Why should journalists have to trade away their rights to political expression in order to work in the media? They are Americans, after all. Again, in this instance, it's exactly like the BCRA; it strips a fundamental right of political assembly and speech from a segment of American society. Regardless of how one feels about bias in the media, that approach is fundamentally wrong.
There are, however, many rights we trade away in return for certain jobs. Athletes have contracts that prohibit activities that put their bodies at risk (Ben Roethlisberger says hi, Ed.) Some individuals who perform personal services give up speech rights as well, which is after all what campaign contributions are.

What's worth probing in Ed's question is why some news organizations would have rules against political contributions. I don't think it's necessarily an act of stupidity. News organizations sell themselves as agents (the journalists) to provide information to the principals (the readers) that is to be reliable. Because there is asymmetric information -- the journalist usually in fact DOES know more about a particular story than the readers, sometimes even more than the blogger -- there is a potential conflict of interest. The journalist can filter the news to turn a story that is sold by his bosses to be "truth" into propaganda. Media owners hire editors, ombudsmen, etc., to represent to the readers that someone has vetted an article and that it contains truthiness. To help with that representation, the newspaper may contract with journalists who sign pledges to waive their right to make political contributions, just as a ballplayer might waive his right to privacy and allow someone to randomly command a urine or blood sample.

While I see no reason why a journalist always must sign away that right to make contributions, I also so no reason why a media owner has to hire someone who would not sign a contract that banned the behavior as a condition of employment. The newspaper is the owner's property, and he has the right to entrust its reputation to those he chooses, since the loss of reputation is something borne by the owner.

Any such restrictions are of course imperfect; there will be chiselers. But technology will also influence the prevalence of such arrangements. When the blogosphere and other independent watchers can investigate who made contributions to whom, newspaper owners may feel more or less compelled to hire reporters with the restrictive covenant against contributions. If the reader can judge for himself the preferences of the reporter, he can adjust his reading as well. Since I would only sign the covenant in return for some consideration -- likely, additional money or perks -- the owner has an incentive to not impose the covenant if it is duplicative of private information produced by others. I can't predict which way newspapers and television news will turn in the age of abundant information.

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Wednesday, June 20, 2007

Scrip for liberals 

Every once in a while someone sends me a story about scrip. Having spent time studying, for example, the history of the karbovanets in Ukraine . There has often been scrip used by the military, for example after WW2. And I have talked in the past about notgeld past and present.

A pastor friend sent me a story of a different kind of dollar alternative. It isn't uncommon for bastions of progressivism to take up these alternative monies. Local business owners tend to think they will be helped by loyalty from residents. But this one is interesting insofar as they encouraged acceptance by intentionally devaluing the local scrip by 10%.
There are about 844,000 BerkShares in circulation, worth $759,600 at the fixed exchange rate of 1 BerkShare to 90 U.S. cents, according to program organizers. The paper scrip is available in denominations of one, five, 10, 20 and 50.

In their 10 months of circulation, they've become a regular feature of the local economy. Businesses that accept BerkShares treat them interchangeably with dollars: a $1 cup of coffee sells for 1 BerkShare, a 10 percent discount for people paying in BerkShares.

Named for the local Berkshire Hills, BerkShares are accepted in about 280 cafes, coffee shops, grocery stores and other businesses in Great Barrington and neighboring towns, including Stockbridge, the town where Rockwell lived for a quarter century.

"BerkShares are cash, and so people have transferred their cash habits to BerkShares," said Susan Witt, executive director of the E.F. Schumacher Society, a nonprofit group that set up the program. "They might have 50 in their pocket, but not 150. They're buying their lunch, their coffee, a small birthday present."

Great Barrington attracts weekend residents and tourists from the New York area who help to support its wealth of organic farms, yoga studios, cafes and businesses like Allow Yourself to Be, which offers services ranging from massage to "chakra balancing" and Infinite Quest, which sells "past life regression therapy."
But of course the people who receive the money are doing business with a devalued currency and cannot get outside suppliers to accept BerkShares, so they end up losing on the transaction.
"The promise of this program is for it to be a completed circle," said Matt Rubiner, owner of Rubiner's cheese shop and Rubi's cafe. Some local farmers who supply him accept BerkShares, but he pays most of his bills in dollars.

"The circle isn't quite completed yet in most cases, and someone has to take the hit," Rubiner said, referring to the 10 percent discount. "The person who takes the hit is the merchant, it's me."
I recall that for some time, when the Canadian dollar traded at about 95 cents on the dollar, northern New England merchants took Canadian currency at par to the US dollar. It wasn't worth the bother to have someone give you that five cent surcharge. You didn't get foreign currency enough to make it overcome the transactions costs. But paradoxically, if you get the BerkShare more accepted, there will be more pressure to move the exchange rate back to $1=1BS. And that might lead the bank to stop converting BerkShares to dollars.

The article portrays this as a liberal cause, but it's something other communities have done. Business people of left and right wings both like the idea of having local consumers purchase locally.

Stephen Burkle, president of the Ithaca (NY) Hours program, said the notes are a badge of local pride.

"At the beginning it was very hard to get small businesses to get on board with it," said Burkle, who also owns a music store in Ithaca. "When Ithaca Hours first started, there wasn't a Home Depot in town, there wasn't a Borders, there wasn't a Starbucks. Now that there are, it's a mechanism for small businesses to compete with national chains."

I think it's a transactions cost issue. What do you think?

When I became a stathead 

My father's side of the family didn't have many children -- my own family includes a brother and sister, making ours the largest. Dad's two brothers never married. So my cousins from his oldest sister were often around as big brothers for me, the oldest, even though they lived 40 miles away. I looked up to Gary, the younger one, in particular.

This became harder as Gary went through high school and experimented with drugs. I have never known what happened exactly, but apparently something he took triggered a psychological reaction from which he never really recovered. He lived with my aunt all his life, unable to hold regular work, and eventually died several years ago.

Still, whenever I was in town (the town of my parents' origin, not my own Manchester) I would try to stop by and see Gary, and share the passion of the Red Sox. Around 1980 or 1981, when I was in graduate school, I flew back to see family and stopped in on him. He had a book that looked homemade, and in it were a bunch of numbers and some writing. It was opened to a page titled "Boston Red Sox". It was a copy of the 1980 (or 1981 -- I really think it was 1980, but I can't be sure) Baseball Abstract by Bill James. As I read, I started to see numbers that I didn't associate with baseball before, like runs created or isolated power.

"Oh King," Gary said, "have you seen this book before?"


"You should read it. There are a lot more statistics in baseball than you see on TV."

Now, like some other guys who go into quantitative fields (which was why I first went into econ), I had been brought up on calculating batting and slugging averages. (I had kind of heard of on-base percentage, but not really.) As Gary and I talked after that, he revealed some intricate knowledge of the process of creating runs, breaking down getting on base, advancing runners, scoring runners, preventing runs, etc. We both admitted that while we first and foremost hate the Yankees, the guy that we didn't want to play an important game against was Earl Weaver, because that guy was smart. And Gary read things James had written about the Orioles and Yankees as well as the Red Sox. The conversation lasted the rest of the game.

I went back to Claremont a couple of days later. I found a copy of the Abstract, and bought it that year and every year thereafter. I still have nearly all of them (a second set, as my first set was water-damaged in storage years ago. I'm still missing a couple of issues.)

At that moment, my understanding of baseball changed. A shift in how one looked at the world of baseball. And in passing, a realization that the statistics we focus on sometimes in other areas, like economics, do not say what we think they say. It's motivated much of my work, including some writing I'm doing this summer. (As they say, watch this space.)

As years passed, any time I visited Gary's house we would talk baseball and Bill James. While Gary's gone, Bill James has gone on to help our Red Sox win the World Series a few years ago and become one of the 100 most influential persons, according to an interview with him this morning in the Wall Street Journal. One of the great things about James is that he is not a stathead; he's a writer who can talk and analyze baseball as it is, and understands the limits of his own insights.
People think they understand how to win in baseball much more than they really do ... The scouts see a lot of things that I can't see. And some of the things they see I have learned to see. But some of the things they see I can't see at all. And I'm not suggesting it's not real, it's just that I can't see it. There is no reason for there to be a conflict. The conflict exists only when people think they know more than they do.
Some years ago I quoted James saying this:
I thought that if I proved convincingly that X was a stupid thing to do, that people would stop doing X. I was wrong. People would just keep saying X.
For a writer, an analyst, or a professor, those are valuable lessons to learn. I give thanks to Gary for introducing me to that world.


One hops into 15B race 

Larry Schumacher reports that Josh Behling has filed to run for the state rep 15B seat currently held by Rep. Larry Haws. Given that Haws has endorsed Al Franken for U.S. Senate, the space in the center for a candidate to run against him is quite wide. (Heck, even Tarryl won't take Franken's checks.)

Behling is co-chair of the SD 15 Republicans BPOU, a young guy with good energy and trying to learn to blog. (Someone get me his blog address please, as I cannot find it.) I don't know him very well yet, but Mrs. S was familiar with him from the Jeff Johnson (SD 15 Senate) race and thinks highly of him, and my contacts with Jeff indicate he would make a good candidate.

Tuesday, June 19, 2007

Chili and Chat wrap 

I was certain, when Derek Brigham invited me to Chili and Chat to replicate the Final Word live, that he had said since we were both vegetarians we would not go hungry. Well that was true ... if you can eat mounds and mounds of cole slaw. (I cannot.)

Aside that, this was a great event. Rep. Tom Emmer is a passionate, humorous, and knowledgeable interview. Which is what we did, since if we had him on the Final Word that's what we would have done on-air. (We had him on once just for ten minutes to talk about Swansongate.) While he reviewed the session in a way readers of this blog (or Michael's) would be familiar, we also talked about the next year and here he had two things important to say:
I have yet to see other posts with pictures, and alas I also didn't get too many notes on who was attending, besides the Freedom Dogs contingent, Matt Abe from North Star Liberty, Drew Emmer of course from Wright County Republican, and at least one other whose face I can imagine but can't put a name or blog on. (I'll fix this when I get an update with pix.)

Let me suggest that SD45 Republicans have found a good way to get people out. Even with other events nearby and a spectacular evening for walking outside, I counted over fifty people in attendance at the event, on a Tuesday night on an off-year of the cycle. Other BPOUs take note, and start getting your people together. I'll come, but next time, somebody brings the vegetarian chili.

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Nope, just playing hookie 

There are simply days where you can't blog. Sometimes it's work related, and today is one of those days. Yesterday, though, was the glorious day of golf for The Patriot. Met great people and played a fabulous golf course. (I was skeptical of their talk that golf carts were special, but they were, and fast as heck too!)
Sure, we had no birdies, but we had sun and fun, and at least one of us had great shoes.

Came home trying to think up something and instead saw my daughter wanting to go for a walk, and the blog lost to Littlest.

More tonight when I return from Chili and Chat.

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Sunday, June 17, 2007

Alaska Pipeline, Technology 

Previous posts have alluded to technology�s role in the building of this engineering marvel. The scale and logistics to complete this pipeline was unbelievable. The actual physical installation was completed in 2.5 construction seasons.

When you look at the referenced pipeline photos, you will notice metal fins at the top of the vertical H supports. These fins act as coolants � they provide for the heat of the oil to be sent into the atmosphere in order to keep the permafrost from melting. The small squares underneath the pipe have been designed to allow the pipe to shift from side to side during an earthquake.

Original plans had to be adapted. In one area, the Gulkana River, the plan to bury the pipe had to be scrapped because of ice. A bridge was needed. There was no time to build a bridge � engineers needed to find one! They did, in Japan. Without this bridge, the pipeline would have experienced a one-year delay.

A second major hassle was constructing the pipeline over the 2,771� Thompson Pass near Valdez. It was extremely steep, almost vertical and there was no alternative route. The engineers, creative again, devised an aerial tramway (think of a ski lift) to which they hooked the pipe to cables and �flew� it into position. Welders hung off safety harnesses to weld together the pieces of pipe.

A final test of the pipeline occurred in 2002 when a 7.9 (out of possible 10) earthquake ripped across AK�s interior. This earthquake, one of the largest ever recorded in the United States, did nothing to the pipeline � it held. No leaks, no breakage, no accidents, etc.

In conclusion, ingenuity, necessity, and talent built the pipeline. The caribou herds are increasing; the permafrost is protected; the revenues from the oil fund more than 80% of the AK state government budget and citizens are paid an annual bonus.

The knowledge gained from this experience shows that we can do anything we put our mind to doing. It is truly a wonder of the world.

Etched next to an Alaska-shaped piece of the pipeline are the words: �We didn�t know it could be done.� But, in true American fashion, we did it.

Decided to post - having problems with I'net access and photo transfer. More when I return.

Alaska Pipeline, Environmental Issues 

The basic problem facing engineers was that there was no technology yet devised that could deal with permafrost, bitterly cold temperatures and the extreme terrain that comprises AK. In addition, environmental and Native groups all lined up to add their concerns to the known environmental concerns.

Eventually all were addressed. The Arab oil embargo of 1973-74 drove home the fact that the United States� dependence on foreign oil was an exposure we did not need. Alaskan native claims were resolved with the 1971 Alaska Native Claims Settlement Act. The Trans Alaska Pipeline Authority At was passed in November of 1973. It cleared the way for construction to begin.

Alaska�s permafrost underlays nearly 600 miles of the pipeline route. Oil comes out of the ground between 156-178 degrees F. Known methods of burying pipeline would have resulted in thawed permafrost which in turn would surround the buried pipe with a soupy silt/water mess. The solution: Move the pipeline above ground with H-shaped vertical supports (see photo at top of this post). On top of these H structures, you will notice aluminum fins. The fins act as a cooling system that pulls excess heat from the permafrost layer and radiates it into the air. This complex yet complete solution represented the first time a pipeline had been built above ground.

The H supports went in slowly, in fact so slowly the pipeline completion date was expected to last until 2010. However, again ingenuity raised its head. By changing the type of materials and processes used, the construction and installation of the supports rapidly increased. Eventually 78,000 supports were placed into service and the 2010 completion date was no longer an issue. These supports hold 420 miles of pipe above ground.

Photos often show the zigzag configuration of the pipeline. This unique design accommodates seismic activity (earthquakes) and the extreme temperature changes along the pipeline route. In addition, in the middle of the H supports, just above the cross-section of the H, is an approximately 4' bar that can move from one side of the H to the other. This horixontal flexibility also lets the pipe flex during an earthquake. Hence, damage is minimized.

A total of 380 miles of pipeline was buried underground. The depth ranged from 3-12 feet, depending on soil conditions. For pipeline buried in avalanche-prone areas, the underground components were refrigerated to protect the permafrost.


Saturday, June 16, 2007

A special guest on the Final Word 

We are pleased to announce that Governor Tim Pawlenty will join us just after 3:30 today on The Final Word. Working in your garage? On a boat? Take twenty and listen in (well, you could listen to the whole two hours from 3-5, but I try to keep expectations reasonable.)

Michael and I will have other stories during the rest of the show. And you have to hear what's up today on the NARN:
Streaming from here at AM 1280 the Patriot; podcasts of all these shows will be up on Monday here.

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Friday, June 15, 2007

Since you won't give us tax money, we're taking your dog 

Give me a break.
In the wake of two severe dog attacks in St. Paul, DFL state Rep. John Lesch said Friday he will introduce legislation next year to ban five dog breeds in Minnesota -- chow chows, wolf hybrids, pit bulls, Akitas and Rottweilers.

Under Lesch's proposed legislation, anyone owning one of the banned dogs would be subject to misdemeanor charges and face as long as 90 days in jail and a fine of as much as $1,000.

Two children were recently bitten in St. Paul by pit bulls that had reportedly bitten people before. And other dog attacks in Minneapolis and St. Paul have drawn attention this year.

"It's a very sweeping piece of legislation," Lesch said, adding that one of his colleagues in the House of Representatives, whom he did not name, had been attacked by a pit bull.
You wonder if legislators taste like chicken.

Lesch is, of course, an assistant city attorney in St. Paul. There's a law in place in Minnesota that prevents a city from banning particular breeds. So he wants to change the law so he can get rid of "dogs that are known to be aggressive," according to his spokesman. Yet neither the St. Paul police nor any other police squad interviewed for that article can show how dog attacks are increasing. If anything, they're down.

So consider yourself on watch, Rep. Lesch. Buttercup does not take kindly to people trying to ban her friends, and has recommended you to next year's silly bill contest.

I wouldn't mess with her if I were you. This is no ordinary Boston Terrier. She's got friends at biker bars, and they're already unhappy with that smoking thing.

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Alaska Pipeline, Design 

After the largest oil find in North America was discovered in Prudhoe Bay, AK, along AK�s Artic Ocean coast the challenge was how to get up to 2,000,000 barrels of oil a day to market. Numerous ideas were brainstormed, evaluated and tested. One was to ship the oil by supertankers from Prudhoe Bay to Valdez or Anchorage. The company that eventually became Exxon, spent $50,000,000 on this experiment, including special ice breaking escorts with an ice-breaking tanker, only to conclude that this system would not work.

$50,000,000 invested, $0 return.

Well, if we can�t go through the ice, why not under it? Maybe submarines could take the oil south. Even flying the oil with 747 airplanes was considered. None were economically feasible for a variety of reasons. Prudhoe Bay is incredibly isolated - the only people are pipeline workers and nature. Though there is concern with this part of the country, it is barren and what we learned with the first pipeline would lead one to conclude that a second pipeline would do zero damage to the environment.

Back to the access and distribution problem of the 1970's. The only way that would work and could be consistently monitored was an overland pipeline. AK presents some of the most challenging terrain on the planet. However, ingenuity, persistence, creativity (and later discussed, adaptability) all contributed to one of the most successful engineering feats ever undertaken by man.


Zygi played the Star (Tribune) 

Well, Anoka County, there goes your last shot at developing that land with the Northern Lights project.
The Minnesota Vikings have tentatively agreed to buy four city blocks for $45 million from Avista Capital Partners, owners of the Star Tribune, as part of a broader plan to build a football stadium and develop surrounding land in downtown Minneapolis, sources close to the sale confirmed Thursday.

The Vikings, as part of the transaction, would also have a right of first refusal to later buy the newspaper's longtime main office building, though that block is not included in the sale. Sources close to the negotiations said the sale could be finalized within days but cautioned it could still unravel.
It cannot be a good sign for the StarTribune's remaining employees when the parent company is cashing out the neighboring land and selling an option on the building they own. As I've noted before, the Anoka deal was sold to Zygi by Red McCombs because Zygi figured he was the better real estate developer. He now has a prime downtown property to develop what one person calls "another Wrigleyville." But he'll want state dollars to help him out. We'll see.

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Really, really bad timing 

An email to the campus advertises summer courses called The Palestinian Summer Celebration.
The Palestinian summer celebration is a unique annual program that gives people from all over the world the chance to encounter the life and culture in Palestine in addition to donating some of their time to a local community organization through voluntary work and internships. The Palestinian summer celebration 2007 will take place in the Bethlehem area in Palestine, between Wednesday June 20th and August 18th 2007.
I'm not liking that "voluntary work and internships" part. Sounds a little too, um, edgy to me.


When we celebrate the second-hander 

A celebratory note appears as a page-one story in the local paper of how the tax consumers got theirs.

In a corner office on the fifth floor of the U.S. Bank building that overlooks downtown, St. Cloud school board member Jerry Von Korff has piled up 16 megabytes worth of memos, notes, graphs and charts about special education funding and the Legislature.

Getting legislators to stop shifting costs of special education programs to local school districts has been a quest that Von Korff, a teacher turned lawyer, has pursued for almost a decade.

In this, his fourth year on the St. Cloud school board, Von Korff, his fellow board members, the district administration and some volunteers are getting credit for generating broad-based support among other Minnesota school districts and education groups and for finally convincing lawmakers to assign additional state dollars to special education.

...Let's put it this way," Von Korff said. "A sense of panic has gone away."

The Legislature took care of about half the problem, school officials and legislators said.

Thus the happiness of our educational system depends not on getting differently-abled students to reach their full potential, but on the school board's member's ability to extract additional dollars from others. He looks not at the student but at the legislature. Would that one school board member, anywhere offer the bargain "Remove the requirements on teaching special education, leave that to us, and you needn't give us a single dollar." Why does this man have sixteen megabytes of information to lobby, rather than sixteen megabytes of information on how to educate? And why does our newspaper celebrate this?

Do they ever argue for less regulation rather than more money?

Source of second-hander.

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Spicoli does Sartell 

The SC Times continues its reprinting of area high school commencement speeches with a Ferris Bueller riff from Sartell HS. Mr. Griffin sounds like an average teen, and probably a good kid. But what I ask is where the adults are. Who's the person who sits with Mr. Griffin and says, "are you sure this is what you want to say? When you tell your grandchildren that you gave the commencement address" (note, we don't say valedictory any more -- there's a lesson in that) "will you be proud to give a copy of this to them? Do you think it will inspire any one?"

Someone in the faculty or administration of that high school almost certainly read this beforehand. That person did no good service to this student. Instead, I bet s/he smiled at the Bueller reference.

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Thursday, June 14, 2007

Yellow bikes redux 

Frank Stephenson (who co-authored the original Berry Bike story) reports that Lexington KY has a similar problem. Today he posts that DC and Paris have programs that tie bikes to specific users, perhaps solving the tragedy of the commons issue.

I spotted a yellow bike from SCSU last month, in downtown St. Cloud. The rider was in bad need of a shave and a shower and did not wear the usual student clothing, making me wonder whether he was the target market for the bike.

SCSU yellow bike program reported here and here.

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Hope this isn't right 

But I think it is.

Larry Schumacher blogged yesterday that one of the people pressing the need for a special session on Governor Pawlenty is St. Cloud Mayor (and former state Senator) Dave Kleis.

Pawlenty, who was overheard telling St. Cloud Mayor Dave Kleis last week at the Sartell Centennial breakfast "We'll get you that LGA," said Wednesday his staff is meeting with legislative leaders to try to work something out.

Kleis, of course, called on Pawlenty to convene a special session so that a tax bill giving cities, counties and townships additional state aid could be repassed after Pawlenty vetoed it because of a provision requiring inflation to be factored into state spending predictions.

Kleis is hoping for more than $1 million in extra state aid to offset the local property tax cost of hiring a dozen new police officers and a dozen new firefighters in the next couple years as he pledged to do if voters approved a property tax bond to pay for a new police headquarters and new fire stations.

That bond kicks in next year and Kleis doesn't want to have to raise property taxes on top of it to staff the buildings.

Did Mayor Kleis promise the voters more than he could afford, betting on the come of more LGA money? Even if he did, the LGA money could come out in the next session rather than in a special. And Governor Pawlenty should stick to the fact that he's "skeptical they can be restrained."

A one-day special session is the equivalent of an untimed down at the end of a football game, usually given to the team behind for one last chance to score. The defense never wants to play an untimed down.

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Asking the right question 

In all my discussion of the state income tax I never did ask the right question. Greg Mankiw asks it today, How much progressivity is optimal?

In short, responding to a paper buzzing around the economics blogs right now written by economists who have worked or advised Democrats, Mankiw asks them to spell out what the model is in their heads. How heavy a weight do you put on the aversion to inequality or poverty? Should you actually specify a "social welfare function"? How distortionary are income taxes? The first two are matters of political philosophy, Mankiw argues, while the last is an economic debate that is unsettled (see the discussion we had last month, for example.)

When I wrote many years ago on inflation as a tax (see this old paper for instance), I was always discomfited by the word optimal. Optimal to whom? The one number I could focus on was "revenue maximizing", which I took to be optimal to Leviathan. That's more defensible in my view (the paper shows that, since seigniorage gains from inflation are not very large, it takes only a small output loss from inflation to make using the inflation tax a loser to government.)

We tend to avoid the political philosophical debate and go for the harder case to make -- that the tax increase is a money loser -- because as economists we don't have any special insight into the philosophical questions. But it's worth asking someone "if we could show the tax increase raised huge sums of money, would you be for it?" Many times, my answer is still no, because I have a different philosophy than the questioner. And we should be honest about that.

UPDATE: And sometimes tax policy is just a bribe to let progress continue.

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Wednesday, June 13, 2007

Mama-San and Cutie 

On my way to breakfast in our Juneau hotel, I met �Cutie�, a delightful Pekingese puppy. Right behind him came his owner, who introduced herself as Mama-san. She told me her story of �Cutie�, actually a male. She had no children but was a long time employee of the hotel. Her story continued - she is also allergic to dogs but the Pekingese breed has hair.

Turns out, last Christmas, the hotel bartender, a couple of other employees and some regular customers decided to get Mama-San a pet. They didn�t tell her they had gotten the dog for her. Instead they asked her to keep the Pekingese for a couple of days. Once they realized she had no allergic reaction to �Cutie,� they put a bow on him and told her that Cutie was hers.

Mama-San decided that since everyone called him Cutie, that would be his name. She�s trained him well. Right now, he�s going through the chewing stage, working his way through empty water bottles. He eagerly follows Mama-San while greeting customers with a wagging tail. Cutie understands commands in Korean as well as English.

And Mama-San is one very grateful, happy lady.


Alaska, Pipeline Basics 

Just north of Fairbanks is a milepost for the Alaskan pipeline. The pipeline, an extraordinary site to behold. Physically, it is a masterpiece of engineering, environmental protection and a major supplier of oil. It was a mental exercise as well as a physical feat.

Here are some basic construction facts. Environmental and engineering issues will be addressed in separate posts.
1 � Preconstruction was a six year effort.
2 � Actual construction was only three years, two months.
3 � Permits required: 515 federal; 832, state (bureaucracy at work).
4 � Number of pipe sections: 100,000.
5 � Pipe sections elevated for animal crossings: 554.
6 � Pipe sections buried for animal crossings: 23.
7 � Peak oil production: 2,000,000 barrels/day (1988).
8 � Number of takers loaded at Valdez: over 17,000 as of summer, 2007.

The pipeline crosses 34 major rivers, 800 smaller streams and three mountain ranges. It is 800 miles long.

All facts above from Alaska Airlines, June, 2007 magazine.

Noted in passing 

I was once offered a job as a sports economist. This was around 1990 -- I didn't take the job partly because I didn't want the label as one, because at the time it wasn't terribly popular, and I was trained in the dark arts of macroeconomics anyway, not really a good fit for my skills. I consider myself really still a dabbler in the area, which has exploded into a subfield of economics in the last fifteen years.

One fellow who went a long way to making it a respectable profession was Prof. Larry Hadley of the University of Dayton, whose death at 62 years old on Monday will be mourned by the great number of sports economists who have come after. When he and Elizabeth Gustafson decided to start running regular sessons on sports economics at the Western Economics Association meetings, I thought they'd run out of material pretty fast. Instead, as Dan Marburger points out in this obit from Dayton,
There were only a small handful of us presenting papers at the time (1996). Since then, the sports econ sessions at the (meetings) have ballooned to a dozen or so sessions. We have a sports economics journal, two textbooks and an international scholarly association. I question if any of those would have come to fruition without Larry's efforts to promote the economics of sports. He will be greatly missed.
I was one of those papers in 1996. He had one of those great, dry wits that economists favor. On top of that, he also helped organize an annual ritual at the WEAs of attending a baseball game at the local stadium of whatever city we were at. A rather tall fellow, he was always walking around the event looking for new economists in sports, seeking papers for next year's conference. It was the game in San Francisco a couple years ago where I last saw Larry.

My prayers are with his wife and children, and with my colleagues and friends at Dayton and the sports economist world.

UPDATE: Further testimonials and observations at the Wages of Wins.

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I just don't need you any more 

Someone comes to the obvious: if marriage is viewed as an institution for joint provision of household services and childrenfreedom and prosperity and technological change reduce the demand for marriage.

This even includes a good point that might go less noticed:
Finally, economic growth raises people's aspirations - it encourages the belief that you can have more, "because you're worth it." This in turn creates dissatisfaction, with the result that a wife with a mediocre spouse is less likely to stand by her man*.
I'd put this a different way: If economic freedom has led to increased inequality, it also means that the potential return to search for a new spouse has increased (you can compete to make contracts with more affluent partners than before.) Since the return to search is greater, marriage is likely to be delayed.

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The most aggravating sentence I read today 

I somehow didn't get to read Katherine Kersten's column on Macalester until this morning. Little of it is really news. University presidents rewarding boorish behavior at a graduation. A something-Studies department with a one-sided curriculum. A history department that teaches American history only from "diverse viewpoints", using the cheap diversity of race and sex. Student and faculty handbooks instructing how to reschedule exams that might conflict with the Wiccan religious calendar. And the usual passel of old liberals and new conservatives pining for a by-gone time when students didn't know what a professor's political views were.

You could throw a dart at any map with colleges on it, and you could write that story. Some may think this week's announced closing of Antioch College, a school renowned for leftist activism, might signal a change. I don't. It would take much, much more than a single school closing to get their attention.

No, the sentence that aggravated me -- really, just an adjective in the sentence -- came out of the mouth of Macalester's president.
Brian Rosenberg, the college president, sees no need for greater intellectual diversity at Macalester. "We work hard to see that the college is a safe place for all reasonable points of view to be expressed," he said.
Do you see the adjective? Here, let me emphasize it:
We work hard to see that the college is a safe place for all reasonable points of view to be expressed.
Dr. Rosenberg, who the hell are you to decide what is reasonable?

But of course, you support academic freedom.

Reasonably well, I'd guess. And I would bet that the survey Kersten mentions, that 2/3 of your political science majors think your students are intolerant of opposing political views, is reasonable?

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NCAA v live blogging 

The NCAA tossed out a reporter who was blogging the Louisville-Oklahoma State super-regional. The NCAA claims it has the right to restrict "live representations" of its games. The NCAA went so far as to revoke the media credential of Louisville Courier-Journal reporter Brian Bennett. But if Bennett or anyone else were to watch the game on ESPN or CSTV and blog from the easy chair, there would be nothing to be done. I also note that CBS Sportsline has a live blogger (called a game logger or a glogger) describe action in-game for most of the major sports; I have MLB.TV to watch the Red Sox when they're not on ESPN and usually pull up the Sportsline feed and the Sons of Sam Horn game thread to enhance my viewing.

I notice Sportsline does get to blog the NCAA tournament, but then they paid for the rights to do so. I do not believe they do so for NCAA football, as best I can tell. I suspect the NCAA official who did this was just a little overzealous, but who knows?

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Tuesday, June 12, 2007

Appearances next week 

I am very pleased to be invited to do a mock radio show for the SD45 Republican BPOU next Tuesday at 6:30pm at Cooper HS in New Hope. Click the link for directions. Michael and I will "interview" Rep. Tom Emmer, a deputy Republican leader. Swansongate will be on the menu, along with Emmer's recollections of "the little minority that did."

Before that, on Monday afternoon people near Victoria should get behind solid barriers as I spray golf balls around Deer Run Golf Club for the 2nd annual Patriot Golf Open. Last I checked there were a few spots left, so if you want to watch the hilarity of me and Matt the producer trying to play golf (and earn our way into MilF), step up now. Ask them to start you as far away from our foursome as possible.


Most stupid sentence of the year 

"While I am a strong supporter of academic freedom, I�m afraid that hallways and office doors are not �free-speech zones.'"

This sentence won the award from FIRE today in its New York Post column. The offending quote was from Dave Barry.

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Maybe it's just Britain 

I was reading Tim Worstall,

We are told, endlessly, that it is only by State intervention in the market place that labour can be properly rewarded for its efforts. Mandated minimum wages... Mandated holiday times,... Mandated this and that in fact...clearly, government knows best in such matters.

Given this obvious fact about the modern world, why is it then that:

More than 80 per cent of the days lost last year were down to strikes in the public sector...

...and I wondered if this was true for the US? Looking up work stoppages,
Of the 20 major work stoppages beginning in 2006, 12 were in private industry and eight were in State and local governments. In private industry, five work stoppages occurred in both manufacturing and construction, and one stoppage each in janitorial services and automotive dealerships. Of the eight work stoppages in State and local governments, four work stoppages involved municipal and county workers, two involved educational services, and one each in public transportation and health care.
And that number does not include Northwest Airlines (begun in August 2005), which was responsible for more than a fourth of all labor-days lost in 2006.


Awash in cash, so what's their plan? 

The NY Times is reporting this morning on the higher-than-expected tax collections state governments are receiving so far this year.
More than 40 states have found themselves with more money than they planned as they wound down their regular sessions. Governors in 23 of those states proposed tax cuts, and a majority of states with surpluses chose to shore up their roads, schools and rainy day funds. For example, lawmakers in Utah agreed to a $1 billion bond act to fix state roads and add lane miles, while in Idaho state spending on education outpaced that on Medicaid for the first time in 20 years.
Of course, here in Minnesota, a plan to use that money for roads foundered on an impasse created by the DFL's insistence on a gas tax increase, which Governor Pawlenty vetoed. So much of it ended up in the rainy-day funds instead. Ditto for property tax relief, leaving Minnesota residents looking across the border at North Dakota's $118 million package. Even as Minnesota's tax collections beat the February forecast by $67 million, no deal was provided.

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Monday, June 11, 2007

Book review: Freedomnomics 

I was very pleased on Saturday to interview (and catch up an old acquaintance) with John Lott, whose new book Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't is now available. Be sure to hear the interview on podcast.

I mention this at the outset: I've know Lott for some time as someone like me interested in public choice economics, particularly as it applies to campaign contributions and elections. We share a belief that the political system actually works pretty well, in a Chicago School tradition and both ended publishing in that area. So fair to say that one part of this book on the folly of campaign finance reform is something I was predisposed to like.

There's little question that the book is intended as a counterpoint to Freakonomics, and you'd have to be living in a cave not to know the backstory. But that focus is appropriate in a larger sense: Perhaps the subtitle of the book should be "Why the Free Market Works Better than the Alternatives." As Lott states at the conclusion of the book,
The free market isn't perfect, but that isn't the right standard by which to judge it. The government is hardly perfect either. (p. 194)
The idea of Government Failure is a neglected concept in Levitt and Dubner, in my view. A chapter titled "Government as Nirvana?" drives home the point. But this is not to say Lott thinks government is corrupted. He says in the previous paragraph to the one above:
There will always be some duplicity in the free market. But there is also an ever-present incentive ingrained in the system for individuals and companies to behave honestly. If someone can make a buck by treating his customers better than someone else, eventually someone will try it. Political markets also have their own mechanisms to limit cheating, resulting in the election of politicians who, by and large, accurately represent their constituents. (p. 194)
Not only will you get the government you deserve, you'll get something close to the one you want! This will come to some readers, I suspect, as a bit of a shock. But he uses two full chapters -- one on the incentives created by reputations and what my teacher Tom Borcherding always called "the discipline of continuous dealings" -- my term, not Lott's, and borrowing from Gordon Tullock again. Repeated plays of a prisoners' dilemma game by two people creates much different incentives than if it's a one-shot game. He also looks at the growth of government more generally, and comes to the surprising conclusion that "Granting women suffrage explains at least a third of the expansion in the size of government." (p. 5)

There is a chapter devoted to the guns, crime and punishment debate that centers much of the public discussion of Lott's earlier work. I didn't find much new in there, but it creates a nice summary of the debate as it exists. I liked that chapter less than the others because I had already followed those arguments, and because they get into the weeds much more than the others. There's almost a change of voice there.

Freedomnomics is in the genre of books used to supplement introductions to economics, as well as a stand-alone book to show economic principles to reasonably intelligent individuals (not necessarily having ever had economics in college, or even going to college.) I have continued to use Steven Landsburg The Armchair Economist for this (I haven't finished More Sex Is Safer Sex yet, will when I get a chance) when I've needed a supplement for an intro course, and I think Freedomnomics will do as well for that purpose. I think if you were to use it that way you would need a guide to help, or to cut up the chapters into smaller pieces. But even without that, students of economics inside and outside classrooms will learn some great stories to explain that markets actually work rather well.

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The Vastness of Alaska 

Briefly mentioned last week is the trip my husband and I are currently taking - to Alaska (AK), the 49th state in the USA and our 50th. Yes, we have managed to get to all other 49 states. We have discovered a truly unique nation terms of people, ideas, experience, interests, and dedication. We are a very fortunate people.

This trip was conceived last winter while playing bridge with friends who are avid salmon fishermen. They invited us non-fishermen to join them. Of course nothing remains as basic as originally intended. Our one-week fishing trip morphed into a three-week adventure. Today, as I try to catch up on blogging, we're in Glacier Bay National Park, at the lodge, watching a misty rain fall in the bay and forest. It's beautiful but I get ahead of myself.

We flew from the Twin Cities to Anchorage, then took another flight north to Fairbanks. When arriving in AK from the east, one flies over multiple mountain ranges - all spectacular from their snow-covered peaks to the marshy bogs at the base. Everything below the mountains' snow range is green, green, green.

AK may be our largest state in terms of land area but it is by far the smallest in inhabitant per mile. Its vastness can be described only with superlative terms: huge, massive, majestic, expansive, lush, magnificent, etc.

More later. Unfortunately, Blogger is having problems and lost my cross references. Perhaps the next location will prove more user friendly.


I got your belt right here 

Lloyd Garver asks how dare New Hampshirites not have a seat belt law. How dare they!
The first time I saw "Live Free or Die" on a license plate, I knew that it had to be the best slogan of any state. I loved its defiant pride. But now, in the area of seat belts and safety, that spirit of "nobody's going to tell us what to do" just doesn't make sense.

Currently, New Hampshire is the only state that doesn't have a mandatory seat belt law. They do require that restraints be used for children and teenagers, but not for adults. Wednesday (May 31), their state senate is scheduled to vote on such a bill. The New Hampshire Senate Transportation and Interstate Committee voted three to two to recommend that the bill be killed. If it is, obviously some of the people of New Hampshire will also suffer that fate.
The bill failed in the NH Senate.

One member of the committee who voted against the bill, Bob Clegg, says, "I choose not to buckle, and I think it's baloney that the government would tell me that I have to, or else."
I grew up with "Live Free or Die", and with "Ax the Tax" Mel Thompson, Bill Loeb, and the rest of what makes New Hampshire the most libertarian state in the union (this is a test to see if I have Alaskan readers.) We don't use seat belts, but we know how to drive. And there is some evidence that the effects of seat belt laws on traffic fatalities is greatly exaggerated, as having a seat belt changes the behavior of drivers.
It seems to me that this attitude underestimates the people of New Hampshire. Any group that could come up with "Live Free or Die" is not stupid. They're not a bunch of immature adolescents who resent it when their parents say they have to do their homework before they go out, and then don't do their homework and sneak out. We're talking about mature, intelligent adults. Just to be defiant, do they speed up when they see a sign that says "School Zone?" Do they sell liquor to kids because they resent that there's a law against it? Do they go to work naked because they don't feel the government should tell them they have to wear clothes?
No, you idiot. We don't need government to tell us how to be civilized. We don't need government to tell us to be courteous. And we don't need government to tell us to do certain things because it passed a law to take someone else's money to pay for something I would have paid for myself. If I have to do what you say because you paid my bill, then as the George Bernand Shaw line goes, we know what I am, we're just haggling over price.
Some people believe, "If the only one I may hurt is me, why should the government be involved?" Proponents of seat belt laws point out that New Hampshire would get $3.7 million from the Federal government for enacting a seat belt bill, and the state would save an estimated $48 million in medical costs. That money's not "baloney."

Putting money aside, if you are a victim of an accident because you don't use a seat belt, you aren't the only one affected � what about the loved ones left behind? Should they have to suffer because you wanted the government to "mind its own business?"
In a word, yes. Who's in a better position to decide what my family can endure, me or the government? As Winston Churchill once observed, the power of man has grown in every sphere, except over himself. New Hampshirites try to conquer that last frontier, and good for them.

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Actually, Ms. Otto, you should read history 

In yet another defense of the concept of budgeting for inflation (a topic I've discussed here, here, and here in case you haven't come across this before since Gov. Pawlenty's veto), State Auditor Rebecca Otto tells a whopper.
Minnesota has performed very well over the years because we lived by a guiding principle regardless of which party was in control. That principle was that we allowed fiscal experts to create a budget forecast that gave a straightforward, honest picture of our state finances. This gave us as a baseline snapshot of where we were headed if nothing changed.
This gives the impression that Governor Pawlenty's was the first administration to remove inflation from budgeting. That is in fact wrong. The law that required inflation of expenditures was only passed in 1994 (Chapter 587, Article 7, Section 2, Subd. 1). When the law was changed in 2002 (Chapter 220, Article 13, Secs. 1 and 2), the House Fiscal Analysis unit created a document that discusses the use of "planning inflation". I highly recommend people to read it. Two sentences jump off their pages:
Even though the inflation adjustment is applied to most appropriations, the Department of Finance has always argued that inflation should not be seen as a commitment to adding funding to any particular program to offset the impact of inflation in the next biennium. (page 4)

[T]he inflation increases are all increases that have not been built into current law
formulas or base budgets. (p. 5)
If there is no commitment, and no building into current law or base budgets, how exactly can Auditor Otto claim that a budget with inflation "
gave us as a baseline snapshot of where we were headed if nothing changed"? That would be at least a mischaracterization of the history of inflation increases.
The beauty of this system was that it allowed the fiscal experts to give Minnesotans, lawmakers and the media an honest assessment of our financial picture.
As the quotes above would show, this is not true. The experts did not want to have that data included. And according to those I talk to, they still don't.
Politicians did not intrude in their work...
And yet they passed laws first requiring them to inflate expenditures, then to require them not to. Pre-1991, Finance sometimes included some estimates and sometimes did not. They applied it to some expenditures at first, and then to all of them. As the House Fiscal document explains, they even ended up giving two inflation adjustments to local government aid, since there were inflation adjustments in the LGA formula, which were applied after the general inflation adjustment was made. (No wonder the LGA crack addicts have been jonesing for a new fix.)
Today, and throughout the time of the current administration, we have allowed politics to enter into the forecasting process. We no longer get a straightforward assessment of our financial baseline.
No, politics has always been there, as House Fiscal explains.
Planning estimate inflation has also been a tool to provide more flexibility for a Governor and Legislature in assembling a new budget. The inflation creates a cushion of several hundred million dollars that is already counted as spending in the budget forecast. For example, in the November 1998 forecast for fiscal years 2000-01, almost $800 million was set aside as planning estimate inflation. That amount allowed the Governor to make budget recommendations for $800 million of spending above the base level budget that did not count as new spending relative
to the budget forecast.
In other words, Governor Ventura could hide new spending without being accountable for it.

As I noted the other day, the budget does include an inflation measurement, it just puts it below the line rather than above the line in terms of stating the current surplus or deficit. An accurate baseline is being provided. What they want is the cover for spending increases under the rules that Carlson and Ventura (and no previous governors) have had. Had you taken the opportunity to read the history, Ms. Otto, rather than hang around DFL fundraisers, maybe you'd know that.

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The embarrassing admission 

�I guess we didn�t call ourselves �Minnesotans for Higher Taxes� for the same reason that the Taxpayers League doesn�t call itself �Down With Government,�� Smith said. �The reason is: You try to focus on the glorious goal.�
That's Dane Smith, president of Growth and Justice. I don't think David Strom would necessarily say "down with government", but he would have no problem saying "less government" or "lower taxes."

From here on we'll call them Growth, Justice and Higher Taxes.

(h/t: Gary Gross)

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Friday, June 08, 2007

NARN live at the Capitol tomorrow 

NARN will be live at the World War II Veterans Memorial at the State Capitol tomorrow. All three shows will be there, with Scott, Brian and Chad 11-1; Ed and Mitch 1-3pm, and Michael and me 3-5. The dedication begins around 2.

We are looking forward to having John Lott on the air to discuss his book Freedomnomics. Those of you who remember Lott more for More Guns, Less Crime should listen in, as I may ask a couple of questions about that work as well. I'll have a review of the book up after the show.

UPDATE (6/9): Our current troops are also to be saluted. Mike from Lamplighter's News, a former guest host of Scholars, has done great work getting together some care packages for the troops overseas. So successful, he has 100 extra he's looking to send but needs addresses for. I know a few of our readers -- brought by Janet, who's enjoying Alaska right now -- are keenly interested in this and might know how to let supply create its own demand. Click through, and get Mike a note with an address to send these packages.

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Did Bush win or lose on climate change? 

Reading Ed Morrissey, I'd say win.
The American position has always been that any emissions agreement that excludes China and India, as well as other developing nations, would both be ineffective and unfair to the West. The Senate in 1997 took the same position when confronted with the Kyoto Accord, which they refused to even consider. Bush has followed in the same policy that the Senate unanimously demanded in 1997.

The American press continually misrepresents this, but the rejection was completely bipartisan at that time, and Europe had refused until now to consider changing the underlying structure of Kyoto. Now, however, the new G-8 agreement apparently includes the two biggest nations on Earth, with a third of the population in their borders. Not only that, but the agreement forgoes hard targets on emissions and the previous mandate for limiting the rise in global temperatures to two degrees Centigrade by 2050, a move which brought the condemnation of Greenpeace.
If success means getting Europe to simply realize the futility of requiring the West to subsidize growth in China and India (and Indonesia and Malaysia, by the way), then I'll take Ed's point.

But while China is trying to make headway, India is already saying no. Success at this point is premature to declare; you basically have a cartel negotiation for output restriction and price increases, and those seldom are easy to create or to enforce.


"I'm skeptical they can be restrained" 

Governor Pawlenty continues to talk to legislators about a transportation bill, but is not inclined to bring the Legislature back to special session.
"I have various ideas" for transportation funding, Pawlenty said at the Capitol, declining, however, to say which ones he favors.

He did say the menu of options includes a gas tax increase, borrowing money, using new technology to relieve congestion, paying for some transportation projects out of the state's general fund, and allowing private investors to build new highways.

...He is still not inclined to support a gas tax increase, he said. "With gas going for $3 a gallon and maybe going to $4 a gallon ... the public is skeptical" of paying higher gas taxes.

Moreover, he said, the gas tax is diminishing as a revenue producer as more drivers switch to hybrids and vehicles powered by ethanol-based E85 and, in the future, by electricity and hydrogen.
That's an interesting empirical question: Would the presence of E85 increase the price elasticitiy of demand for gasoline (and thus reduce the revenue gain from a per-gallon tax increase)? Theoretically it would, but the question is how much, and I am rather skeptical it's that large. I like the next paragraph very much:
While Minnesota has resisted private toll roads, Pawlenty said he sees some limited possibility for allowing private equity money to pay for building new roads but not for expanding existing highways.
There has been an increased interest in public-private partnerships for toll roads of late; Texas is expanding its use of leases of roads to private firms. I see no reason why this option should remain off the table in Minnesota.

But don't hold your breath that this will happen soon.
He will urge legislators to take incremental steps on transportation funding, he said, "rather than hold out for the perfect."

Pawlenty said he would not call the Legislature back for a special session just to pass a transportation bill.

He reiterated he is "not inclined" to order a special session for other unfinished business because "I'm skeptical they can be restrained" to a narrow agenda of essential items.
As pointed out before, the DFL strategy was all-or-nothing. Accepting Pawlenty's plan would have killed the push for gas tax candy for several years.

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Thursday, June 07, 2007

Take a chance on Obama 

Best of the Web Today carried a story about a rather unique fundraiser Barack Obama is running, by allowing people to buy chances for a private dinner for five with the Senator. The fundraising letter suggests that for "even $5, ... Barack wants to sit down with supporters like you." James Taranto wonders,
Just to make this simple, let's estimate conservatively that 100,000 individual donors are eligible for the dinner drawing, and that each of them has donated a mere $5. That would mean that Obama has raised $500,000 by dining with four people. And what's more, [campaign manager David] Plouffe is describing this $125,000-a-plate dinner as an act of populism!
Of course it isn't, but the net contribution to the campaign is just $5 - (.00004 x value of the dinner). If you'd pay $10000 for the dinner with the Senator, and that was a price he'd accept, you're still offering a net $1 gain to the campaign by taking the raffle ticket (and paying the $10k if you lose.) Actually sounds pretty clever.


But I thought the benefits outweighed the costs! 

St. Louis County Commissioner Keith Nelson said Tuesday he plans to introduce a resolution at next Tuesday�s board meeting that would reduce for several years liquor license fees, to help them transition to when the new statewide smoking ban law goes into effect on Oct. 1.

�I�m looking at this as a business retention tool,�� Nelson told other County Board commissioners Tuesday during their Committee of the Whole portion, as a way to help small businesses.

The typical small- to mid-sized business brings in property taxes to the county worth what 10 homestead properties might generate. �This is a valuable industry to us,�� Nelson explained. �They pay a lot of property taxes.��

The county collects about $84,000 annually from on-sale liquor licenses. Nelson is proposing that the fees be adjusted by an amount not to exceed 50 percent per license for two years, starting next year, and to add a third year to reduced fees if the total number of licenses declines by more than 10 percent in the first two years, or 5 percent annually.

While fees vary according to different criteria, a typical on-sale liquor license issued by the county can cost $1,000 each.

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Guilty displeasures 

An 80-something woman from whom we rented a studio in the early 1990s asked once if I was Armenian. "I remember my dad saying to me at breakfast to clean my plate. 'Don't forget the starving Armenians,' he'd tell me." Throughout time we have guilted kids into eating more than they wanted.

Phil Miller has a new, bizarre twist.

I noticed a sign hanging in the lunch room of PowerKid, the Eldest's school recently. It was a version of the tried and true warning from mom "You better clean your plate because there's a child starving in Africa." But this one went a bit further on the guilt-o-meter:

When YOU throw away YOUR food, a child somewhere is dying because he doesn't have enough food.

Phil goes through possible reasons why kids are starving in Africa without any of the reasons being due to the PowerKid's actions. Let me suggest a simpler explanation: tranasctions costs. The cost of picking up hundreds of kids' half-eaten sandwiches or left-behind green beans, packing and shipping them to Africa, and distributing them to starving children is simply too high. It destroys wealth far more than letting kids toss the food away and put an extra dime in the mission basket at church. Plus, your child is eating less which, given concerns of youth obesity, should be considered a good thing.


Wednesday, June 06, 2007

Why doesn't it happen here? 

St. Cloud charges for public waste pickup by the bag, but picks up recyclables for free. I have found this a great idea that worked to make many more people recycle. But reading Steven Dubner makes me wonder why his story doesn't happen in St. Cloud.
The introduction of new pay-by-weight trash charges in Ireland seems to have produced a strange and troubling effect: an increase in burn victims at St. James Hospital in Dublin.


The theory is that people wanted to avoid having to pay for all their trash so instead they burned it in their backyards.
I thought that the main difference would be the acceptance of burning in Ireland versus Minnesota, but it turns out burning was illegal there too. (At my parents' home in the Maine woods -- with private trash pickup paid as a flat fee -- trash was often burned in the stove in the living room.)

I cannot ever recall seeing someone burning trash in their back yard fire pits here. Why not?

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The brain drain of Mexico 

Frank Stephenson calls this paragraph from the Investors Business Daily "the silliest sentences I've read today."
Illegal immigrants in the U.S. are paying for Mexico's consumer binge. Currently, some 10% of all Mexican households get remittances from the U.S. Foreign workers now make up 16% of the Mexican work force. If they stayed home and worked in Mexico they would be building Mexico's economy � not that of the U.S. Instead, they live in poverty here, overwhelming U.S. social services agencies and making Mexico's economy much weaker than it should be.
I spent time a few years ago in Armenia thinking about remittances, and wrote two papers on the topic with my colleague Bryan Roberts. I haven't thought as much about the question of whether or not they are a burden on the U.S. economy on net (Stephenson says they probably are not, but I don't know that.) What intrigues me is the last line -- do the remittances help or hurt the economy of the home country of the immigrants?

IBD mentions one of the negative effects, the strengthening of the peso due to the inflow of dollars into Mexico. This is a version of Dutch disease, insofar as exports are now relatively expensive, but it's only a problem in my view if the government and central bank are fixing the exchange rate or otherwise mismanaging currency policies. (See this recent FRB Atlanta paper for more.) In short, if remittances are a problem for the peso, it's the fault of the central bank. We did not see there being much of an effect in Armenia.

There are other demand-type impacts of remittances that I could get into, but the IBD quote suggests a brain drain on Mexico. Most often it is the more educated of the sending country that choose to immigrate (as they face the largest wage differentials between sending and receiving countries), but that's not necessarily true for unauthorized immigrants. See, for example, this paper by Mora and Taylor on migration from rural villages in Mexico. When we looked at data for Armenia, we found that over half of emigrants had more than twelve years education (note that there are almost no restrictions on Armenian emigration to Russia, which is where less educated Armenians would seek work in construction, for example.)

There's the possibility of benefits. Emigrants may return home and bring new skills and financial capital with them. They may stay in the receiving country but create trade networks with the sending countries, helping both. But the balance of the evidence I've read indicates that the net effect on Mexico is negative.

Last, thinking about supply a little more, what's the effect of remittances on the work effort of the families receiving them? Imagine the family deciding it will send one of its children overseas to earn money, remit the funds back to the home family, and allow the home family to supply less labor. Is it "nonsense on stilts" to think this is a bad thing? How will Mexican productivity improve to the point that its educated workers will be better employed in Mexico if human capital is continually shipped abroad? The answer depends on whether you think there are positive externalities to human capital development. I don't think that's a settled question.

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Mother may I 

There was an attempt in Illinois to keep Chief Illiniwek as the mascot of the University of Illinois, but a judge threw out the case yesterday. Two students and an attorney separately sued the school's trustees arguing they did not have the right to sue.
The 12-count suit by Maloney and Ponce alleged that the trustees violated a 1996 statute enacted by the General Assembly that said Chief Illiniwek "is and may remain the honored symbol" of the UI.

"Had the Legislature intended to remove from the trustees the authority to do anything with the symbol, they could have said so," Jones said, underscoring the use of the word 'may' in the act.

He also agreed with the arguments made by Jim Kearns, the Urbana attorney representing the UI, that the students' rights to free speech, expression and academic freedom had not been violated by either the UI or the NCAA in the retirement of the Chief.

Jones noted that the NCAA has not told Maloney and Ponce individually that they may not portray the Chief but it has made clear to the UI the consequences it faces if it continues to hold the Chief out as its symbol.

"The UI has the right to choose what image it chooses to project," Jones said.
The students had portrayed the mascot, and the judge argued they could still do so, just not as officially part of the UI game.

Meanwhile, the suit for the University of North Dakota mascot has cost the plaintiffs $430,000, all paid for by private donations. That case will go to trial in December.

(h/t: Chronicle of Higher Ed news blog.)

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If it helped, would it matter? 

There's a new report from the Center on Education Policy that studies student achievement and achievement gaps since the enactment of No Child Left Behind. Its basic findings include:
1. In most states with three or more years of comparable test data, student achievement in reading and math has gone up since 2002, the year NCLB was enacted.

2. There is more evidence of achievement gaps between groups of students narrowing since 2002 than of gaps widening. Still, the magnitude of the gaps is often substantial.

3. In 9 of the 13 states with sufficient data to determine pre- and post-NCLB trends, average yearly gains in test scores were greater after NCLB took effect than before.

4. It is very difficult, if not impossible, to determine the extent to which these trends in test results have occurred because of NCLB. Since 2002, states, school districts, and schools have simultaneously implemented many different but interconnected policies to raise achievement.
Let's suppose this report is right, and we could further show that there is causality from passage of NCLB to the improvement in student achievement (in a way that statisticians would agree meets the criteria for testing causality.) Would that be enough to convince you that the federal government should have a bigger role in education, or would you continue to argue for local control? In other words, are you philosophically opposed, or is your argument consequentialist (i.e., "federal control doesn't work")? I have an answer to that question myself, but I simply invite yours in comments and I'll put mine in there after a few others are offered.

(h/t: Joanne Jacobs)

UPDATE: Read this over lunch:
In the summer of 2004, the Charlotte-Mecklenburg School District (CMS) in North Carolina determined that ten elementary schools and six middle schools had failed to make adequate yearly progress (AYP) for two consecutive years, and would face the first phase of sanctions under the federal No Child Left Behind Act (NCLB). By law, parents of children in those schools had to be allowed the opportunity to send their children to different schools.
CMS had school choice, but the forms were really difficult to read and get through. Under NCLB, simpler reports were mandated and provided. Parents could choose to get into better schools, but had to go through a lottery to get scarce slots.
Justine Hastings and Jeffrey Weinstein use this natural experiment to explore whether parents changed their school choices in response to the new information about academic performance, and whether allowing them to make a more informed choice led to academic gains. The authors were given access to the district's administrative records. As a result, their sample included information on the less informed school choice made in the spring of 2004 and the more fully informed school choice made in July of 2004. They also had information about school assignment procedures, attendance records, test scores, and student demographics. Of the 6,695 students in their sample, 1,092 students both filled out a new choice form in July and chose to attend a different school.

The authors find that the simplified NCLB notification doubled the fraction of parents choosing a different school, and those parents chose schools with strikingly higher academic achievement. Approximately 16 percent of "parents who received notification responded by choosing schools with test scores that were an average of 1 standard deviation higher than the school that they had chosen to attend just a few months earlier."

A key determinant of whether a parent chose to opt out of a failing school was the existence of higher quality alternatives nearby. Higher test scores at nearby schools significantly increased both the probability that a parent would choose another school, and the test score at the school chosen. The authors find evidence that winning admission to a chosen school reduced serious suspension rates, and that students who gained admission to schools with test scores substantially above their failing school experienced significant improvements in test scores.


Tuesday, June 05, 2007

Hey, honey, I have options 

While the Minnesota Legislature seemed willing to spend money like Michael Jordan, one thing it didn't buy was the new plan for a Vikings stadium. Perhaps it's due to a lousy plan, but remember this is the last team to get a deal in a town that has handed them around freely of late. This leads Mark Yost (subscribers link) to wonder aloud if the Vikings are the newest temptation of the City of the Angels.
So as you look around the NFL for the franchise that�s most unhappy with its stadium deal, the Vikings quickly jump to the top of the list. Their lease at the Metrodome runs through 2011, but as any contract lawyer will tell you, everything�s negotiable. So get used to the sound of �the Los Angeles Vikings.� It only makes sense.

But does it? Yost casts some uncertainty whether adding a franchise in LA adds or subtracts from TV revenue (since now everyone there can watch six games, you have a lot of Angeleno eyeballs to sell with that contract.) Maybe they're a major-league city or maybe they're not ... or maybe they just prefer college football.

Yet every team uses Los Angeles for football like Tampa was used in baseball in the past. The bigger reason for there being no LA professional football is probably more strategic.
Pro football is dead in L.A. because the owners have put it on the back burner for years, more interested in using the threat of it to extorttaxpayer money from cities and playing potential stadium owners and sites against each other. A rise in TV ratings this year, and the fact that NFL games get a decent share in L.A. even without a local team, have also reduced the urgency level.
Likewise, Aaron Schatz:
Despite the fact that a team in Los Angeles would help the NFL in broadcast negotiations, the city also has some value to the league without a team. Every time a football team is unhappy in its current city, it gets to threaten to move to Los Angeles in an effort to get a better stadium deal and more tax breaks. (The fact that Mayor Hahn appears uninterested in such sweetheart deals doesn't seem to have diminished the effectiveness of a general threat to decamp to L.A.) San Diego, Indianapolis, Minnesota, and New Orleans have all pulled this stunt recently. So letting Los Angeles go without football has allowed the NFL to extort more money from taxpayers across the country.
This latter article is from 2004, and note that the three other cities mentioned have gotten their tax booty from their cities (though for New Orleans, Katrina and Reggie Bush played a role, as Yost points out), and that now-Mayor Antonio Villaraigosa seems warmer to giving away a sweetheart deal.

I expect the result is that there will be a stadium deal in 2008, not that the Vikings will move, unless Governor Tim Pawlenty has gotten religion on this, too.

Cross-posted at The Sports Economist.

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Rediscovering partisan cycles 

I noticed a post on Angry Bear in which "Cactus" is attempting to show that "the economy does not perform as well when the President is a Republican than when the President is a Democrat." Bill Polley in a comment notes that what Cactus is finding is perhaps nothing more than a political business cycle. Having written my dissertation in the 1980s in large part on PBCs, let me add a couple of thoughts.

Jac Heckelman notes the research of Michael Klein (J Money, Credit and Banking 1996):
Instead of focusing on the actual values of the economic variables, Klein analyzes business cycle turning points, as identified by the National Bureau of Economic Research. He finds that 26 of the 34 presidential elections held from 1854-1990 were during an identified expansionary period. While expansions typically end in the period right after an election, he does not find that contractions are more likely to end in the period before an election. Thus, his evidence for political business cycles is somewhat mixed. Klein also finds that turning points differ by party control. Expansions are more likely to end following Republican victories, and contractions are more likely to end soon after Democratic victories. These partisan findings are much stronger after World War I.
Rising inflation has often accompanied defeat for Democratic candidates (LBJ and Carter), which in turn calls for contractionary policies. Cactus links to a post on money supply growth and GDP growth by presidential administrations, but this is confusing inflation and money growth and uses a dubious measure of GDP growth.

All the research done on PBCs up to 2000 lead Allen Drazen to conclude:
Although there is wide (but not universal) agreement that aggregate economic conditions affect election outcomes in the U.S., there is significant disagreement about whether there is opportunistic manipulation that can be observed in the macro data. There is a clear partisan effect in the United States (as well as in some other countries), with economic activity being lower in the first part of Republican than Democratic administrations, but still disagreement about the underlying driving mechanisms.
Drazen offers a way out of the box, in the form of a model that allows monetary policy to be independently determined but passively responding to activist fiscal policies. Fiscal policy could do two different things -- it could behave opportunistically to influence elections by flooding the economy with new spending just before an election (inflationary effects to come post-election), or it could behave partisan by favoring deficit spending more for one party than another.

Ah, but you say that it's the Republicans who deficit-spend now versus before. And indeed, the very effects we saw in partisan cycles pre-1980 disappear post-1980 with Reagan and a new focus on tax rates versus budget balance (that last bit is my conjecture, not at all supported by data in this post.) Heckleman points out this was true before,
In the earlier part of the Davidson-Fratianni-von Hagen, and Klein studies the Republicans, as the party of Lincoln and McKinley, had a large constituency base comprised of the industrial workers, and tended to support trade protectionism, the opposite of contemporary Republicans. It may still be true that significant differences in the structure of the business cycle occurred depending on which political party controlled policy, even in the period prior to the world wars, but since neither study examined these earlier time periods in isolation as they did for the later time period, that remains speculative.
The same can be said for Cactus, bridging two very different Republican parties (and, if Bill Clinton is a guide, two different Democratic parties.)

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A different way to spend political capital 

The Wall Street Journal (subscribers only) thinks Gov. Pawlenty did very well in beating back the DFL tax increases.
Last month the Democrats who run the Legislature in St. Paul pushed through a big tax and spending increase in their $35 billion state budget. Last week Mr. Pawlenty responded by vetoing all six of the spending and tax bills the Democrats sent him. The usual media and interest group suspects are upset, but Mr. Pawlenty is rallying his own supporters and making himself a defender of the taxpaying middle class.

Not to be too picky, but he actually just line-item vetoed five of the six.
In Minnesota, as in many other states last November, Democrats picked up big majorities in both the state House and Senate. First on the Democratic wish list was a budget plan of the kind now being promoted by the party's Presidential candidates: Offer a few tax savings to the middle class but whack "the rich" with a huge tax hike, and use the revenue windfall to finance teacher pay raises, "universal health care," $200 million in subsidies for the Mall of America, and even a pay raise for legislators.
To be fair, again, the few tax savings were the property tax relief, but as noted before, that was a trade of a yes for a maybe.
The Democratic plan would have raised the state's top marginal income tax rate to 9.7% from 7.85%. That's right up there with California, New York and New Jersey in the top five of confiscatory taxation states. Democrats also proposed a gas tax hike, a new real estate tax, and a tax on cell phones. In all, Democrats wanted to raise some $5 billion in income taxes, and new taxes on gas, beer, real estate transactions, cell phones and even a strange new death tax: a tripling of taxes on hearses. These would have raised taxes by about $2,000 for every income tax filer in the state. The Minnesota League of Taxpayers [more correct, the Taxpayers League of Minnesota --kb] parodied the budget plan as here a tax, there a tax, everywhere a tax, tax.

Every Republican in the House voted to sustain Mr. Pawlenty's veto, and the state GOP, which fractured last year, is unifying around the fiscal debate. "We ran the table on the Democrats," says Mike Wigley, the chairman of the Taxpayers League of Minnesota. "We got no new taxes, no bonding bill for the first time in a decade, and a budget lower than what the Governor proposed at the start of the year." Mr. Pawlenty is under pressure from Democrats to negotiate a new budget, but he holds the political high ground.

One reason Congressional Republicans were run out of their majority was because they lost their "brand" identity as conservative fiscal stewards. Mr. Pawlenty narrowly survived re-election in that dreadful Republican year. Now he's shrewdly expending political capital to good effect to beat back Democratic tax-and-spend policies that could damage Minnesota for years to come. Are Republicans in Washington paying attention?
Someone asked me this morning whether Pawlenty would bring the Legislature back in special session, faked out by the headline on this article in the StarTribune. Despite the whining, I expect the governor to stay strong based on the remarks made by his spokeman Brian McClung last Saturday on our show.

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Monday, June 04, 2007

To SCSU Scholars Readers 

To All,

Postings by me for the next few weeks will come from AK. My husband and I are traveling with friends to the 50th state, our last one. I hope to share some of the wonders of AK with you. We are huge fans of the US National Park system and will be visiting Denali and Glacier Bay. We'll even try our hand at salmon fishing.

More serious topics will be covered upon my return.



Meanwhile, spending down to zero... 

I'll keep as quiet as possible over the debate among my conservative friends on Bush's handling of the immigration question. But I think, when President Bush said he was going to spend his political capital, he did not have this in mind.

Yesterday, Bush headlined a fundraiser for the New Jersey state GOP, where donors could pay $5,000 to pose for a photo with the Commander in Chief. Expensive photo op, right? Well, that's actually cheaper that what donors paid just a year ago for a grip and grin with Bush. Last summer, GOP officials around the country charged at least $10,000 a pop for presidential photo op, a bargain compared to the $25,000-a-flash Bush commanded during some Republican National Committee fund-raisers back in 2000 and 2004.

(h/t: Tyler Cowen.)

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More from Our Guys in Iraq 

When it rains, it pours. Just yesterday, I posted a photo of guys looking at one of my shipments of goodies to them. Well, today, I got a snailmail "thank you" and wanted to share some of their thoughts with you.

"The temperatures are now well over 100 degrees! With gear, we each have our own personal little ovens to bake in! ...... We received your morale booster in the mail yesterday. The boxes you sent had pretzels, lots of M&Ms, and a ton of other great things. ...we have an area where we lay out some of the things we get sent. ...I can't thank you enough for all your support and generosity."

Their humvees are air-conditioned! (thank goodness) but they've also had some casualties. They are working through everything. For them to hear from us (vs. the MSM) is a real upper. So, if you want to do something, you can go here and volunteer.
Soldiers Angels or Operation Gratitude.


What if you choose well and are still poor? 

I was reading Mitch's poverty riff over the weekend and thought again to myself how often we miss the point of poverty by making bad calculations. Mitch spends the early part of his post describing how little money he had while making choices of how to live his life in order to invest in his human capital:
I was choosing, at the time (and it turned out to be a bad choice) to sacrifice a lot, one might say even obsessively, to try to re-jumpstart my radio �career�...
Now that stuck in my head a day or two, because you wonder how many people make "bad career choices" and end up poor. We know of the investments in good human capital. I often draw a graph below to describe the differences between Prudence and Jimmy. (This is a pretty common diagram to draw in getting intermediate macro students to understand lifetime savings, income and consumption. I get the suspicion I've drawn this graph for you before, dear reader, but I can't find it in my archives right now.)

Prudence is, well, prudent. She invests in her education or in some skills, perhaps to become a world-class artist, athlete, chef or talk radio personality. She accepts the lower income of her early years in return for a peak period later on. (You might wish to argue that income should be replaced with satisfaction -- I don't think Mitch ever planned to get rich in radio but he loves the activity, as anyone who's sat in a broadcast with him can attest.) That job can generate enough income for her later on to make it worthwhile to forgo the amount of income Jimmy makes.

Jimmy is not necessarily a spendthrift, but he has made the choice to forgo some of his investment in human capital in order to consume a higher income stream now. He then has a lower rate of appreciation of his income over his lifetime. They both decline as they approach death (that's the place where the line goes to zero, assumed to happen simultaneously for these two) and we've no reason to think one can invest for retirement better than the other. You can change the assumptions if you want, but these wouldn't change my basic point.

You hear sometimes that people "made choices" that make them poor. Here you can see that Prudence makes a choice that makes her poorer than Jimmy for quite some time. Perhaps the poverty level is set between their two income levels in their youth. My point is that if poverty is measured on a year-to-year basis, as many of Mitch's commenters did, you end up calling Mitch poor or not poor at some point in time in his past, and that misses the point of what he was doing. He's engaged instead in human capital investment. My students often do this too, by delaying graduation so they can work part time and take a lesser course load, or by coming back to school and quitting their jobs for awhile.

This struck me again when I was reading a high school senior's commencement address in the paper this morning.
The first thing I want to tell you is this: If you have lofty goals, go after them now, while you can. If you want to be an Olympic skier, do it ...! If you want to pursue a career in blues guitar, do it ...! If you want to save the world, do it ...!
(I deleted the names of the three students he addressed. Maybe they don't want to be here.)

If you can offer something to society � no matter how seemingly small it may be � you matter, you are an integral part of our community and society.

So, if you want to "go for the gold," figuratively or literally, do it. No one here will stop you.

Right, but what if you make those choices and they turn out to be "bad choices"? If your choices land you "in poverty", what is to be done? We have some answers to offer in economics. We know that if we compensate those who take risks and made "bad choices" but we tax those who take risks and made "good choices", the resulting behavior is to encourage risktaking without careful consideration of whether what your going for the gold has value to society. And if we let the losses stand and subsidize the winners, everyone tries to do the same thing and risktaking is discouraged. People respond to incentives.

Or, as Mitch puts it:

If society is going to subsidize anything, it should be good behavior - staying in school, learning a skill that can eventually help someone support themselves and those for whom they�re responsible, putting down the damn bong and keeping your johnson in your pants and learning how to support oneself and, eventually, raise families that value the same thing.

This is not to argue that every choice is like that, or that every person in poverty is investing in their human capital. Of course there are those that do not; there are events in life, like getting hit by a truck, that can cause poverty even though all the choices were reasonable. And different societies encourage or discourage human capital investment through its institutions (see, for instance, this considerable post by Brink Lindsey.) But it's a delicate balance one tries to find, to create a set of rules that meet both a sense of fair play over income distribution while at the same time keeping incentives in place that encourage thought-out risktaking.

It's not enough to tell people to "go for the gold" -- they have to know what gold is.

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More American Ingenuity 

As covered in the post Friday, American ingenuity is something we just take for granted. Why do we want to constantly change and improve things? I'm not sure but here's some food for thought: Perhaps because everyone, and I mean everyone, who came to America, left their country of origin because of famine or other physical catastrophe or because they didn't fit socially, politically, religiously, etc.

It was the strong ones - mentally, emotionally and physically - who survived. America provided an environment where opportunity and real freedom of thought abound. People were no longer constrained by restrictive rules of clan, tribe, religion, monarchy, or bullish leaders. Their individual hard work let many achieve what could not be achieved elsewhere. Did this attitude of self-reliance morph into a subtle but powerful attitude that released creative ideas that resulted in a constant improvement mentality? I don't know but I do know that we are an incredibly creative group of people.

This latest improvement item is a small but important one for those who take pills on a daily basis. We are all aware of the 7-day pill boxes. Now, there's an even better box that includes a horizontal bar that a user must push to the right to open the respective daily holder of pills.

EZY Dose
has designed this 7-day locking pill reminder to be child deterrent and prevent accidental spillage.

Again, American ingenuity at play.

Forecasting decisions versus events 

I said something on the air Saturday that, based on a couple of phone calls after the show, appears to require some explanation. What I said was that there are two entirely different types of forecasting one is discussing in this budget inflation debate.

One type of forecasting is forecasting of an event. The revenues generated by the tax code are the result of an event -- what happens in the economy -- multiplied by a vector of tax rates that collect revenue based on a matrix of flows of income and stocks of wealth or assets in the hands of economic agents. The tax rates are constant; the movement in tax bases comes from the Global Insights forecast (as I mentioned earlier). Insert the numbers from that economic forecast in the matrix, plug and chug, and there you are, a revenue forecast.

What I said on the air was that you can't forecast decisions. That's not right exactly; there's a very good example of decision-forecasting in the Taylor Rule, which is a forecast of the Federal Funds rate target set by the Federal Reserve as the basis of its monetary policy. It is a description of how monetary policy was being set under the leadership of Chairman Greenspan. (Does it describe Chairman Bernanke? Look at the graph and decide for yourself. The Taylor Rule, properly understood, is not a mechanism that predicts an economic event but a heuristic used to try to understand how the FOMC is deciding policy at that point in time. The rule is not independent of the committee whose behavior it is forecasting.

Legislatures and executives do not automatically adjust spending to inflation. The budget forecast provided, as noted by the House Fiscal Analysis Department, is the budget's structural balance, i.e., "how much more is being collected than spent before any tax or spending decisions are made." (Emphasis added.) They may do so as an element of policy; the budget forecast provides information on what additional spending would occur if all non-indexed items were to be raised by inflation as measured by CPI. But is it appropriate for an arm of the executive branch to forecast a policy decision of the legislative branch? I think it is not.

There is, by the way, a very simple solution. The Federal government has both an Office of Management and Budget (reporting to the executive branch) and a Congressional Budget Office. If the DFL wants a forecasting arm that reports budget figures the way they would like to read them, have the Senate and House Fiscal Analysis Department provide you that information. What the DFL is doing instead is censoring the information the Finance Department can provide, but not allowing it to report spending without inflation. This is a bad policy.

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Clarifying what inflation means: Try reading the report 

While we interviewed Brian McClung, spokesman for Governor Tim Pawlenty on Saturday's edition of NARN's The Final Word, he said something that perked me up. He reminded me on the inflation issue that the Finance Department in fact does print the data in its report. That was news to me and so I looked up the latest report from February. Sure enough, there it was on page 7.
FY 2008-11 Planning Estimates
($ in millions)

Projected revenues$16,551 $17,127 $17,818 $18,889
Projected Spending$16,143 $16,494 $16,785 $17,123
Balance$408 $633 $1,033 $1,766
Forecast Change$64 ($45)($187)($231)
Estimated Inflation (CPI)$320 $700 $1,060 $1,430
Forecast Change($20)$50 $90 $130
The impact of inflation is not reflected in expenditure projections. Inflation for FY 2008 and FY 2009, based on the consumer price index, is expected to be 2.0 and 2.2 percent.

For FY 2010 and FY 2011 CPI growth rates of 2.0 and 1.9 percent are projected. The inflation forecast is down slightly for FY 2008, but about 0.2 percent for FY 2009-11.

Using current law projections, if spending increases at the rate of inflation, revenues and spending will remain in balance through FY 2011. Historically increases in spending have been greater than those attributable to inflation alone.
Inflation then was going to be about 4.25% for the first biennium. The argument isn't that they are hiding the information. The issue is that the DFL leadership wants the inflation number cooked in above the line, so that the budget would look like this:

Projected revenues$16,551 $17,127 $17,818 $18,889
Projected Spending$16,463 $17,194 $17,845 $18,553
Balance$88 ($67)($27)$336
Forecast Change$44 $5 ($97)($101)
Comparing this to the current budget, the latest highlights report from Finance shows spending of $34.5 billion versus the $33.7 billion that would have been reported from the revised budget and $32.5 that Finance actually reported.

So what's the big deal? Pretty clear: Changing the way in which it was reported would have change the tenor of the debate. Rather than having almost no "new money" to finance its new priorities, the revised reporting would have allowed more campaigning, more editorials from compliant (and under-educated) columnists that taxes needed to be raised. Had the same inflation factor been applied to education, they would have screamed that K-12 had been cut (I know, they will anyway.)

Here for example is a paragraph from the faculty union's lobbyist's email to us about the higher ed bill; I've highlighted the inflation parts.

The Governor started off the session proposing $123 million in new funding for the MnSCU system�and $55 million of that was one-time funding that did not continue into the next biennium. He proposed no money for inflation, and $25 million of his proposal was for a one-time �performance bonus.� The legislature listened to the systems, students and faculty, and focused their funding on maintaining and improving the core infrastructure of MnSCU. The House passed a bill providing $168 million in new funding for MnSCU. The Senate passed two bills that together would have provided $187 million for MnSCU. They compromised in conference committee at $150.7 million.

The Governor vetoed the first higher education bill in its entirety, forcing the DFL higher education chairs to make some tough compromises on both policy matters (the Dream Act, ACHIEVE, and performance funding) and funding to get the Governor to support a second bill (there weren�t enough DFLer�s in either the House or Senate to vote to over-ride the veto). However, through patience and persistence, the higher education chairs were able to put together a bill that the Governor ultimately signed. The appropriation for the MnSCU system in the final bill was not only $28 million above what the Governor originally proposed�almost none of the money is �one time� funding.
Budgeting into a base appropriation is an attempt to set the bar higher each period. The budget proposals from the governor's office used a $1 billion budget surplus from the current biennium, thus those were one-time monies which Pawlenty offered to use in the appropriate way: as one-time expenditures. By budgeting then as not one-time money, the "tail" of the bill is higher, meaning the anticipated surplus in FY 2010-11 is less than it would have otherwise been, making the probability of a tax increase in that period higher than it otherwise would be.

Putting up each number by an inflation factor, contrary to Larry Pogemiller's assertion, is in fact hiding additional costs of government. And what that's about, as much as anything, is a lack of growth in government employment. An inflation factor in the budget puts a base under wages for those employees.

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Sunday, June 03, 2007

Thanks from Iraq 

As posted a few months ago, I ship goodies, etc. to our soldiers serving in Iraq. I've been doing this about four years. My latest group, an FOB - Forward Operating Base - unit sent a couple of photos. Though this photograph looks like an ordinary office building, it can be misleading. The FOB units usually are in a remote geographic site or now, under General Petreaus, scattered throughout a given area in one of the major cities. I ship to the remote ones because they don't get mail every day and do not have access to PXs. I wanted to share one of these photos with you.

Here as with most shipments, the "stuff" is put in a central place and guys pick what they need or want. Nothing goes to waste, nothing. Buried in this particular shipment were four large bags of M & Ms - a premier treat. It's the only chocolate that does not melt. I lucked out after Easter when Byerly's put the large bags on sale - I bought 40 of them! Should hold me until Christmas.

If you are interested in adopting a soldier or unit, you can go to Soldiers Angels or Operation Gratitude. They will link you with a group or individual.

As a recently retired Lt. Col. said in a presentation today, "You cannot be liberal and humanitarian and pull from Iraq." So, we pitch in and take care of our guys.

Friday, June 01, 2007

American Ingenuity 

Today I attempted to give blood (another story, another time) and experienced another example of the continuous improvements we take for granted. One Red Cross mobile donor center is located in the carpeted auditorium of a large church, Hosanna, in Lakeville. They have six to eight "beds" set up for donors. They bring a lot of equipment that requires power so they string many cords across the floor. For the first time today, I noticed a clear plastic, 14" wide tape over the wires. It could be cut to any length and since it was far wider than the standard duct tape or other tapes used, it kept people from tripping over tape that held down cords. In addition, when this tape is removed, it leaves no mark on the carpet.

They have also introduced a portable laser device to track the bar codes attached to each individual donor's blood. And, over a year ago, they put the 60+ questionnaire on a computer so it is much faster and easier to take.

People won't pay much attention to these improvements but they are important. They represent constant examples of American ingenuity that we simply assume everyone else can and does do. Not the case. Our constant "How can we do it better?" attitude sets Americans apart from much of the world.

Another jobs data conflict 

This is the sort of thing that is causing me hair loss.
The BED {Business Employment Dynamics} survey is based on the Quarterly Census of Employment and Wages (QCEW) which is far more comprehensive than the BLS� monthly snapshot. It showed the economy created about 19,000 private-sector jobs in the third quarter, compared to almost 500,000 indicated in the monthly figures for that period. It also shows the number of construction jobs dropped by 77,000, in contrast to the increase of 19,000 jobs shown in the monthly surveys.

But Thursday�s GDP report contained clues that that disparity did not persist into the fourth quarter. The Commerce Department�s Bureau of Economic Analysis revised up total wage income in the fourth quarter by 0.5%, to $6.195 trillion from $6.162 trillion. That�s based on their access to the fourth quarter QCEW data, which has not been released to the public.
I think we've reached a point where the monthly data need to be updated more frequently than the annual benchmarking. And anyone thinking the coincidence of two job numbers being identical is more than a coincidence, plus come to office hours for extra tutoring.


Mum's the word 

Tim Harford answers a letter from an economics for MBAs class that is concerned that their instructor is sloughing off because he's underpaid:
The first question is whether you think you are learning valuable skills on this MBA programme or just �signalling� - proving that you are smart, hard-working and full of desire for a career in management consulting. If the former, then you should shop your lecturer before he denies you more opportunities to learn. Since he is teaching economics, however, I doubt you are learning anything practical. You have nothing to worry about unless the signal itself starts to look meaningless.

We then move to the next node on the decision tree. (Fancy MBA talk, no?) Does this lecturer degrade the signal your MBA is giving about what a brilliant bunch you are? As long as the external examiners are as lazy as the lecturer, your secret should be safe.

Just one thing. If you must blow the whistle, keep it all in-house. If word got around - say, to readers of the FT - that your MBA is a shambles, that really would be bad for your career prospects. So I have done you all an economic favour and left the name of your college off this letter.

I think maybe rather than signalling, it's a matter of teaching them to join the tribe. So, as Harford says, it depends on whether the chiefs of the tribe, the external examiners, have a tough initiation.


How open is Minnesota? 

I didn't realize, though, that it was this much.
Minnesota�s manufactured exports climbed to a record high of $15 billion in 2006, growing by 10.1 percent � or just more than $1.4 billion � over the previous year.

Manufactured goods made up 62 percent of Minnesota�s estimated $24.2 billion in total exports for the year. The export total also includes an estimated $7.1 billion in services (or 29 percent of total exports) and an estimated $1.9 billion in agricultural commodities (or 9 percent of total exports).
Most of the growth happened in the first half of the year. And this all sounds good until you read the full report. Here's the lead paragraph:
Minnesota�s manufactured exports soared to $15.2 billion in 2006, growing by $1.4 billion between 2005 and 2006. Minnesota�s export growth rate was 10.1 percent, the 13th fastest growth rate among the 20 largest exporting states. The U.S. export growth rate was 14.5 percent, paced by extremely rapid growth by states such as Washington (45.5 percent) and New Jersey (29.8 percent). Minnesota accounted for 1.6 percent of U.S. manufactured exports and ranked 19th largest among states in 2006.
So while the news story says we exported more, it turns out we're not doing as well as other states.

Minnesota state GDP was $232 billion in 2005 (we don't have 2006 data yet.) Manufacturing is $32 billion, so nearly half of the manufacturing sector's output is going out of the country. About 12% of the workforce is in manufacturing.

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Sorting your thoughts 

If you are still trying to work out where you are on the immigration debate, you probably should take some time to think through issues as Dani Rodrik has. Reading this on guest workers, I realize I do put a non-zero weight on the welfare of immigrants (even though I'd argue it should be less than the weight on citizens). But the issue is whether or not a guest worker program is workable. I wish I had had that thought when I did the interview with Captain Ed. It does in fact clarify for me that, if I want to argue against the bill (as I do) I need to sharpen my own argument about how unworkable enforcement is. In short, we need someone to answer George Borjas' first question: "What guarantee is there that the guest workers will in fact be temporary workers? How can such a guarantee be enforced in the United States?"

Cost benefit analysis often focuses the mind this way.

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Minnesota complicit in price gouging? 

The price of gas is too high because stations don't lower prices fast enough.

Despite popular misconceptions, price gouging almost never occurs as prices rise. Instead, price gouging occurs when dealers keep prices artificially high in order to gain a little extra profit or recoup costs, even though the DTW price has declined.

...Most people never notice true price gouging. They will complain that the price went too high, but that's the fault of the oil companies, not the dealers. Prices that stay high for too long go unnoticed. Just because the price of gas stays high does not mean that a dealer is price gouging. The price may actually be higher. That's why it's almost impossible to prove, let alone prosecute, price gouging.

In Minnesota you can't lower the price until you refill your storage tank. That's not gouging, then, that's protecting mom-and-pop gasoline retailers.

But even in the absence of such laws, Michael Giberson argues, price declines are slower because consumers aren't spending as much time searching.

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Mrs. Scholar's latest column 

On the newly passed smoking ban is up. As one would have predicted, the supporters of the ban are in high dudgeon. My short answer: Treat the ban as a regulatory taking, pay off the bars for the loss of their property rights. If that's too expensive for you, then there's proof that the ban is inefficient.

UPDATE: A discussion broke out over whether one could sue for a regulatory taking. I don't pretend to understand the law that well, but from what I see there hasn't been a case put that looks quite like the Minnesota law yet. There was an Ohio case heard in 2005, D.A.B.E. v City of Toledo, but the 6th Circuit held only that the level of restriction was not enough to meet the requirements of a regulatory taking. Ohio allows a separate room for smokers to bring in their own food and drink (no employees allowed), and while that adds costs to businesses it wasn't in that court's view preventing "beneficial use" of the bar owner's property. The Minnesota law doesn't allow that possibility and thus might be considered closer to meeting the facial test for a regulatory taking. I have not seen a case in California, which has a law closer to the Minnesota law. I wonder if climate matters, so that a complete ban in Minnesota is more a taking than, say, one in Florida.

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