Wednesday, October 31, 2007

Hillary, Heat and Debates 

There are many news outlets, including blogs, criticizing Mrs. Clinton for her flip- flopping in last night's Democratic Presidential Debate. So be it. What got my attention were the comments made by her staffers today, that Tim Russert was too tough in his questions, unfair, biased, etc. From their defense of their goddess, it appears they have not bothered to watch the questioning of Bush's spokesperson by the Washington Press Corps or questions posed to Republican presidential candidates.

Hillary, honey, if you can't stand the heat, get out of the kitchen. Last night you were asked very valid questions and you could or would not answer them, period. If you cannot handle questions from news people, you will never be able to make a case for Americans. Therefore, you should not be president. You may think you can do the job but if you cannot answer specific questions directly either you don't have an answer or you have an answer you know the American public will not buy and you want to avoid letting us know.

Regardless, you came across a shrill, unprepared, rude, and panicky candidate. You will have to be tougher than you have shown. You cannot play the game as your hubby did - he didn't have to deal with the threats to freedom that we face today and in the future. Either grow up, make your case, state your position or get out of the kitchen.

What really has happened to the real wage? 

The answer is, "it depends!"

It depends on your choice of how you keep it real (to use my previous metaphor). Terry Fitzgerald finds that if you use the same deflator for all three series commonly used to discuss real wages -- average hourly earnings, median hourly wage, and national labor income per hour -- and you look at the same types of jobs being measured, average real hourly earnings rises 10% between 1975 and 2005, rather than falls 4%. Median hourly real wage rises 20% rather than 12%.

It also depends on whether or not you count benefits, which national labor income includes. Fitzgerald finds that counting in benefits would help you shrink the three figures to 16% for AHE, 28% for MHW, and 39% for NLI per hour. That still is a pretty big difference, which Fitzgerald thinks is partly accounted for by the difference between median and mean, and the difference between the groups of workers covered in the three measures. But that won't likely take care of all of those differences. And even if you take the largest of the three numbers, that's a real wage increase per year averaging only 1.1% -- lower than most other 30 year periods in U.S. history. (Fitzgerald seems to prefer the 28% figure for the thirty years, or around 0.83% per year over the time.)

So when you hear about the declining middle class yet read that things are just grand, the question to ask is, what exactly are they measuring? Skepticism is highly recommended.


Thompson and Social Security 

D.J. Tice has been posting on The Big Question some excellent material on the Social Security debate that I really hope will happen. While he did some factchecking of Hillary Clinton's claim that the global war of terror threatens Social Security -- which could also be said, albeit to a smaller degree, about earmarking transportation money for bike trails -- he stated that the Republicans have been "less than wholly impressive" on Social Security, except for Fred Thompson. In an earlier post he notes Thompson's position is to switch from indexing benefits to wage inflation to indexing on price inflation.

It�s a real plan for restoring Social Security�s solvency � real enough to be scaldingly controversial. By most estimates, so called price indexing would cause future benefits to fall enough to balance Social Security�s books without tax hikes, about 25 percent from the levels now promised. In effect, it would simply cut benefits to match Social Security�s existing revenue stream.

All the same, price indexing would still mean that future retirees would receive real benefits, after inflation, equal to those of today�s retirees.
Here's an example of the kind of attack on the Thompson plan you can expect, from our liberal friends at the Center for Budget and Policy Priorities. The price indexing idea has been around for quite some time, and was considered the starting point for discussions President Bush tried to have in 2005; you might remember how well that went. Economists and public policy specialists have known of this option longer than that.

So what's wrong with it? For one, it means you cannot grow your way to funding Social Security liabilities (unless all of a sudden profits and interest grow much, much faster -- not a position likely to be supported by CBPP.) Wage indexing means that any gains in productivity created by future generations will be transferred off to the retired generation. Insisting on the maintenance of wage indexing means you are moving the cost of public pensions increasingly onto future generations.

Second, as David Leonhart's column today makes clear, the Social Security problem is only part of the larger issue of unfunded liabilities we have. Medicare is much larger, and nobody seems willing yet to discuss that issue. Last night Rep. Kucinich argued for extending Medicare to all, and the other Democratic candidates weren't far behind. Republicans aren't any better. When Ben Bernanke brings it up, he gets scolded: Why should presidential candidates be expected to be any bolder? Well, here too, Thompson has at least said he wants to address the topic.

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We'll even ruin your Halloween 

This is the sort of thing that gets us a bad name. Tyler Cowen correctly points out that we probably have the right structure to giving.
[I]n-kind transfers are often more efficient than cash gifts, and that holds for public policy as well. (Imagine giving "money to buy kidney dialysis," instead of "kidney dialysis," and see how many people fake kidney disease.) The candy transfer insures that a) mostly young kids do the asking, and b) at some point everyone just stops and goes home.
Now we have a rule in our house not to buy candy until 10/31, because there is a high degree of fluctuation in visitors depending on weather. (Currently about 50 and breezy.) I did not create this rule; Mrs. S did (though I think it's just keeping candy out of the house due to her own lack of willpower.) But I wonder now -- if our time is more valuable, why don't we give large, low-value items? Heavier bags cut down the travel of the trick-or-treaters. The loss of fruit as a treat for Halloween has made bags lighter. If Cowen's logic is correct about why candy over cash, why not press the advantage further by giving candy in heavy wrapping?

Someone brought candy into our office today, though we are closed before any trick-or-treaters would come. Why would they do that?


Grabbing the Bobo vote 

Mitch says we need to pander to him to get his endorsement for MOB Mayor. I don't think I can afford his breakfast tab on Saturdays, and he has only his vote to give -- he's banned everyone else but Flash from his blog. So we would like his support but need to focus on those whose support we can use to push us over the top.

Thus we turn to the chimp. We have not yet gotten Bobo's support, but we have asked his brother Yoyo to help us out here.
We have already awarded Yoyo the bachelor's degree, thus his tassel, and made him Director of Recreation in our new Administraiaiaiaiaiation. We expect that Bobo will withdraw from the race and join Yoyo and me on the ChimpEconomistBushIsBobo Ticket. Atomizer does martinis; we do daiquiris, name your flavor. Yoyo, naturally, likes banana. And he gives generous pours.

Voted yet? Once a day, here. Borrow your friend's computer while they're grabbing coffee and vote again.

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Tuesday, October 30, 2007

"Indoctrinate U." -- share it liberally 

My review of the movie is up at the The Minnesota Free Market Institute. I'm glad they picked that title for the review; I didn't give them one for some reason.


ACORN, the Dems, voter fraud, MSM, etc. 

If you recall the 2004 election, there were many complaints by Democrats of how the Republicans cheated. That's because the Dems lost. In 2006, the Dems won big time. Prior to the election, there were cries of voter fraud, etc. Well, the Dems won - never heard another word, did we.

ACORN, Association of Community Organizations for Reform Now, members completed and filed more than 1,800 fictitious voter-registration cards during a 2006 registration drive in King and Pierce counties in the state of Washington. Seven were accused of voter fraud, three admitted guilt, one has been sentenced.

Did you see this on the evening news? No, I didn't think so.

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A win for economic liberty in Minneapolis 

We spoke in August on the Final Word with Lee McGrath and Scott Bullock of the Institute for Justice about their case defending a Minneapolis City Council decision to end the use of entry restrictions into the Minneapolis taxi market. The case was in court because existing members of the taxi cartel argued that changing the regulation and removing the restriction was a regulatory taking. IJ reports that they have won a ruling from the magistrate.
Can an entrenched cartel of Minneapolis taxi drivers violate the civil rights of entrepreneurs and consumers?

No, according to U.S. Magistrate Judge Franklin L. Noel. In an opinion released today, the judge recommended that a lawsuit brought by members of the taxi cartel to overturn the city�s free-market reforms be dismissed.

In his opinion, Judge Noel determined: �The [established] taxi vehicle license holders do not have a constitutionally protected freedom from competition.�

Taxicab regulation has long been seen by economists as an entry barrier protecting cab cartels. Here and in Canada, such regulations make it difficult for the poor who want to travel to places inconvenient by bus. (Here's a survey of the literature.) In St. Cloud, one of the most frequently cited problems for people with modest or low incomes is the lack of public transportation; yet we have had a system that has prevented immigrants from even holding a license. While St. Cloud has a pretty good bus system, there are still places of work that would be difficult for the car-less to get to regularly. ("I used to walk to work, in the winter, in the snow, uphill, both ways." Yeah, I hear you.) If cabs were to operate freely in the city, could workers find better jobs off the bus routes, get their children to child care more easily, and get to cheaper grocery stores for food? It might be worth the effort.

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Orientation 'treatments' 

Suppose you have a high school junior or senior looking to attend a nice college. Nothing real fancy, mind you, just a reasonable quality school with faculty who commit to teaching, a nice campus and dorm life, etc. You get the materials from one school, whose Office of Residence Life has an education program designed for those living in the dorms. It has a set of "competencies" for your child to develop in the interest of learning "citizenship." These include
You think "that stuff looks pretty liberal," but you decide that because it's a public school (so tuition is reasonable) they probably can't go too far in pushing this stuff, right?

Welcome to the University of Delaware.

Students living in the university�s eight housing complexes are required to attend training sessions, floor meetings, and one-on-one meetings with their Resident Assistants (RAs). The RAs who facilitate these meetings have received their own intensive training from the university, including a �diversity facilitation training� session at which RAs were taught, among other things, that �[a] racist is one who is both privileged and socialized on the basis of race by a white supremacist (racist) system. The term applies to all white people (i.e., people of European descent) living in the United States, regardless of class, gender, religion, culture or sexuality.�

The university suggests that at one-on-one sessions with students, RAs should ask intrusive personal questions such as �When did you discover your sexual identity?� Students who express discomfort with this type of questioning often meet with disapproval from their RAs, who write reports on these one-on-one sessions and deliver these reports to their superiors. One student identified in a write-up as an RA�s �worst� one-on-one session was a young woman who stated that she was tired of having �diversity shoved down her throat.�

...At various points in the program, students are also pressured or even required to take actions that outwardly indicate their agreement with the university�s ideology, regardless of their personal beliefs. Such actions include displaying specific door decorations, committing to reduce their ecological footprint by at least 20%, taking action by advocating for an �oppressed� social group, and taking action by advocating for a �sustainable world.�

In the Office of Residence Life�s internal materials, these programs are described using the harrowing language of ideological reeducation. In documents relating to the assessment of student learning, for example, the residence hall lesson plans are referred to as �treatments.�
You can see other stories like this now through Thursday night by watching Indoctrinate U at the Oak Street Cinema in Minneapolis.

I've written years ago about our own student orientations and those given to others and their parents, but this one appears to jump the shark.

UPDATE: In comments, Jeff makes a one of those "wish-I'd-thought-of-that" point:
I'm less worried for the average dorm-dwelling student (who can probably ignore this nonsense; in reality, it's rarely "mandatory") and more troubled by the fact that becoming an RA is apparently conditional on professing a particular set of beliefs. The RAs are the ones who are most likely to find themselves in the awkward situation King is describing, wondering if thoughtcrime is going to prevent them from gaining the assistantship for which they are otherwise qualified.
George Borjas knows a thing or two about this sort of thing as well:
Why am I super-sensitive to this? Because as a young boy I myself went through a one-year course in ideological reorientation. I attended an elite elementary Catholic school in Havana. Castro took over, the Catholic school was shut down, and I got transferred to a revolutionary school where the entire day was spent teaching Marxist-Leninist ideology. Luckily, this lasted only a year and I continued my education in Miami (where the entire school day was instead spent talking about the upcoming football game). I am certain that the blind zealotry that I saw in the young teacher's eyes that year turned me off from that particular way of viewing the world for the rest of my life. One can only hope that many of the students forced to attend the re-education programs at Delaware and other universities react in the same way.
Borjas says he is looking forward to seeing Indoctrinate U.


My neighbor the farmer 

If you live in the Twin Cities, look around you. One of your neighbors might be getting money from agricultural subsidies. Over a billion dollars in an eighteen month period. While there have been repeated attempts to limit farm subsidy payments to only those who are actively participating in farming, the article claims some are getting checks merely for participating in a conference call once a year.

There's a new farm bill working its way through Congress right now, and fixing this problem is not on the agenda. If someone would like to wear the mantle of fiscal conservative -- let's say you, Rep. Bachmann -- how about a proposal to stop this silliness?

H/T: Mark J. Perry, who has a map of where the money goes.

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Whaddya mean we can't trade with Iran? 

I was at the Patriot Saturday when Michael noted he received a press release from the Governor's office that said a deal he had agreed while in India regarding Essar Group's purchase of the Minnesota Steel and to construct a new plant in Hibbing. News reports describe the problem:

The Essar Group closed Monday on a deal to buy Minnesota Steel, planning to begin construction on a steel mill near Hibbing early next year -- a project that Pawlenty said holds great promise for the state of Minnesota. But later in the week, federal officials contacted the governor to inform him of Essar's possible ties to Iran.

Reuters reports that Essar plans to begin work on an $8 billion to $10 billion oil refinery in Iran early next year, working with the National Iranian Refining and Distribution Co. Such a deal may constitute or lead to business practices that are prohibited by the U.S. government. Pawlenty said Essar officials have confirmed talk in Iran, but say they do not have any commitments there.

If the federal government finds Essar's actions in Iran to be a violation of U.S. policy, Pawlenty said he would withdraw his support for the company's planned steel mill on the Iron Range.

The deal includes $30-60 million in state money for the Iron Range, and potentially scotching the deal has got the Ranger Mafia up in arms.
"It never ceases to amaze me how this governor can change his mind from one day to the next. It's frustrating that a project we've been working on for seven years is finally picked up on by the Twin Cities media a couple of days ago when the governor says it's going to be a good deal for the Range and state. Then days later, a complete reversal," said state Rep. Tom Rukavina, DFL-Virginia, in a telephone interview Sunday evening. ...

"I was stunned. This is so extraordinary. We were told the meeting with Essar went well (on Thursday) and then he gets back to Minnesota and immediately draws this line in the sand. I find it puzzling," said state Rep. Tom Anzelc, DFL-Balsam Township.

Anzelc said he had been out at some hunting shacks talking to some guys prior to next weekend's opening of the deer firearms season and had also been to an anniversary party.

"People are puzzled. But they're still upbeat. After all, we're Rangers," he said.
What on earth does that mean, "we're Rangers"? We're used to getting our way? We're used to getting easy money from the state?

So while the governor says "There are certain things in life that are more important than a steel mill," the Rangers think that trading with a company that deals with Iran is no big deal. All of a sudden, Rangers like globalization.
As to whether there should be a concern of a potential new corporation on the Iron Range and in Minnesota would have dealings with Iran, Anzelc said, "Sure it's a concern. But it's a concern that will always be there when you are engaging in a global economy with a very tense geo-political situation.

"We can't control all the countries of the world and all their actions. Essar is a company from India interested in building a steel mill using our iron ore because it's a steel company that has a market. Our traditional domestic steel interests don't have those interests available. That's why it's Essar," he said.

"Let's look at China. It's the largest communist country in the world with the third largest army. But we're sending them plenty of materials and they're sending back a lot of cheap goods that people buy ... not me. Look at Pakistan. Every T-shirt you see is made there and they're sheltering Osama (bin Laden, the architect of the 9-11 terrorist attacks that killed about 3,000 people in the United States). And we're worried about India building a refinery?" Rukavina said.
You know what? Give me a search warrant and fifteen minutes, and I bet I can find items from China and Pakistan in Rep. Rukavina's home.

But this isn't just trading any ol' thing. This is a refinery. One of the real possible places where the U.S. has leverage with Iran would be a military strike on the one refinery the country has. Iran would like very much to have another refinery to reduce that pressure; U.S. interests are clearly in keeping this from happening via peaceful means. Why the state of Minnesota should give money to that company that helps them build the plant is quite beyond my reasoning skills, but I'm no Ranger.

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Posts of the day 

I'm sure 95% of my readers read PowerLine, but for the remainder, today's introduction of the anti-Keillor is a moment to cheer. To sum up the point we turn to Will Rogers: "I can remember way back when a Liberal was one who was generous with his own money.'' Here's hoping ol' Gary can toss a few Powdermilk Biscuits to the poor...

Also, in the voting for mayor of the MOB, the incummbet is resorting to scurrilous tactics, like using dog pictures to win votes. Not to be outdone... is a fine creature preparing to listen to a scintillating lecture on computational general equilibrium models in economic development in Mongolia. She will be chief of staff in the Banaiaiaiaiaiaian Administration should you elect me.

Which you can do here once every day. Have both an office and home computer? You get to vote twice. Each. Day.


Monday, October 29, 2007

Ethics, the Washington Post, and the rest 

This article from National Review Online discusses the latest round of congressional ethics laws. While many of us would like to see more sunshine on the behavior of our politicians, we'd also like to believe that our news was free from bias.

This quote about the Washington Post from the above article says much:
The [ethical] waters are much murkier for the Washington Post, whose parent company shelled out $91,000 for an in-house lobbyist through the first six months of the year, according to the Senate Office of Public Records. (Not only did the Post lobbyist cover the Free Flow of Information Act, but he also lobbied on such varied issues as immigration reform, No Child Left Behind, and the District of Columbia Appropriations bill.)

We know much of the MSM coverage is biased but for the nation's paper to hire a lobbyist on some of the biggest issues of our day, well....

Wouldn't it be of interest to you to have the Washington Post disclose, when they publish an article about, for example, immigration reform, what position they lobbied for and how much they spent?


Taxing intent -- spooky! 

This story just cracked me up. And not just because the Iowa Department of Revenue wants to tax your pumpkin if you use it for a display, but not if you want to use it for food. No, it's for this first sentence.
The Department recently refined its position on whether pumpkins are subject to Iowa sales tax to more closely match what we believe to be their predominant use.

In the past, pumpkins were exempt from sales tax as a food (edible squash), even if they were to be later made into jack-o'-lanterns or used as decorations.

Our position now is that pumpkins are taxable if:
So what I want to know is how many people attended the meeting where "The Department recently refined its position..." How many, and at what cost? What could these people have been doing instead of cogitating on the burning question of pumpkin use?

The Tax Policy Blog provides more feedback here.


Spending your way to prosperity 

Our local state senator Tarryl Clark is not going to let go of this idea that we can spend our way to prosperity. There would be more jobs in Minnesota, she says, if only Governor Pawlenty would have let the legislature spend more money. Via Larry Schumacher (referring to a news column that I guess I didn't get, maybe Mrs. S figured it would be bad for my blood pressure?)
"In this year's legislative session, the Minnesota Senate passed a capital investment bill with broad bi-partisan support. The bill funded dozens of construction projects across the state including a new biomedical research facility at the U of M, new public safety training centers, and economic development projects around the state. However, the Governor vetoed this bill and by doing so he vetoed thousands of jobs. If he had instead signed the bill, Minnesotans would be working on these projects right now.
I think I should mail Sen. Clark a copy of Bastiat. It is easy to see the jobs created by the additional spending on these construction projects; that is what is seen. But she seems incapable of understanding the jobs lost due to the higher taxes to be paid now and in the future by businesses in return for these projects. That is what is unseen. Government consists of elected officials who necessarily have short time horizons and thus think they can borrow their way to prosperity. This doesn't work for homeowners, and it doesn't work for businesses, and it doesn't work for state governments. Just ask Michigan.

There are any number of reasons for the Minnesota unemployment rate to exceed that of the U.S. If you look at the annual figures, job loss in Minnesota is focused on the goods-producing sector, particularly manufacturing and construction. The service sector is moving at a fairly normal pace; health care services are strong. Given manufacturing is in a secular long-run trend downward around the country, how much of this do you want to lay at the feet of Pawlenty? And do you want to spend $200 million to try to get back 2,000 jobs in construction? How many jobs in the service sector might be lost to create those construction jobs?

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Let's look at the contracts 

I'd encourage you to read Larry Schumacher and Charlie Quimby on lack of transparency in Minnesota government. Charlie's correct to write:

Last session, the legislature passed, and Governor Pawlenty signed, the State Government Omnibus Bill, which contained a provision for a web-based contracts disclosure system. But no money was appropriated to create it.

This is just one example of the political struggle to reconcile public demands for more government accountability with pressure to control spending. One side says, here's a needed reform and the other side says, fine, but don't spend any money on it unless you cut something else.

The bill passes with bipartisan support and everyone is on record as being in favor of greater transparency, but there's no money or accountability for actually making anything happen.

This results in a patchwork of the good, the bad, and the unfunded.

I can tell you about how contracts work through our university system, but I can't show you who got paid for what, even though there's no problem with you coming to the library here and getting data on my salary. There's enough blame here to be bipartisan; we should ask our candidates next year if they intend to fund this program.

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Property taxes and the optimal student-teacher ratio 

Being an economist in a smaller place, and particularly one willing to speak on public policy, means you get lots of calls for commentary. One such call showed up Thursday night while I was driving back from watching the World Series: an 8am appearance on Hot Talk to talk about the school levy in the St. Cloud school district. I got all of about three minutes in, just enough time to say something I thought was relatively non-controversial -- increasing property taxes tends to push down house prices, which around here (and damn near anywhere else in America) don't need any more pushing.

I guess it was controversial to one of the other people on the show, school board president Jerry von Korff. I received Friday night an exhaustive email suggesting that I am incorrect on this basic point. So I spent a little time thinking before returning his email -- indeed, I get to be wrong every day here on Scholars -- and then sent the following back to him (personal notes edited out):
I think there are two points on which we have some disagreement. First, that property values include some prospective valuation of both tax and government service flows and, second, that the cost of 7% of 742's income would be catastrophic. While I think it would hurt, I don't think it's nearly so calamitous, except to the employment prospects of some teachers.

One of the points you did not make in the part of Barnett's show that I heard was that the property tax paid by 742 residents if the tax did not pass would fall, and not by a little bit. Had I had enough time, I would have read the data from your own FAQ. So a no vote is in essence a vote for property tax owners to receive a tax cut. People have a right to make that choice. The possibility of that choice means that the expected value of taxes to be paid on a house are lower right now than they will be if the levy passes. (That doesn't mean, by the way, that I think the levy will fail; in fact I'll be surprised if it does. But that would not invalidate this analysis.)

The value of that tax cut has an immediate benefit, in the form of lower taxes, and a second benefit in the form of lowering the PITI -- principal, interest, taxes and insurance -- on a house in the district. (Added here later, not in letter: The district has a tax calculator that says on a $150k valued house you would only pay a net increase of $1.50 a month, but what the top line really says that if the levy expires you get a tax cut, which I estimate to be about $9.80 a month. On net, then, the vote is costing you $11.30 a month.) That means that more buyers would qualify for a mortgage to buy that house, and certainly that means house prices could be sustained. Surely you are aware of this from your work with appraisers, and I apologize for boring you with things you already know, but this was the basis of my comment. I'd expect any economist to agree that if the number of people who can afford to be a house falls, demand declines leading to a drop in price, all other things equal.

Now to the second point, which you probably are thinking right now: The reduction in services in the district would be a negative for potential homeowners with children. Laying off teachers means increased class sizes, and you may wish to argue that this will lead to parents wanting to move to Sartell or SRR [Sauk Rapids-Rice] districts. This would make those houses even less desirable! you might claim.

Parents might believe this. But they would find that smaller class sizes really are not that helpful to student learning. The evidence from Project STAR in Tennessee done by economists like Eric Hanushek or Caroline Minter Hoxby are pretty clear that there are many better ways of spending money than by keeping class sizes at, say, 20 rather than 25. Hanushek has a meta-study that looks at evidence from a hundred or so separate pieces of research and there's just no evidence that 742's students would be helped by maintaining class sizes two students less than they would be if the levy went down. (Two is my very quick-and-dirty estimate from the MDE's statistics. If it's much more, you should show me why that's true.) In STAR, Hanushek found that a 10% reduction in classroom size cost about $850 a student but raised student achievement only 0.02 standard deviations. Surely you could find a better way to spend the money.

I have a great deal of sympathy for your point on the unfunded mandate of NCLB and if the district made accountability the key of its pitch, arguing that to do so it needed money for online testing, I might be willing to support something here. But if you can only argue that the loss is in classroom size and extra-curriculars, I have a hard time with the argument that these will offset the loss in demand for houses by pricing out the lower-income families who can't qualify the PITI for their mortgages. I have less sympathy for the outcry over the state's funding formula, but that's really not the point here. I'm indifferent whether the state charges me more taxes and transfers them to you or the school district issue a bond and ask me to pay for it. If anything was to tip the scale, it would be that the bond implies local control. Given your comment on NCLB, I'd think you'd be for that.
Many school districts and legislators use this comment on class sizes as the trump card -- you wouldn't want your child in a larger class, she'd get less attention that way. So here's the question: At what point is the class small enough? Go ahead, ask your teacher or your school board this question. If 20 is better than 25, is 15 better than 20? If so, then is 10 better than 15? Should we have one for every student? I mean, if money wasn't an object, at what point do the gains become so small that the district and its teachers would decide to do something else with the money?

And when they tell you they want to hold class sizes down, ask if they've got enough rooms for those kids. Are they planning to come back and ask for another building levy to house those extra -- but smaller! better! -- classes? Ask them as well, as Hanushek did to Congress nine years ago, whether they are aware that between 1950 and 1995, pupil-teacher ratios fell by 35% ... without much of any change in performance?

One also needs to talk to parents and get information out about the cost of reducing class sizes compared to the benefits. Many school officials believe the voters will react negatively to increasing class sizes by voting with their feet. They may be right. To the extent that you can reduce that reaction, you might help a school board move in the right direction.

I have had a fairly long exchange with von Korff since writing this, and without either of us conceding much he and I have found a way to talk about teacher productivity. It's what we really want to know: How can we make teaching and teachers more effective? There's no doubt that much of what happens in the classroom is outside the teacher's control, and that a simple look at test scores without including environmental factors matters. We won't necessarily agree on what the right set of environmental factors are, and maybe we never will. But what also matters -- and on this I think we have some agreement -- is that teachers need to be incentivized to use the best methods. In his view, that requires smaller classes. In mine, that's a huge opportunity to discuss whether we could find a better delivery method that might mean larger classes. If the focus is on output rather than input, on production rather than class size, therein lies the possibility of real changes that matter.

In short, what's the optimal student-teacher ratio? The economic research I mentioned above suggests there's a very flat range of achievement scores for classes between about fifteen and thirty students. Where's your school? Again, I beg you to look up your own district's data. It's not hard to find, and it's not hard to understand.

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Walk like a champ, talk like a champ 

I am working in my Jason Varitek road jersey today. (If you don't know, he's that guy with the finger in the air. He wears the 'C' on his jersey.) Tired, but almost as happy as these guys.

Here's something a little weird. I am watching the game last night. We are ahead 4-1 in the bottom of the eighth, and our best middle relief pitcher, who's a little gassed from his workload the last three games, is on the mound. A single, an out, and a Garrett Atkins home run later, and it's 4-3. In the years past -- say, any time between 1918 and 2004, for instance -- my reaction would be "we're dead. We're so dead. We are Tom Tancredo Campaign dead. How do we die this time?" And you'd sit and watch with that Eyes of the Dead look like that guy with the word "Risk" tattooed on his fingers in that commercial.

This time? I say to Littlest, "hey, it's 4-3 and Paps is coming in the game. Pitched a lot this series, but he's a horse. I like our chances."

That's when I realize the curse is dead and gone forever. We could have even lost that game last night and it would still be dead. So Mitch is right; give the 86 years a rest, send it to the same history books where we discuss the Hundred Years War. Now it's our turn, and even if some gloryhounds can't even wait for the end of the series:

...we don't have to say Bambino or Yankees suck any more.

We are Red Sox Nation. Our team is World Champions for the second time in four years. We belong here.

Don't like it? Come beat us.

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I could use another title 

In case you hadn't heard, I am running for Mayor of the Minnesota Organization of Blogs. My only campaign promise is free vowels for everyone. The polls are now open, and your support is appreciated.


Sunday, October 28, 2007

Grade Inflation - Who Loses? 

Most people who have any connection with education institutions are aware that grade inflation is a topic of discussion. Resolving the issue is not. After getting inflated grades in high school and earlier, students enter universities believing they are very bright and entitled to high grades there, too. The author of this article in The Economist attributes inflated grades at the college level to a reaction to time pressures on professors and teaching assistants. Since the students all think they are very bright (and some are) they question any grade not an "A." As the author implies, it is just easier to give a high grade than spend the time and hassle defending a legitimate lower grade. However, there is far more to the problem than avoiding hassles.

Who loses?
First, the student loses because he/she believes that a high grade means they have learned something. Not necessarily so - too often grades are "given" vs "earned." The student has a poor sense of how much talent and effort it takes to be an "A" student, one that performs significantly above average. He hits the non-academic world and cannot understand why he is not rated the best employee since the 1800's.

The parents lose because they have been given an over-valued assessment of their Johnny or Susie. They believe their kid is able to take on anything because their grades are really high. Then Johnny or Susie returns home because they cannot compete in or cope with the real world. Parents also lose because they are paying taxes to support a system that in many instances does not teach what students need to succeed. Our system today has few repercussions for poor performance or bad behavior. The real world does not have "do-overs" on exams.

Employers lose because they think they are hiring someone with certain knowledge, responsibility and decent work ethics. Instead they get new employees who are often lazy, incompetent, and lacking in the ability to work well with others, yet have an over-inflated perception of themselves.

Our nation loses because these students have not been taught to think critically, do not know basic facts on which to base arguments, and have low personal standards for such basic habits as consistently showing up for work on time. Students from other nations often know more and work harder than US educated students.

We are in a global economy whether we like it or not. The attitude towards academics on most of the planet is to learn everything one can. This means learning the basic foundations of math, science, and real history (not just the guilt-driven issues of the West). My foreign students from Asia, Africa, Eastern Europe and South America have drive and reasonable expectations. Our last 40 years of coddling US students, making excuses for aberrant behavior and grade inflation have resulted in far too many "graduates" knowing less, expecting more, and running home to mom and dad when things do not work.

As always, there are exceptions but my contacts in industry are very, very concerned about the quality of college graduates today. Since this post is getting long, I will document suggestions separately.

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Friday, October 26, 2007

Indoctrinate U - A Must See 

Tonight was the premier opening of the documentary film, Indoctrinate U brought to the Twin CIties by the Minnesota Association of Scholars. Producer, Thor Halvorssen and Director, Evan Maloney joined 65 supporters for a dinner at McNamara Alumni Center at the University of Minnesota. We learned the background of the movie, what it took to get it to its current state, and future plans.

Minneapolis-St. Paul is the first location to offer multiple showings of the film. You can see it at the Oak Street Cinema near the U of MN campus. Times are as follows:
Saturday/Sunday 7:15, with a 5:15 Matinee each day;
Monday through Thursday 7:15 and 9:15, with 5:15 Matinees Tuesday & Wednesday

If you are a college student, a parent with college students, a future college student, this movie is a must see. What has happened since the 1960's on our campuses is a disgrace, a waste of taxpayer money, but most importantly, a defeat for the open exchange of ideas. Our nation has thrived on the exchange of ideas, different opinions, and the right to express them. Forcing students to adhere to a one-sided philosophy is bad for all.

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Nixon and Putin, sitting in a tree 

Controlling P-R-I-C-E.
Seeking to tame galloping food prices ahead of parliamentary elections in early December, the Russian government on Wednesday signed an agreement with major food producers instituting temporary price controls on basic products.

A tersely worded statement posted on the Web site of the Agriculture Ministry said the producers had signed the agreement �at their own initiative.�

�Producers and retail organizations, understanding the social responsibility of business in the balanced and stable development of the consumer market in Russia, will take necessary measures over the course of the agreement to ensure that the most vulnerable strata of the population can purchase products at acceptably stable prices,� the statement read.

Prices for products like cheese and vegetable oil have jumped and even doubled in some regions in the past two months.

Here's the Nixon period from Commanding Heights. Arthur Burns at the Fed raised the money supply 13% in that period in advance of Nixon's re-election. M2 in Russia at this time is up almost 28%.

A deep recession followed the relaxation of price controls in the US in 1974-75. Those investing in Russia are hereby warned.

(h/t: Greg Mankiw.)

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Carry a gun on campus? You're sick 

Via Best of the Web, the story of students who are walking with empty holsters on campus to protest the prohibition on guns on campus.

"People who would otherwise be able to defend themselves are left defenseless when on campus," said Ethan Bratt, a graduate student wearing an empty holster this week on the campus of Seattle Pacific University.

Students for Concealed Carry on Campus, a group of college students, parents and citizens who organized after the deadly shootings at Virginia Tech University in April, launched the protest.

...Campuses are prime targets for people intent on harming others because laws prohibit concealed weapons there, Bratt said.

But others believe college is no place for firearms.

"You don't like the fact that you can't have a gun on your college campus? Drop out of school," said Peter Hamm, a spokesman for the Brady Center to Prevent Gun Violence.

I would like to think the market will take care of this; schools willing to treat their students with respect regarding their right to carry a weapon can appeal to those who wish to do so. But campuses have long been hostile to the idea -- particularly the faculty, as I found out some years ago.

As Peter Hamm's response indicates, it doesn't occur to the gun-restricter that he's even violating rights. We've seen that up here, according to Wendy Kaminer.

Want to see other students whose rights are simply assumed not to exist? Come see Indoctrinate U, opening tonight.


Three rules for reporting on statistics 

One thing you try to teach students is how to put numbers in context. Based on the idea that "figures don't lie, but liars sure can figure," part of educating citizens in a democracy, and of critical thinking, is to ask questions about numbers presented by political candidates and media.

Some simple rules I teach:
  1. The Carl Sagan rule. For older readers, what's the one phrase you remember from him on the Tonight Show with Johnny Carson? "Millions and millions" of planets/stars/galaxies... The idea was to imply "a lot, a real lot, bigger than you can imagine." The use of large numbers is usually meant to impress or scare you. So for example, remember yesterday when I mentioned that the subprime mortgage crisis would cost $14 million in local property tax revenue in Minnesota? You should ask "out of how much total is that?" The answer is that total property tax revenue collected in the state is almost $7 billion, so that the hit is around one fourth of one percent. (That is .0025% (thanks for the correction, Dale and Peter!) for those of you scoring at home.) Doing things in terms of shares (like spending or taxes) is a help in putting things in the right context.
  2. The "keeping it real" rule. You might think this is a simple matter of deflating everything by CPI, but that is a bit difficult. What's the real cost of a personal computer now versus one five years ago? That question is almost nonsense, because the computer on my desk five years ago does nowhere near what mine does now. One of the things I really like to do with this is to show students some of the annual reports of the Dallas Fed, written by Michael Cox and Richard Alm, which attempt to put the cost of things in something that really is constant, like human effort. Or by understanding that productivity at work isn't just measured by output per unit of input, but includes the quality of time at work and at home. The point is that to really keep it real, you need a real numeraire that people can hang on to, not just some "absence of money" definition. Keynes wrote the General Theory using the wage rate as his numeraire. Austrian economists have a point in referring to the use of a numeraire as "misleading". I don't eschew one, but it should be used with care.
  3. The adjective rule. Pay very close attention to the adjective used in defining the term to be measured. Take yesterday's editorial in Investor's Business Daily about President Bush's spending. Spot the adjective:
    Bush is "arguably an even bigger spender than LBJ," says a story from McClatchy Newspapers on the president's fiscal record. Pretty tough words, given that LBJ conducted both a war in Vietnam and a War on Poverty simultaneously, racking up huge gains in spending over his term and a half in office.

    The McClatchy piece says discretionary spending under Bush has risen an inflation-adjusted 5.3% in his first six years, outstripping the 4.6% under Johnson � and way above President Reagan's meager 1.9%. By "almost any yardstick," the article continues, Bush "generally exceeds the spending of his predecessors."

    "Any yardstick," that is, except the most important of all � spending as a share of GDP. On this, Bush is actually lower than most of his predecessors.
    What do we mean by "discretionary spending"? The definition used by the federal government (via C-SPAN) is the spending which is annually appropriated by Congress and signed into law. Entitlement programs are out as are any other mandatory spending; combined that's about half the federal budget. But discretionary spending includes all defense spending (including supplemental spending for the war on terror.) It also includes the money spent on cleanup for Katrina, which puts a different spin on the word "discretionary". So which do you want to look at? Nondefense discretionary? Nondefense, non-disaster relief discretionary? And if that's the yardstick, why wouldn't policymakers simply choose to move more and more spending into mandatory programs so that they escape such scrutiny?
Now there's no way around Bush as someone who has spent a great deal of money and been at best a 'C' student as an economic policymaker. But looking at this chart from Heritage indicates to me that the rise in nondefense discretionary spending isn't a recent phenomenon. One can be rightly disappointed that nothing's been done to stop the rise. But when people want to talk about spending, be sure you keep it real, and keep the context in mind.


Thursday, October 25, 2007

Free speech? You're sick 

The new tactic of campus officials in suppressing free speech seems to be the declaration that the annoying speaker is a threat to the campus and needs mental screening and evaluation. The latest example happens at Valdosta (GA) State, where T. Hayden Barnes, a student with strong environmental views, had the temerity to criticize an administrative decision to build new parking garages.
On April 13, Barnes posted a collage of pictures on his page, including pictures of [VSU President Ronald M.] Zaccari, a parking deck, a bulldozer excavating trees, a flattened globe marked by a tire tread, automobile exhaust, a gas mask, an asthma inhaler, a public bus underneath the �not allowed� symbol, United States currency, and a photocopy of the Climate Change Statement of the American College & University Presidents� Climate Commitment. The collage was also marked with a variety of captions, including �No Blood for Oil,� �More Smog,� �Bus system that might have been,� �Climate change statement from President Zaccari,� and �S.A.V.E.�Zaccari Memorial Parking Garage,� a sarcastic reference to concerns he says Zaccari had expressed in a meeting about his �legacy� as president of VSU.

Barnes also penned a letter to the editor of the VSU student paper about the proposed parking deck plans on April 19 and wrote to Zaccari on April 26 to ask for an exemption from the mandatory student fee designated for funding the parking garage construction.

According to VSU, Barnes also �posted a link on his website page to an article discussing the massacre at Virginia Tech�; linked to an advertisement for a film competition sponsored by commercial photography site, which featured the tagline �Shoot it. Upload it. Get famous. Project Spotlight is looking for the next big thing. Are you it?�; and commented on his website that he was �cleaning out and rearranging his room and thus, his mind, or so he hopes.�

On May 7, Barnes found a notice of administrative withdrawal from Zaccari underneath his dormitory door. The notice informed Barnes that �as a result of recent activities directed towards me by you, included [sic] but not limited to the attached threatening document [the Facebook collage], you are considered to present a clear and present danger to this campus.�
FIRE has stored the Facebook page which looks pretty innocuous. I'm going to guess that Barnes committed the same 'crime' as Troy Scheffler did -- he mentioned Virginia Tech without denouncing guns. Unlike Scheffler, Barnes actually went ahead and got his required psychiatric evaluation and submitted it to the university, which is now dragging its feet on reinstating the student to campus. All about a parking garage.

Pres. Zaccari deserves some scorn for his poor handling of this situation. But I want to call attention to this increased use of psychiatric screening as a retaliation for speech administrators don't like. Here's a case from Regent University, a private school that expelled a student for posting an obscene picture of the school's president. These three cases within the last six months point up a disturbing new trend. All the more reason for you to join us for Indoctrinate U this weekend at the Oak Street Cinema in Minneapolis!

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Michael Murphy, Medal of Honor Recipient 

After waiting a couple of days, all I can say is "How sad, how very sad." Michael Murphy, a Navy Seal, lost is life in Afghanistan after his group got ambushed. He exposed his position when calling for help; sustained a number of wounds but relayed his group's position to headquarters. Before any could be rescued, Michael died along with other Seals that day, a low for Seals, but also a riveting memory told very well by Marcus Lattrell in his book, "Lone Surviver."

We still read and hear of heroes - unfortunately, not on the so-called news channels. Their anti-military bias has tarnished their views to the point where a fact challenged would-be reporter gets more attention than a true hero, one who really deserves honor and respect from the American public.

On October 22, President Bush presented the Medal of Honor to Michael's parents. We are indeed fortunate that we still have young men and women who understand honor, country, valor, truth, and freedom - without the soldier, our freedoms are gone.

Thank you Mr. and Mrs. Murphy for raising such a fine young man. We are indebted to you and his memory as well as others who have made the ultimate sacrifice for our freedom.

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Walking towards the target 

I realize that to some readers details of monetary policy are arcana. If you feel that way, go to the next topic; I'm going to work through this morning's report on the Federal Reserve's increased transparency proposal.

The discussion about Ben Bernanke since the minute after he was nominated to chair the Fed was whether and when the Fed would switch to an inflation targeting strategy for monetary policy. Today's report says the Fed is deferring that debate to a later time, and some might take from this that the inflation targeting is not in the cards. I read this report to say just the opposite.

The centerpiece of their new communications steps would be the release of economic forecasts of policy makers four times a year, instead of the current two times, with additional detail and background, according to people familiar with the matter. Moreover, the horizon for those forecasts would be extended to three years from two.

The new initiatives have been in the works all year. Earlier this year, the Fed had hoped to finalize them by this month. But the fallout of the market turmoil that erupted in August has complicated the agenda of next week's meeting of the policy-making Federal Open Market Committee and it may defer decisions on its communications policy to a later meeting.

Inflation targeting is really inflation forecast targeting. The central bank issues a report on what it thinks inflation will be over some time horizon. It then establishes a target inflation rate. The two put together inform one what the path of monetary policy would be. But they pretty much have to come in that order: A target without a forecast is a useless signal; a forecast tells you something even if you do not have a specific target in mind. I can think inflation should be higher or lower than the forecast without saying how much, though how much is something we would want to know.

Bernanke has been using forecasts more, elevating them in policy discussions. To have those now made public and more frequent is an important first step necessary for inflation targeting. It's not sufficient, though.

So what has to be discussed? This gets to the very heart of the Federal Reserve Act of 1913, the law that created and controls the behavior of the Fed. The Federal Reserve has a dual mandate to both maintain price stability and provide for high employment. Frederic Mishkin, in an interview just published by the Minneapolis Federal Reserve, discusses this compared to the European Central Bank, which has a mandate for price stability first. He says
The Congress has given us a dual mandate; that is, the Federal Reserve seeks to promote the two equal objectives of maximum employment and price stability, so that's what we have to execute. Even if the Congress hadn't given us such a mandate, the basic structure of the dual mandate is what I would feel is appropriate, and so we should be aiming to pursue such an objective anyway.

A hierarchical mandate says that first we focus on price stability and if we're successful then we'll focus on other concerns, particularly output fluctuations. If you interpret a hierarchical mandate as focusing on price stability in the long run, making sure that long-run inflation expectations are grounded�and we've seen tremendous success not just in the United States but in Europe in terms of grounding inflation expectations�then the dual mandate and the hierarchical mandate are identical.

Some people have said to me that the dual mandate versus hierarchical mandate dichotomy is a red herring. I don't agree, because I think it is an important issue in communications strategy. It's important to make it clear that you care about output fluctuations, but you're going to look at this from a long-run context and never take your eye off the inflation ball. That's the right way to do the dual mandate.

Similarly, with the hierarchical mandate, you should not be an �inflation-nutter,� as Bank of England Governor Mervyn King has expressed it. That is, you shouldn't be focused solely on inflation control. You must also worry about the fact that if you act too quickly to get inflation down to your long-run objective, you might have excessive, unnecessary fluctuations in output. So I think modern monetary theory, in writing down a hierarchical mandate or a dual mandate, will write exactly the same loss function, exactly the same kind of optimization theory for a central bank.
My suspicion is that this statement by Mishkin reflects Bernanke's view as well. (It's very unlikely that in a Fed publication a governor is going to say anything contrary to the view of the Board.) So the Fed may think it can accomplish the inflation target within the context of the dual mandate. But it has a second issue -- does it have complete goal independence to make this statement on its own, or will it need Congress to give some support? I turn to the means by which the Bank of Canada adopted inflation targeting, in which the Bank and the government made a joint statement in 1991. In both cases, the legislature can stop a proposal to create inflation targeting; in the Canadian case, the Bank was able to convince the government of its plan. (I'll point to this paper by Michael King for Canadian central banking history.)

It is interesting then that the Fed continues to refer to these changes as part of its communications strategy. Communicate with whom? I suspect communication is much towards Congress as it is with Wall Street. It needs at least tacit approval from both, in my view, to put inflation targeting on the front burner, and it may need legislation -- something to which both Congress and Wall Street will be loath. It should make for an interesting few years with Bernanke's Fed.

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Honey! I shrunk the property tax! 

The Joint Economic Committee's Democratic membership has released a report on the impact of the subprime mortgage crisis on property values and property tax revenues. This morning's press release includes this statement from our own Sen. Klobuchar.
�In the world of subprime lending, the chickens have come home to roost,� said Klobuchar. �If we are to contain the economic spillover effect of the subprime lending disaster, we must act now.�
They claim over $100 billion in lost home value and, not to be ignored, almost a billion dollars in property tax revenue.

Yet while claiming they are using conservative estimates, the report itself contains this paragraph on page 12:
The effects of larger price declines could considerably increase the magnitude of these damages. For example, Moody�s forecasts that, in the aggregate, housing prices will decline by about 6.9 percent between Q3 2007 and Q2 2009 and rise mildly thereafter. If we instead assume that the aggregate price decline is 20 percent over that period, the total number of foreclosures for the period 2007 to 2009 would be nearly 2 million and the loss of property values would total about $106 billion.
That is indeed what they go for, and as a result for Minnesota's estimated 121,000 subprime mortgages, 28,000 will end up in foreclosure, and the repricing of those homes and the homes near them will lead to a $14 million loss in local property tax revenue.

Of course federal government officials have been peddling solutions like it was soda pop. Klobuchar and other Democrats on the JEC have been pushing for increasing the repurchase of mortgages by Fannie Mae and Freddie Mac, changing bankruptcy laws and attacking "predatory lending practices". Norm Coleman has proposed allowing borrowers to tap tax-free accounts without penalty to refinance. But if you think prices are going to drop 20% as the JEC report projects -- and given the sales of existing homes, I wouldn't say that is an impossible outcome -- it's not clear any of these are good solutions -- the Democrat plan puts the taxpayers on the hook, while the Coleman plan has the borrower bear the cost and sacrifice some of his or her retirement funds to help let the banks off the hook.

So here's your quiz: How much in local (county, municipal, school) property tax is paid in Minnesota? I'll put the answer in comments after you put your guesses there. Or you can Google it if you like. Then ask yourself -- how horrible would a $14 million hit be? And how likely will it be that local officials will cry panic over the number at any rate and rail louder than ever for property tax relief from the state next spring?

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Responding to the threat of vouchers 

In economics, you look often for natural experiments to test a hypothesis. In Florida, schools are graded and vouchers are given to students in schools who "fail" the test twice. Thus one failure doesn't invoke a penalty but increases incentives to improve performance.

Rajashri Chakrabarti writes about these incentives. (h/t: WSJ Real Time Economics). Because the Florida program only requires a school to get to minimum standards in one area of the three 'R's, Chakrabarti tests whether the schools focused on one subject over the other two. They do: the focus is on writing rather than reading and arithmetic "because it was easiest to improve in."
Case studies reported in Goldhaber and Hannaway (2004) are very much consistent with this picture: �Writing came first �because this is the easiest to pass�...�With writing there�s a script; it�s pretty much first we did this, then we did this, and finally we did that, and using that simple sequencing in your writing you would get a passing grade.��

Telephone interviews conducted by me with school administrators in several F schools in different Florida districts also show a similar picture. They reveal widespread beliefs among school administrators that writing scores were much easier to improve in than reading and math scores. They say that they focused on writing in various ways after the program. They established a �team approach in writing� which introduced writing across the curriculum. This approach incorporated writing components in other subject areas also such as history, geography, etc. to increase the students� practice in writing. They also introduced school wide projects in writing, longer time blocks in writing, and writing components in lower grades.
That is an interesting result, reasons for which I do not really know but can speculate. If you are grading writing, it has to be by a template -- "three points for this; five for that"; the template is something teachers will know. As a result, they can teach to the template. That and repetition, it appears, did the trick. Is this learning? To some extent yes, but it would be useful to know if there were cross-effects to other student subject areas. It doesn't appear to be so, but the results are not clear on that question.

The study also finds that schools focused on the low-performing students, but that the higher-performing students did not suffer a decrease in scores as a result. If anything, the higher-performing student results went up with the lower-performing students, just not as much.

The important point is that the threat of vouchers appears to motivate some behavioral change in teaching strategies that improve learning. It is another example of why the voucher program is worth further investigation and study, and supports the claims of its advocates.


Bo-chump* and The New Republic 

A few months ago Private Scott Thomas Beauchamp submitted articles describing supposed ugly behavior of American soldiers to the left-leaning New Republic Magazine (TNR). The descriptions reported were absurd to anyone who has a clue about the caliber of our military. Of course, the left is not interested in supporting our military but will eagerly publish anything that is critical, but check facts? Nah. Writers in the blogosphere took one look at the articles and immediately, red flags appeared.

Further research indicated that TNR had done minimal fact checking and ignored the full disclosure practice of identifying relationships with staff. Turns out at the time of Mr. Beauchamp's written submissions, his wife worked at The New Republic.

Over the past 10 weeks, TNR editors have refused to admit their errors, have pulled the articles, and entered the "hide in the cave" zone. Appears they want people to forget their lack of editorial responsibility. TNR accused the Army of stonewalling - yet it's TNR who has been stonewalling the truth. Our Army did its investigation and concluded the stories were false.

Yesterday, Drudge got copies of the Army's investigation and conversations between the TNR edictors and Mr. Beauchamp who now wants the whole thing to go away - I wonder why??? The Drudge documents are now gone but can be accessed through Michelle Malkin's website.

Mr. Beauchamp is the product of an education system that tells everyone they're special without providing grounding in honesty, integrity, and personal responsibility. Because Beauchamp had access to a left-leaning, anti-Bush and anti-US military magazine, by his own admission, he submitted articles based on fantasy and gross extrapolation of facts (one article appears to be an based on the actions of German soldiers in Afghanistan a couple of years ago). He dreamed about being another Hemingway.

When we teach children that everything and anything goes, and they are not accountable for what they say and do, they develop a very warped idea of life and will have major difficulties living on their own. Mr. Beauchamp got caught. Hopefully he'll learn from this experience. On the other hand, TNR does not appear to have learned anything from this experience. A once decent left of center magazine has shown its inability to deal with facts that do not support thier bias, again.

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Wednesday, October 24, 2007

The bundles intertwined 

I was reading Phil Miller's excellent essay on McMansions in Edina and saw that he used the "bundle of rights" approach pioneered by Armen Alchian. Here's an essay by Anthony de Jasay on that point. de Jasay makes a useful point on the nature of rights versus freedoms.

A freedom is a relation between one person and a set of acts. The person is presumed to be free to perform any act in the set that does not breach the rules against torts (offences against person and property) and (a less stringent requirement) the rules of civility. A substantial obstruction of freedom (e.g., gagging or threatening to hit a person to stop him from speaking freely) is a tort or an incivility. As such, it is wrong. To say that a person has a "right to a freedom" is tantamount to saying that he has a right not to be wronged�a redundant and silly proposition. It also implies that he would not have this freedom if he had not somehow obtained a right to it�an implication that is at the source of much false theorizing. You do not need a right to move if your moves stay within the rules�this indeed is what it means to have rules.

In contrast to a freedom, a right is a relation between two persons, the right-holder and the obligor, and an act the obligor must perform at the rightholder's bidding. A right may be created by contract in which the obligor, in exchange for a consideration, surrenders his freedom to perform (or forbear from performing) some set of acts as he pleases, and agrees to perform (or forbear from performing) it as required by the rightholder. Here, both parties enter voluntarily into the right/obligation relation. However, a right may also be created by some authority, such as the government acting on behalf of "society", conferring it upon rightholders and imposing the corresponding obligation on obligors of its own choosing.
There is no right that I see for the homeowner to build, as the building contract is between the owner and the construction company, and to a lesser extent between the owner and the zoning authority. Whether or not someone is free to build a McMansion is, however, a matter where civility does play a role. Suppose St. Cloud did not have a noise ordinance, and you were to play Iron Maiden very, very loud at 3am. You may claim you have a right to do so because the government has not enjoined you from it, and courts might declare your behavior not to be a nuisance (I hear you could get a good ruling about Iron Maiden from Justice Foot) but you do not have the freedom to do so without consequences. It is, among the non-Iron Maiden-loving crowd, uncivil.

I agree with Phil that it's troubling that positional goods are a call for government action which turns the question of freedom into a set of rights (as de Jasay's last sentence discusses.) P.J. O'Rourke's idea of the rules of governance as "keep your hands to yourself, and mind your own business" appeal to me, but a government by the people means the people have to accept those rules first. In the town of Edina, it appears they do not.

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The nonmonkey flunks international trade 

I think it's been a while since I feasted at the Coleman Cornucopia of Crapola. So hitting a hanging slider from Nicholas should be permitted.

He's having a cow over the purchase and registration of cars for the I-35W bridge reconstruction from Colorado.

Tuesday, I saw 15 trucks parked by the bridge site -- 12 Ford F-150 Supercab 4-by-4's with Triton V-8 engines, two Ford Explorers and one Ford Escape -- so new that many still have instruction tags hanging from their ignitions and control panels, and they have temporary state registration cards taped in their rear windows.

But those registrations are not from Minnesota, where Flatiron -- costing far more than local bidders, and taking longer to complete the project -- is scheduled to begin work next week. Flatiron's Fords are registered in Colorado; they were purchased in Littleton, a Denver suburb.

A Flatiron spokesperson did not respond to requests for comment, but permit me to sum up the situation here: Buying Colorado trucks for a high-profile project in Minnesota that still carries the emotional pangs of death and destruction? Dumb, Flatiron.

As Mark Perry points out, these are not Colorado "imports".
Ford F-150 pickup trucks are built in Kansas City, Norfolk, Detroit and Louisville, and would have therefore been "imported" from Missouri, Virginia, Michigan or Kentucky to Colorado, before being "imported" to Minnesota from Colorado.
As would be the trucks sold by John Wiese Ford in Sauk Centre, whose owner whines to Coleman about losing the sale. Perhaps Mr. Wiese could explain why, on a state contract, it would be acceptable to pay an additional 2.8% tax on the Minnesota-bought vehicles rather than those in Littleton, Colorado. That cost would have been projected into the contract Flatiron signed with the state and its taxpayers.
This is a company that was judged to have better public "outreach" than the local firms that lost out on the project, despite submitting lower bids. Would a Minnesota company buy a shiny new fleet for the project from, say, Colorado?
To save $39,200 on the expenses for this project? We may be dumb here, but we're not stupid. It would be an easy thing to fix -- just announce that contractors buying materials to fulfill a state contract get the goods tax-free if bought in Minnesota (which would push bids down; JOBZ has such a provision.) And Coleman also wanted to pick up the Hennepin county tax on this purchase, a cool $2100 towards building the Twins stadium (using his figure of $1.4 million for the trucks Flatiron wants to purchase, not the even million Coleman uses to keep his math simple. My students are quite capable of .0015*$1.4 million.)

What was actually lost to Minnesota was merely the $48,475 to the state coffers from the state sales tax, plus the profit margin that John Wiese or some other dealer would have made on the trucks, which if Flatiron is as skilled at buying as it is at bidding isn't more than $1000/truck. A far cry from $750,000, not likely a tenth of that.
Even with a generous fleet discount, we are talking a million dollars. While that may be a drop in the bucket on a $234 million project, a million bucks means $65,000 in lost sales taxes, which could have helped MnDOT add, who knows? Maybe a bridge inspector!
This is sheer demagoguery, of the same type as Don Boudreaux points out in Barbara Boxer's complaint that the war in Iraq makes fighting California's wildfires worse. Losing sales tax revenue makes lots of things more difficult to buy. You can say the same about resources consumed to fund the DREAM Act or bike trails. But of course you won't, because that's not your hobby horse.
Yes, but it's a MnDOT project. About the only surprising thing to me is these new trucks aren't on fire.
What the hell is it with Coleman and fire, anyway?

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Looking a little too hard 

Lew Rockwell thinks he's found an economist who succumbs to the broken window fallacy. But look what the economist says:
"In the odd nature of economic accounting, this will probably be a stimulus. ... There will be a huge amount of rebuilding in the next couple of years, financed by insurance payments."
The emphasis is mine. If you inserted the word "regional" in front of "economic accounting", it would be clearer. Much of the money that covers the insurance claims comes from outside the region. The premiums of all homeowners who buy fire insurance rise; they are the ones who buy less of other things to pay for the insurance (or go without.) Now certainly some construction workers are going to move into San Diego to take up those jobs, but it's not entirely clear that the economist is wrong from an economic accounting point of view, and no reason to excoriate the economist as if he did not know the broken window fallacy.

UPDATE: James Hamilton at UCSD checks in that he's fine, and then tells us about the fires.


Elasticities everywhere: The green edition 

The cover story of this week's Business Week is titled Little Green Lies, about the on-the-job education of one Auden Schendler. After a few years of trying to get his company to make investments directly in reducing energy consumption, he was finally able to get them to make a commitment to purchase renewable wind energy credits. (They tout this on their environment page.) This gave the company a leadership position but Schendler a queasy feeling, because it wasn't really changing energy consumption, just buying a green plaque.

Any student of economics could have told you this would be true once they read the economics of these credits as described in the article.
Credits purchased at $2 a megawatt hour, the price Aspen Skiing and many other corporations pay, logically can't have much effect. Wind developers receive about $51 per megawatt hour for the electricity they sell to utilities. They get another $20 in federal tax breaks, and the equivalent of up to $20 more in accelerated depreciation of their capital equipment. Even many wind-power developers that stand to profit from RECs concede that producers making $91 a megawatt hour aren't going to expand production for another $2. "At this price, they're not very meaningful for the developer," says John Calaway, chief development officer for U.S. wind power at Babcock & Brown, an investment bank that funds new wind projects. "It doesn't support building something that wouldn't otherwise be built."
So the change in the price of electricity caused by the increase in demand for green energy generated by wind is less than 2.2%; what would be the elasticity of supply? In the short run you would expect it to be very, very small. What about in the longer run? Could it be greater than one? What would this due to the production of wind power generators?

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Why would you increase others' demand for a service you buy? 

I fail to understand why our own student governments here in Minnesota think the DREAM Act is such a good idea. This arrived via email this morning through our union:
MSUSA Action Alert! We need your help! Contact your U.S Senators today!

Senate Sets Test Vote on Immigrant Education Bill:

The Senate is going to debate and possible vote on the DREAM Act tomorrow as a test to see if the chamber is ready to support a piecemeal approach to legalization of some of the 12 million illegal immigrants living in the United States.

The bill, sponsored by Majority Whip Richard J. Durbin, D-Ill., would allow the children of illegal immigrants who entered the United States before age 16 and lived here at least five years to gain conditional legal status and eventual citizenship if they attend college or join the military for at least two years.

Call Sen. Norm Coleman and Sen. Amy Klobuchar and tell them to support Sen. Durbin's Dream Act Legislation.

What to Say:

Hi! My name is ____________ and I am a student at (your campus). I am calling to urge Senators to vote yes on the Durbin DREAM Act legislation to provide a 6-year path to legal residence for high school graduates who were brought to the U.S. years ago as undocumented children. I support the DREAM Act because it will increase access to higher education for 360,000 qualified high school graduates who are currently denied their dream to an education. Thank you for your time and I look forward to your support.
Now I get why my union likes the idea -- increase demand for my product and it should help push up my wages. And given the decline in high school graduating classes, we need every warm body. That doesn't mean I support DREAM -- I don't; I'm unwilling to do anything until we stop the hemorrhaging of our borders first, lest DREAM becomes a kids magnet that adds further incentives to illegal immigration. But why would students want more crowded classrooms? And why would they support "a piecemeal approach to legalization of some of the 12 million illegal immigrants living in the United States"??

Student governments get to engage in cheap talk - they can take political positions comforted both by the fact that their student bodies pay little attention to their statements and the training they get from their professors who push this. A vote against supporting DREAM in a student government meeting will lead to accusations of behaving in a racist fashion; the cost of voting 'yes' is small since you're unlikely to change the outcome, so nobody squawks about this.

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Tuesday, October 23, 2007

Bill Kristol 

Tonight we attended the Fall Briefing of the Center of the American Experiment. The keynote speaker was William Kristol, editor of The Weekly Standard magazine. The event was well attended and the audience was appreciative of the insights Kristol provided. Main points are summarized below.

He believes recent history will be divided into three earas: 1932-1968, the liberal era; 1968-2004; 2004 forward, an era of erratic, unpredictable events that will last at least another generation.

As for current problems, he believes Social Security can be fixed. The big problem is Medicare. Mr. Kristol believes the generations after the baby-boomers will solve the issue because they will have to. His impression of boomers is not very positive. As an aside, a number of books are starting to address the irresponsibility of boomers and their parents. Agree or not agree, Diana Wests's latest book The Death of the Grown-UP appears to dovetail with Kristol's impression of boomers (of which he is one). Countering this somewhat negative view is Kristol's experience with the majors, lieutenant colonels and colonels of the American military who are currently leading the surge and successful turnaround in Iraq. Mr. Kristol's opinion of these young leaders is very high. He sees them as becoming our needed strong leaders in the years ahead.

He also reminded us of the enormous strides Indians and Chinese have made over the past 35 years. Hundreds of millions of people in both nations have been able to experience a decent life, a prediction no one would have made a few decades ago. How were so many people able to improve their lives? Via free-market ideas and US international policies. Closely coupled with the economics side is the role the US has played since WWII in preventing a major war. We do take so much freedom and safety for granted - it's our military that provides freedom and safety, not just for us but billions on the planet.

Regarding the Bush administration - he believes it deserves credit for keeping us free from another attack and over all, much safer than anyone would have predicted on 9/12/2001 and history will treat Mr. Bush well. Kristol does fault the Bush administration for its inability to get across to the American people the severity of the threats to freedom everywhere posed by our enemy. Europe is still in denial - they simply refuse to take the threats against their societies seriously.

Iran's threats are ignored by Europe and Mr. Kristol is concerned that we are ignoring what the Iranians are doing to our soldiers - we need to become more tough in this arena.

Overall, an informative evening.

John Bolton will be the guest speaker for the Center's spring dinner.

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Rather than tend to your cows 

Apparently some legislators are so busy that the cows are getting lonely.
Rep. Ken Tschumper is pondering whether to sell his herd of Brown Swiss dairy cattle.

... �I�m not getting tired out. And I�m certainly not complaining about it,� said Tschumper. �It just takes a lot of time,� he said. �That�s all I�ve been doing since eight o�clock working on flood related issues,� said Tschumper, speaking one late morning this week.

In addition to its constituency work, the interim committee schedule has been drawing many lawmakers frequently to St. Paul and to sites across the state.

Since the end of the regular legislative session in May, about 100 commission, committee, subcommittee, and working group hearings have taken place.

The pace continues through October � two hearings are scheduled on Halloween.

Through the month of December, the House committee schedule currently has the number of hearings over the interim, held and planned, at more than 130.
You might think I'm going to talk about all the per diem money this fellow is collecting. What is more disturbing, though, is the stuff these guys end up doing. Take for example this highly critical meeting held last week on ... pesticide right-to-know laws.

Rep. Tschumper said there are a number of cases each year when people are exposed to unsafe levels of pesticides. �This is not an isolated case,�� he said of testimony to be heard in Wadena.

Tschumper said that along with the right to access records, he wants to see requirements that pesticide applicators notify neighbors in advance of spraying.

�We want to improve the law to eliminate the risk of accidental exposure. That is our goal,�� said Tschumper. He added that pesticide exposure is as much an urban as rural issue.

Well I guess it would be OK to take a few days away from flood issues to deal with something that important. If he just wants to hold a meeting and talk, that's fine. But you can bet some intrusive piece of legislation will come out of this.

Rep. Tschumper, your cows miss you. Go home. February will be soon enough to find out if we need the nanny state telling us where and when to use pesticides.

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Thanks for acting in your own self-interest 

Phil Miller and John Palmer talk about the sign that says "If you ate today, thank a farmer." Or for that matter "If your child can read, thank a teacher" ... as if I would have let my child sit in front of a TV or sit alone on a swing illiterate if it wasn't for public education.

Should we thank these beer distributors in London for hoarding the resources to make beer (which means not used for ethanol, e.g.) in a rainy summer so that we can have lower prices this Christmas? Should we compensate them for the losses they took on warehousing the suds? Or do we just allow them to make a loss and think we're just lucky because of the weather?

As the Stossel video below shows, the farmer you are thanking doesn't even know your name; at least the teacher knows your child's. The beer distributors are making a loss but sell to you cheap beer during the holidays, not because they want your thanks but because they don't want to pay to warehouse that beer anymore. What motivates all of them is the desire to earn a living, to trade with people they do not know. The growth of our standard of living depends in great part on being able to trade not with just the people you know but those you don't, not out of friendship or love but one's own self-interest. The institutions that develop to permit this, and to widen that circle of strangers, are what we collectively call "the market".

Hey, mack, fix that conjunction 

Don Vaccaro, chief executive of, a Connecticut company that markets the tickets of brokers across the country, said bleacher seats for games at Fenway Park this week are selling on his website for $700 to $750, ten times face value but well below the 2004 level of $1,200 to $1,400.

Compared with the 2004 World Series, Vaccaro said, many more tickets are being resold this year but prices are significantly lower because the stakes for both buyers and sellers were so much higher in 2004.

Source via KPC where Mungowitz notes the difference in prices should be a measure of the value of novelty. I notice that I'm back to the usual watch-ticker-until-overwhelmed-by-curiosity mode versus the honey-nobody-bother-me mode. This could be conditioned by my subscription to for three years now. I got cable for sports, but baseball is the one sport I don't use it for.

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Pass the levy or we'll shoot this teacher 

It's that time of the year when a school district's thoughts turn to money. (Do they ever turn anywhere else? -- ed.) I listened to KNSI this morning and heard this report:
If school levy referendums don�t pass districts say they will be forced to make more cuts.

Sauk-Rapids Rice Superintendent Greg Vandal says if their operating levy doesn�t pass they would have to make about a million and half dollars in cuts. The cuts would come on top of three and a half million dollars worth of cuts made in the past three years.

St. Cloud schools Superintendent Bruce Watkins says they would look at cutting about five and half million over the next two year. That includes teachers, transportation and activities.

99 of Minnesota�s 341 school districts have levies on the November sixth ballot.
Over in the St. Cloud Times, the editorial says "c'mon! it's just $2 more per day! What is the matter with you people?" But for Rocori, the district under consideration, average teacher salaries last year were $49,759; its superintendent is making almost $110,000. That's more than $21,000 less than the Sauk Rapids-Rice superintendent makes, but that's not the point. There are about 120 FTE teachers in the Rocori district for 2006-07 school year, down from 126 FTE in 2002-2003, but they are also down 59 (2275 vs 2334) students over this time period. The district has not had a cut in the number of administrators, and has added 1.5 full time positions in non-instructional staff. (All date from the Minnesota Department of Education.) But you still need to sacrifice a bagel and cream cheese to them, every day.

I opened my mail the other night to see the official notice of the levy vote in St. Cloud. We have an expiring levy here which they wish to renew and juice an extra $20-30 a year on the average home. So it's sold as costing just a few dollars more, but in essence we are being asked for an increase of $180 on that house if we let the old levy expire. In a world where home sellers are having trouble finding buyers, the extra levy amounts to a decrease in the price of their house, as some potential buyers are priced out of the market.

Speed Gibson correctly notes that when they say they'll lay off teachers, they mean it.
First off, they will follow through on their threats, for it's schools first, students second. They are indeed that ruthless. Meanwhile, they'll get started working on the next referendum, wasting more time and money.

Second, we no-voters (of either party) will get the blame, i.e. give them yet another excuse for failure. Even the conscientious staffers, and there are many, will be disheartened, maybe pull up a little. Similarly, students will be told we grinches are too cheap to give them a quality education, giving them a reason to merely get by.

And in the final analysis, the Legislature will eventually give them what they want anyway. That's where the battle must happen, and without making the kids suffer while we sort this out.
That, and the begging that continues from teachers, many of whom are in fact trying to create good projects. Russ Roberts, commenting on one website that solicits voluntary contributions for schools, says the problem is incentives:

The tragedy is that creative teachers probably do struggle to find funding for creative projects. That's because they're in public schools. There is little or no incentive for funding increases to please the customers, be they students or their parents.

Alas, In 2007, donors have already funded $4,176,945 worth of resources for students through DonorsChoose. Please, if you are one of those donors, give your money elsewhere. Help students get out of a system that wastes resources on such an extraordinary scale. Give to a charity that helps students get into private schools where there is at least some accountability.
"But that's heartless! You will allow kids with good parents to opt out of public schools leaving them only the kids with bad parents." Which is to suggest something: It is up to us to provide for accountability of public schools, and to insist that school officials and legislators meet our expectations. Will this happen? Like Speed Gibson, I'm skeptical.

But quitting cannot be an option. If you are in one of those 99 districts that are seeking more money from taxpayers, you should use the Minnesota Dept. of Education data download website to get statistics such as what is happening to enrollment and likely to happen in the future? (The State Demographer's website is good for that too.) What is happening to the number of teachers and how much are they paid? What about administrators? Non-instructional staff? What about graduation rates? Test scores? All that data is available now (one good benefit of No Child Left Behind). Do the research, and impress your friends with your knowledge. You might educate a few.

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Monday, October 22, 2007

Are higher cigarette taxes good for the poor? 

In the SCHIP debate, one piece that opponents put forward was that the payment for SCHIP was to be increasing regressive tobacco taxes. The Tax Foundation points out that unlike past discussions of increasing tobacco taxes, this time it was argued that increasing taxes on the poor would be a good thing. The Center for Budget and Policy Priorities argues:
While low-income adults are more likely to smoke than those with higher incomes, studies show they also are more likely to quit or cut back on smoking when they have to pay more for cigarettes. Thus, a tobacco tax increase would reduce smoking more effectively among low-income individuals than among those at higher income levels. In fact, more than three-quarters of the smokers who would be expected to quit in response to the 61 cents per pack cigarette tax increase in the bipartisan legislation have incomes below 200 percent of the poverty line.
That makes sense -- 3/4 of those who would respond to an increase in cigarette prices would be those who are low income, therefore more sensitive to price changes. But the Tax Foundation's analysis shows that, if you assume 18 of the 45 million smokers in America are poor, and that the elasticity of demand to a change in the price of cigarettes is approximately 0.2 (TF cites the American Cancer Society as its source for that -- when I look at for example this CBO survey I see other numbers, particularly for the young, that would be higher) then we have less than 1.5 million smokers quitting, of which 1.1 are poor. So 94% of smokers who are poor will pay the tax.

The howler, though, is this line from the CBPP:
Since three out of every four smokers expected to quit because of the tax increase would be low-income, most of the economic and health benefits of quitting would go to low-income families. By spending less money on cigarettes (including the taxes on cigarettes), those low-income families with an individual who stops smoking would free up funds for family needs such as child care, utilities, and food.
On that basis, the Tax Foundation says, why not raise taxes higher? My reaction is, if you are decided that a single dollar spent on child care, utilities and food makes you better off than any amount of money spent on tobacco, why not just prohibit them? Or better, put them in government stores and have potential purchasers prove they have the income and health insurance to support their habits? (Full prohibition would kill any number of public expenditure programs, so we can't have that.)

This decision that the marginal rate of substitution between tobacco and other goods for the poor is infinite shows the arrogance of public policymakers. If the tax is large enough you get a behavior change but also a deadweight loss. Maybe that loss is small and there are enough externalities from smoking to make the tax worthwhile (if you want to get all Pigovian about it.) But the loss increases at an increasing rate with the tax rate. Meaning, these taxes are getting increasingly costly to society.

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Recessions happen to other folks 

A recent CNN poll found 46% of Americans believe the economy is in a recession, while 51% do not. What does that mean? Many conservative writers will look at the current economic situation and say things are going well and it's all MSM pushing a recession meme to influence politics. If you ask business economists they say the outlook has dimmed. (Last consumer confidence was down, it will be interesting to see this time next week.)

Jeffrey Miller wrote last April about a similar observation. The public often holds a more negative view of how well others are doing than themselves. Political scientests refer to voting based on these perceptions as 'sociotropic' -- people vote on how they perceive the group is doing rather than on the basis of their own pocketbooks. There's reason to believe, even if you've not read or read and don't buy Bryan Caplan's work, that voting might be based on some more vague perceptions rather than what is actually best for your own finances.

So today's Gallup Poll on investor confidence is particularly interesting in this light.

Investor optimism overall remained at its lowest levels of the year in October, according to the new UBS/Gallup poll. The Index of Investor Optimism now stands at 70 -- essentially the same as September�s 68. ...

Although the overall Index remained flat, its composition changed significantly. The Economic Dimension of the Index, which measures investors� feelings about the direction of the overall U.S. economy, improved 10 points, from -2 in September to +8 in October. This suggests that the Fed�s cut in interest rates and early October�s more positive monthly unemployment report made investors somewhat more optimistic about the future direction of the U.S. economy.

In sharp contrast, investors� optimism about their individual investment portfolios fell in October, as the Personal Dimension of the Index tumbled 8 points to 62 from 70 in September. This matches the 2007 low point for investors� optimism about their own portfolios, recorded in April. It also suggests that many investors may not be as confident as they were a month ago that the equity markets can continue to do well even as the overall U.S. economy slows.

Among investors, then, the feelings about the economy are much more pocketbook than sociotropic.

A local friend reported to me that someone spoke in a meeting of business leaders rather negatively about my writing on the local economy. Basically that I don't know what I'm talking about. Someone responded to him that at least sectorally there are problems stemming from housing. My friend reported that, afterwards, several people came up to him and the guy who spoke back to the critic saying "doesn't he know there are people really hurting out there?"

"Is your firm hurting?" I asked.

"No, we're fine," he replied. "But I know others who are in big trouble."

The question is, how do we know that, and how does it influence both what we say about the economy and how we vote for candidates we think can do something about it? (Whether they actually can do anything is another matter.)

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This is just sad 

Hey Duane. Your team gets bounced in the first round because they don't believe they can beat the Red Sox, so you jump onto the Indians bandwagon with the boss. And now this?
Go Rocks. You are a team of destiny. Do not let that big, ugly green wall bother you. Sorry, Tribe. The bandwagon started losing the air out of the tires in game 5.
Pathetic. Are you going to help pick the Game 5 National Anthem singer next?

Hugh pulls his head up from Terry Pluto's behind long enough to wish us well. I thought they were the better team going in, but they could not solve their pitching problems as well as the Sox solved theirs. That's what makes October great. You left a team for dead on Tuesday, and less than a week later they are -240 to win the Series.

Two words: Dave Roberts. If you saw that coming, stop reading this blog and go to Vegas now.

But that doesn't stop the excitement.

It is a little weird this time; this team hasn't been to the WS without the Curse thing hanging over us. We always expect to win; without the Curse we don't have the "we're owed" thing going any more. That was paid up in the 90 feet from first to second.

Who's Dave Roberts this time?

UPDATE: Fraters delenda est.

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Sunday, October 21, 2007

Indoctrinate U 

On Saturday, King invited me to co-host his radio show, "The Final Hour" on AM 1280. Our guest for the day was Ken Doyle, president of the Minnesota Association of Scholars. The conversation for the first hour centered on the documentary, "Indoctrinate U" which is coming to the Oak Street Cinema in the Twin Cities beginning this Friday, October 26, and running through Thursday, November 1.

The focus of the documentary is the biased environment so many college and university students experience when they attempt to challenge college speech codes, inconsistent application of university rules and regulations, or disagree with the one-sidedness of some professors, even if the professor is wrong. A documentary preview and related events are linked here.

Detailed information on the show times can be found here.

We hope all interested in higher education, instructors, taxpayers, students, government officials, and others will attend a showing. Our nation has thrived because of its culture of open discussion and honest debate. Denying future generations the environment to challenge without fear of being penalized in their grades, is just wrong.

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Friday, October 19, 2007

Lucky for us, we have foolish neighbors 

The new state business tax climate index is out from the Tax Foundation, and Minnesota ranks #42 out of the fifty states for business climate. At least we have improved since 2003, when we were #46. Maybe most lucky for us, Iowa is #45, Nebraska #43 and Wisconsin #39. Small differences could be made up for by, perhaps, having lakes and state-subsidized sports teams. That might even convince #30 North Dakota.

South Dakota, on the other hand, is #2, with no corporate income tax. Maybe it's just a windy Mississippi?

Also worth noting, Minnesota ranks #19 on this list for its property tax index. It seems everyone wants property tax relief, yet that's the score for business climate on which Minnesota does best. A high top-bracket corporate income tax rate (9.8%) is a real downer for the state, but it could be worse. You could be Iowa:
Iowa can once again trace its poor overall ranking of 45th to its income tax rates on both personal and corporate income. They stand out as a warning to entrepreneurs. Individuals face an escalating series of tax rates that hit 8.98% over $58,500. Only a handful of states tax any source of income at such a high rate, and even those high-tax states usually apply it to much higher levels of income. Iowa�s 12% corporate income tax is in a league of its own. No other state has a double-digit rate on the books.
Both Iowa and Minnesota have both corporate and individual alternative minimum tax provisions.

Closed for inventory 

A former student who works for the government collecting data says:
One of my girlfriends is a teacher in Peru. She said that Sunday is the day for the national census, as such they are required to stay at home from 6 am to 8 pm. Ah, to be a data collector in Peru.
Indeed, Peru does do a one-day census. "Stand still, I'm counting..."

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I don't CARE if it's cheaper 

As I drove to campus today I heard Laura Ingraham excoriating the Department of Homeland Security for the purchasing of Chinese steel for building the border fence along the Mexican border with Arizona. Pennsylvania legislators are predictably in anguish over DHS' insensitivity. Captain Ed comments,
Normally, I prefer a free-market approach and think the government should get the best deal, just like any other consumer. However, if we're going to build a border barrier, having a "Made in China" label on it sends a curious message. National-security efforts should involve Americans to the greatest degree possible, ...
Yes, it does send a message: We know the difference between free trade in goods and illegal immigration. Why we should conflate the two is beyond me, and our unwillingness to tell the U.S. steel industry that we don't wish to (again!) send taxpayer money to support their inefficient industry is simple economic foolishness.

That piece of Ed's last sentence is a good example of Caplan's anti-foreign bias. He knows the free market argument but rejects it because it's unseemly to him in this case. I suspect the majority agree with Ed: This is what drives up the price of government.

BTW, this joke from the Adam Smith Institute today seems appropriate in the context:
A kangaroo kept getting out of his enclosure at the zoo. Knowing that he could hop high, the zoo officials put up a 10-foot fence. He was out the next morning, just roaming around the zoo. A 20-foot fence was put up. Again he got out. When the fence was 40 feet high, a camel in the next enclosure asked the kangaroo, "How high do you think they'll go?"
The kangaroo said, "About a thousand feet, unless somebody locks the gate at night!"


The benefits of econoblogging 

There has been a good bit of chat around the economics blogosphere about whether the best economics blogs are in danger of dying off because the opportunity costs of blogging are too high. My short answer is: High relative to what?

Blogging is of course subject to the MB=MC rule, and undoubtedly the best economists are busy. But the benefits to them from blogging might be greater. Tyler Cowen pointed out earlier this year that blogging is a form of self-experimentation:
Blogging makes us more oriented toward an intellectual bottom line, more interested in the directly empirical, more tolerant of human differences, more analytical in the course of daily life, more interested in people who are interesting, and less patient with Continental philosophy.
I'm sure that last point was humor, but the rest is certainly true. A drawback for me in some ways is that in writing my book now, I'm more direct, shorter, and less willing to let a part of my writing wander on a tangent. It's true also in teaching -- I get more done.

Am I more tolerant? I don't really know about that, but I think I can express my differences with others better than I did when I started this five-plus years ago. I find I read more, have more interesting conversations with others, and have met some great economists and non-economists through this blog. As Dani Rodrik found out, you have no idea who's reading until they either leave you a comment or, more often, tell you in person later on. (We think of them as separate worlds; at least in the world of MOB blogging, it's not. I know now dozens of Minnesota bloggers I'd've never met before, and some of them are friends in the real rather than online world.)

Because I read more now, I think research is improved too.

Now without a doubt, the Mankiws and Rodriks and Cowens of the world do not need blogs to be known; they are not really adding to their audiences. I am, because I teach at Flyover State. (Note: I say 'teach at', not 'am a professor at'; therein lies a huge difference in how we see our jobs.) I get the high-opportunity-cost thing -- as you've probably noticed, my output here is down because the book is already past deadline and not ready to ship yet (so why are you writing this? --ed.). But you cannot evaluate the costs in isolation.

Blogging of course isn't for everyone, and perhaps because some of the now-big names weren't here three years ago there will be a shake-out; many startups die, in restaurants and blogs. But you learn the benefits, and your blog evolves. Take a look at my archives and you'll see this is a far different place than when it started. I've even thought of a name change to reflect that, though the brand capital in Scholars is high enough to make that a problem I have to think about. Whatever we call it, it's both more costly and more rewarding for me now than when I started.

UPDATE: See this also by Bill Polley. I worry about the lemons problem only insofar as one thinks econoblogging is about spreading the word of what's on the cutting edge of economics research or the policy debates. I have never concerned myself with the former, and as to the latter, I'm not terribly convinced that the best policy analysis comes from the economists with the longest c.v.'s. Again, that might be about where I'm from and what I do, a personal bias. Your call, not mine, whether I'm a lemon. Arnold Kling most certainly is not.

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Thursday, October 18, 2007

Back to morning drive 

Twenty-five years ago ("oh God, he's not doing one of those Mitch posts, is he?" -- ed.) I was a grad student-cum-radio DJ at KSPC in Claremont, CA, and morning drive was my beat that term, my last on radio before NARN began. The grad student wakes up usually earlier than your average Pomona College undergrad, so it fell to me to do this (the kids liked doing the after-midnight stints.)

Tomorrow morning I sit in for Andy Barnett on KNSI from 6-9AM, 1450 on your AM dial, here in the Cloud. (Hmmm, now that I look at your site, Andy, I notice a link missing from your blogroll?) Topics will be all over the place, I suppose, as I haven't been able to rustle up my usual collection of guests. Three hours of my voice? Maybe we'll invite Mrs. Scholar to her first radio experience!

Pray for me; I get up early enough, but talking to a corner of the world at that time will be quite the experience.

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The delicacy of signals 

I appreciate very much Captain Ed's post about my thoughts on the genocide resolution question last night. He hasn't backed down from his position on the resolution in Congress (unlike Speaker Pelosi, it appears):
Congress does not exist to validate genocides. If it wants to start, it has plenty of nations on which to focus before it gets to Armenia, which I listed the other day. The Irish genocide not only preceded the Armenian, it had more direct impact on America. And that's the problem with demanding these resolutions; it creates a demand for Congress to address every insult to ethnic groups. Our ancestors came here to get away from those concerns, not to indulge them.

Congress exists to protect American interests. Period. And Congress hasn't even done its own job this session; it should do that before venturing into academic investigations.

The last thing we need is an argument about what are the A-list genocides, the B-list genocides, etc. Besides, communism killed even more of its own people than the Irish and Armenian genocides; should that one go first? It's a silly argument we should avoid.

But suffice to say that signaling is costly, and at times more costly than others. The Turkish government has repeatedly made signaling expensive regarding its own history; it is not an act of cowardice for the U.S. to react to that expense with an eye first and foremost to its own sons and daughters in the field. And it is not an act of disloyalty for Armenians to say in response, "well then, when?"

Rudy Rummel
says it well: Sometimes we have to accept the less-bad, when no good is available:
We can be satisfied with scholars and media accepting that the genocide occurred, without putting an official stamp on it. I want to do this. I want all genocides and democides to be recognized by democracies so that in world opinion, thug regimes are recognized for the murder they commit. And those so murdered did not die in vain. But life is a balance of values, I am sorry to say.
Patience wears thin sometimes, frustration fills one with grief. At some point, I can only hope, the balance will shift.


Education, Armenians, and the Turks/Ottomans 

King has posted about the Armenian genocide committed by the Ottoman Turks after WW I. It was an example of atrocious, murderous behavior by one ethnic group towards another.

Upon rereading some of King's posts, I was struck by a key point about education that King made. Most western nations over the centuries have practiced one kind of self criticism or another. Whether it's the Judea-Christian heritage and the concept of sin, forgiveness, and change that causes the self criticism, I don't know. But, I'm willing to bet this kind of self-criticism does not exist in very many cultures.

The US, through its MSM and much education, has taken self criticism to an extreme, to the point where our children often only hear of our errors, mistakes, etc. but not the incredible achievements we have made. What other country has gone to war, against itself, to free a part of its population? You can debate the main causes of the Civil War but one key result was slavery was outlawed. We still struggled but our ancestors fought, died, and outlawed one of humanity's most degrading practices.

This paragraph from King's post says a lot. I did once attend a commemoration at Claremont for the 80th anniversary of April 24, what we call Martyrs Day. Armenian-American students whom I was advising organized a panel, emceed by Mrs. Scholar -- while I held our infant Littlest in the back -- and to which we had brought a survivor who was 85 by this time and was six during the march to Der el-Zor. While he spoke we got treated to people with their own placards and shouts. Tempers flared as they said we were liars. My aunt, who lives in southern California and was in attendance, became very angry. But instead we talked with these Turkish students, who said they were told about this meeting not by our signs around campus but by letter. They never said who sent it, but I have a guess. When asked what they know about the history of the Armenians and Greeks of their country during and after World War I, they said they did not really know the stories, they were not taught. We eventually settled down, shook hands and went on our way, we back to our memories and parents telling us stories, and they back to their fatherland and ... nothing.

What is very important in this paragraph is that these anti-Armenian protesters, by their own admission, WERE NOT TAUGHT the murderous parts of their history. Ethnic groups will be around forever and all have their embarrassing and often cruel practices in their history. Ignoring horrendous acts against others by ancestors or current representatives is wrong and bodes poorly for peace or any other positive development for human kind.

All ethnic groups or nations cheat their societies when they teach only the negative or the positive. When people are denied the chance to learn true history, the good and the bad, all lose. If and when those mistaught learn the truth, as ugly or enlightening as it may be, they can rightly question everything else they were taught.

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Wednesday, October 17, 2007

Education, Government, Dems 

We hear much today about the negative state of public education. One of my previous careers was as an elementary teacher who taught students in grades 4-6 over a period of years. I was fortunate enough to teach when teachers were expected to teach content. Our students' scores on Iowa Basic Skills Tests or other national tests were used as guidelines for instruction. My teaching also occurred before the teachers union became as powerful as it is.

I am quite aware that there are a number of teachers who are opposed to being measured on their teaching ability, opposed to being held accountable for what children learn. A number of Colleges of Education have become so preoccupied with their social agendas that they ignore the content components of teaching and replace them with someone's perception of "social justice." This approach is detrimental to teachers, parents, and students.

A wonderful but sad article on this topic is today's article by Jeff Jacoby, a columnist for the Boston Globe. The summary of his article is this: from the beginning of our nation, "parental rights and rights of conscience in the education of children" were the backbone of our children's education, not a political party's view whose leaders believe that parents "don't get to impose" their views and values on what their kids are taught in school.

What drove this article by Mr. Jacoby was a debate among Democratic presidential candidates at Dartmouth College. The controversial question described a second-grade teacher who, to the dismay of several parents, had read her young students a story celebrating same-sex marriage. Were the candidates "comfortable" with that?

This is Mr. Edwards response which was mostly accepted by all other candidates: "Yes, absolutely," former senator John Edwards promptly replied. "I want my children . . . to be exposed to all the information . . . even in second grade . . . because I don't want to impose my view. Nobody made me God. I don't get to decide on behalf of my family or my children. . . . I don't get to impose on them what it is that I believe is right."

Just exactly what is a parent's responsibility if it's not to teach their children values, morals, respect, etc.? Of course Mr. Edwards' children, as they move from childhood through adolescence to adulthood, will gain the freedom to make their own choices, so his views ultimately will not be "imposed" on them. But the role of parents in guiding the moral development of their children is a bedrock element in our society. Saying anything and everything goes is an abdication of parental responsibility.

Moreover, Mr. Edwards doesn't really want to apply what he said to other moral issues. Would he want to expose second graders to "all of the [racist] information" put out by the David Dukes of the world? Or is it only certain politically correct views about which "all the information" is acceptable? Mr. Edwards, by his comments and the acquiescence of the other Democratic presidential candidates, in essence advocates complete governmental control over the educational content delivered to our children.

There are topics that are not age appropriate. I believe it is detrimental to a child's development to deal with concepts like this at too early an age. Children deserve the opportunity to be children. Parents should have the right to insist that their children have that opportunity. Who is in the best position to make that decision -- a parent or an employee of the state? I would have thought that basic First Amendment principles would resolve those kinds of issues in favor of the individual parent, not the state. Denying such parental control invites comparison to the worst excesses of Soviet-era mind control.

Moreover, it is ironic that the very members of the school bureaucracy who want to deny parental involvement in the teaching of these issues simultaneously turn around and blame the lack of learning by students on insufficient parental involvement in the schools.

And please, everyone, note that parental control over the age-appropriate content of the values and moral education of a second grader is a completely separate issue from the debate on the merits of gay marriage.

The parents who protested this book lost in their appeals to the school administration and school board.

When will we return to real education, facts, content, challenges, learning to make decisions and stop the intrusion on values? Only when children are taught what they need to learn will they get real self-confidence and become responsible members of society. Wasting time on issues that are irrelevant at a given age is a slam on education in general, teachers who want to teach, and parents who expect their children to be taught something near to what they were taught. Finally the children who have so much instruction time wasted on social issues when they are lagging behind the rest of the industrialized world are being cheated of their ability to compete in the economy of their future.

"A great nation needs a thick skin" 

Knowing that we have fathers on either side of the Armenian-Turkish question (I did not know his mother was not Turkish; my mother is what we call back home "an old Yankee"), I had wondered when the WSJ's James Taranto would weigh in on the question of the genocide resolution. He does so today, and the result is actually quite good, containing tough medicine for both sides to swallow.

I have many Armenian friends, of whom several are of the type that still bring placards and shout angry words at Turkish officials when they visit the United States. When you are brought up in an Armenian (or even half-Armenian) household, you are taught over and again about the genocide, about the denial TO THIS DAY of it by the Turkish government, etc. When I read bloggers and columnists making the distinction between the current government and the Ittihad who then criticize the Congress for not being good judges of history, I wonder how many of them know that Ataturk himself was at one time a member of the Young Turks who later gave the orders to exterminate Armenians? Luckily, I guess, Mustafa Kemal was not in the top circle. Taner Akcam of the University of Minnesota has given an accounting.

So fine, I grew up with the history drilled into me, and Taranto says "this column is with Jack Murtha in acknowledging that we don't know enough to have an informed opinion." Yet when I read yesterday the quotes of some people -- including my friends -- who say "we all know it was a genocide," how do we know they know enough to have an informed opinion? And if they do not, are they in the slightest embarrassed by their ignorance?

That said, I have not stood with the placards and shouted the shouts. I have spent years with friends who are Turkish, most of whom acknowledge what happened and what we all know to be true -- many people who say they are Turkish can go back in their own family trees and find Armenians as well as Greeks and Kurds and Jews. Turkey wasn't always for the Turks. At one time, it was as multicultural a place as anywhere in the Middle East. The persons defending Turkey from the charges of genocide today may in fact be partly Armenian. Turkey for the Turks wasn't always the watchword.

I did once attend a commemoration at Claremont for the 80th anniversary of April 24, what we call Martyrs Day. Armenian-American students whom I was advising organized a panel, emceed by Mrs. Scholar -- while I held our infant Littlest in the back -- and to which we had brought a survivor who was 85 by this time and was six during the march to Der el-Zor. While he spoke we got treated to people with their own placards and shouts. Tempers flared as they said we were liars. My aunt, who lives in southern California and was in attendance, became very angry. But instead we talked with these Turkish students, who said they were told about this meeting not by our signs around campus but by letter. They never said who sent it, but I have a guess. When asked what they know about the history of the Armenians and Greeks of their country during and after World War I, they said they did not really know the stories, they were not taught. We eventually settled down, shook hands and went on our way, we back to our memories and parents telling us stories, and they back to their fatherland and ... nothing.

So Ataturk made a great nation, we are told, and its grandchildren do not know enough to form a good opinion. But this does not prevent Taranto from saying the right thing to Turkey:
Ankara's petulant threats, over what is after all only a piece of paper, seem to us to display a certain national immaturity. The Turks feel insulted by this resolution? Poor babies. America endures all manner of insults from allies, enemies and neutrals, including our friends the Turks. A great nation needs a thick skin.

Imposing injury in retaliation for insult is the Turkish way, at least as far as its World War I history is concerned. As the Guardian reported last week:

Aram Dink, and Serkis Seropyan, both editors at the Turkish-Armenian daily Agos, were each given a one-year suspended sentence under Turkey's controversial law on insulting "Turkishness," their lawyer, Erdal Dogan, said.

The case against Hrant Dink--for calling the killings of Armenians during the first world war a genocide--was dropped when he was shot dead in January, but the court continued with the prosecution of the other men under article 301 of Turkish law. Hrant Dink had been convicted and was appealing against the decision when he was killed by a Turkish youth.

Other journalists and historians have actually spent time in prison for "insulting Turkishness." Wherever one stands on the underlying question of whether the events of 1915 constitute genocide--and this column is with Jack Murtha in acknowledging that we don't know enough to have an informed opinion--Ankara's illiberal treatment of dissenters is hard to defend.

So it is not just a ninety-plus year old event. Hrant Dink died this past January. Had the world acted sooner in leading Turkey to a table of reconciliation and forgiveness -- which at this point is all that can happen, though some Armenians still think there can be more -- would he still be alive? Or was his it Dink's own fault -- was his statement "counterproductive"?


Not just one rate 

It appears that a conservative magazine spiked an editorial by an economist because she said the Laffer curve "didn't apply at American levels of taxation." Mark Thoma runs down liberal blog reaction and adds
The supply-siders are enforcing a big lie - that tax cuts pay for themselves - a lie that helped them to push through huge tax cuts. Show me where liberal publications are enforcing message discipline based upon a lie about unions.
Unless a liberal economist wants to tell us of a story spiked we can't answer the latter. But as to the former, the truth is those of us there at the beginning of the Reagan administration did not say that all tax cuts pay for themselves, or that the income tax rate ever was in the range that puts you on the wrong side of the Laffer curve. What we do know (say, from the work done in this book, on which I was an editorial assistant) is that some forms of investment did face punitive rates that reduced revenues to the point that a lower rate would increase revenues. See also this essay by Jim Gwartney, which discusses in part his results from looking at income tax avoidance behavior of individuals. The current top-end effective marginal tax rate on labor income is about 60% combined state and local (source in .pdf), which I think is probably below the peak in the Laffer curve. But the taxation of Social Security benefits at the time Bush took office exceeded 100% for a 64-year-old senior who earned $44,000. Is that part of "the big lie"?

If Thoma is referring to politicians or campaign managers inflating claims about tax cuts, fine. It's the same thing that can be said about Keynesians and their political audiences. But if he is discussing the economists who have provided such evidence as above, he's overstating his case. Particularly in the case of capital income, the tax code provides a plethora of effective tax rates and, now as then, there are at least a few whose rates near 100%.

The growth effects, by the way, seem to be most correlated with corporate tax rates, not individual, and in 1985, the height of Reagan, the marginal corporate income tax rate was 46%, above the median for countries around the world. (The current rate is 39%.) Cutting corporate rates is far less attractive politically, as is just cutting the top rates on individual income taxes.

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Much wisdom near 

John Palmer gets this right about economic forecasting.
  1. Big-time models are expensive and high opportunity costs (if you think model-builders have valuable alternative uses)
  2. Big-time models, despite the major investments in them, were not outpredicting simple myopic predictions much, if at all.
There was a relatively well-known paper by Ed Feige and Douglas Pearce thirty years ago that argued for economically rational expectations, meaning that additional information or processing costs have to be compared to the benefits of getting better predictions. It's a point I've driven home in advising researchers -- particularly in other country central banks -- to get them over their rapture with the latest complicated modeling problem.


Class - the Halfway Mark 

As stated in earlier posts, I am a rather demanding college instructor. I spend the first 90 minutes of each semester reviewing the syllabus, my expectations, and set the tone for the class. It's an expectation thing - if you set standards and demand performance, in the vast majority of cases, you will get it.

Major complaints voiced by employers about workers today include: new people do not know how to work; they expect much for doing little; they show up late and see nothing wrong with this behavior; often, they are inconsiderate. A reason for my approach to teaching is to address these issues. I track attendance diligently - this is not a class to cut. Exams are time consuming but are comprised of case studies based on real life situations. Students are expected to inform me of misses (rare) before class, not after.

I am also very concerned about content. It is reported that up to 50% of an organization's resources are spent on information technology (IT). This does not mean the IT department consumes 50% of an organization's budget but rather with the equipment, support, maintenance, new development and outside resources, a significant portion of expenses are used in data usages. Hence, employees need to know basic computer jargon and understand the issues the IT department faces as well as their non-IT role in projects.

We are half way through the course. The usual 15% dropped the first week. Students remaining arrive on time or let me know if something has arisen. They meet deadlines. They ask relevant questions. Every semester I wonder if I'm getting through. It helps when feedback comes before the final evaluation. Recently a number of students commented that though the workload is heavy, they appreciate: the effort I put into the class and the respect for importance of their time; the real world knowledge they are getting; the upfront openness in regard to planning their schedule (the just distributed midterm exam will require 10-12 hours; they are cautioned early to budget their week); the ability to reach me.

Now, I took these instructor responsibilities for granted - assumed they were part of my job. Apparently, this is not the case in many circumstances - enough so that students recognize when an instructor takes THEIR learning seriously.

I figure it's my job to know content and teach it; their side of the equation is to show up, study, and learn the content. Simple - a 2-way street, we all win.

Tuesday, October 16, 2007

Do you want to debate policy or history? 

I wrote early on about the passage of the Armenian genocide resolution, and while I had hoped the issue might go away, it has not. The focus is on the incompetence or darker motives of the Democrats that have pushed this issue. This Investors Business Daily editorial is exemplar:
...House Speaker Nancy Pelosi has decided to let HR 106, a nonbinding resolution that declares the Turkish Ottomans' murder of Armenians as genocide, to go forward.

The Turks are angered at the intentional insult leveled at them by Congress for a crime that's now 92 years old. They've threatened to stop cooperating with the U.S. in Iraq.

This behavior is consistent with Turkey's history of reactions to "insult." My reaction is to wonder why this is considered an "insult". Even those critical of the Democrats, such as Michael Rubin, at least have the decency to say that "[t]here is no doubt that up to a million Armenians died during World War I..." But in the very same sentence,

...although historians still debate whether their deaths constitute deliberate genocide or are collateral casualties of war.

Is this really necessary, to enter doubt over the mass murder itself? What's with "deliberate genocide"? Can Rubin cite an example of "accidental genocide"? Richard Cohen goes even further:

Of even that, I have some doubt. The congressional resolution repeatedly employs the word genocide, a term used by many scholars. But Raphael Lemkin, the Polish-Jewish emigre who coined the term in 1943, clearly had what the Nazis were doing to the Jews in mind. If that is the standard � and it need not be � then what happened in the collapsing Ottoman Empire in 1915 was something short of genocide.

It was plenty bad � maybe as many as 1.5 million Armenians perished, many of them outright murdered � but not all Armenians everywhere in what was then Turkey were as calamitously affected. The substantial Armenian communities in Constantinople, Smyrna and Aleppo were largely spared. No German city could make that statement about its Jews.

Is it acceptable for someone to claim that, because some members of the Armenian community fought with Russians in World War I, it was acceptable to call a whole people "a fifth column"? The International Center for Transnational Justice has offered an analysis of the events of that time. The key question is whether the intent of the Young Turks was to destroy the Armenian community, in whole or in part. That last sentence -- it's not a genocide because the Turks left a few communities alone -- is frankly an insult.

Scholars have been refused the opportunity to even debate the issue in Turkey by a court decree, forced to change plans. When the seminar went forward, protests were held outside. There is never going to be a time in the foreseeable future a good time to declare support for the Armenian claim, and Cohen at least comes around to saying it is "unacceptable" for Turkey to control the statement of history. There has never been a time in the past where it was sufficiently convenient for members of either party to make a statement of history -- witness Bill Clinton's request to squelch a Republican move to recognize the genocide in 2000. When Denny Hastert agreed to the request, the Turks were delighted. The author of the genocide bill that year, Republican Jim Rogan of Burbank, subsequently lost to Democrat Adam Schiff. Unsurprisingly, the bill before the House right now is authored by Schiff. As the New Republic reported in July (unprotected full version),
With Rogan's seat on the line in 2000, a first-ever vote on a genocide resolution seemed a sure thing--that is, until the Turkish government mobilized its lobbying team, led by former Republican House Speaker Bob Livingston, its $700,000 man in the field. In a state of affairs one furious Republican described to Roll Call as "ridiculous," Livingston found himself battling a measure meant to protect the very House majority he had briefly presided over just two years earlier. A Turkish threat to cancel military contracts, including a $4.5 billion helicopter deal with a Fort Worthbased company, ensured the opposition of powerful Texas Republicans like Tom DeLay. Hastert was cornered. But he found cover in Bill Clinton, who warned that Turkey might shut down its American-run Incirlik air base, from which the United States patrolled the no-fly zone over northern Iraq. Citing Clinton's objections, Hastert pulled the bill. Rogan tried to accuse Clinton of playing politics, and someone sent out a last-minute mailer featuring Schiff next to a Turkish flag. But it wasn't enough, and Schiff beat Rogan by nine percentage points.
Sound familiar? Think the Turks aren't playing games with this again?

Maybe I can respect those, such as John McCain on Ed's show yesterday, who are willing to say "I know it was genocide but the timing is very bad." And of course you cannot promise to bring it up later, as that is of course unlikely to appease Turkey. But McCain and other not-now'ers are boxed in by their logic; they cannot make a credible commitment to ever recognize the genocide by an official non-binding declaration. How will they ever acknowledge the history they all claim to know?

And it needs acknowledgment. As Youssef Ibrahim says, how can one expect Turkey to join the ranks of civil society, which must include respect for ethnic minorities, if it cannot recognize its own transition from an uncivil past?

As George Bush once said, "Sixty years of Western nations excusing and accommodating the lack of freedom in the Middle East did nothing to make us safe."

Ninety-two years in our case, Mr. President. And counting.


Long run health care costs and tax cuts 

In the details of the move by several GOP representatives, including Rep. Michele Bachmann, to eliminate the alternative minimum tax, I found the graph to your left. It shows the share of tax revenues expected to be paid to the federal government between 2000 and 2050 under current law. My first reaction was "that cannot be right." But looking at the last CBO report, it appears to be so.

Digging around a bit leads me to these two paragraphs from the report:
The future rates of growth for the government�s major health care programs �Medicare and Medicaid�will be the primary determinant of the nation�s long-term fiscal balance. They are also a primary source of budgetary uncertainty. Over the past four decades, per-beneficiary costs under Medicare and Medicaid have increased about 2.5 percentage points faster per year than has per capita GDP. Should those costs continue to increase at that rate, federal spending on those two programs alone would rise from 4.6 percent of GDP in 2007 to about 20 percent by 2050 (see Figure 1-3). That percentage represents about the same share of the economy that the entire federal budget does today. Even if health care costs grow 2.0 percentage points above per capita GDP�a rate consistent with that experienced in Medicare and Medicaid over the past 15 years�the share of GDP absorbed by the two major health care programs would reach 17 percent of the economy by the middle of the century. (At a rate of growth of 1.0 percent above per capita GDP, the share of those programs would be about 11 percent of GDP by 2050.) (p. 19)

If tax revenues as a share of GDP remain at historical levels (about 18.2 percent of GDP), additional spending for Medicare, Medicaid, and Social Security will eventually cause future budget deficits to become unsustainable. Even if revenues follow the path projected under current law and rise to about 24 percent of GDP by 2050, budgetary pressures would increase significantly. As a result, substantial reductions in the projected growth of spending, a sizable increase in taxes as a percentage of the economy, or some combination of changes in policies for spending and revenues is likely to be necessary to achieve fiscal stability in the coming decades. Such policy changes would certainly have some effect on the economy, but those effects would probably be less than the costs of allowing deficits to grow to unsustainable levels. (p. 22)
So the projection in the graph isn't really what the current law is, but an assumption based on assuming the choice made is to increase taxes. In that sense, it's hard to really label that graph "current law". But the point remains quite clear -- unless and until we get a hold of health care spending in the economy in some way, even if to simply have it grow at no greater a rate than do prices as a whole, we have a very serious and disturbing pattern of future budget deficits facing us. The short-run issues with a potential recession ahead are troubling enough. This is much larger.

As to the Taxpayer Choice Act, then, you can expect people to say both we cannot afford it and that it gives too many benefits to the rich. Greg Mankiw shows that personal taxes as a share of GDP have been falling. Indexing AMT would be much cheaper than an outright repeal, and the latter will be pointed up for saving most of the money against the rich. (That's all well and good, but even the smaller amounts for the merely-well-off may be enough to cause their budgets serious strain.)

The "taxpayer choice" part of TCA would give taxpayers a one-time choice to switch to a simplified tax system (with an option to switch back once in a lifetime, or to change due to changes in family circumstances like death, divorce or marriage.) The simplified plan is a 10%-25% two-bracket tax system with a cutoff of $100,000 for married couples. The standard deduction would be $25,000 for married couples. (Single and married filing separate taxpayers get half of those amounts.) The personal exemption would be set at $3,500 per family member. Looking at my own tax form, I would have saved almost 20% of my tax bill under this plan (plus the $69.95 I spend on TurboTax, plus about six hours of time filling out forms. I'd still have the damn Schedule C.) Given that it's a choice, we can only assume there would be income tax lost here as well. Both measures, to be revenue neutral, would require either a spending cut or a tax increase somewhere else.

It does not have a real chance of passage in my view, but it highlights two points, neither having to do with the alternative minimum tax: We have a complicated tax system that could well stand simplification; and we have a long-term spending problem that must be fixed.

UPDATE: More comment on the Taxpayers Choice Act from the Skeptical Optimist.

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"Transit causes congestion" 

In 2001, then-Governor Grey Davis cut the ribbons on the last segment on southern California's I-105 and proudly announced that there would be no more of these. The future lies with buses and trains.

The governor did not realize that transit causes congestion. The funds diverted have badly clogged the state's highways. California has some of the worst roads in the U.S.

The California approach may be "green" but it also kills. A 31-vehicle crash on a tunnel of the I-5 killed two adults and a baby. There may be more victims. Truckers had been complaining about the state of the tunnel for years. The full costs in delays and repairs are still unknown.
This from Prof. Peter Gordon at USC. Come now to Minnesota, where Andy documents how the Democrats are not willing to fund a third of MnDOT's request for spending authority to start the I-35W bridge. Gary notes the commitment to transit held by Sixth District House candidate Elwyn Tinklenberg during his time as transportation commissioner.

Transit causes more than congestion. It diverts dollars from bridges, which now are being used as pawns for tax increases and as buses under which they wish to throw Carol Molnau.

I won't hold my breath waiting for a proper reckoning by the know-nothing media.

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Monday, October 15, 2007

The lady is back 

It looks as though Yuliya Tymoshenko will indeed be the new prime minister in Ukraine, after the final count today gives her and President Viktor Yushchenko a thin majority in the new parliament. It's a very thin coalition; LEvko reports that several attempts to bring a third coalition partner on board have failed. That failure may be due to the continued desire of Yushchenko to keep his erstwhile enemy Viktor Yanukovych closer by having Yanukovych's party have all the deputy ministerial posts. The most likely third partner in the coalition has warned that would be a deal breaker. But if Yushchenko has the ability to choose the speaker of the parliament, he may still have a card to play to solidify the majority.


Great news from Iraq 

This enormous success will get little if any coverage in the mainstream media (MSM). However, this is crucial. My young Iraqi friend has emphasized multiple times that Iraqis don't care a whole lot about which interpretation of Islam is "the" interpretation.

What is critical is this: No one, absolutely no one who lives in a totalitarian society can even consider this "freedom" thing when under the heel of totalitarian rule (religion, tribe, generic thug, etc.). In a dictatorial environment, one spends one's time trying to survive, avoid being accused of something they never did and avoid real torture. Freedom is a luxury only available when security and safety and the rule of law are mostly in place.

Americans, with the surge, gave the Iraqis a chance. Iraqis are taking advantage of the recent stability unknown previously (Saddam was not safe). This breakthrough is one of many that have occurred in the past two months. It is a gross pity these achievements are not headlined everywhere.

For those who went through any business program, there is a concept called Maslow's Hierarchy of Needs. In summary, once basic physical needs have been met, safety and security are required before anything else can be achieved. People need basics first - the Iraqis discovered this and realized their success was possible and the AQI bullies brought in from outside Iraq were not the way to go. The Iraqis are moving forward.


Patients for the goose are docs for the gander 

After reading this I wondered: What would be the net cost to the health care system of us both limiting immigration of patients and of health care professionals? I suppose the answer will be "we want the professionals and all the legal immigrant patients", but suppose you cut off the anchor babies that become doctors, plus their siblings and relatives? I have no answer, but I think it would be interesting to research.


Designer markets 

James wonders if someone can explain what Prof Hurwicz and these two other guys that won the Nobel this morning did. Let me see if I can help here. Cowen and Tabarrok have different takes on this (on the same blog even!) than I might offer. Tabarrok tries to explain it in terms his grandmother could understand.

As I hinted in the previous post, in most exchange situations potential buyers and potential sellers have different information about a good. They communicate in a variety of institutions that we call "markets". There are times when that communication generates a piece of information that is vital, which is the price. That tells the buyer enough about the availability of a good that they can decide whether or not it's socially optimal for him to acquire it and use it the way he wants. It tells the seller whether she should transfer it to someone else.

Usually, but not always. In auctions, for example, where there's only one unit of the good being sold or bought, the prices bid or asked might be distorted by the fact that winning the auction means the others lose. A setting where this is often found is in the bidding of public works contracts; those who wondered about how the highest bid won the I-35W bridge contract would be interested in the work of these economists. What these economists do, in short, is figure out ways in which we can design better auctions that get the information needed to make a good decision about who gets these contracts. (That's not its only use, of course, but it's a good example of its usefulness.)

Stationary Bandit points out a paper by Hurwicz that gets at that idea. Titled "But Who Will Guard the Guardians?", Hurwicz says the question has two dimensions. First, who has enough information to watch over them? And secondly, how will they communicate the information?
Even a casual perusal of daily newspapers should be sufficient to convince us that there is nothing absurd about the present day �guardians��leaders and officials of political, economic, and social entities�needing, and indeed getting a great deal of oversight. The question is rather as to the extent oversight is, or even can be, effective. ...

Much economic analysis is based on the perfectly competitive model. Implicitly, at least, this model (or, more precisely, its applicability) requires strong assumptions concerning the information available to �agents� (individuals, firms, etc.) engaging in economic activity as well as the existence of implementation mechanisms such as the enforcement of contracts and absence of collusion. Similarly, conclusions concerning the effects of alternative forms of taxation, subsidies, social insurance depend in an essential way on implementation mechanisms supplying information concerning obligations and entitlements, entities facilitating financial flows, as well as enforcement of payments or disclosure of relevant information. I think it may be fair to say that until recently in economic model building [as distinct from obiter dicta] much more attention has been paid to the information requirements (and uncertainty when precise information is not available) than to problems of implementation. Yet if implementation is impossible or prohibitively costly, even the most attractive mechanism remains a utopia. (pp. 1-3)
So we know a set of circumstances in which the market gets the allocation right; what they do is show how to create a market that mimics those circumstances when the institutions that develop in an economy don't do it naturally. It's interesting to me that people are characterizing this as "going out of style" and that "it's hard to understand". The math in it certainly is -- I confess to not understanding it fully myself -- but the idea is not.

Peter Boettke points out the connection between Hurwicz et al. and Hayek's work on the use of knowledge in a society.


How NOT to run an airline 

For those of us living in the upper Midwest, encounters with service difficulties from Northwest Airlines are relatively common. Sometimes weather plays a role, but most often it's just an airline not paying attention to details because it figures it has a captured audience. Last night was one of those cases.

There has been runway construction this summer, which is scheduled to end this week. There are four runways at MSP, and taking one of the major ones out has put some strain on the remainder. So it came as little surprise to me, when flying into the airport last night after a trip to the West Coast over the weekend -- the reason for no posting Friday -- that I got hung up circling the airport for thirty minutes. Given I had a short connect to the commuter flight to St. Cloud, that was stressful enough.

Running out of the plane after it landed, I noticed the sign that said the plane was delayed by seven minutes. Good, I thought, I might make it after all. I have experience running through airports, but my PRs for getting from concourse C to B are now ten year old records.

I hit Concourse B at fifteen minutes before the flight is to leave, and as I approach I see people milling around the gate area. As I approach, the sign on the monitor behind the desk says the plan is not leaving for another 90 minutes. I tell the person at the desk that the monitors of departures indicated this flight leaving in fifteen minutes? She was nonplussed; "oh, they should fix that." Yes, you would think they would. "It might be longer; we're still waiting for the flight to get in."

So I watch the end of the Pats-Cowboys game -- deliciously ended with that extra touchdown to tell the world they are running up the score on everyone -- go back to the gate with 50 minutes to go and call my brother to talk about the day's games. While we talk, they back-up the departure time by ten minutes. OK, I'm getting home soon, this is fine.

I hang up, two guys who heard me talking strike up a conversation about football. A second guy approaches the gate podium. This, remember, is a commuter flight on a plane with 34 seats. There are never two people at this podium. Hmmm.

Next, they change the monitor for a flight to Eau Claire. Still say nothing.

Five more minutes pass, and they cancel the flight. "Weather related," they say, so no help with hotel. There's a late flight to St. Cloud but it's full, and so is the first flight the next morning. We are booked on the second flight. When people want their bags, they are told they cannot get them unless they wait for someone to get them and bring them to a carousel, and that this will take 2-3 hours. "But they are right there outside." Answer: Podium guy isn't the bag guy. What about a refund for that ticket? What about a bus to St. Cloud? No and no. We are left to fend for ourselves, or sleep wherever and wait for the 11am flight.

As you can tell from this post, I didn't wait. I found someone to share a $159 car rental (!) to get to the St. Cloud airport, where I picked up my car and went home. My checked bag is still probably in Minneapolis. And while we drove, there was very little rain. Indeed, MSP reported 0.13 inches yesterday.

Weather related? Or runway-closure related? And if it's the latter, where are the contingencies? What is the purpose of the second podium guy -- who said he was the decision-maker -- other than crowd control? This fellow was not very helpful and in fact quite rude. The people at the front desk would not issue a refund or any help, just giving me a book with a phone number to call today to request a ticket refund. What are they there for? To sell, only.

Is it unreasonable for me to think the airline did not have more information than I did about the probability of canceling the flight at the first moment I arrived at the gate? What would it take for me to get them to reveal that information? What is their interest in hiding it from me?

Any business that faces competition would not behave this way because if so they would lose customers. Failure to provide a service is one thing. Failure to provide anything more than a "tough luck, sorry" is unacceptable. NWA, I'm going to start encouraging people to do all that is possible to increase competition in that airport. I don't want you to fail; I want you to do better. But that means I have to act fickled.

So can I get you to believe me? Maybe I should learn a little game theory.

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Friday, October 12, 2007

Do you REALLY call people you don't know? 

Years ago in one of my previous careers, I attended a week long marketing training session for field sales reps. The course was designed to acquaint all of us with the latest software in the finance industry. About 20 sales people from around the country were present, along with Maurice, a fully-bearded, older gentleman from one of our development sites.

We all introduced ourselves, including Maurice who told us he was from one of our great labs and was attending the class to get information to help develop artificial intelligence (AI) applications for the finance industry.

One day, over lunch, a few of us found Maurice sitting by himself at a table. Being outgoing, marketing types, we asked if we could join him. He welcomed us. We went through the normal chit chat then I said to Maurice, "We're sales people and we depend on the products you all design. Is there anything you would like to ask us?"

Maurice's question must have been one the lab people discussed regularly because he immediately asked, with a tone of skepticism in his voice, "Do you people really call people you don't know?"

Although we explained to him that of course we did, all the time, he seemed unconvinced. The idea that someone would find it easy to pick up the phone and initiate a conversation with someone you didn't know was totally foreign to him and his coworkers, yet he had talents we could only dream of.

What brought this to mind was today I received an email that Mrs. Fields would not use the word "Christmas" this year so as to not offend anyone. This didn't make a lot of sense to me for a number of reasons so I called the Mrs. Fields 800 number. The rumor is not true; they have posted a number of Christmas products on their website (they have the Happy Holiday stuff, too), and will be updating the Christmas portion most likely after Halloween. It's easy to call, especially 800 numbers. The worst that will happen is they will say "no" in some manner or another and they have no clue who you are.

When these events happen, I always think of Maurice. We didn't get the AI but he had some great stories to take back to his coworkers.

Anniversary and Thanks 

I've never been big on anniversaries (fortunately, my husband is forgiving) so I missed noting that it has been just over a year since King put up my first post. He was generous enough to invite me to blog with him and I have ever since. Thanks, King.

And thanks to all you readers for your comments, here on the blog and in person when our paths have crossed.

One of my friends is from Burma. He/she fled Burma after demonstrations a number of years ago. Her/his life was in jeopardy. Those of you who have followed the latest protests know that all communications outside the country have been blocked, shut down. We take this freedom to express opinions for granted. King gave me an opportunity to write for an audience. It has been great!


Thursday, October 11, 2007

Indoctrinate U, Meet the Director and Producer 

As noted in this earlier post, the documentary, Indoctrinate U, will be coming to Minneapolis for a week, October 26-November 1.

The Minnesota Assocation of Scholars (of which King and I are members and on the board) along with the Tocqueville Center at the U of M will be sponsoring a Meet-the-Producer (Thor Halverson) and Director (Evan Coyne Maloney) Gala dinner/film opening night, October 26 at 5:30 PM. Tickets for this unique opportunity are $50 per person and can be ordered by calling 612.624.5341.

The dinner will be served in the U of M McNamara Center.

All of us contribute to the funding of colleges and universities. An unfortunate morphing has taken place over the last 35+ years, a shift to the left. This film documents much of this shift. As with most tough environments, knowing what one is going to face ahead of time helps one deal with difficult positions. If you or your friends have students in college or about to attend, this documentary is a "must see."

To see reviews, click here.

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The power of single-issue voters, Armenian edition 

The House Foreign Affairs Committee has voted 27-21 to move H Res 106, the resolution on recognition of the Armenian genocide, for a vote of the full House. Based on email I'm getting, the reaction of most Armenians is ecstatic. The Turks, meanwhile, have moved to recall their ambassador for "consultations".

Ed thinks this is wasting time and pointless, and the White House is in full damage control. I talked about earlier efforts here. The truth is that Armenian-Americans understand the value of being fickled voters (just as sports economists have hypothesized that teams are more likely to put winners on the field when their fans are more fickled about showing up only for winners.) As the story Ed linked shows, bill sponsor Adam Schiff only got his position after Armenians flipped on his Republican predecessor after the Republicans had pulled back a previous genocide bill for a vote. People and politicians respond to incentives, and the Armenian lobby has been quite effective in this regard. (Please note, the interest of full disclosure, that my last name is Armenian and I work on economic issues in Armenia.)

I do not think one can say that the current government is faultless in the genocide when it continues to fund deniers. This isn't much different than the Saudi funding of centers which many have criticized. One might ask whether, if the issue was not being fought by the Turkish government currently elected, why the reaction to a simple committee vote?

No doubt the US would like to have good relations with Turkey for geopolitical reasons, and no doubt too that Armenia neither offers the same strategic advantages, nor should consider this the most pressing issue. (Again, for full disclosure, I have been part of a conference discussing the value of opening the border to trade between the two countries, something that I still feel would be beneficial to each side.) Still, recognition of injustice is part of the step of reconciliation, and having the West say that at some point reconciliation is needed seems sound foreign policy, regardless of which party supports it.

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Be it known 

...that I indeed have thrown my hat into the MOB Mayor ring. Here are my qualifications:

Like the current occupant, I like dogs.

(OK, dog vote, check.)

Like the current occupant, I like big trucks. Well, not quite as big, but let's see his truck save Matt Damon.

(OK, dogs and trucks. Sounding like a coalition here.)

Unlike the current occupant, I value spelling.

(Contrast. Michael tells me this is important.)

Unlike the current occupant, I know stuff about economics. Fixing trucks, no, no clue. But I promise to increase the MOB budget by 50% next year.

(OK, big spending promises. I think this is going to work!)

And those offering their open support (link to me via trackback) will get their names read on the air a week from Saturday and can enter the drawing to play with me for MiLF next year, which will get you much closer to the Pitcher than the current occupant will.

(That ought to do it. Yes, I can feel the seal now.)


So how much money is that? 

I was reading Mitch's post that the University of Minnesota still wants to play the University of North Dakota in hockey (just not anything else) and wondered how much money this is they are trying to hang onto.

shows those tickets cost about $70-$250 each on the secondary market. Certainly some go for less from the box office (face value is $30), but losing UND from the hockey schedule would cost not just the revenue but the benefit of giving those cherished UND tickets away to alums in return for donations. Mariucci has 10,000 seats, so you assume the total ticket revenue and implied revenues (to include the concessions and parking, etc.) are about $1 million per game.

So then you wonder, given UND is a Division II program for every other sport, what is this costing them? UND does not play the Gophers in football or basketball (it already plays North Dakota State and South Dakota State as those two schools jump up to D-I. One is left to conclude that the University has engaged in the ultimate of cheap signaling.

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Blogs and levy votes 

The Times runs a headline story today on the use of a blog and a wiki to drum up discussion and action on the Sauk Rapids-Rice school levy vote. I'm quoted a few times in this story. I don't know how many views these pages get -- the blog has a counter indicating less than 4000 hits, which would be about eight days on my site (check sitemeters to the right). The billboard in the story caught my eye as I drove down the highway yesterday morning after a meeting north of Sauk Rapids; it is very hard to read that sign driving 65 mph, so the news coverage probably gave the anonymous blogger more publicity than he could have expected.

Many blogs will cover levy campaigns and take sides, but doing so with a new blog is to me likely to be less effective than coverage on an existing blog. More of them, I suspect, are like this, created by the affected school teachers.

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Wednesday, October 10, 2007

Anonymous monsters 

Last (Tuesday) night, there was a hearing about racial profiling in St. Cloud. I have listened to the testimony of some of the people who believe they have been victimized by it. In the case of the story told in the paper, I'm perplexed by why this man was stopped, but one incident does not contain enough evidence to support a claim of systemic racial profiling by an entire city police squad. I remind my out-of-town readers that St. Cloud isn't that big a place; most of us know the players involved in both the police and the potential victim communities. I say in all confidence that I have no confidence that I know enough.

That does not prevent me from knowing enough from the comments to that story (over 700 as I type this) to think we have a (hopefully) small number (but maybe not?) of people who use a chat board to either to feel free to be insensitive, boorish, and make racially insensitive remarks or to in fact be racists. To my in-town readers: This is the kind of writing that has most of the SCSU campus convinced that coercive state action is needed to stop that behavior. It is an abomination for us to sit by and let these casi belli for affirmative action go unremarked. Either you must condemn that behavior, or you allow evil to spread. You might try to stand in the middle, but to quote my favorite Friedman story, "there's no midpoint between right and wrong."

Much of the furor centers on anonymity, as if signing your name to that dark thought would be enough to put it out of your mind forever. It doesn't, it just makes it subterranean. I'm amazed how many of my conservative friends (many of whom I spoke with today) think anonymity is the problem. It is, if you think the problem is just people speaking or writing like that. Evil thoughts left unspoken are just as evil. There are cases where anonymity is useful -- I think Michael's blog is testament to that -- but it also can lead to Stillwater Infidels. (There's a story about this school levy blogger coming out shortly, which was weird because I just saw a sign opposing the Sauk Rapids-Rice levy as I drove down Highway 10 this AM, just before speaking to a reporter about that blog. More on this when the story posts.)

I do not have an answer to the problem of how to deal with the people behind those comments. I can only write here that it's wrong to watch and do nothing.


Gun = nut 

Hamline University has told suspended student Troy Scheffler that he will be required to seek a mental health exam before returning to school. The interim suspension, enforced on April 23, continues in place to this day, according to a press release from the Foundation for Individual Rights in Education.
�Hamline�s punishment of Troy Scheffler is severe, unfair, and apparently unwarranted,� FIRE President Greg Lukianoff said. �Peacefully advocating for students� ability to carry a concealed weapon as a response to the Virginia Tech shootings may be controversial, but it simply does not justify ordering a mandatory psychological evaluation.�
There has been no movement, apparently, since Mitch and Ed interviewed him. I had a chance to talk with Troy before he went on their show and I did not find anything in him that appeared in any way "nutty". But apparently the willingness of a person to argue for concealed carry permits as a way of defending yourself on a campus from a Virginia Tech-style homicidal rage is so far outside Hamline's experience as to lead to such speculation. And, it would appear, reason to deny Scheffler any form of due process within Hamline's judicial system.


Tuesday, October 09, 2007

Quick note on Costa Rica 

Agreed, we should be happy that Costa Rica has voted to join CAFTA and the world of free trade, but this shouldn't be a huge surprise. Costa Rica has long been a country more free than many of its neighbors and, unlike Dani Rodrik's El Salvador story, it has in fact grown. Looking at The World Economy we find that after Costa Rican per capita GDP grew only 0.8% per year on average between 1920 and 1950, growth accelerated to 2.3% per year from 1950 to 2000. (El Salvador grew only 1.2% per year in the last half-century.) Thus living standards in Costa Rica have doubled every 30 years. If Bob Lawson wants an example to counter El Salvador ...
... a nation with a history of low economic freedom and political stability with little credibility in the eyes of domestic and foreign investors. It has only recently begun to stabilize and improve its economic institutions. I would not expect it to grow quickly immediately. These things take time. I would predict things to improve only after some degree of credibility is earned. In El Salvador's case, this could take a long time.
...he could do a lot worse than to pick Costa Rica.

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It's still wrong, even if I laugh 

You have to hand it to the University of North Dakota. They are determined to win this mascot lawsuit with the NCAA, and they aren't too worried about the public relations.

The Chronicle of Higher Ed (permalink for subscribers, temp link)

In a memorandum sent on September 24 to five top administrators at the university, Sally J. Page, the affirmative-action officer, said that academic departments and university programs that publicly stated their opposition to the nickname in a recent advertisement in a local newspaper may also have put the university at risk of a federal civil-rights lawsuit.

"Should any individual or group file a complaint that he/she was denied an opportunity to participate or fully enjoy the services provided because the individual did not agree with the program's position opposing the logo or the Sioux name, then the university easily could be in a position of trying to defend itself from a discrimination or a hostile-environment claim based on race," Ms. Page wrote in the memo, which was provided to The Chronicle by a faculty member who opposes the nickname.

"The listing of the department or program in a newspaper ad sends an inappropriate message to students and others who may wish to participate in the educational opportunity or services and who may feel uncomfortable doing so because of the public position," the memo continued.

The provocation was an ad aganst the logo signed by four academic departments and a number of other programs on the UND campus. The signers are unhappy but complying with the affirmative action office. The opponents of the nickname point out that the same memo could have been put out to any supporter of the nickname. That's true, except nobody has taken out such an ad that I can find, and it is after all the university's official position -- so the campus itself could be called an "hostile environment". John Rosenberg wonders,
Surely there are many students there, and at other institutions, who are made to feel uncomfortable and even �unwelcome� because of their support for colorblind, non-discriminatory equal treatment.
I still don't like the use of the law in this way, but Rosenberg is right to call this a "man bites dog" story.

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What's the matter with you people? 

Bike Trail Jim and the trainoholics are now thinking we need to "change public opinion" on a gas tax. Gary reports:
The problem isn�t money; the problem is politicians like Rep. Shuster and Rep. Oberstar whose waste of taxpayers� money is robbing legislatures of the money needed to maintain roads and bridges.

I�ve said before ... that the Shusters and Oberstars of the world need to dramatically reduce the amount of money spent on earmarks. It�s galling to hear them say that We The People need to change. That�s wrong-headed thinking. They need to change. They need to stop piling $24 billion worth of earmarks into Highway Bills. They need to stop funding Bridges to Nowhere with those earmarks. They need to stop using the Highway Trust Fund to build bike trails and interpretive centers.

Of course public opinion is killing them right now. The earmarks just in the 2005 transportation boondoggle (a bipartisan affair signed off by President Bush, to his shame) are enough to give pause to the idea that public opinion is wrong. Before you get more money from taxpayers, you should have an accounting for what you've already taken in. We'd ask no less of our children and their allowance, wouldn't we? Why should politicians be any different?

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So what's your solution, Kevin? 

I don't think you need a long explanation for why those at the very top of the income distribution pay lower tax rates than the rest of America. Kevin Drum does not think you really need one ... but then draws you a graph to say "the tax system is moderately progressive until you get up to the 5,000 richest people in the country, at which point it becomes regressive."

Well yes, of course it does, Kevin. The tax code includes lots of credits and exemptions. Those with over $10 million in income are able to contribute to both political parties to keep those credits and exemptions in place to their benefit. My solution to that is to get rid of credits, exemptions, and graduated tax tables. What's yours?

(Possible idea: How about taxing political donations?)

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Yes indeed, it feels like fall 

The leaves are falling.
The chilly winds blow.
I grab my sweater.
In Bemidji, snow?

Outside, my paper,
Overhead, a duck...
Ah, the sports section!
The Yankees still suck.

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Monday, October 08, 2007

Indoctrinate U coming to The U 

Indoctrinate U, the controversial new documentary of efforts across the US that force students to accept politically correct ideas or risk humiliation in class, even failing grades, is coming to the Twin Cities.

The location is the Oak Street Cinema, (612.331.3134) Oak Street at Washington, East Edge of UM Minneapolis Campus.

Dates and show times (all times PM):
Fri. Oct 26, 7:15
Sat/Sun Oct 27, 28 5:15, 7:15
Mon Oct. 29 7:15, 9:16
Tues, Wed., Oct 30, 31 5:15, 7:15, 9:15
Thurs., Nov 1 7:15, 9:15

Cost: Matinees (5:15) Adults $6, Students $4
Evenings Adults $8, Students $5

Set aside a date. More posts to come.

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Spoiled Kids 

Updated - see end of article. On a recent bike ride through our neighborhood I saw examples like the following. Mom works outside the home, as does Dad. They have two boys, about ages 10 and 12. Guess who does the yard work?

Dad mows the grass; mom sweeps if off the road and walkways. Apparently the kids were told to walk the dog so they got on their bikes, put the dog on a leash and "walked" it for maybe five minutes. Both kids returned home and are now in the house. Meanwhile, Mom and Dad are finishing the lawn activities.

Want to guess when these two boys will become responsible?

Update: On Monday, The St. Paul Pioneer Press carried an article on the necessity of children doing chores around the home, not for money but responsibility and carrying their share of the load. The article includes suggestions and tips. It appears one of the major excuses for not requiring kids to do chores is that parents want to spend time with their kids without "nagging" them. We're not helping our kids be relieving them of all responsibility related to living spaces.

A major chore is picking up toys, games, etc. and no one wants to do it - maybe because there are so many of them. A simple solution here is to gather all the toys, games, etc. and give away at least 50% of them. Problem partially solved.


Got your redhots! 

A very good friend of mine talked to me about the use of software to buy up scads of tickets on TicketMaster and then resell them at higher prices. I'm fascinated, by the way, that Hannah Montana tickets on StubHub are averaging $5 more than Springsteen tix. It seems we are willing to pay more to impress our children (or nieces) than to treat ourselves to a rock concert and trip down nostalgia lane. There's a principal-agent story in there I think, but that's not my point here.

My friend wondered if this would lead acts (or their promoters) to raise their prices to capture back some of the profits that these sophisticated market-makers were earning. Via Mark Perry, StubHub is sharing its earnings with Major League Baseball. Now in sports the incentives may be different. One baseball executive notes that StubHub as a legal market will increase the demand for season tickets, as excess tickets from an 81-game package are more common but also more easily moved. But more to the point:

StubHub ... reports the average price of a ticket being sold on its site for games at Chase Field in Phoenix was $105. Some tickets sold for as little as $22.

But back at on the Northside of Chicago at the friendly, but pricey confines of Wrigley Field, a larger fan base and more limited supply of tickets had driven the average resale price up to $334, with some tickets selling for as much as $2,177, and standing room tickets going for $100.

The difference made it worth it for Cubs fans to catch a plane rather than the Chicago L to a game, especially if they could cash in frequent flyer miles. So about 11.3 percent of the Arizona tickets being purchased on StubHub were going to Illinois buyers, while only 0.5 percent of the Wrigley tickets were being sold to fans from Arizona.

...The fact that there are services like StubHub only increases the supply of tickets that can be sold on the secondary market, thus lowering the price.

The tickets are thus delivered more efficiently. One may whistle to himself as someone bags the $6000 per ticket for another potential Red Sox-Yankee cataclysm next week (that's not a prediction, and not even a desire from this Boston fan), but the market moves resources from those who value them less to those who value them more. The Sox-Angels game yesterday had perhaps 20% of its attendees as Red Sox fans, because the tickets were cheaper and Sox fans are more intense as a one-team city. (Even Red Sox-Yankee tickets, though, sometimes go for decent prices.)

My friend's question is a good one, though: What differs between the sports and music industries that might make scalping good for one and bad for another? If I'm missing something here, put it in comments please.

Worth a listen: Russ Roberts' podcast on ticket scalping.

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What happens when input prices rise: Suds edition 

I can hear the Elder crying. The WSJ tells us that increases in grain prices are causing an increase in the price of beer.

Craft beer makers have faced escalating costs over the past year. Prices for malting barley, which accounts for a beer's color and sweetness, have jumped as farmers increasingly shifted to planting corn, which has been bringing higher prices because of high demand from makers of biofuels, like ethanol. The weak dollar also has made it more expensive for U.S. brewers to buy commodities from Europe.

The news worsened for craft brewers significantly in recent weeks. Firms that turn barley into brewing malt informed craft brewers of price increases ranging from 40% to 80%, and hops suppliers announced increases ranging from 20% to 100%, depending on the variety of hops.

I am thinking of trading my Touareg in and was looking at flexible fuel vehicles. I now see I would just be shooting myself in the six-pack and burrito.

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Academics and capitalism 

Looking at the Ahmadinejad invitation, the disinvitation of Larry Summers to speak at the University of California, the protest over a part-time post at Stanford for Donald Rumsfeld, and the disinvitation and reinvitation of Erwin Chemerinsky to be dean of the new law school at Cal-Irvine, Gary Becker and Richard Posner delve into why academia is so far to the left of the population as a whole. This is a relatively new phenomenon, Justice Posner notes, citing the protests of Adlai Stevenson visiting Yale in 1956. (Anyone reading Robert Bork's Slouching towards Gomorrah would nod his head.) Posner wonders if this is a fading phenomenon since most of the radicals are now approaching retirement age. This may explain for example the finding in this morning's Chronicle of Higher Ed (subscriber link; temp link) that only 9.2% of faculty identified as conservative and barely more than one in five voted for President Bush in 2004. Here's the study, by Neil Gross and Solon Simmons. In the Chronicle article

"The data in this paper surprised me in the opposite direction that it surprised the authors," said Mr. Summers, who is now a university professor at Harvard. "It made me think that there is even less ideological diversity in the American university than I had imagined."

In his remarks, Mr. Summers concentrated on a subset of the data concerning elite, Ph.D.-granting universities. In humanities and social-science departments at those institutions, Mr. Summers pointed out, not a single instructor reported voting for President Bush in 2004.

"There is an overwhelming tilt toward the progressive side," Mr. Summers said. "Compared to the underrepresentation of other groups whose underrepresentation is often stressed, the underrepresentation of conservatives appears to be rather substantially more, perhaps."

I think Prof. Summers' speaking fees just took another hit. (UPDATE: See this review of the Gross and Simmons study, with more from Summers, at Inside Higher Ed.)

Prof. Becker looks to Joseph Schumpeter for an answer, but I think better is von Mises' Anti-Capitalistic Mentality. In a capitalist society one succeeds by his or her own devices, and nobody likes to be reminded of this when they fail to measure up. "Everybody knows very well that there are people like himself who succeeded where he himself failed." And unlike most professions where the successful end up traveling in social circles away from the unsuccessful, in academia they are kept together. Looking first at doctors,
Those more eminent than he himself is, those whose methods and innovations he must learn and practice in order to be up-to-date were his classmates in the medical school, they served with him as internes, they attend with him the meetings of medical associations. He meets them at the bedside of patients as well as in social gatherings. Some of them are his personal friends or related to him, and they all behave toward him with the utmost civility and address him as their dear colleague. But they tower far above him in the appre�ciation of the public and often also in height of income. They have outstripped him and now belong to another class of men. When he compares himself with them, he feels humiliated. But he must watch himself carefully lest anybody notice his resent�ment and envy. Even the slightest indication of such feelings would be looked upon as very bad manners and would depreciate him in the eyes of everybody. He must swallow his mor�tification and divert his wrath toward a vicarious target. He in�dicts society�s economic organization, the nefarious system of capitalism.
This is true as well of academics, Mises explains, whose codes of conduct require them to be civil when barely beneath the surface they seethe with resentment. Of such stuff are humorous novels like The Groves of Academe by Mary McCarthy, Jane Smiley's Moo or Richard Russo's Straight Man. Mises goes on to argue it is worse in America than elsewhere because academics can mix with socialites in Europe but seldom do so here.

Becker concludes:
Neither the unsuccessful performance of the US government first in Vietnam and now in Iraq, which they so strongly condemn, nor even the colossal failures of socialism and communism during the past half century, succeeded in weakening the faith of intellectuals in governmental solutions to problems rather than private market solutions. Since their basic hostility to capitalism is largely unabated, but they are embarrassed to openly advocate socialism and very large governments, given the history of the 20th century, intellectuals have shifted their attacks to criticisms of the way they believe private enterprise systems treat women and minorities, the environment, and various other issues. They also promote political correctness in what one can say about causes of differences in performance among different groups, health care systems, and other issues.
The ability of the academic to hold inconsistent positions consistently truly amazes. This is why you will not find the Left adopting pro-market policies, even if they would help meet progressive goals.

UPDATE (10/9): Michael Barone also notes:
Sometime in the 1960s, [colleges and universities] abandoned their role as advocates of American values -- critical advocates who tried to advance freedom and equality further than Americans had yet succeeded in doing -- and took on the role of adversaries of society.
Commenting on that piece, Paul Mirengoff argues that the voter check provides some restraint on public universities. I really cannot agree with this, pointing to the California examples above as part of my evidence. The radicalization of campuses in the 1960s is much more about Berkeley and Kent State than Harvard or Dartmouth. Paul says structural flaws prevent alumni from doing more on private campuses. Those same structural flaws apply to many public institutions. For example, the absence of any real board for SCSU or other state universities in Minnesota: We are governed by a MnSCU board instead.


The law and unintended consequences 

The Adam Smith Institute has a good joke (click; I won't spoil it) about how the law creates results we don't intend. Despite the portrayal of tax cuts (for example, this letter to the editors of our local paper today), the data show that in 2005 the top 1% of the income distribution paid 39.38% of federal income taxes, the highest share paid by that group in 25 years. ("But King! Supply side economics is bunk!" When you get an operational definition of supply side economics, get back to me on that, OK? It surely does not mean across-the-board tax cuts provide 100% revenue recovery, and those who portray it as such engage in caricature.)

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Promoting "understanding" 

On Friday this week, Century College in White Bear Lake is sponsoring a conference titled "Building Bridges of Understanding to the Muslim World." Bridge-building being all the rage in Minnesota these days, I thought it was worth a look. The featured talks include representatives of the following organizations:
I will be away from the area that day, but I will be interested to hear what these and other speakers might say about fighting terrorism or how to get the majority of Muslims who oppose it to speak up about it.

Note that, unlike the decision to not invite Desmond Tutu to St. Thomas, I have no problem inviting these speakers to Century. My question is whether these speakers will have to face questions from the audience, and whether or not they can do a better job of answering these questions than was done at Columbia.


Friday, October 05, 2007

First trade, now taxes? 

After ranting yesterday about Republicans abandoning free trade, now they seem to be getting advice that the tax message won't work either. Or at least, not the way Republicans normally talk about them:
Most voters are unpersuaded by the Republican message that the Bush tax cuts were a resounding success that pumped the economy back to life. Worse, the key independent voters are actually repelled by that message. "It crashes like the Hindenburg," says Richard Thau, who has been monitoring swing voter sentiments across the nation. Why? Because politicians who boast about the rosy economy seem out of touch, even delusional, given the rising costs of gasoline, health insurance and college tuition.
None of the three products there are sold in free markets, of course, and you could cite that as a reason for why their prices are going up, but they're different stories and as a campaign focus probably snoozeville. Conservative bloggers will lament and argue that the economy has added lots of jobs; liberal bloggers respond, with some merit, that the expansion this time has not added as many jobs as previous expansions.

Of course there's no way of knowing how bad things would have been without the tax cuts, but the slow pace this time, combined with some rather hyperbolic rhetoric over what tax cuts would do, make them a loser.

But, good news! While you might not be able to sell the idea of a tax cut, you can get out the message of the damage from a tax hike.

Pollster David Winston, who's been testing the tax issue for Republicans, agrees with that assessment. When Mr. Winston asked a national sample of registered voters last month, "Do you believe or not believe this statement: Given the cost of living these days, now is not the time to raise taxes," 65% believe now isn't the time to raise taxes, while only 31% believe it is.

There is another GOP imperative: The anti-tax message must be linked to wasteful government spending. "There's no question that for seven out of 10 American voters, wasteful government spending is one of the largest problems in Washington," says pollster Tony Fabrizio. "For many of these voters it's a bigger issue than taxes." All of the polling consistently finds that voters believe about 40 cents of every dollar spent by Washington is wasted. So this widespread aversion to the way government mishandles money may be the best shield against tax hikes--at all levels of government.

In Mr. Winston's survey, 75% of respondents agreed that, "Taxes should not be increased as long as Congress continues to waste the tax money it already receives." Only 23% did not.

Advantageous to the Republicans, then, is that they are not in charge of Congress currently, so that there's the potential to demonstrate Democratic wastefulness. That is why, here in Minnesota, the "Bike Trail Jim" Oberstar tag may have some impact. Or why my friends who are trying to defeat John Murtha might find a second front useful.

The best news of all?
This is a nation that instinctively gets the supply-side message that putting people to work yields more tax revenues than a strategy of weighing down businesses and workers with tax hikes, which explains this stunning finding: When Mr. Winston's poll asked, "Which approach is more likely to increase federal revenues?" 81% said "increasing economic growth" while only 13% said "increasing taxes."
Both parties will have to deal with this question: Why has the Bush expansion not produced jobs, and why has it always seemed a bit lackluster? When do we get back to the growth? By emphasizing comparative advantage and trade to boost productivity, and low taxes to encourage investment in both physical and human capital, a message of "let go and let's grow" could still find fertile ground in 2008.

It is already happening:
While annual federal spending grew 2.8% in fiscal 2007 over fiscal 2006, year to year, revenue grew 6.7%. Individual income-tax receipts are estimated to be 11.3% higher than last year, and corporate income tax receipts are estimated to be 5% higher. Revenue growth has cooled substantially from the 11.8% fiscal year-to-year increase from 2005 to 2006. Spending growth also slowed.

...�While somewhat lower than estimates issued at the beginning of the year, the 2007 deficit announced today by the Congressional Budget Office is no cause for celebration,� said House Budget Committee Chairman John Spratt (D., S.C.)
Because they still want to let the tax cuts expire. Convincing voters that that would be a tax increase will be crucial in the next campaign for Republicans, and they're playing from behind on that issue right now.

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"Why do economists work on sports?" 

Guesting at Marginal Revolution, Justin Wolfers asks the question and gives six possible answers. In a comment, the seventh and I think best is given:
The elephant in the room here is that many sports produce a vast quantity of analyzable data in a reasonably convenient form.
I'm not sure why it's an elephant in the room. It's not just the volume of data but how it is collected. I sat at Veterans Stadium in its last year, in the upper deck, with a good friend (we were watching Phils-Red Sox), and sitting on my other side was a guy scoring the game. Now I score all my games, but often using an accounting style format that I learned from an old Bill James Abstract many years ago. I'm used to seeing the diamond boxes, or people drawing in their diamonds, etc. But what this guy had was entirely different, with recording of pitch type and location and speed. Given where we were, he wasn't a scout. So I ask him, and he says he's paid by Stats, Inc. $50 plus the cost of a seat to score the game. Not every game is scored, he said, but probably 90% are. (I looked at their jobs page, and you can see they pay for data.) And before them, of course, is the Elias Sports Bureau, which does 'official stats" for every major team sport. When you know that all the data has been created consistently by a small set of guys (see this SABR interview with Steve Hirdt), you have an ability to evaluate how people respond to incentives in a controlled setting that's almost as good as an experiment.

This competition in statistics between Elias and STATS (and a couple other providers) produces more and better data all the time, with controls put in place by the nature of games.

I'd also add one more thing to the list of things Wolfers mentions for why we study sports: I do not think it's an accident that there is much more on team sports than individual sports. Team production, and its impact on labor, has fascinated us for half a century because it's peculiar (to borrow Walter Neale's description) and applicable in other areas, like fishing boats or some management settings. Baseball gives you some chance to disentangle team production because it's more sequential (at least for offense and pitching), but even there it's not perfect. So more to do! And it's being done.

Quick thought on the employment report 

Any number of people -- including Captain Ed, Ironman, -- are suggesting this jobs report is really good news, not only for adding 110,000 jobs in September but also for revising up the July and August numbers. Yes it did, but the revision is quite interesting. The initially reported total private employment number was 115,883 thousand in August and 115,859 in July; the new numbers are 115,888 and 115,856. Yes, certainly there are larger revisions in the industry subcategories but these are largely going to be offsetting, which is the nature of estimating numbers from surveys. More sample, less variability.

Barry Ritholz notes that those earlier data had aberrant data for public education employment; for August, the number was revised from7.961 million to 8.050 million, accounting for nearly all of the gain. Since we kind of knew that old number was off, this gain doesn't tell me anything new. So you're left only with the September gain as really news, and what do we find? Goods sector down across the board (construction, manufacturing and mining)

As I noted in a comment on Ed's post, in St. Cloud the expansion had largely been two-legged: housing and health. Now we hop along on one leg plus a mild expansion in local manufacturing, which is not confirmed in these national data. (See our latest quarterly business report for more.)

Steve Conover says don't get too excited. I'm not, and neither should you be.


The Big Picture - Technology and the Real World 

As many of you know, I teach MIS at Metropolitan State University in the Twin Cities. Major advantages of teaching at Metro include: small class size and older students, average age is mid-late 20's. This means mom and dad are most likely not funding their journey through college. These students realize they need the degree and for the most part are willing to work to attain it.

One topic covered in MIS is the System Development Life Cycle (SDLC), a guideline for identifying the necessities to install a new computer application. We study it from the technical side then after counting off, I divide the class into groups to apply the methodology to something outside the technical arena. Topics may include planning a trip to Hawaii, babysitting the neighbor's dog for a week, buying a new car, etc.

The major benefit that arises from taking a technical concept and applying it outside technical parameters is that students learn that there is similarity across the board when structuring a solution to a problem - regardless where the problem occurs; the methodology is transferable. This kind of application also removes the mystery so often associated with computers.

Another benefit of short in-class activities is that students are randomly assigned to a group via counting-off or alphabetically, one time. Since they are given a specific objective, the group has focus. All barriers just drop - no one is judged on any physical traits - they simply have to work together on a practical application of a technical process.

The groups for these mini projects shift with each topic. Students learn that they can all work with anyone - they get beyond the divisive labels that too many in society want to apply to any respective subgroup.


Mrs. S does Columbia 

Mrs. Scholar's monthly column in the Times is up, about the Columbia speech by Ahmadinejad. Her takeaway: "What does it take to prepare a student to talk to a dictator?" and can you learn that at Columbia? Or St. Cloud State?

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Thursday, October 04, 2007

In the Shadow of the Moon 

Tonight my husband and I saw a wonderful movie, In the Shadow of the Moon, directed by Ron Howard. It is the story of America's Apollo Program, when we went to the moon.

There are still a number of astronauts alive who were interviewed for this movie. It vividly shows the politics of the 1960's, all we were living through. But it also shows who and what we are - doers, believers, dreamers. The movie captures everything good about our nation. It is unfortunate that far too many of those who were educated after this incredible success have no clue as to what we can do.

The movie ran at the Lagoon Theater in Minneapolis through tonight. I wish I'd seen it earlier. However, if you find it coming to your town, go see it. Every school child in America, grade 1-12 should see this movie. It makes you proud to be an American. The side benefits the world inherited from this venture are too numerous to mention but all benefited from our research and knowledge.

As one astronaut said, "Every place we went, people said 'We did it', not 'You Americans, but we - mankind." To see the actual film footage of the positive reactions of people across the planet warms the heart.

If you lived through it, you will love the recall. If you have children, somehow, find a copy and watch it with them. If you teach, get it for your school.

Defining graphic 

A group of students on campus organizes themselves as "Friends for Life", with the purpose of educating students about the costs of abortion. They are able to obtain funding towards that mission and have inserts they wish to place in the campus newspaper, and so they approach the newspaper to buy the right to include them. The inserts were refused last year and again this year. The story next is unedited except to remove the name of the editor at the newspaper, and was mailed to me by David Brix, who leads Friends for Life. In his words:

In the past, the group had been granted permission by the paper and the literature was run with no complications. However, the next year the very same insert was rejected with no reasons given by the paper. Answers as to why were refused to FFL members despite the fact that FFL is a paying client of The Chronicle.

This year FFL tried again, but with a new insert; however, that too was rejected. The reason the insert was rejected was because it was considered too graphic for a college audience. The problem with the denial is the inconsistency of The Chronicle. On Thursday September 20, the paper had run an insert of a provocative looking underwear model in volume 84 number 5. Many found this image to be graphic and offensive; but, it was considered acceptable for college students to see.

Both images are graphic. To be sure you agree to see them, I've uploaded them separately and provide a link to the Armani Exchange and the Human Life Alliance (HLA) photos. I have copies of both of the HLA inserts that were rejected, as well as the Armani insert.

Brix also relates an exchange with an editor (whose name and phone number I am redacting, I'll explain why in a moment):

Last Thursday I brought the HLA insert down to the Chronicle office and gave it to [an editor]. She told me that usually anything is appropriate but they have to take a look at political based ads. She told me she would have to check with the editor. She called me back that afternoon and left me this voice mail:

�Hi David, this is [redacted] from the University Chronicle�a�replying about the inserts for Friends for Life. I showed it to our editor and we are not going to be able to run this, some of the pictures are just too graphic and� that�s just kind of how�just kind of�how we do things. So if you have any questions please feel free to call me back the number here is 320-308-nnnn. Thanks, bye�.

Now go back and look at the pictures. The picture the editor refused is certainly graphic. It is meant to provoke, to raise one's emotions, in order to make a political point. The other picture, the Armani picture, is meant to provoke, to raise one's emotions, to make a commercial point. Ask yourself: Which kind of provocative speech is the First Amendment intended to protect?

Understand too, that nobody -- not the Friends for Life group, nor me -- would ask the Chronicle to censor the Armani ad.

The Chronicle has of course run ads before that have been provocative and political. It ran a scurrilous article attacking a member of the faculty and former dean, promised to investigate its failure to research it properly, and then ran away from the research when it was apparent the paper would end up not looking good. It is not beyond running a cartoon praising a male Homecoming Queen. The paper once included an insert from a person who wanted to provoke a reaction by denying the Holocaust. Perhaps that experience so affected the paper and its adviser that now they are checking anything not clearly commercial for content. Yet when it makes a point that might be politically correct, like supporting the Homecoming Queen, or commercially expedient, like taking money for a commercial ad, they aren't checking. Notice again what Brix said:
She told me that usually anything is appropriate but they have to take a look at political based ads. She told me she would have to check with the editor.
This is inimical to a free press, and it is inimical to a campus newspaper in a university (and advised by a department) that trumpets its commitment to the First Amendment.

I do not blame that particular editor for the rejection of the HLA ad -- which is why I do not want to name her or give out a phone number. And turnover at a campus newspaper is quite high, of course, since students graduate, so the current staff cannot be held responsible for any of the other problems I've named for the Chronicle. You have to look for the one constant.

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I'm glad they're not possessive 

A note from a student this PM:
I am not going to be in class today because I have to attend a wake. One of my girlfriends' uncle passed away unexpectedly so as you can assume things have been really crazy this week.
I hope one of his other girlfriends doesn't have a relative die this week, or he might be in some trouble.


Attention, Republicans 

Come a little closer, please, and listen.

This is really annoying.

The sign of broadening resistance to globalization came in a new Wall Street Journal-NBC News Poll that showed a fraying of Republican Party orthodoxy on the economy. While 60% of respondents said they want the next president and Congress to continue cutting taxes, 32% said it's time for some tax increases on the wealthiest Americans to reduce the budget deficit and pay for health care.

Six in 10 Republicans in the poll agreed with a statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports. That represents a challenge for Republican candidates who generally echo Mr. Bush's calls for continued trade expansion, and reflects a substantial shift in sentiment from eight years ago.

"It's a lot harder to sell the free-trade message to Republicans," said Republican pollster Neil Newhouse, who conducts the Journal/NBC poll with Democratic counterpart Peter Hart. The poll comes ahead of the Oct. 9 Republican presidential debate in Michigan sponsored by the Journal and the CNBC and MSNBC television networks.

Let us not forget that it was Bill Clinton who pushed through NAFTA, so it isn't like you can pull your usual stunt of saying "well, we're for protecting American jobs, but we'll not kill the economy like THOSE guys will!" It's that kind of signaling that eventually lead Clinton to make his famous WTO speech in Seattle in 1999, in which he undid seven years of good policy.

Lose this issue, and you lose a lot more than my support. (And I'm very serious about this; it's an issue I care about more than most of the ones that animate Republican activists.) Are you -- are we -- the party of freedom or are we not? Milton and Rose Friedman wrote ten years ago:
Few measures that we could take would do more to promote the cause of freedom at home and abroad than complete free trade. Instead of making grants to foreign governments in the name of economic aid--thereby promoting socialism--while at the same time imposing restrictions on the products they produce--thereby hindering free enterprise--we could assume a consistent and principled stance. We could say to the rest of the world: We believe in freedom and intend to practice it. We cannot force you to be free. But we can offer full cooperation on equal terms to all. Our market is open to you without tariffs or other restrictions. Sell here what you can and wish to. Buy whatever you can and wish to. In that way cooperation among individuals can be worldwide and free.
If you have any belief in the mission America has in Iraq and Afghanistan -- in putting examples of democracy and connectivity to the rest of the planet's market system in a part of the world where Islamofascists try to build barriers -- how can you then support barriers on Chinese toys or Korean semiconductors?

Yet in a post at Anti-Strib on what it means to be a conservative there was a statement "The area where conservatives support a large govt. role is national defense and international trade." (My emphasis.) When I asked what that was about, Tracy replies:
China, Japan and a few other countries have basically unfair advantages in the US market.

The US allowed the Japanese to destroy our domestic electronics industry.

Even our largest companies need the full support of the US government when dealing with other large countries.

I know I'm in the minority on this, but I see how other countries block our products.
Sadly, you're not, Tracy.

We're all for competition and the free market when two American companies are beating each other's brains in, but in comes Fujitsu and whoa! Get the cops!?!?

When Republicans have won in the post-Watergate world, the message has been "we're the freedom party; they're the forced-fairness party." Try not to screw that up, and you can win. If you can't even come up with that much vision, you will perish.

UPDATE (10/7): Ben Muse digs into the poll and finds that it only represents Republican voters deemed likely to vote in the primary. Not a representative sample, he says. But certainly containing the people having the candidates' ears...

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Wednesday, October 03, 2007

Sometimes nothing is a real cool hand 

In Ukraine, sometimes losing is winning, as long as you lose only by a little bit. Other times, losing really sucks.

The parliamentary elections that just concluded are now pretty well counted, and while the blue forces of former PM Viktor Yanukovych finished in first place, they look to be on the outside of a majority. Both his Party of Regions and the Yuliya Tymoshenko bloc believe they've won. President Viktor Yushchenko's party finished a distant third.

But the key lies in one of the top two forming a coalition with Yushchenko's party plus one of the folks in fourth or fifth place. (Forget any idea of a grand coalition, even if it seems Yushchenko wants one. Tymoshenko will hear none of that.) Ukraine has proportional representation for seating deputies to its Rada or parliament, with a 3% threshold. With all but a handful of ballots counted unofficially, the Socialist Party of Oleksandr Moroz appears to have finished just below 3%. The recounting and ballot challenges and official certification should be fun.

That leaves two sources of the additional votes needed to create a coalition. One of them, the Communist Party, isn't likely to be in any possible combination. The other is the Lytvyn Bloc of Volodomyr Lytvyn, the former prime minister. He is signaling interest in a coalition with Tymoshenko and Yushchenko. Tymoshenko may be interested. Formation of that coalition would give those two a relatively stable majority, and Lytvyn a lot of power. LEvko wrote a note about Lytvyn last year; he's not well loved with the Yanukovych people. Yanukovych would need both Yushchenko's bloc and the Communists to form a coalition without Lytvyn if the Socialists are out, which is why the counting of the ballots is so important. There may be around 20 million votes, so changing the results from 2.87% to 3.00% doesn't take more than about 26,000 votes. In a country with a checkered past on voting irregularities, that's a real possibility.

But let's assume the vote count holds the Socialists out. If a coalition of Yuliya, Lytvyn and the president is there, why is the president flirting with Yanukovych? Here's my hunch. Yushchenko dismissed the parliament and called elections a few months ago, and Yanukovych -- whose party was in charge at the time -- decided to go to elections rather than fight whether Yushchenko had the right to do this. I do not think there's a gentlemen's agreement to re-form the Yush&Yanuk coalition between them, but if Yushchenko comes out too quickly for a coalition with the Tymoshenko bloc -- say, before the certification of the election -- the blue forces could make life difficult for the Orange by claiming the vote was illegal. In short, they'd go back to these charges that were made throughout the summer until the elections were called and agreed. Rather than put up with that, Yushchenko may be trying to play both sides ... and no doubt being sure his own situation is secured. The constitutional arrangement between the Rada and the executive branch is still to be decided.

Whichever of these coalitions form, they should take the time to read Edward Hugh's analysis of the challenges Ukraine faces.

Another failure of the Yellow Pages test 

Phil Miller notices that his city of Mankato has a newspaper with strange notions of public goods:
Here's a common refrain in our local newspaper. Step 1: public supposedly wants good. Step 2: the private sector won't provide it. Step 3 ???? Step 4: get the taxpayer to provide it.
The object of the Mankato newspaper's desire is a water park.
They are also expensive. The private sector can, in some cases, justify building a water park � particularly as part of a hotel project. But there are few cases where a large publicly available water park can be built and operated as a profitable private venture.
Mankato editorialist, meet Summerland. Right here in lil' ol' St. Cloud. Not a hotel in sight out there on the outskirts of town. Now certainly some towns will build water parks because they have lots of tax base (take Becker, for example) but in general, remember Steven Goldsmith's Yellow Pages test: If you can find a service provided privately in the Yellow Pages, you don't need government to provide it.

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When do I get my card? 

Does it take a PhD to be called an economist?

To refer to oneself as a medical doctor or be a member of the American Medical Association there exists clear education requirements. This prevents people from taking medical advice from someone unqualified and inflicting harm upon them. No such conditions are required to be called an economist or join the American Economic Association. This results in people who enjoy thinking about the economy, but may lack even undergraduate understanding of the field, representing themselves as experts on issues pertaining to the labour market, trade, and development. Often you have to do some digging to find out they are actually ... sociologists.

The years of graduate-school seminars and rigorous mathematical training empowers PhD economists to converse with each other in a language all our own. This allows us to continue to believe that our years of education were worthwhile because we can recognize each other and sneer at the impostors. In the mean time, the rest of the world takes thoughtful advice and opinions from people who sometimes, while not having our illustrious pedigree, also have some very good ideas�and sometimes better ones.

In graduate school one day I was sitting in Craig Stubblebine's public finance course in which he asked a question. I started my answer with "As an economist, I would say..." Before I got any further he smiled and said "Who said you were an economist? When did you get your card?" Flustered, I retracted the first three words and proceeded to answer the question. I don't recall the question or my answer, or his response to it. Just that I was told I didn't necessarily get to call myself an economist just because I was a second-year grad student. Obviously that stuck, since it happened almost thirty years ago.

When I advise undergraduate students -- I do next to no advising of our masters students -- they ask what kinds of jobs they can get, and the first thing I tell them is that it's highly unlikely it will have the word 'economist' in the title. Instead, I tell them they are trained to analyze, so look for the word 'analyst' in the job title. That opens up many jobs; it won't be apparent they fit the job, but I tell them their more liberal artsy background (versus the student graduating from our business school) makes them more adaptable. They should have a story to tell of how this is so, I explain. They will be thinking like an economist, we hope, but not called such.

But I think, to expand on the linked post, that calling oneself an economist has to mean more than "studying the economy" or being "a labor expert." I think it means some commitment to understanding human action as rational (or, to use the title of Mises' book, Human Action is intentional or purposeful.) It understands incentives as powerful; it understands that all human actions have costs; it understands decision making as happening at the margin. To go back to the heterodox post earlier today, that understanding still allows a well-populated spectrum of beliefs on policy issues. One can certainly stand on the spectrum without that understanding and talk about trade or labor, and one can probably call that talk "economics", but should get your card as an economist? I wouldn't give it to you. We cannot call economics a discipline without some disciplinary standards.

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How much should you subsidize childbirth? 

Gerald Prante says Hillary Clinton's $5000 bond for each newborn is in fact already here:'s called the child tax credit, and it was put in place and increased significantly by conservative Republicans (along with President Clinton's signature and President Bush's signature). Every year until a child is age 17, most families can deduct $1,000 from their final tax bill for every child they have. (It's a credit, meaning it's $1,000 at the very end, not a deduction which merely reduces taxable income.) And that $1,000 per year adds up. When that child turns 18, the family will have saved over $28,000 (assuming a 5 percent interest rate). On the other hand, a $5,000 bond only turns out to be around $12,000 over that same time period.
The child tax credit phases out for married couples with AGI over $110,000 ($75,000 for single heads of households, source.)

When I saw this, I thought about the child credits or grants being given in Mongolia. (I'm pretty sure there's a similar program in Mexico, but I don't know it well.) There, the benefit is used to encourage an increase in marriage and childbearing. Even though the payment is small (less than $100), both family activities are responsive to the money, and the money was conditioned on families being intact, getting your children immunized and in school. Even though it appears more than 70% of the money went to families that were above the targeted poverty group -- even including a second round of screening for poverty based on expenditure patterns or other proxies -- it was working, though you could quibble with some operational details.

What behavioral changes could we expect if we further subsidized childbirth in America? That's a question of elasticities. Would we require the family to have two parents (and would gay and lesbian couples qualify?) Would you really encourage marriage this way?


Everyone's eclectic 

There must be some explanation for this. In an article on who is heterodox in economics, the answer seem to be everyone. The journalist treats the claim with appropriate skepticism. I believe positions are occupied across the entire spectrum within economics, because everyone is incentivized to be a little different from all the others, but not too different.

It's worth remembering, as Arnold Kling did last year, that what's consensus now can become apostasy later. Timothy Garton Ash observed after the fall of the Berlin Wall that "there is no 'socialist economics' there is only economics." So convergence happened, as James Buchanan predicted many years ago ("Economics in the Post-Socialist Century", 101 Econ J., 1991; also the source of the Ash quote.) And when you get convergence, people want to find a way to differentiate themselves.

Which is as good a rationale for this blog as any.


Tuesday, October 02, 2007

Simon did half the job, you do the rest 

So I'm reading from Bryan Caplan a challenge:
Can you write an economically sound answer to the question "When Did Life For the Poor Get Better?" that a five-year-old could understand? 150 words or less!
Now alas, I'm late to the party and didn't get something in for Caplan to read to his son. And my work is still incomplete. But here's the basis of an answer, from the late Julian Simon in 1995.
This is the economic history of humanity in a nutshell:

From 2 million or 200,000 or 20,000 or 2,000 years ago until the 18th Century there was slow growth in population, almost no increase in health or decrease in mortality, slow growth in the availability of natural resources (but not increased scarcity), increase in wealth for a few, and mixed effects on the environment. Since then there has been rapid growth in population due to spectacular decreases in the death rate, rapid growth in resources, widespread increases in wealth, and an unprecedently clean and beautiful living environment in many parts of the world along with a degraded environment in the poor and socialist parts of the world.
My attempt at translating it to your child's level:
From the beginning of time to about when our country was formed, kids grew up to live as well off as mom and dad, and their kids lived as well off as they did. They lived about the same number of years old. A few were kings and queens, and they and their closest friends lived really well, but not too long. The earth was kind of clean, but not too much so when you don't have toilets for poop. And we did not grow in the number of people living on earth. Since then, there are more people on Earth, kids live longer than their moms and dads, most have much more money than back then and nice houses (with toilets!) The countryside is cleaner in most of the places where people got rid of kings and dictators, but not so much where they did not.
Been a few years since I've had a five-year-old, so I'm no judge of whether that works. But I made the word count, and I know stories with toilets and poop are remembered by kids. I suppose the kid will think our country is why this all happened; I'm not that patriotic, but I wouldn't rush to remove that impression as a short-cut to the longer answers.

(And yes, I'm mildly embarrassed by using that word twice, but I'm not above the occasional cheap trick in pursuit of a good lesson learned.)


Appeasement Doesn't Work - Ever 

A few weeks ago, a group of friends were having lunch. One, I'll call Sue, has a sister who is married to a guy who has been diagnosed as bi-polar but refuses to take his meds. While not boring the reader with details, I do want to mention is this: Sue's sister has tried everything to make the marriage work. She has changed her job, working hours, counseling, etc. to no avail. I agree it takes two but when relationships fail, history shows, one tries harder to repair it than the other. In this case, Sue's sister returns at the slightest sign of hope. She's been doing this for years.

Appeasement in relationships doesn't work.

Our education system has spent the last 40 years telling our students they don't need to memorize facts or dates and that everyone is special. As a result, we test poorly when compared to other industrial nations. While I agree all children are special, refusing to teach them basic facts, dates, etc. results in an over valued ego that cannot think. This knowledge is needed to process new information and see it in perspective. Ignoring standards and giving students top grades out of a misplaced idea that "good grades result in self-esteem," or because the teacher wants the student to feel good, or the teacher is afraid of parents is defeating for the student. Eventually they will hit the real world which does not have "do-overs" or outsiders settling disputes. The real world demands performance. Actual learning not pabulum results in real self-esteem, not the empty "feel good" misperceptions too many kids have.

Appeasement for students doesn't work.

Move to a global scale. Unfortunately, there will always be real bullies and thugs. Today most are found in a number of African nations, military juntas in the East, and the dictatorships in the Middle East. Too many politicians want to dialogue, talk, etc. with nations that do not have any leaders who want to dialogue with us. Tough stands by the anyone in the west are slammed at home and abroad because we might upset someone's fragile ego. They won't talk to us because they lose. We need to wake up.

Appeasement doesn't work.

It's already happened here 

An editorial last week in the Atlanta Journal-Constitution (h/t the ever-reliable Gerald Prante) argues that killing the property tax is deadly to local government control and authority.

Local governments in Georgia, like in all states, are more responsive to their citizens than is the state government because they have the ability and flexibility to provide the services those citizens demand. And that requires the ability to raise and lower taxes.

Georgia local governments are more efficient than the state at providing local services because local government officials know the costs and benefits of those services. Relying on political leaders in the state capitals to fund local police, fire and ambulance services and schools almost guarantees that those and other essential local public services will be inadequately funded. Do you think the Georgia General Assembly would fund schools, police or libraries to the extent the average citizen wants or would be willing to pay for? Fifty years of political science research suggests it would not.

Isn't this what has happened in Minnesota? Take the local increase in property taxes, which is receiving all kinds of negative letters to the editor in the Times. Is there any reason to think this is due to anything but the local government aid that we continue to see fought over at the Capitol?

We already have a system in Minnesota that gives the state far too much control over which cities can tax which taxpayers how much. Georgia, don't do what we've done.

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Quote of the day 

A dumb borrower requires an even dumber lender.
James Hamilton, who needs only one finger to figure out who to blame in the mortgage mess. Alan Blinder misses the Parsimony Prize by five.

Do I LOOK like a taxi? 

This morning Littlest Scholar heads out the door to the car, checks the back seat to see that her football is in tow, and upon arriving to school tells me her diorama she had made last night had been forgotten at home. It must be brought now. Because of road and bridge construction, it takes me forty minutes to go home, retrieve the diorama and bring it to school.

This caused me to miss my normal bagel-and-coffee with friends. Should I charge her for this?

When I finally get to my computer, a letter from the teacher at school, and it contains in part:
Would you please be able to get (her) to school a few minutes earlier in the morning? We start our day at 7:40, and that has been when she has walked in the door the last few days. Maybe about 7:35 or so. Thanks very much.
I'm a bit tempted to be flip with the teacher (who, btw, sent this at 7:45, so whatever was being done right at 7:40 didn't require his full attention.) After all, the bridge construction has changed traffic flows three times in the last four weeks, and predicting the time to leave the house to have her arrive at 7:35 is an estimate with much greater uncertainty now than in time passed. So I decided to reflect a little economics on the problem.

So, you might say, how about waking up Miss Forget-Your-Diorama a little earlier and setting off to school earlier? So what if she's early? Not so easy there, either. Teachers are preparing for classes at 7:20 or so, so if you show up that early you get a note asking you not to bring the kid so soon. (I know, I've received that note too.) Besides, as Mike Munger points out in an essay on lateness today (how convenient!), showing up early is seldom a good thing either. Kids in particular can be disruptive before class, wander around outside, gossip with other students, or otherwise not be prepared for the opening bell. And the bell never rings early, so that reduces the incentive to come in early. Munger notes five rules mostly in the context of academic meetings, but they apply more generally. From them he concludes a theory of lateness:

We all give other people a (small) credit for being early, a reputational effect. But we dislike waiting. Most important, people would choose a shorter wait instead of receiving the credit given to those who arrive early.

Indeed, since the school sends me a note equally for bring the child early or late, the credit I get for a 7:25 arrival is zero. Maybe something closer to 7:32 might bring a smile, hardly enough payment for forgoing that last article in the sports pages with my breakfast.

With that set-up, a simple economic analysis predicts several things. First, everybody would like to arrive on-time (no damage to reputation), and be the last to arrive (no waiting for meeting to start). Unless everyone literally walks into the room at the same time, this can't happen.

Which is what Littlest, now a teen, is thinking: She wants to be the last one in and on time. With teacher now moving the goalpost, we're redefined late. But this is also a problem for the teacher -- everyone wants to be the last one in, so if he permits Littlest to arrive with zero time on the clock, other students are incented to try to come in ten seconds after her. Which leads to Munger's next point:

Second, the outcome that everyone arrives (approximately) on time is still possible, and is in fact what economists call an "equilibrium," or possible stable outcome. But it is very fragile, because if even one person is occasionally tardy, everyone sits and kills time. Next time, everyone comes later. So any random factor can upset the "arrive on time" outcome.

Which is what has happened here: The bridge construction is the random factor that could lead to a cascade effect of all students (particularly the eighth graders) showing up late, which of course is a bad outcome. I'm sure the equilibrium is less stable for academic meetings than school starting times, but given it's a small school she goes to, it's more like a committee meeting than if this were a school of a thousand students (like each of our two junior highs.)

Third, meeting-goers can assure themselves of not having to wait, or at least not having to wait very long, by being late. And, since lots of people think that way, everyone is late sometimes. Some people, in fact, are late all of the time.

So what can we do? I'd suggest putting the pain onto the students (of course, since that's not me) by perhaps giving them "the tardy chair" and telling them their recess or lunch starts five minutes after everyone else's (but ends on time.) One of my colleagues does this in his classes, and it seems to work. Or make her stand until recess. (I note in comments on Munger's blog that his co-blogger Kevin Greir's wife locked university students out of the classroom when they were late. That option is not available to Littlest's teacher.) Small incentives should matter in this case; the student can be on time. Now Littlest would complain this is unfair because the bridge traffic is not her fault. I agree, but a lesson to learn is to be prepared for unexpected events and to evaluate uncertain outcomes. I would not let her off the hook for that.

(I note that Tyler Cowen has explained why paying her to be on time is not going to work, and why I need to have the teacher impose the negative incentive rather than providing a positive one myself.)

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Really? No economic theory of tipping? 

Greg Mankiw, while discussing the experiment in voluntary price discrimination that the band Radiohead is about to engage in -- and know this, I will buy that album as I've bought all of the albums before -- says we economists "do not have a good theory of tipping."
Normally, we assume that consumers pay as little as they have to when buying the products they want. Yet, when buying meals, haircuts, and taxi services, most consumers voluntarily pay more than they are legally required. Why does this happen? Why is it more true for some services than for others? Why do tipping customs vary from country to country? I have no idea.
On behalf of my good friend Orn Bodvarsson, I have to disagree. Orn and other writers (including another colleague, Bill Luksetich, and one of our graduates, Sherry McDermott) have surveyed patrons of restaurants to look at their tipping behavior. His analysis is that people are rational maximizers in tipping as much as in other parts of their lives.

Tipping is often a means of overcoming a principal-agent issue with the restaurant for food quality and speed. My son makes a living cooking in different kinds of restaurants. Does he conflict with other cooks? Not much. Conflicts are with aggressive servers. As I explained to him early on, the server is pressured to do so by his or her demand for tips. The server is an agent of the customer at the table. The word itself is derived from an acronym: To Insure Promptness.

Tippers will respond to food quality and speed; they also respond to how the server looks and how much attention they give the tipper. I always let the server know when I am going to be paying the bill at the beginning of the meal, so that I get better service relative to others at the table. (Though, if it's a business meeting, I should want better service for my client -- and usually they get it.)

I've always questioned this with Orn and his co-authors regarding the tip given in a restaurant in a roadside cafe, where most patrons are unlikely to return to the restaurant. If the tip is not for a continuous dealing, what is it for? If you are tipping because "it's the right thing to do" or because you are signaling, the question is whether you tip more or less if you are dining alone?

A few months ago Tyler Cowen argued that tipping wasn't an agency problem at all:
The real question is why America is structured so that waiters and waitresses can sell feel-good services ("you are a generous tipper and a fine man") to strangers, in return for money. In other words, how did waiters end up as fundraisers, noting that the final Marshallian incidence may lower their wages by the amount they receive in tips? Most cross-cultural explanations of tipping start with the agency problem between diners and servers ("can you bring my drink now?"), but I believe that is the wrong approach. I view tipping as correlated with effective fundraising in other areas, and Americans as being especially willing to set this additional fundraising arena in motion.
I like that thought, and understood that way the similarities between restaurant tipping and Radiohead's album pricing mechanism are more apparent. In both cases people are showing they are willing to pay more for what is the same good, and doing so willingly. Dennis Young has a simple story of the lemonade stand that gives away the drink but has a tip jar. Hansmann's theory could be applied to say the restaurant doesn't know how much you value a prime rib dinner, so it prices it low and then relies on customers to pay tips to the servers to reflect their willingness to pay more (and capture that by a lower wage to servers.) But Hansmann argued this method only works for some industry structures -- it assumes there isn't a single price the restaurant can charge that covers average total costs (where the server gets paid a wage and no tips.)

So we don't have NO theory; you might say you don't think the theories out there work terribly well, but how many other economic theories fit THAT bill?

UPDATE: Mrs. Dani Rodrik is a Radiohead customer willing to pay more.


Monday, October 01, 2007

What's not to like about a $200 million gift 

Claremont McKenna College, one of the Claremont consortium where I attended grad school and where I spent a year visiting, has Claremont McKenna received a $200-million gift from a philanthropist.
The donation is from Robert Day, a college alumnus and trustee who is founder and chairman of the Trust Co. of the West, an investment management firm headquartered in downtown Los Angeles. Forbes magazine recently estimated Day's fortune at $1.6 billion and ranked him 297 in its listing of the 400 richest Americans.

His gift is unusual for its huge size in relation to the small college, which enrolls just 1,140 students and specializes in public policy and economics.

The gift, which has sparked some debate on campus, would create Claremont McKenna's first graduate program, a one-year master's for 50 students that would entail the hiring of eight professors. In addition, as many as 50 students from all five undergraduate schools at the Claremont Colleges consortium would be eligible for senior year grants requiring them to take courses in finance, accounting and leadership psychology.
Well, what's not to like about this? Ben Casnocha explains that because of the school's classical liberal tradition, quoting from a lovely history of the school by government Prof. Ward Elliot. (I know him, but not well.)

So the debate on campus is over what, giving that money to a single department, or is it because it's THAT department? From the Times article:
Some professors, while recognizing the generosity, said they worried that the money could tilt the college too much toward economics and financial studies. A letter to Gann, drafted by literature department chairman Robert Faggen and signed by other literature professors, said they are concerned that the gift will "distort the college into a single focus trade school."

Government professor Andrew Busch, who is an associate dean of faculty, said most people are grateful for the money and think it fits well with the college's overall mission. Still, he added, "Any time you have a fairly small college and receive such a large gift, there are some questions about the parts of the college that don't receive the gift and where this puts them."
It puts you in the position of trying to use the grant to free up the college's other funds to give more to the literature department. But some lefties on the campus seem unhappy about this.

More on Burma/Myanmar 

My friend today told me that there is no word from family members in Burma/Myanmar. He did say the military junta was burning bodies, providing family members with a "token" of the murdered family member. As stated yesterday, she said far more have been murdered than the token 10 listed in the MSM.

As this report in National Review, via the London Times says, 1000s have been murdered and bodies are being dumped in a jungle. (You need to scroll down quite a way to find it.)

People, this is what dictators do - there are no courts, rights, freedom of speech. This is what happens when thugs grab power. Understand that in many parts of the Far East, monks are held in the highest esteem. To wantonly murder them shows what happens when thugs rule. We Americans have no clue, not a clue, as to how brutal and all-controlling totalitarian regimes can be.