Monday, December 31, 2007

Happy New Year 

To All Our Readers,

Happy New Year! May 2008 be your best ever. If you encounter tests, trials and tribulations, may you overcome them and then, give yourself a pat on the back!!

We're looking forward to your readership.

I want my STC 

In our QBR we asked questions about the airport here in St. Cloud. I drive from here to The Patriot each Saturday, which takes me about 80 minutes. As you may know, the station is awfully close to MSP airport. When I buy a ticket to go on Northwest somewhere, I frequently add the commuter flight from STC to MSP; this is mostly for the free parking and the short security checkpoint wait. We asked about whether people would be willing to pay to park at STC, and amazingly, only 2/3 thought they should continue to get what they receive now for free.

Most people want a second carrier to serve STC, with Chicago and Denver the most frequent options sought. Right now the only scheduled service is to MSP via Mesaba Airlines, which operates as Northwest Airlink. Mesaba is one of the airlines that gets money through a grant program called the Essential Air Services Grant. There is a second program called the Small Community Air Services Development program that also funds regional airports subsidizing air travel from small communities.

How much is it? USA Today reports that over $100 million is used to subsidize these programs. Mesaba's parent, MAIR Holdings -- who also owns Big Sky Airlines -- earns some revenue from EAS payments, though others have done better:

One beneficiary of subsidies has been the airlines the DOT picks in competitive bidding to run the flights. Great Lakes, whose business is largely subsidized flights, went from post-9/11 red ink into the black in 2003, turning a small operating profit three years ahead of the rest of the airline industry.

The subsidies alone, excluding fares from subsidized flights, made up 30% of Great Lakes' operating revenue in 2002-06, company reports show.

That second carrier people want in St. Cloud? You'll probably need to find a grant to pay for that. And when airlines are cutting routes repeatedly and the regional carrier industry has three times the capacity as current flyers, good luck with that.

(h/t: Peter Gordon)

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First it was pop cans 

You remember perhaps from a few months ago a pop-can smuggling scam? Yes, it's just like that old Seinfeld episode with Kramer and Newman taking the U-Haul to Michigan, and when it happened in real life I had a chuckle about it reading the story probably on Fark.

But understand the mechanism: The government creates a rule that requires us to pay deposits on cans. The cans have a legal price well above their price in the market without this price control. Some governments place a higher legal price than others. Ergo, those who get pop cans in the low-legal-price states have some incentive to move those cans to the high-legal-price states. It's an artificial incentive, one created by government, which government then has to prevent by creating the pop-can police.

It's happening again with cigarettes in Maryland. There, the cigarette tax is doubling:
So, two cartons, with 20 packs and 400 cigarettes, would sell for $127 in Maryland but only $77 in Virginia. Our previous report on illegal cigarette smuggling showed it was on the rise because of high cigarette taxes, and in this case, such an illegal transaction could net the smuggler a lucrative $50, or 65 percent profit. Plus there's online smuggling too.
It doesn't take a U-Haul trailer to get a carton of cigarettes across the border.

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Franchising and economic growth 

Reading Mark Perry's post reminds me of the excitement around Kyiv, Ukraine in 1996 when it was announced that the country would get its first McDonald's. Certainly for most Kyivans the excitement was the chance for a real Big Mac. But for some it was a chance to work for a western franchise that had standards for delivery of services and products. I ran into one of the future managers of the place by happenstance in Budapest (where he had been sent to a "Hamburger University".) He was learning not so much how to make a hamburger but the principles of delivering a fast food product using western techniques.

I ate a few years later in a Pizza Hut in Cairo. The service was noticeably different than that in local Cairene restaurants. (I know, "you were in Cairo and you went to Pizza Hut???" I was there five weeks, and you can only eat felafels for so long. Vegetarian in the Middle East is not for the finicky.) The food came to you hot and fresh, and you would not have noticed much difference in quality.

So how much is passed along to developing countries by franchises, I wonder? How much of what we know in America about entrepreneurship is contained in a course one takes to learn how to manage a Pizza Hut, a McDonald's, a Subway? I suspect it's more than a little bit; I bet there's a research paper or more in there for those willing to dig around.

What I forecast, not what I want 

My friend the local meteorologist Bob Weisman often uses the line "I don't make the weather, I just forecast it." Usually when I forecast the local economy -- and unlike Bob I only publish quarterly rather than daily -- I don't say it's raining. But this time I had to use a new line:

A formula showed a 39 percent chance of recession in October, according to the St. Cloud Area Quarterly Business Report, which is funded by St. Cloud State University and the St. Cloud Area Economic Development Partnership. The report was released Friday in ROI Central Minnesota magazine. ...

In the report, university economists King Banaian and Rich MacDonald use several economic indicators and a survey of business leaders to determine what the area economy looks like.

...Usually the fall survey is strong. But 84 area businesses surveyed reported the lowest fall indexes of future national business conditions and expected employment since the fall 2002 survey, when the area economy was experiencing a recession.

The area has seen recessions three times in the last 20 years. The last one persisted from May 2001 to February 2003.

The report�s authors said they expect the economy to continue weakening. In September, they encouraged business leaders to prepare for a downturn.

�We�re not walking around with sandwich boards saying �the end is near,�� Banaian said. �(But) if that signal we gave last fall was right, the worst could be yet to come.�

I wonder how many people remember what a sandwich board is?

I got a few looks from people at church yesterday to suggest I might need to tell them Bob's line. We didn't create this recession, no matter what the local real estate industry sends me for mail (just a few; others have been very candid and informative in their assessments. And our forecast does not use any direct housing market indicators at any rate.) But the graph that the first sentence uses is here:
The period before the recession in 2001-03 was like the 2004-05 numbers. We don't know there's a recession coming, but what we've said for months now is that the risk of recession is higher than anytime since that period, and that in fact we had a small "growth recession" -- a period where the economy might have expanded very slowly (if we had measures to show that) but not enough to keep unemployment from rising -- in 1995-96. I still think that is a very real possibility this time around rather than a classic two-quarter slump in production, which would put us in line with national estimates. The paucity of local data in my case means I really have no out-of-sample predictions to use to calibrate the model for recession prediction, so while I do not want to hope for a recession I admit more than the usual nervousness about whether the local one hits, particularly if there is no national recession.

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Global Warming Summary 

Many of you have read previous posts here and here on global warming. I have no problem agreeing that Earth is going through some kind of change - it has for its entire existence, perhaps a few hundred million years. I do have a problem with people ignoring provable scientific data that contradicts their emotional, possibly control driven agenda. The current hype over "global warming" is, unfortunately, just hype.

I will be posting more this year. However, this particular site summarizes the gaping holes in the current mantra. Much of the data referenced is in agreement with my current reading, Unstoppable Global Warming Every 1500 Years. This book is packed with detail and references.

We owe it to our children and grandchildren to be honest with them about the earth's changing nature. Humans have adapted to the changing earth for millenia. To saddle our children with unsubstantiated facts that lead to unnecessary fears and anxiety, is grossly unfair, unjust, and just plain wrong.


Sunday, December 30, 2007

Sliding Geese 

A few days ago, we looked out our living room window to the hill behind our house. What we noticed was really wild. There were five schusses with geese foot prints at the top of the hill, a slight depression for 15-20', geese footprints at the bottom to the left of the depression, then wing tip indentations in the snow.

We did not see the geese but look for yourself - what else could make these impressions?

Click on photo to enlarge.


U of M's Women's Basketball 

As mentioned last season, we follow the U of M women's basketball team. The 2006-7 season was pretty much a training year - the team was comprised of one senior, two juniors, one sophomore and the rest were freshmen. Talented? Yes. Experienced? No.

We were looking forward to the 2007-8 season with a bit of trepidation. Would a year of experience in a tough league prove beneficial? This season began with 12 players and added another this fall for a total of 13. Then one of the best defenders, a senior, got sidelined for the season with a torn ACL. The 6'4" freshman has had knee problems and most likely will not play. The team is now comprised of a core group of eight players: one senior, two juniors, five sophomores - not a lot of room for error or more accidents.

But they are really coming together. They hang tough no matter what - they simply refuse to stop trying. Their record is 11-3 record so far including wins in their first two Big-10 games. Two wins, against Michigan State (#24 pre-season) and Louisville, (#23 pre-season) have increased the team's confidence.

What has been just wonderful is watching incredible improvement in such a short time. The heavy part of the schedule, Big-10 is just beginning and much could happen. But the attitude, drive, persistence, teamwork, passing, and patience all look good. It should be a fun season.


Friday, December 28, 2007

A quick note from a son of NH 

I'm amused by my conservative friends' reactions to the Manchester Union-Leader's endorsement of John McCain and unendorsement of Mitt Romney. Growing up there (and delivering the paper throughout my teen years), I have pretty good memories of the paper getting Ed Muskie to cry after a particularly vicious Bill Loeb editorial, references to Gerald Ford as "Jerry the Jerk" etc. The paper has always had an old-time feel of the papers where Clark Kent and Peter Parker worked at, with a cigar-chomping, bellowing bully in charge. While current publisher Joe McQuaid isn't quite the same guy the Loebs were, he grew up at their side and the paper still views its role in the presidential contest as its chance to be a newspaper on the national stage. Come January 10th, they'll turn back into a pumpkin for the next 3.5 years.

By the way: The last time McCain ran, McQuaid referred to him as "the most liberal guy on the Republican side." The Leader endorsed Steve Forbes in 2000. McCain of course won, with Forbes a distant third. McQuaid called GW Bush "a wimp". So those who want to dig up something the Concord Monitor wrote 28 years ago to call the Union Leader a liberal paper should probably think whether that really applies.

By the way, part 2: This fellow used to write at the U-L, and it gets me to thinking that if the Loebs were alive today, they might have endorsed Ron Paul.


Trade: It's an empirical question 

When thinking about policy questions where there are heated debates, I try sometimes (not often enough, I suspect) to step back and ask whether my own position is consequential or philosophical. That is, if the good outcomes for an economy I saw happening from policy X could be shown to me to be not the case, would I still support policy X? For example, if you could show me that 20 people more die each year because of second-hand smoke, would I change my mind about smoking bans? No, I would answer. Smoking occurs in a physical space, and people can choose whether to be in spaces where secondhand smoke occurs or not. The science on second hand smoke isn't really that important to me. The market can assess the risk and people can choose where to work, eat, drink, etc. (The science might matter to me concerning SHS and a home child care facility, but I'd argue the parents can choose the level of risk they are willing to assume for their children.)

When it comes to international trade, however, I suspect my position is not philosophical. It's not that "anyone, anywhere in the world has the ABSOLUTE RIGHT to trade with anyone else in the world" regardless of harms imposed on certain parties. Economists make the case for comparative advantage that trade is "Pareto optimal" (at least potentially), which is a consequentialist argument. When trade occurs between nations, we teach, both nations are better off. If we couldn't draw the proper before-and-after diagrams with production possibility curves or whatever other pedagogic device we might use, what would we say? Would we really assert it's an absolute right of man? I don't think so.

So as Paul Krugman reflected on international trade, he posited an empirical question to address those who make the consequentialist argument. Here's an example: between countries at very different levels of economic development tends to create large classes of losers as well as winners.

Although the outsourcing of some high-tech jobs to India has made headlines, on balance, highly educated workers in the United States benefit from higher wages and expanded job opportunities because of trade. For example, ThinkPad notebook computers are now made by a Chinese company, Lenovo, but a lot of Lenovo�s research and development is conducted in North Carolina.

But workers with less formal education either see their jobs shipped overseas or find their wages driven down by the ripple effect as other workers with similar qualifications crowd into their industries and look for employment to replace the jobs they lost to foreign competition. And lower prices at Wal-Mart aren�t sufficient compensation.

All this is textbook international economics: contrary to what people sometimes assert, economic theory says that free trade normally makes a country richer, but it doesn�t say that it�s normally good for everyone. Still, when the effects of third-world exports on U.S. wages first became an issue in the 1990s, a number of economists � myself included � looked at the data and concluded that any negative effects on U.S. wages were modest.

The trouble now is that these effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically � from just 2.5 percent of G.D.P. in 1990 to 6 percent in 2006.

The statement about textbook international econ is certainly true. But the part that follows is an assertion based on data not placed in evidence. Greg Mankiw tells us Krugman is writing a paper in which that data might be forthcoming. We will see. Dani Rodrik thinks Mankiw hasn't shown the proper respect for Krugman's conjecture. But what Mankiw seems to say to me is that there's not enough here to reject the textbook view yet. And that those that reject the textbook view as a philosophical position rather than an empirical question may be called "protectionist". I think that's correct. And it is fit and proper for Krugman to go back and ask, does the received wisdom we held about trade when it was 2.5% of GDP still apply to a world where trade is 6%?

Don Boudreaux points that way as well, noting that a "pauper labor" theory of increasing inequality has already been shown to hold no water ... by Krugman himself. Boudreaux writes:
A famous trade economist argues that this concern is misplaced. In a 1996 essay, this economist - responding to a protectionist who fretted that western trade with low-wage countries would harm workers in the west - wrote that this protectionist "offers us no more than the classic 'pauper labor' fallacy, the fallacy that Ricardo dealt with when he first stated the idea, and which is a staple of even first-year courses in economics. In fact, one never teaches the Ricardian model without emphasizing precisely the way that model refutes the claim that competition from low-wage countries is necessarily a bad thing, that it shows how trade can be mutually beneficial regardless of differences in wage rates."
We don't know what evidence Krugman has, so let's wait and see. But a consequential argument is always going to view both "anti-globalists and knee-jerk free traders" (Rodrik's words) as having a different argument. None of the economists cited here fit either of those camps.


More Charlie Wilsons wanted (and more Philip Seymour Hoffman!!) 

I went with some friends to see Charlie Wilson's War last night. Forget Tom Hanks -- Philip Seymour Hoffman has the best role in the movie and dominates the scenes he's in. I loved him in Casino Royale M:I3, and now in this he's in my very short list of movies that I'll see because he's in it regardless of what the movie is about. (Thanks to Ming; I have no idea why I was thinking Casino Royale there. It makes more sense with M:I3, a movie I otherwise didn't like.)

A couple places (notably this IBD editorial) suggest the movie has a Hollywood slant. OK, maybe it does, though for someone my age you have enough knowledge of the Soviet invasion of Afghanistan and the role of the US with the mujaheddin in western Pakistan to put the proper history around it. You don't need to be an expert. It might have been nice to have seen Reagan at least once in the movie. But that appears an error of omission than commission, and it bothers one less. John Fund today wonders what happened to "Scoop Jackson Democrats" like Charlie Wilson. I wonder if Scoop Jackson would even be a Democrat. If this is how Dewayne Wickham treats Joe Lieberman, what would he do with a Charlie Wilson?


Thursday, December 27, 2007

Buttercup's eggnog woes 

Miss Buttercup had a very good holiday. Too good, reports Littlest Scholar. As a service to our readers, we present "Buttercup's Eggnog Woes."


Radio daze 

A long weekend of radio for me:
All times Central. Hope you can listen in.

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Wednesday, December 26, 2007

Muslims and Treatment of Women 

This column by Jeff Jacoby of the Boston Globe provides a succinct analysis of the subjugation and often murder of women in too many Muslim countries as well as in some Muslim communities in the west. Atrocious punishment is imposed on Muslim women by Muslim males because the man's honor has been tarnished? It is difficult for us to comprehend the intensity of the Muslim male's violent reactions to what we see as normal, female behavior.

In reference, I have a few questions to pose to the so-called feminist leaders of the west:
1 - Where is NOW's response to these murders? No where.
2 - Where are the other western women's rights groups? No where.
3 - Where are the female professors of "women's studies" that decry dead white male historical behavior yet ignore the current, abusive treatment of women in too many Muslim countries? No where.
4 - Where is the MSM that is so eager to criticize America while turning a blind eye to these abhorrent male Muslim actions? No where.
5 - Where are the female journalists who supposedly are so interested in covering women's rights? No where.
It is interesting to note that so many western feminist professors, journalists, and do-gooders are quite at ease attacking the relative innocent behavior of white males but are incredibly ignorant (or playing ostrich) when looking at the horrific treatment of women from other cultures, particularly some Muslim cultures. In spite of western elite female rhetoric, all cultures are not equal. Women across the planet, professional and in servitude will lose big time if we in the west lose this war of ideas, and yes, this war of cultures.



More Snow Photos - for Our Guys! 

Jon wrote from Iraq that he and some of his buddies miss the snow. Since we've had at least 8" and possibly 12" in the last 24 hours, we took a few more photos which are posted below. Pine trees across the street; a mature oak fronted by a stubborn oak that will drop its leaves in spring; trees behind our house; 8-12" on our deck table.

The snowfall was beautiful - no wind for 24 house so the flakes literally floated from the sky. The formations on the trees are spectacular. Driving, another story but we're fine - you just drive slower and the DOT has done a great job of removing the snow.


Press-ganging grandma 

You wouldn't think you should worry about the property taxes of someone living in Westchester County, NY, but one senior citizen, facing a property tax bill of $12,000 while living on Social Security, is being offered a chance to trade labor for taxes.
The town is pushing a program that would let seniors work part-time, for $7 an hour, to help pay off some of their property taxes.

"People shouldn't have to sell their house, move away to a place with less taxes, leave behind their family and friends," said Town Supervisor Paul Feiner.

He envisions retired doctors mentoring schoolchildren, retired accountants helping with the town's finances, retired lawyers offering their services for a discount. But there are plenty of less-skilled jobs that need doing, he said.

"It's not like we're going to see grandma running the snowplow," he said. "There are lots of things people can do for the town and it wouldn't cost us that much to pay them."

The proposal has caused a stir in Greenburgh, a town of 90,000 in Westchester County, which has the nation's third-highest homeowner property taxes. The plan would be unusual if not unique in New York, but similar programs are considered successes in Colorado, Massachusetts, South Carolina and elsewhere.
The tax workoff programs have existed elsewhere, we're told, but with property taxes becoming much more of a burden on homes that have less and less value lately, we'll hear more about these.

One interesting thing the young 'uns are doing in California is to use Proposition 8 to reduce their tax bills.
Across the U.S., concerns about property taxes have reached levels not seen since the passage of California's Proposition 13 in 1978. That landmark law capped property taxes at 1% of assessed value and said the base assessment on a home couldn't increase more than 2% a year until it is sold. A companion initiative, Proposition 8, allows homeowners to get assessments temporarily reduced during a weak housing market, until home prices recover.

This year, thousands of California homeowners -- primarily those who bought their homes in the past few years, at the market's peak -- are getting a tax break because of Proposition 8. Assessors in counties such as Ventura and Contra Costa decided to review thousands of properties sold since 2005 and reduced many of the tax bills mailed this fall.
With home prices down 6.7% in the nation (and more in CA, it appears) these revisions could be substantial. That cuts the amount of tax revenue the state collects and is helping create the fiscal emergency facing Gov. Schwarzenegger. And when Arnold tells Granny to get to work, you better believe she'll listen.

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Buy local -- how productive? 

I was gathering up some data a few weeks ago for a new Quarterly Business Report -- to be published within the next two weeks, watch this space -- and picked through some new data on St. Cloud GDP. One of the things that jumped out at me was this fact: St. Cloud area employment in retail trade is almost 14% of total employment, but retail contributes only about 8% to area GDP. All those restaurants and bars hire more than 7% of the labor force but do not account for 2% of GDP. So when we worry about what the effect of opening this store or closing that restaurant would be, we are worried about what happens to low-paying jobs and the income of the shopkeepers and not about what the area produces.

John Palmer is thinking about these claims too.
Suppose I shop locally when I could get something for a lower price by shopping on the internet. I'd be better off, and I would have some money left over. If I paid the higher price to the local merchant they'd have the extra money instead of me. But they'd be shipping a bunch of the money outside the community, too, to pay for the merchandise they sold and to buy other things for themselves. I don't see much difference except they'd be richer and I'd be poorer.
You'd need some kind of input-output analysis to get that figured out more precisely, but the only effect I see is that somehow the local shopkeepers will pay better wages to my low-wage workers than the Wal-Marts and McDonalds. But if those places disappeared, do you think the same number of jobs would be available by the local merchants at higher wages? A decrease in demand for workers would push wages up? You'll have to work me through that logic.


And worse during the holidays 

Psycmeister is in Chicago with his father who is gravely ill. Prayers are requested. On behalf of the SCBA and the MOB, Leo, our hearts go out to you.

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Put your hands where I can see them, Mucus Boy 

For the second time in about a month, on Sunday night I felt my head swelling up and a nasty need for a decongestant. I walked to my medicine cabinet -- which is not a cosmetics cabinet, like the one Mrs. S keeps upstairs -- and dug around for some Wal-Phed PE. Pop one. Wait. Nothing.

I should have known better, as this is what happened last time too. The box says "Pseudoephedrine Free." As Jeffery Tucker points out this morning, you may as well have swallowed Pez than PE. And why? Because somebody somewhere might use pseudoephedrine to make meth. But this isn't just a rant on government deciding meth prevention for a few is more important than cold relief for many. Tucker finds a more sinister possibility:
It seems that most all pseudoephedrine is manufactured in China and India, and very cheaply, much more cheaply than it can be made in the United States or Europe. What that means is that these companies don't have lobbyists in Washington who can make an effective case for their product.

Contrast this was phenylephrine, the world's largest manufacturer of which is located in Germany. The company is called Boehringer-Ingelheim, according to MSNBC. It developed the drug in 1949 for use in eyedrops. In the last two years, virtually every manufacturer of cold medicine has changed its formula to include the Boehringer drug. Some continue to make the old formula available but only with special access.

Is it possible that the move against wonderful pseudoephedrine and in favor of useless phenylephrine was really a form of protectionism in disguise? That it was really about rewarding a well-connected company at the expense of companies without connections?

If that sounds cynical, take a look at this. It seems that our friends at Boehringer Ingelheim are rather interested in American politics, with 73% of its donations going to Republican candidates for federal office. You can see here that Boehringer even has a PAC located in Ridgefield, Connecticut. Someone with more time than I have ought to check to see how the people it supported for Congress voted on the act that resulted in a massive shift toward their product, and has nearly kept its competitive product off the market.
Now that isn't a whole lot of money. But Tucker argues that lobbying by BI went up dramatically at about the same time the pseudoephedrine ban -- also known as the Combat Methamphetamine Epidemic Act of 2005 -- was placed as a rider in the Patriot Act reauthorization. Coincidence?

But we're going in the wrong direction. In Oregon, they'll now require you to get a prescription for pseudoephedrine. Meanwhile, a new company is making a name for itself and raising capital to sell software to track down criminals buying too much pseudoephedrine. How long before one must comply with a post-nasal drip test at the pharmacy counter?

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Monday, December 24, 2007

Merry Christmas and Happy Holidays 

To our readers,

Thank you for visiting our site, reading our posts and leaving your comments.

This time of year, we celebrate - Christians, the birth of Christ; Jews, Hanukkah; others celebrate what they choose, some do not celebrate. For those of you who do take time to remember during this season, Merry Christmas and Happy Holidays. Take your choice but enjoy.

We have had beautiful snowfalls. The term "White Christmas" is close to perfect this year. Here are a few photos taken outside our home.

King adds: To show you how cold it is: The family always wants pictures of us, for fear we have died in the cold (you'd think New Hampshirites would understand cold, but they get more snow than cold.) So we had procrastinated more than normal and on Wednesday Mrs. S makes Littlest take the camera outside and intercepts me before I dump the sport coat for sweats. The effect is:

That's Littlest breathing behind the camera.


Shia + Sunni = Iraq - Where's the MSM? 

As this article shows Shia and Sunni in Iraq do have the capability of willing to work together and can get over the mindset of division and one-upmanship. Local Iraqis, regardless of Muslim sect, are taking charge of their neighborhoods and streets and sharing the space.

In their drive for "news," too many media pundits, all over the planet, focus on the abnormal, the aberration, the unusual, and anything that will divide groups. Just consider the mouths that constantly play the race card in the USA. But Iraqis have already discovered that what appears on western television is not necessarily what is happening in Iraq. This ability to discern truth from propaganda is a very healthy sign for a nation's population who were under the thumb of a dictator for more than one generation. It shows what people can do when given the opportunity for free thought. Our soldiers have made a significant impact on Iraqi society and the Iraqis "get it."

There is more to do but the Iraqis are making incredible progress, governmental, physical, religious and emotional. They are a shining example of what people can do when given a chance.

HT Captain Ed

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Because it's so much fun watching a second place team 

Skip Sauer notes the large increase in Yankee ticket prices, by as much as 50%.

You can see the Red Sox for less. Your field box seat at Fenway is $125, half what you pay at Yankee Stadium to watch the best team syringes can buy.

But you'll pay more on Stub Hub to watch the Red Sox get their championship rings. I can only hope one of those is under my Christmas tree tomorrow.


Consumer led rally? 

There's some backing and filling by those of us who've thought the fourth quarter was going to be negative for economic growth. (I'm not in that camp, btw, but I have thought it would come in around 1% and continue to stand by that.) James Hamilton looks at the consumer spending numbers and concludes that there is almost no chance of a negative fourth quarter. Retail sales, particularly online, seem to be called either "decent" or better. I for one do not ever place much faith in consumer confidence polls as being indicative of spending, so fretting over their fall seems a waste of time.

It nevertheless beggars the imagination how we are managing to have positive consumer spending when real disposable personal income has been down in both October and November. Maybe it's credit cards, as Michael Mandel notes more than 4% of credit card balances are at least 30 days delinquent. The question I think will turn on how aggressive price-cutting cited in many places this season ends up helping or hurting sales and the bottom line.

And there's still this sub-prime thing out there... Here's a couple facts from the local market that someone provided to me last week. Volume of sales in local real estate in the St. Cloud area is down 16.6% through November. Inventory of listings to sales is now over 24 months compared to 20 in November 2006.

If consumers are leading us through this soft patch, my question is ... with what?


Budgets reflect choices 

THe St. Cloud Times ran a story in yesterday's paper announcing that Sauk Rapids property taxes will rise. The subheading reads "Hike reflects loss of Local Government Aid." Yet inside the story we learn, that isn't entirely true.
The final general fund budget was set at $5.19 million, a 9 percent increase compared with the 2007 budget.

The budget was approved without much deviation from the preliminary budget, Finance Director Jack Kahlhamer said.

It includes an additional $20,000 for the street maintenance budget, as it will cost more to maintain the downtown beautification efforts related to the bridge project.

The city also agreed to fully pay for the Sauk Rapids-Rice school resource officer.

The school district decided it no longer could pay its share of the officer�s salary, Kahlhamer said.

Sauk Rapids is also looking to add one full-time position, either a police officer or maintenance worker, he said.

But the decision to hire a new employee could depend on funding outlooks � and Local Government Aid � in the years ahead.

The city will see a reduction of $140,000 in LGA in 2008 and is unsure whether cuts will continue.
OK, let's do a little math. 9% of $5.19 million is $467,100. LGA is falling by $140,000. Another $20,000 is going to downtown beautification after the building of the new Sauk Rapids bridge. (As someone who drives through downtown SR each weekday morning during the school year, I will say you are getting at least some value for that $20k.)

That leaves over $300,000. What do we know about it? We know the school district, which lost a levy vote last month, decided to cut a position and that the city chose to pay for it instead. Perhaps this was agreed between the city and district, but at any rate it supports a claim that the city is raising your taxes because the district couldn't. We know the city is also looking for money for another position as well. It will choose to do so depending on whether more milk flows from the LGA teat.

So why does the newspaper run a sub-head reading "Hike reflects loss of Local Government Aid"?? Why not say "Hike reflects hiring decisions of Local Government"?

Note that this same newspaper, in the very same section, runs an editorial criticizing the vintage of science textbooks the school board is using. What is their preferred method of paying for this?
This board points the bulk of the blame at state and federal governments for everything from unfunded mandates to an outdated K-12 education funding formula. To say nothing of neither entity having a credible estimate as to what it takes to educate today's students to today's standards.

That's not to say St. Cloud school board members and district administration are free of blame. Clearly, more local diligence the past several years likely would have raised awareness, perhaps even funds, to address this situation.
Obviously the paper has forgotten the basics of budget constraints. Deciding to have newer textbooks or prettier downtowns or an extra maintenance worker can be paid for in three ways: you can tax more, you can borrow more, or you can spend less on something else. The Times editorial board and its headline writers appear blind to that last choice. If the newspaper were to, let's say, hire another reporter, it could either raise prices on the paper or its ads, it could borrow more money from its Gannett parent, or it could cut spending somewhere else in the office. I know the people at the Times, they are smart people, they know that choice and make it EVERY DAY. What is it, then, that blinds them to using that same logic to a textbook?

The school board has made its choices: It chose to continue to use vintage textbooks. Now I don't know what new things have happened in physics in the last decade that are imperative to put in front of high school students in their textbooks (is there a webpage that can substitute?) But was it imperative enough to get teachers to accept a lower salary? Was it imperative enough to forgo keyless entries in all classrooms? Was it imperative enough to kill off a couple trips for the dance team?

Your budget reflects your choices, but the choices will only be rational when the budget constraint is hardened. The Times is wheezing for softening that constraint, and its headlines reflect that the only ones who will have to face a hard budget constraint are taxpayers.

Who always have.

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Sunday, December 23, 2007

Merry Christmas and the PC Crowd 

Being the holiday season, we have been "out and about" at stores and restaurants for the last couple of weeks.. We decided to wish servers, clerks, etc. "Merry Christmas" instead of the politically acceptable "Happy Holidays."

The response has been overwhelmingly positive. Every recipient has responded with "Merry Christmas to you, too. " One may conclude they feel safe saying it since sometimes, note sometimes, we say it first. However, I have encountered a number of service people who are saying "Merry Christmas" before I do. Could there be a little backlash occurring?

One server at a national restaurant chain shared the following with us. She said the servers had a discussion to decide what to say. They all concluded that they were going to say "Merry Christmas" and the result was that very, very, very few customers objected.

One may or may not be Christian but face it, this is a happy time of year. It does us well to remind ourselves that we have a history of celebrating Christmas. Let's keep it.


MN's Department of Transportation, Snow Removal 

I live south of the Minnesota River, about a mile east of I 35. Though mostly retired, I also drive a significant amount. This fall I traveled from Lakeville to Energy Park in St. Paul on a regular basis to teach. This particular trip can be made a number of ways and I've driven all of them. What was a total surprise was how relatively easy it was to get through downtown Minneapolis on I 94. I had expected major gridlock after the I35 bridge collapse but never encountered the gridlock. There was much traffic but removing the shoulders and creating a fourth lane to get through downtown was a very smart move, one that kept traffic moving fairly well.

The second, again relatively successful rerouting of traffic is through the Crosstown/62 and 35W interchange construction project. This is a huge undertaking, long overdue, and will continue for quite some time. One is never quite sure from day to day how one will be routed through the maze, but DOT figures a way to make it work.

Our DOT takes a lot of heat, incredible criticism most of the time. I'd just like to say, they do some things well. Their ability to move snow is unsurpassed. Watching snowplow drivers do their job is like watching an art form: efficient and beautiful. Next time you are driving and the plows are doing their tandem snow removal, instead of getting frustrated, position yourself behind them and watch the show - it is truly fantastic!


Friday, December 21, 2007

Opportunistic tax cutting 

During the disinflation of the 1980s and 1990s there were references to opportunistic disinflation (this 1996 speech by former Fed governor Laurence Meyer is a good start) as a stabilization strategy. It made monetary policy in essence asymmetric in its response to inflation. If it accelerated the Fed would aggressively tighten monetary policy. But if a recession occurred due to some negative demand shock, the Fed would use that opportunity to move inflationary expectations lower. Likewise, if a favorable supply shock happened that pushed inflation lower the Fed would not try to keep inflation at the current rate.

Suppose one held the view that government is too large. Gridlock in Washington (be it partisan gridlock or an executive branch more small-government conservative than the legislative branch held by the same party -- no, we're not describing the Bush Administration 2001-06 here) makes it difficult to build consensus to right-size government spending. But during recessions, one might be able to argue for tax cuts that temporarily raised the deficit and then as growth returned one could argue for reducing deficits by reducing the size of government spending. I would call this "opportunistic tax cutting" or "opportunistic fiscal policy."

Contra Mark Thoma, I would argue that fiscal policy isn't just stabilization policy. There is an argument for allocative policy (for those of us who grew our public finance roots on the Musgraves), assigning to public funding and provision those goods and services for which there's both a market failure and not a government failure. If one were to believe government was too large then proposing a 0.5-1.0% of GDP tax cut, as former Clinton Treasury Secretary Larry Summers did Wednesday, may be seen as an attempt to chip away at overgrown government. (I sincerely doubt that is Summers' major intent, but it might be a minor one.) When the next boom hits, government may not expand as much since, Felix Salmon puts it, "taxes are a hell of a lot easier to cut than they are to raise." Indeed they are; that's the point of the exercise.

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Bucks, bowls, and NPV 

John Quiggin is right on this point: The oft-cited number that people put out about aid to Africa (something like $500 billion in 50 years) is meaningless because we don't have a present value calculation.
If every Australian receives, or pays, a dollar a week, the total amount is very close to a billion dollars a year. And if you have a cash flow of a billion dollars a year, and your interest rate is 5 per cent, the present value of that cash flow (the amount of extra wealth you would need to generate the flow) is twenty billion dollars.

It�s easy to stretch this gap even further. A dollar a week is about fourteen cents a day. And, if we looked at the US (about 300 million people), or the entire developed world (around a billion people, depending on your definition), the total would be that much larger. Fourteen cents a day for everyone in the developed world has a present value of one trillion dollars.

The fact that the same flow of money can be presented in such radically different ways, and that each of them is appropriate in certain contexts, is one reason public policy debates get confused.

But who knows how much is enough? The IMF says, according to this blog, that debt forgiveness to HIPCs (mostly in sub-Saharan Africa) of $32.8 billion is too slow. That's probably less than planned, but why is the higher number magical?

The trouble, as Bill Easterly points out, is that Africa is already growing, we just don't know if the aid had anything to do with it.
Why do aid organizations and their celebrity backers want to make African successes look like failures? One can only speculate, but it certainly helps aid agencies get more publicity and more money if problems seem greater than they are. As for the stars � well, could Africa be saving celebrity careers more than celebrities are saving Africa?

In truth, Africans are and will be escaping poverty the same way everybody else did: through the efforts of resourceful entrepreneurs, democratic reformers and ordinary citizens at home, not through PR extravaganzas of ill-informed outsiders.

The real Africa needs increased trade from the West more than it needs more aid handouts. A respected Ugandan journalist, Andrew Mwenda, made this point at a recent African conference despite the fact that the world's most famous celebrity activist � Bono � was attempting to shout him down. Mwenda was suffering from too much reality for Bono's taste: "What man or nation has ever become rich by holding out a begging bowl?" asked Mwenda.
It would be nice to have the present value number, but it's used to count the wrong things.

Wanna help them? Trade with them.


Fare deal at last 

The case of Minneapolis taxi cab licenses (previously reported here) has now been dismissed by a judge, making it possible for free entry into the Minneapolis cab market. The Institute for Justice is doing a bang-up job for economic liberty and has brought the immigrant groups that sought entry into the cab market a nice Christmas gift.

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Just get 'em to 50 

I was reading Bryan Caplan distinguishing his views on parenting from Steve Levitt's, and not finding myself really lining up on one side of the other. I'm not entirely sure it's necessary that my kids like me when they grow up, but I care about how they turn out, and I wouldn't mind it if they were willing to provide some support in my final days on the planet (if I turn out to die in a way that one could foretell by a few weeks or more.)

I have two children. Most readers know about Littlest, but Oldest (from my first marriage) is not often mentioned because he is older by a decade and does not live at home. We do not talk every day like some parents do with their twenty-somethings. He walks to work from his apartment here in town, and I see him some days and we wave. We both like to text. But get together? Maybe once a month. He's pretty independent and I want to respect that. A measure of my success or failure as a parent is not in my view how many times a month I see him.

In the comments to Caplan's post someone mentioned an article from last year by Orson Scott Card that says two very important things: "good is good enough", and take the long view:
What is the measure of happiness? I suppose everyone has their own idea, but species-wide, the prevailing notion might run something like this:

When your kids reach the age of 50:

1. They're married to somebody they like and trust.

2. They're supporting themselves.

3. Their own kids are growing up decently.

4. Everybody in the family is speaking to each other.

5. They're all good people -- contributing to society and living by the rules.

That's an achievable standard, isn't it? It doesn't look so hard.

Of course, your kids can make horrible choices that put the kibosh on some of these things. But if you teach them what's expected of a good person, and show it in your own life, you can't force them not to make bad choices. That happens, and it's sad, and all you can do then is help them work through the consequences of those choices and try to salvage happiness at the end of the road.

In fact, raising kids who are hardworking, self-supporting, reliable, kindly people who get along with each other is hard enough that I think any parents who achieve it have a right to be perfectly content with the job they did.

Why, then, do so many parents set impossible standards for themselves and their children, guaranteeing that they -- and their children -- will fail, and making everybody miserable in the process?
There are times where Mrs. S worries Littlest will be harmed in some way, that we cannot assure her safety. We worry about the choices our kids make, and perhaps that's wise if it turns out they are lousy risk-assessors. We would like to be sure they can MAKE IT TO 50! That seems worth worrying about, though understanding there are some risks you can't reduce to zero. But what your kids do for a living, whether they are the best they can be, may not be as important as just getting them to be self-sustaining people in families that care for each other when they hit the age you are. When someone says to me about my child "She's a good kid" or "He's a very nice young man" I sometimes hear a 'but' as in "but he could be ..." To which I would like to say, "yeah, so could we all. Your point is...?"

So this the first Christmas season in which I am over 50, and I'd like to congratulate my parents on going five-for-five with me (assuming I'm capable of judging #3 and #5). If I'm lucky, I'll live long enough to see if I did as well.

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A Xenophobe at The Economist 

xen�o�phobe (n.) A person unduly fearful or contemptuous of that which is foreign, especially of strangers or foreign peoples.

From a blog post today at London-based Free Exchange, "in which journalists from The Economist Newspaper, and the Economist Intelligence Unit post their thoughts and observations":
I am often accused of "elitism" for supporting free immigration, which is completely baffling on its face, since the reason for my support is the welfare of very poor foreigners.

...Poorer Americans, in addition to having less money, are on the whole also more racist, xenophobic, and sexist than wealthier Americans. "The elite", like it or not, is generally a liberalising influence in politics, and populism can and does take savage right-wing forms.
The writer is clearly xenophobic (both contemptuous and fearful) about those strange and foreign "poorer Americans."

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Thursday, December 20, 2007

Where do ed majors come from? 

While reading this post by Mark Perry (and drawing on a graphic from Ironman at Political Calculations) I remembered we had a paper presented to us last month by David Lang at Sacramento State looking at similar information. Here's the paper in .doc form that David presented. Two points I'd make:
  1. The choice of major isn't just driven by ability. There seems to be a correlation that has students from lower income families more likely to choose education as their major. If income and SAT scores are correlated, the correlation between education majors and SAT scores might be a mask for some other causal pattern.
  2. Those lower income students also tend to take more math and science in their college curricula. In short, students from lower income families who have the math skills tend to go into science and technology -- it offers a fast turnaround to a good-paying job. The humanities majors tend to get students from higher-income families because these are in some sense superior goods. If Mom and Dad will keep Assistant Professor Buffy in a nice apartment and without car payments, she's more likely to be willing to major in Victorian literature.
So before making claims that our students stink because our teachers aren't very good, we should think harder about what data supports that claim. If we know ed majors come from these backgrounds perhaps more can be done to prepare them to teach.

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Coolest thing I've seen this week 

A picture of GDP production by area. Higher spikes indicate more economic activity. That should give one some idea of why the Northeast dominates the USA. From G-Econ, courtesy Arnold Kling. I also liked looking at Russia and China there.


Academic PEDs 

I don't know why this is news. I knew several students while in graduate school that used "whites" or No-Doz or some other stimulants that may or may not have been legal to enhance performance during finals. Me, I made espresso for myself with a pot I bought at a Pier 1. (Only after quals did I learn how to make Turkish coffee -- I think my Iranian friends in school were trying to get a competitive advantage!) Would I have used these other "little helpers" in graduate school to get through qualifying exams? Let he who is without sin...

Still, I think it's a valid question that the article asks: If you knew your student was taking a cognitive enhancer, what would you do? If you're an assistant professor at a university where tenure is competitive -- A's receiving tenure decreases the probability that B in the same department will gain it -- what is your reaction? There will be no Mitchell Report on this; figure it out for yourself.

(h/t: Chronicle of Higher Ed)


Wednesday, December 19, 2007

Many a slip, MnSCU version 

So another biennium begins in the Minnesota State Colleges and Universities system, and the first semester ends without the faculty having finalized a contract with the system. Some faculty walk around with buttons that indicate their salary demands (about 15% increase over the two years). Word around the campus is that if we get even remotely that amount, the schools do not have enough money to pay those salaries and so there will have to be cutbacks.

The union -- the Inter-Faculty Organization -- delves into the details and discovers one reason why the money might not be there:

At the last MnSCU Board of Trustees� meeting MnSCU officials revealed a little more detail than has been supplied in the past on how they plan to spend the $62.8 million increase in technology money this year. MnSCU is increasing expenditures on technology from $21,500,000 in FY2007 (last year) to $46,355,000 million this year�a 115% increase in one year. They are proposing an additional $4.7 million increase in system level technology expenditures next fiscal year. MnSCU currently has 140 system level technology positions, 20 of which are vacant. They are proposing to add an additional 55 new technology positions.

MnSCU received essentially block grants from the legislature of $666.8 million in FY2008 (this year) and $689.3 million in FY2009. The biennial increase in appropriations was 12.6%. The increase in appropriations this year to the MnSCU system as a whole was 10.6% The increase in appropriations sent out to the campuses by MnSCU was only 3.3%.

Faculty have complained that MnSCU is spending too much money on central office growth, particularly on system level technology, and not sending enough of the state appropriation out to the campuses, where education takes place. The amount of money MnSCU is spending on �Systemwide Set-Asides� is increasing from $58.9 million in FY2007 to $85.8 million in FY2008 (a 45.6% increase) and to $90.8 million in FY2009 (another 5.8% increase). At the last IFO Budget Committee meeting, Tom Fauchald, Budget Committee Chair, presented an analysis of the growth in state appropriations from MnSCU to the state universities as a percent of the university operating budgets. Here is the biennial growth by university:

Bemidji 2.50%
Metro 2.92%
Moorhead 2.18%
Mankato 2.71%
Southwest 1.93%
St. Cloud 2.62%
Winona 3.20%
The data is easily available by reading through the system's budget documents. While I have plenty of beefs with the union, they have exposed a very important problem in the system.

When this was discussed at the town hall in Waite Park, most of the suggestions focused on why do we have a system office, and what does it provide? Why would a system office need to suck up almost a sixth of the state's appropriation? Why do we have a huge St. Paul office with more employees than any of the colleges and universities in the system save two? Is it really more efficient and better for SCSU that it is a system board of trustees in St. Paul that hired President Potter to our campus last summer, rather than a St. Cloud board of trustees? If there was, wouldn't that board provide the resources he would need to pay the salaries he was negotiating? You certainly would not get this situation where the state appropriates 12% more money to the system, but only 3% reaches the place where the students are.

It's a strange world, this MnSCU. I got the impression that more scrutiny of this spending pattern might come from legislators. It's long overdue.

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Psst, wanna ride a train? 

What should be the price of a ride on a public train? One of the things we know from basic microeconomics is that some element of price discrimination -- getting more from the inelastic demand riders and then offering a lower price from those with more elastic demand -- should result in more riders. If the purpose of LRT is to get cars off the street, finding ways to separate those groups and charge different prices will help.

Craig Westover and I exchanged some email about this a few weeks ago, and he now has an op-ed in which he tries to use a two-tier pricing mechanism to generate a proper price for transit and in the meantime provide a market for trading riding rights that could be income support for those with lower incomes. It's an intriguing idea. You cannot expand it too much, of course, because one problem with LRT will be congestion -- if the train is too crowded, you drive both the low price and high price riders off it. But I don't see the problem as being insurmountable.

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Overtreatment or overdemand? 

I went to the St. Cloud Area Partnership annual meeting this morning, and while there heard a roundtable discussion by three local business leaders. One was president of the local hospital, a medical doctor by training who now administers a quite successful regional hospital. When asked what factors he would point to as holding down health costs in the future, he responded with a short, rather pointed lecture on how consumers were substituting professional health care for their own health choices. In fact, he said, we need to take better care of ourselves and use the health care system less.

I turned to someone after the meeting and commented on this. "How many other businesses are there where the seller tells the buyer she or he is buying too much of the seller's services?" We scratched our heads and walked on.

Mark Thoma ties some interesting articles on health care together this morning under the title "Overtreatment." This is the title of a book by Shannon Brownlee which argues that between 20-30% of the health care services we consume in America do not produce improved health. The issue turns on the organization of health care into a fee-for-service system that makes doctors into piece-rate employees of third-party payers (for the most part.) More aggressive care didn't result in better health.

So there's two arguments here -- one is that the doctors and hospitals have no incentive to hold down costs, and the second is that doctors are just responding to what the patients are asking, and the patients are substituting professional health services for good personal health choices (exercise, diet, etc.) And I was trying to think, how could we figure out which of these stories is true? I had thought of the Levitt exercise on real estate agents: Doctors themselves should consume less dubious health care if it's a problem of consumer knowledge and consumer demand. But, as John Lott argued against, you'd have to figure the doctors know where the best, most effective, and cheapest procedures are. That test is unlikely to be persuasive.

So as I hear politicians begin to ramp up a debate in Minnesota next year over health care, I see more good questions than answers.

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Tuesday, December 18, 2007

Bridges and budget constraints 

I was at a public presentation made by some Republican legislators last week -- I have some notes but don't think I'll post them -- the discussion was about veterans and our support for the Iraq War. Some chirpy woman, who had made several critical comments already that evening, declared that we had made no payment on the Iraq War, which only could make sense to me by her claiming that every dollar taxed by our Federal government has to be spent on all the other things in the budget. That is, her implicit assumption is that we can only spend a dollar on Iraq after all those farm subsidies, health care cost reimbursements and post offices named after everyone and his mother-in-law.

I find this logic either amusing or irritating, depending on my mood. At the time I was irritated, but after visiting with friends I let it go.

Irritation returned this morning as I read the second in the StarTribune's full frontal assault on your wallet in the name of safety.

For MnDOT to keep pace with all statewide transportation needs from 2008 to 2030 -- including construction, safety projects, maintenance, and upgrades -- it would cost taxpayers $38.1 billion, according to MnDOT's most recent estimates.

But over that same time period, with current funding policy, MnDOT estimates that it will only have $14.5 billion.

McFarlin said MnDOT's fiscal 2008 budget is short at least $85 million for scheduled construction projects.

At what point did anyone discuss redistributing money to transportation from other parts of the budget? "Which ones?" you ask. Well, Phil Krinkie has an idea: Maybe we don't need to spend money on transit, particularly when you buy an 80 mile project but get a 40 mile project instead. Nicole Russell wonders about $50 million to provide security at the GOP Convention. Nice that Bemidji State gets some sugar for engineer and nurse training but could that money be better spent?

Every additional dollar spent on bridge repair, construction, or inspection has three sources: You can tax more; you can borrow more; or you can spend less somewhere else. Dropping any of those three from the equation means you are optimizing subject to NO budget constraint. This is the height of folly; you cannot run your own home buying more of X, Y and Z without at least considering if you could do without so much of A, B, or C. Neither can you run a government.

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Milton Friedman divides spending in four categories. You can spend your money on yourself, you can spend your money on others, you can spend other people's money (OPM) on yourself, or you can spend OPM on other people. "And if I spend somebody else�s money on somebody else, I�m not concerned about how much it is, and I�m not concerned about what I get."

I think he would argue this is because I pay a fairly small share of it, my vote on whether or not to spend it is unlikely to be decisive, but investing resources in it is.

I suspect this might explain why no bigger hullabaloo is made over the item Lileks has found in the Minneapolis budget. That Mayor R.T. Rybak thinks it should be using OPM on making loans that banks could easily make (a violation of the yellow pages test) is bad enough. I might understand the desire to use money to take property owned by the city and make loans to help get it rehabilitated and back in use productively. Maybe. But the thought that the City of Minneapolis should offer itself as an alternative to Islamic banking boggles the mind. I fail to see how any court would uphold a unit of government in the United States making any loan to an entity on the basis of a religious test as passing muster of the separation of church and state, and that Rybak could not even SEE this as a problem is utterly amazing.

There are private market alternatives already in place for this, so even if you restricted your search of the yellow pages to interest-free loans, you have choices.

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Monday, December 17, 2007

I think that'll leave a mark 

There are a fair number of markets that are stable. I can�t undo the excesses of the last six years - housing prices rising at an unsustainable level, easy credit. When you have these kinds of excesses, it takes a while to work your way through it.
Treasury Secretary Henry Paulson, responding to Alan Greenspan's comments on ABC News' This Week that government should use cash "in larger amounts to help homeowners rather than to try to fix" credit markets. Who do you think Paulson would consider responsible for those "excesses"?


Actually, I get this 

Angus is really upset about Mike Huckabee's restaurant choices. What kind of guy wants to go Olive Garden or T.G.I.Friday's when he's eating in Manhattan on someone else's dime?

I can answer that: In my five years as a vegan who travels (in the first half of the nineties) I had a list in my head of restaurant chains and what they had that I could eat on my diet. Now I'm sure there are hundreds of restaurants that have better menus than the OG, but suppose I am sitting down to interview in one and scan the menu and find they do not have anything on it that is vegan. I am also trying to project myself in the interview as a guy who's a little aw-shucks, not pretentious, not a pain in the posterior. Do I want to take time reviewing some options the chef MIGHT cook for my fussy self?

Not that I'm a fan of the Huckster, but I can understand why he might look for a chain restaurant while traveling.

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The Dance of the Snowblowers 

My jaw dropped when I read Mike Moffatt on the relative scarcity of snowblowers in Canadian households -- just over 20% of households with gas-powered snowblowers. Now I might believe that number for the USA given how much of our country is in climates where the snowblower is likely to go unused. (One of Littlest's friends, now living in the Richmond VA area, reported receiving five inches of snow but that it was now 70 degrees as she wrote -- my parents in Myrtle Beach reported this AM that it was 32 degrees.)

On my street I think everyone has a snowblower. One of the male bonding experiences is when there's a heavy snowfall. All the men of our street come out wearing their union suits or sweats covered with parkas, and a symphony of cylinders breaks out. I've thought about setting the whole dance to music, but haven't written the score. There seems to be even an etiquette involved in how wide our blowing of the sidewalks should be, and that it is not allowed to blow the other guy's sidewalk unless it is known that the man of that house is out of town. (I travel more than most of my neighbors, so I've been the recipient of this kindness a few times over the eleven years I've lived on this street.)

So what accounts for the low penetration of snowblowers in Canadian households? If you say it's differences in prosperity, what income elasticity of demand for snowblowers are you figuring? I can't imagine this is a cost issue.

Footnote: In my neighborhood in Manchester, NH, growing up, which was mostly populated by first-generation Americans from Quebec, there were only three snowblowers. Two were owned by construction guys who would, when a big Nor'easter would blow 20+ inches of snow, walk up and down the street blowing out driveways. Both gone now; hopefully there are snowblowers in Heaven.

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Sunday, December 16, 2007

Remembering our Vets 

Please view the You Tube video about Wreaths-Across-America at my friend Chad's site. H/T Michelle Malkin, too. Morrill Worcester of Worcester Wreaths in Maine began laying wreaths at Arlington Cemetery in 1992, his way of remembering those who have died so we may enjoy the fruits of freedom. The project, now called Wreaths-across-America has grown to laying wreaths at over 200 national and state cemeteries across the USA. Yesterday, at the Fort Snelling Cemetery in Bloomington, MN, a wreath laying ceremony occurred.

Next year, I will get in front of this project so more of us can participate and contribute.

Thank you to all the veterans and those who laid the wreaths. We must always remember the real heroes of our freedoms - those who fight and those who lost their lives so we can live as peacefully as we do and extend this peace to others for whom safety like ours is only a dream.

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Saturday, December 15, 2007

Marty Seifert and Goals 

This morning, I heard Marty Seifert, Republican Minority Leader, clearly articulate goals for the upcoming legislative session and campaigns for next year. In summary, what he said made sense. Here goes:

1 - The Republican message is positive: increase jobs, have government live within its means; have government apply fiscal discipline.
2 - Transportation: roads and bridges; roads and bridges; roads and bridges.
3 - Marshall should not have to pay for others' pork projects nor should others have to pay for Marshall's pork projects. (Locals want, locals raise the money, locals pay. We need to stop the mindset of going to the state government trough.)
4 - We need fewer people riding the welfare wagon. MN gets 4000-6000 new residents a year who come here for public benefits.

We need to return to individual responsibility versus everyone wanting someone else's money. Then we all win.


Happy Birthday to an American Soldier in Afghanistan 

Or," Give 'em hell, Ma!" If you go to the website, you can see photos.

I could try to rewrite this, but the quote from the Illinois Families United web page, referenced above says it all:
Bev Perlson wanted to give her son a special gift for his birthday - He is in Afghanistan. She decided to show him how much she supported his mission - defending and protecting America. Bev decided to take a stand in front of the Cannon Office building that houses Rep. Nancy Pelosi. Bev chose to play patriotic music and carry signs that say "I'm proud of my son" and "Fund the Troops". Bev arranged for a permit for the corner and during the week of December 10- 14 and from 9:00 am to 5:00 pm she proudly showed her colors each day! Families United board members stopped by on Tuesday and Wednesday and stood beside her. We were honored to sing Happy Birthday to John!(Note - no media attention was given!)
Code Pink decided to appear but as usual, they didn't have their facts straight. The diary covers events through Wednesday. Subsequent posts will be written this weekend.

It would be nice if our media would bother to look at the real reasons for our soldiers fighting versus sticking to their groupthink mindset and ignoring the real heroes of this daunting challenge. Bev and her friends do "get it" but too many politicians and Americans are still playing ostrich. Our "peace" crowd opposes the very people (our soldiers) who protect their right to protest. The peace crowd refuses to acknowledge they could not do what they do in any nation that is fighting us. They do not realize how their actions aid those who want to destroy freedom.

Some of our citizens really understand the threat to us, our children, our grandchildren and freedom in general. Thank goodness they do.

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Friday, December 14, 2007

Icelanders put on their boogie shoes 

The cheap dollar brings foreign tourists here to shop, and one group is pretty happy about getting deals:
This December at the Holiday Inn near the Mall of America in Bloomington, Minn., more than a quarter of the 171 rooms are sometimes filled with shoppers who have come over on direct flights on Iceland Air from Reykjavik. Each spends around $2,500 at the mall�s stores, says Evie Walter, the hotel�s director of sales. ��Where�s Victoria�s Secret?�� is usually one of the first questions they�ll ask, she says.
Apparently, according to this article, if the group doesn't speak English, "charades always works."

I won't be stopping at the Mall of America tomorrow, as I will be spelling an unwell Mitch and putting in four hours on NARN tomorrow. Captain Ed will be with me 1-3pm CT and his interview with Mike Huckabee will surely be a topic, and Michael for Final Word in our usual 3-5pm slot with a more Minnesota feel. Meanwhile, I'm going to bed to read the Mitchell report. I will certainly have something to say about that.


Teachers respond to incentives 

The Chronicle of Higher Education reports that SAT scores for teachers who passed the Praxis test for licensing had SAT verbal scores 13 above those who took the test eight years ago.
The report credits �a confluence of policy changes at the federal, state, and institutional levels� for improvements in the academic quality of teachers. Among the policies it specifically cites as having an impact are stricter admissions standards for teacher-education programs; changes in accreditation requirements that put more emphasis on how much is learned by students in teacher-education programs; and a provision in the Higher Education Act, as reauthorized in 1998, requiring all states and institutions that prepare teachers to report licensure-test passing rates.
So you make it harder to get in, and make states report passing rates, and the scores go up. That doesn't seem too mysterious to me.

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You are virtuous: Keep your money. 

The Tax Foundation blog points to the many examples where we give tax breaks for virtuous behavior.
The current tax code gives credits to people for going to college and for driving hybrid cars, as they were being implemented by people thinking that such activities were virtuous and worthy of subsidization. And then there is the biggest bonus for virtuous behavior in our tax code -- the charitable deduction.

Our federal tax code give bonuses to old people, blind people, people with children, teachers, farmers, homeowners, first-time homebuyers in D.C., the environmentally-conscious, people who park at work, people who take public transit to work, charitable people, college students, parents with kids in college, people who move, workers with low incomes, and people with large medical expenses.
The French consider there to be virtue in owning a small bookshop too, so rather than give them a tax credit we give them price protection. And on and on.

I was going to post something yesterday on the cross-talk between Greg Mankiw and John Irons on the difference between the right and left in discussing economics, but perhaps it comes down to something simpler. When Irons argues that "The right sees the market allocation of resources as optimal in all cases, so, by definition, government intervention makes things worse off," I want to know on what basis we decide what is optimal? For the right I don't think it's a matter of virtue. Markets represent the trading of a value for a value, moving resources from those who value them less to those who value them more. References to an "all-too-powerful marketplace", quoting Mankiw, ignores the fact that the marketplace is nothing more than billions of transactions conducted between millions of people (nowadays, and the increase of that circle of transactors signifies human progress.) I may value goods because they make me feel more virtuous (e.g., charity as a positional good), but to say we somehow objectively know what is virtuous doesn't pass muster for anyone I know who would be a right-economist. Perhaps, following Mankiw, negative externalities are part of less-than-virtuous behavior, but it's unclear that governments can increase the amount of virtue, no matter how big a "bonus" it gives to virtuous production.

Obviously I take one side of that debate and I could object to others of Irons' points. I do think at its base, though, Mankiw's point that "the right sees people as largely rational" is the fundamental point. I would add to it, following Douglass North, that this rationality occurs in a world full of ambiguity, and humans try to bridge that ambiguity through institutions and beliefs that may in fact be imperfect and can be improved over time. The question is whether those changes -- I think of them as meta-changes -- are something that is spontaneous or intentional? Those who want to reward virtue are certainly in the latter camp.


Global Warming - Some Stats 

The American Thinker magazine has published some interesting statistics on global warming and the Kyoto protocol. Turns out 75% of the nations that signed Kyoto grew their emissions faster than the US.
The article also lists a number of countries whose emissions increased substantially. You may argue the point that the US produces the most emissions. When you look at the absolute numbers, that is true. But there are a few other facts that should be considered when thinking along this line.
* The US is the world's largest producer of goods, thus it will produce more emissions.
* If the US continues to produce more goods with far lower emission increases, then it would stand to reason that others might want to consider how we achieve this positive impact.
This entire scenario keeps coming back to what do Americans or anyone else on the planet want to give up to supposedly decrease CO 2 emissions? For many, air-conditioning is a need, not a want - the US South would not have taken off economically without air-conditioning. Will Americans easily give up the mobility cars provide? What about the ability to produce unprecedented amounts of safe food and clean water for everyone? Returning to practices of the 1900's and earlier can be done but people had shorter life spans, pain killers of today's caliber were unknown, and emergency medical care as it exists today was nonexistent, etc.

There always is another point of view. To restrict the world's poor from attaining a longer life span and the opportunity to improve their standard of living with even the basics of clean water and enough food because some group uses faulty science to support their cause is grossly unjust.

(H/t to Powerline)


Global Warming - Book Report 

All the "people who care" about global warming along with their private jets and talk about saving the planet are in Bali, Indonesia discussing the situation.

Meanwhile, there are scientists who are not buying into the guilt-driven rhetoric that is fodder for the media. If you are wondering where you can find good, readable information about what is happening to our planet, a good place to start is with this book: "Unstoppable Global Warming, Every 1500 Years" by S. Fred SInger and Dennis T. Avery. Just reading the first 22 pages will give you more supported data in an understandable format than you will get from all the hype that is in the media. I'll be blogging on this book for a while.

Summary: The earth has been through these warm and cold cycles for at least 400,000 years as indicated by the ice core sample from the Antartic Vostok Glacier. This core sample supported the findings from 1984 when the first ice core was extracted from Greenland.


Thursday, December 13, 2007

Most fascinating paper I read this week 

This paper uses a human capital earnings equation to quantify administrative corruption in the public sector. Regression analyses are conducted based on information from surveys administered to public officials in Albania. After accounting for officials� characteristics, e.g., schooling, experience, gender, type of agency, and public and private sectors� features, we deduce that the administrative corruption was on average 2.6 times officials� current salary in Albania, which is equivalent to 16.7% of the country�s GDP.
Omer Gokcekus and Amy Muedin, Quantifying Corruption by a human capital earnings equation, forthcoming in the International Review of Economics. My thanks to Omer for sending this along to me.

Albania is 84th of the 99 countries surveyed for corruption by Transparency International. Think about that -- 1/6th of the production of Albania is estimated to be handed over to government officials in return for favors.


She's gotta have it 

Mitch and Andy note Sen. Amy Klobuchar's search for wish fulfillment. The reason the train does not come to St. Cloud is a matter of costs and benefits. You barely have a benefit to cost ratio of .85 to get to Big Lake. Given the cost of adding track and the paucity of additional ridership one is likely to get, it scarcely makes sense to extend the line any time in the foreseeable future.

For the riders that would be interested, there is a plan for bus service from St. Cloud to the Big Lake station, reports Larry Schumacher.

A student of mine has written a report on the Hiawatha LRT and notes that closeness to a station improves your property values, but the effect dissipates fairly quickly. More than 2.5 miles away from a station in Bloomington, for example, the economic impact on one's home price is nil.

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Retail sales -- don't pop that cork yet 

Ed Morrissey says I'm a little more pessimistic than him on the economy generally, and reports the new retail sales data are showing the economy steaming ahead. It's a very broad-based expansion of sales, no doubt -- even general merchandise moved up a respectable 0.5%. So where can I find a cloud in all that silver lining?

The most logical place to look is the fact that Thanksgiving was the earliest possible date, meaning the Christmas shopping season is more in February than usual. Now I would think seasonally adjusted data would pick that up, but maybe not. So I went to look at the last four years in which Thanksgiving fell on November 22, which are 1973, 1979, 1990 and 2001. Here's what I found using the data server FRED at the St. Louis Federal Reserve:

1973 November+0.8%, December -2.6%
1979 November +1.3%, December +0.3%
1990 November -0.3%, December -0.8%
2001 November -2.7%, December -1.0%
2007 November +1.2%, December ???

A couple of points worth making. We are in recession in 1973, 1990 and 2001. The 2001 numbers are from a different dataset than the earlier three dates (the new data we collect these days does not go back before 1992) and it is heavily influenced by the October number being so large after the shock to sales of 9-11. (October 2001 retail sales grew 6.6% because a good amount of shopping was not done in September.) 1979 sees us about to entire a recession the following January. Whether there's some reason these all fall on years when Thanksgiving is early ... heck, I don't know.

Nonetheless, in each case except 2001, November retail sales data was better than the December figure. So maybe some of the 1.2% was moving forward of Christmas sales. The 1979 experience wouldn't be a bad bet for the rest of the year.

I would also add the results of a poll saying 57% of Americans believe the economy is in recession now and information that tax collections from corporations may be falling cannot be really a sign that the economy is steaming ahead. I was never in the negative GDP growth for Q4 camp, but if I had a professional forecast under 1%, I'd hesitate before picking up that eraser.


Concerning those swastikas 

James Lileks, a couple of hours ago on the story:

When I was at the U it was rare to find a bathroom stall that didn�t have a swastika, or some other piece of moron-spoor. The reaction then? Usually someone wrote a profane rejoinder with a Sharpie. Today:

�As campus officials and police look for those responsible, (university President) Potter said conversation might be the key to ending the crimes. In recent weeks, the school has increased security, created a team to evaluate each case, held training for faculty members to help them find ways to process the incidents in their classes, and reached out to the city's mayor in efforts to get conversation going and to talk about how to deal with hatred and bigotry.�

I suspect there�s one fellow behind this, loving every minute.
When I have tried to say this, or make any mention of the First Amendment -- it doesn't protect a vandal, but it might protect someone reading Mein Kampf in front of Atwood (oh, wait, that's not a public expression area) -- I have been pretty routinely shouted down. A message to the campus from the provost yesterday noted these "reprehensible and cowardly acts "threaten the safety and sense of security of many of our students. Several students are so upset that they are considering transferring to another university." I have to wonder what kind of education we provide here where a student asks mom and dad to let them transfer when they see a carved swastika (or, new this week, a drawing of a burning cross including the letters 'KKK') and not get out their best Roman Maroni voice and mutter "Fargin iceholes." Every escalation of response on the campus has led to new acts. As a very wise man said in response to that message yesterday, "at some point withholding the attention such petty thugs crave is the only way to starve their self-obsession. While we must take every such act seriously, we dare not become distracted by their acts of "terror", because that is exactly what such bigots seek."

And for those that can't here, free Sharpies to the first ten commenters.


Wednesday, December 12, 2007

Gratitude, Gratitude, Gratitude 

We who are stateside will celebrate Christmas and other holidays this season. Some soldiers are home, others are not, many will be traveling. When you see them, thank them. If saying something is too hard to do, check out this mini-video and learn a very heart warming, silent "thank you," one you can teach your children.

If you would like to take another step, Richard Glasgow of Stillwater, MN has designed terrific "thank you" cards for our soldiers. He gives them away but will also take donations to defray the costs of production. If you go to this website, you will see copies of the cards. I hand them to soldiers and put them on windshields of cars that have bumper stickers indicating a family member in the service.

Spread some joy as well as gratitude this holiday season.


Tales of the starving, tales of the envy 

In 2005, the overall U.S. effective tax rate (the ratio of federal taxes to household income) rose to 20.5% from 20.1% percent in 2004, reflecting a rise in the effective individual income tax rate and in the effective corporate income tax rate, the Congressional Budget Office said in its annual tally. In 2000, before President Bush�s tax cuts, it was 23%.

CBO said the effective tax rate paid by the top 1% Americans declined slightly to 31.2% from 31.4%. In 2000, before Mr. Bush�s tax cuts, the top 1% paid 33% of their income in taxes.

But the share of taxes paid by the best-off 1% of the population rose to 27.6% in 2005 from 25.4% from 2004 because their share of pretax income rose so significantly.

The effective tax rate paid by the American households in the middle class in 2005 was 14.2%, up from 2004 (14.1%) but down significantly from the pre-Bush 16.6% level of 2000. The tally includes all federal taxes, not just the all-too-familiar federal income.

Source. This will of course come as real news to those who get their news from newspapers. To the rest of us, not so much is new. The top 1% is a bigger share of total income than it was before -- yes, that means inequality went up, for those of you scoring at home -- so while they are paying more of the taxes, their tax/income ratio went down. The question is, if you had kept the tax/income ratio at 33% for that 1%, would there be an increase in GDP for everyone else?

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Leaving Lombard Street 

Today's actions by the Fed and other central banks to create a new "term auction facility" to inject liquidity in the market is very unusual, and the explanations given through Greg Ip's reporting doesn't really explain much. There is a discount facility already in place, not just here but elsewhere. What it does is hold down interest rates during periods when there's some external shock to liquidity. The two graphs to your left show what happens without a discount or Lombard facility and when you do have one. (Click to expand them and read the legends. From the Bank of Japan.) They prevent spikes in interest rates that would cause some loans to reprice and as a result exacerbate the liquidity crunch.

The advice one receives all the way back to Walther Bagehot's Lombard Street in 1873 is that central banks should always lend freely, readily and at a penalty rate. Calculated Risk points out that the Bank of England's leader, Mervyn King, understood Bagehot well last September. If you do not charge a penalty rate, he said, you encourage banks to engage in more risk-taking. This becomes now really a bailout (much more than the cramdown on ARMs in the Paulson-Bush plan working through the Congress now.)

Ip reports the Fed as saying they couldn't get enough lending to banks with the penalty rate -- nobody seems willing to pay it. Reducing the penalty would have also destabilized the Fed funds market. So instead there is an auction -- rates TBD -- based on "a wide range of collateral, the same range as is available at the discount window." We won't know who borrowed, we won't know what the collateral is, and we may not even know the terms. Sounds like very little in the way of transparency, which Mr. Practical picks up:
Essentially, what the Fed is doing is taking the stigma away from the discount window--the Fed will lend directly to banks and the banks don�t have to tell anybody. Theoretically, the Fed could make these quiet loans for indefinite periods, thus giving banks more permanent capital (it�s really credit, but banks call it capital).
Likewise, Floyd Norris:

The Fed will lend money to banks based on almost any asset they own, even ones that are not liquid at all. That will include some of the more exotic loans and securities out there.

Investors, it appears, love it. The stock market opened sharply higher, reducing the losses that came yesterday after the Fed cut interest rates, but not by enough to satisfy Wall Street. This move is taken as evidence that central banks are determined to rescue the system, whatever it takes.

How much will the Fed lend against illiquid assets? It has a public list, already in use in discount window lending. You will note that it allows the lending of up to 85 percent of the face value of AAA-rated collateralized mortgage obligations, if there is no observable market value. There are some C.M.O.�s out there that have not yet been downgraded but that might not bring that much in a sale.

I�d love to see which assets are pledged, and how much the Fed lends against them. But the Fed won�t disclose those facts. Nor will it let us know which banks borrow using the new facility.

Given the lack of transparency, I would consider this little more than a credit rationing device. It does not let the market set the amount of credit absorbed based on a fixed price -- it is inserting a fixed amount of liquidity based on what it is they decide they'll lend against (at whatever rate of discount they choose.) This does not necessarily lend to creation of orderly markets. This does not smooth out interest rate fluctuations from future burps in the credit markets that are bound to happen over the next few months as more and more of these instruments experience stress. I can see what Europe gets from this deal, but why the Fed is doing it is not as clear.

UPDATE: This is excellent:
But this, this is a bailout,. Nearly all government bailouts take the form of subsidized loans, extending credit at low rates to counterparties or against collateral for which the market would have demanded a high premium. That is precisely what the TAF will do. The Fed's press release claims, of course, that loans will only be available to "sound" banks, and that they will be "fully collateralized". But no one who can get the same deal from private markets will use this facility. The need for the program arises because private markets are skeptical about the soundness of counterparties and the quality of the assets they have to offer as collateral. The Fed hints at this when it mentions the "wide variety of collateral" that can be used to secure loans. You can bet that whatever it is private lenders are eschewing will be pledged as collateral to the Fed under TAF. The Fed is going to bear private risk that market refuses to. That is a bailout.
Exactly. So why does Bernanke agree to this? (h/t: Felix Salmon.)

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So which way do you take this? 

Via Yahoo News:
The New Hampshire chapter of the National Education Association, the country's largest teachers union, has endorsed Hillary Rodham Clinton and Mike Huckabee for the Democratic and Republican presidential nominations respectively, sources said Wednesday.

This is the first time the 16,000-member group has endorsed a Republican candidate, despite estimates that a quarter of its members are Republicans.
I laughed when during the YouTube/CNN debate Huckabee said his campaign was in need of all the endorsements it could get, including in that instance Log Cabin Republicans. But in that case he said he'd take support without changing his views. He may not have changed his education views, but they are different from the rest of the GOP field, as reported in today's Concord Monitor:

Huckabee became the first Republican yesterday to be endorsed by the New Hampshire chapter of the National Education Association. In a short press conference, President Rhonda Wesolowski lauded Huckabee's opposition to school vouchers and his commitment to arts and music education.

But Huckabee also favors "testing teachers" and replacing those who do not meet established standards. The NEA has been critical of the practice, as well as the federal No Child Left Behind law, parts of which Huckabee supports.

Still, Wesolowski said NEA-New Hampshire liked that Huckabee favors measuring student growth over time as opposed to judging a teacher's effectiveness by how students score on a single test. She said the group didn't ask Huckabee much about No Child Left Behind, since he wasn't a member of the Congress that passed the law. Huckabee, who backed President Bush in 2004, initially supported it.

Now one should give Huckabee credit for going to the teachers unions and asking for their support -- would that other GOP candidates would do so! But opposing vouchers and supporting higher spending make him less than appealing to Republicans for whom education is an issue of concern. A governor that mandates an hour of arts and music instruction per week, which Huckabee did in 2005, is not someone who supports local control. I find that pretty odd for any chapter of the NEA to support.

The Monitor article has a great deal of information about Huckabee's education record, so those so interested are invited to read it.

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Heroes? CBS? Yes, but 

While working out this morning, I happened to view one of the televisions near the machines. CBS was airing a segment, "Heroes at Home." They were showing Americans helping other Americans whose spouses are overseas. Americans do these kinds of actions and I am glad to see that the donors are getting exposure for their great work. It is wonderful to know that families also have support here at home.

But I have another question:

Where was and is CBS and their news and their opinions and their coverage on the brave heroes who are doing the fighting? You know, the ones protecting us, our children, and freedom for the future? If I recall, most of the alphabet soup coverage of the war by the mainstream media has been very, very negative, including incomplete, snap judgments on the actions of our military (while ignoring the documented barbaric behavior of our enemy).

It seems rather odd that now that victory is a definite possibility, CBS chooses to show those helping the families here as "heroes" but continues to ignore the heroes overseas. Could this be another MSM ploy, one to make soldiers "victims?" I certainly hope not but I do have to wonder.

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Tuesday, December 11, 2007

The Fed -- that's some corner you backed into 

I imagine a new Jim Cramer explosion is on the way -- Mish notes Bill Gross saying "The Fed does not understand the gravity of the situation" -- but I'm trying to figure out whether the Fed could have made this move given what they believe about inflation.

The charts on the Taylor rule suggest that inflation is under control, if you believe there is much productive capacity still in the economy. I also see inflation still being above where the Fed would like it if you look at median CPI or at TIPS data. So their posture could be seen by some as having room to come down, but not to move to a really easy position. If we assume the Fed forecasts 2% GDP growth for 2008 and thinks PCE inflation will be 1.9% (from its minutes of its prior meeting) then my forward-looking Taylor rule forecast for 2008 would be 3.75-4.00%. Maybe, just maybe, you can imagine taking that journey with a single step, but it is not the Fed's wont. Perhaps it is, as William Polley suggests, just a chance to buy some flexibility. But I would guess that, unless the Fed gets a sneak peek at Q4 GDP figures -- it meets 29/30 January, right when those data are announced -- you probably can plan on another 25 bp next month. The WSJ speculates that the lack of "insurance" language in the directive means the Fed moved down its forecast from here. The Taylor rule would provide you the best case, but I cannot get that to give me a cut much more than another 50 bp from right here. If the 4th quarter GDP number comes in negative, however, all bets are off.

Street economists are more dour. Small surprise there.

UPDATE (12/12): James Hamilton suggests that the futures market might have told you exactly a quarter-point, if you had thought it through.


Say that with a Norwegian accent 

I have to admit, I find this amusing:

From WSJ's Political Journal's John Fund:
But some dissident elements appeared in Oslo to protest Mr. Gore's plan for centralizing control over economic growth. reports that a Democrat source in Oslo detected "a significant Ron Paul for President contingent with signs and banners outside [Mr. Gore's] hotel." Apparently, some Paul supporters believe Mr. Gore's plans would only make the world poorer and less able to cope with serious environmental concerns. A source in Oslo told me that several Paulheads chanted, "All we are saying, is give growth a chance," in a throwback to a 1960s anti-war protest song.
So he isn't probably going to win anything, but there are times this race really benefits from having the energy of the Paulites.

Original at


End of semester 

...makes me really busy. Observations on the Fed rate cut when I can this evening.

Monday, December 10, 2007

Cost and safety: the case for toys 

In the comments on this post about an anti-China-toy piece in the local paper last week, the question seemed to come down to whether or not parents could and would pay enough attention to toy safety. Would they be able to make choices on safety versus cost. This morning from the WSJ's Holidaysales Blog:
Nielsen said cost consciousness emerged in nearly 20% of online discussions. Ten percent of discussions mentioned toy recalls, Nielsen said, with many parents seeking out American-made products to �play it safe.
Alas, even your Lincoln Logs are made in China. But the fact remains that cost does matter.

But what's the substitute? Ruth Mantell reports that the Consumer Product Safety Commission is just overrun, with too few inspectors and ... wait for it ... underfunding.
The CPSC has about 15 investigators to monitor all U.S. ports of entry, while billions of products enter America's market every year. When it comes specifically to toys, there is no single designated "toy tester," according to the agency. Rather, there are about 80 professionals -- toxicologists, field inspectors and others -- with toys as a primary, though not sole, responsibility.
Yet there is Underwriters Laboratories, which provides a private market, third-party certification program. It is quite easy to look for these marks on products, as prominent display is the reason firms would volunteer to testing. How much more safety would we get if we relied on a quintuple-sized CPSC rather than having consumers look for UL labels?


It's only a matter of time 

Angry parents in Hungary have formed an association to license local Santas after complaining they weren't up to scratch.

The Hungarian Santa Foundation has teamed up with Santa Claus workers' unions to create an exam with strict requirements for people who want to work as Santas.

And they plan to take legal action against any fake Father Christmases who try and operate without a Santa licence.

Apart from having to sit the exams - from now on every Hungarian Santa has to be at least 5ft 7ins tall and in good physical shape.

His voice has to be low, and he has to possess good communication skills, and he has to convince examiners he likes kids.

Foundation head Gyoergy Balint said: "If a jolly old man with a sack of presents is found handing out presents amongst kids on the street without a proper Santa diploma - then he will have to answer in a court of law."

Source. Which gets me to thinking: I heard a great sermon yesterday at a church where I occasionally sing in which the Salvation Army came up. And I saw a bellringer on this campus.

It's only a matter of time -- will they be banished or just licensed? And what will be the requirements? Your answers invited in comments.

(h/t: Businesspundit)


Always low prices defeats gougers 

William Polley writes about WalMart and offers of assistance in emergencies. Of course a firm's generosity is dictated in part by a desire to be seen as generous in hopes of improving sales. I am unwilling to denigrate a beneficent act simply because of the benefactor's motives. But Bill goes on with something more interesting:

I think you see fewer stories these days about "guys in pickup trucks" these days. (Though they did at one time exist, and I think they still do. My above-mentioned post has some links in the comments where I point to media discussions of them, though they are getting a bit dated.) But even so, I think the big boxes are still going to fall short of the optimal outcome, meaning the "price gougers" will still exist in the hardest-to-get-to areas.

Here's where the rubber meets the road. There are two reasons that prices can go up. It's either a supply issue or a demand issue. (It can, of course, be both.) In the immediate aftermath of a disaster, the supply of certain items decreases and demand for those items increases. But if a number of large (competing) firms with nearly constant marginal costs and with vast distribution networks can move the supply from one area to another at a low cost, then prices will not rise very much... even if demand increases.

Suppose then that the supply of building materials in the short-run (say, a week, rather than a day or two) has become more elastic because of improvements in distribution networks. Where those networks extend easily thanks to roads, rail and airports, we should see an increase in demand met with an increase in quantity supplied, and a smaller increase in prices. But that does not mean the gougers will completely go away. Indeed, 'gougers' -- which are simply producers sharply increasing marginal costs -- are desirable as those willing to take risks in order to move needed supplies to hard hit, remote areas. They still produce a useful service, but their services are less needed now than fifteen years ago.

Do you call that "hooray for WalMart!" or "hooray for technology!"? I'd say both.


Leave it to professionals 

I had thought I'd understood the mortgage freeze -- which I went on at length about in a special bonus hour of NARN -- The Reunion Tour with Mitch and Ed Saturday -- but both a call from 'the Crazy Uke' (a local mortgage banker known to most of us as a citizen of Jasperwood) and this post by Calculated Risk convinces me I should let experts do the job instead. The parts I got right: Not a bailout; the purpose of the plan is to get homeowners to the phones. I have watched friends and family with financial trouble hide like Adam and Eve after the apple from the ringing phone. Nothing good comes from that. So IF you are in trouble and you're not talking to your bank, get on it. What the plan does is create some agreed rules by which borrowers and mortgages of different types are sorted into different buckets and put into some faster process for refinancing. (Perhaps borrowers don't realize you can get mortgages modified -- this helps with that.)

What I know I got wrong: I kept saying you had to have 3% equity. In fact, you have to have LESS than 3%. As CR points out:
This is plan is for homeowners with weak credit (maybe 1.2 to 1.8 million) that are underwater - or about to be underwater - on their homes. They can't sell. They can't refinance. And they probably can't make the new payment.
I completely screwed that up on the air. Ugh.

What I did not realize but doesn't change my mind: The degree to which there may be risk-shifting to the public sector. Also at Calculated Risk, Tanta explains "at the simplest level, what's going on here is that loans that were "insured" (or credit-enhanced) by the private sector are being refinanced into loans that are insured or credit-enhanced by the public sector." So no current dollars are put out there, but the possibility is that government money would be at risk if the defaults keep happening. Is that a bailout? I don't think so.

What runs through my head watching this unfold is the failure and organized private sector rescue of Long Term Capital Management in 1998. In particular I call your attention to the testimony of then-New York Fed President William McDonough. The similarities are striking: See if you see them too.
Two factors influenced our involvement. First, in the rush of Long-Term Capital's counterparties to close-out their positions, other market participants -- investors who had no dealings with Long-Term Capital -- would have been affected as well. Second, as losses spread to other market participants and Long-Term Capital's counterparties, this would lead to tremendous uncertainty about how far prices would move. Under these circumstances, there was a likelihood that a number of credit and interest rate markets would experience extreme price moves and possibly cease to function for a period of one or more days and maybe longer. This would have caused a vicious cycle...


Friday, December 07, 2007

How baseball continues to hate Marvin Miller 

I mentioned this briefly on Monday, but Phil Miller and Skip Sauer get to the meat of it. Phil's conclusion:

So, should Marvin Miller be in the Hall of Fame? That depends on how you view MLB. If you view it as a profit-maximizing cooperative, probably not. If you view MLB as something higher and you think the Hall of Fame should include people who made MLB substantially better off by their contributions, then the answer is yes. How did he make MLB better? By fighting for players' rights to contract with teams of their choosing.

Will he get there? Sadly, probably not with the voting rules as they are right now, at least not for a long time.

The rules have a committee of 12, largely of former baseball executives, the very people who Skip says responded to the breaking of the reserve clause "with a twenty year long, Sisyphus-like ordeal of lockouts and strong-arm tactics in an attempt to turn back the clock in the labor market."

Having former baseball executives decide Marvin Miller's entry into the Hall of Fame is like asking Democrats to pick the next Republican presidential nominee, or vice versa. The players should get to vote on Miller.

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Mrs. Scholar's December column 

Is on electoral fraud, and included an interview with Rep. Keith Ellison. I could not resist one comment. Gary obviously was posting the same piece at the same time -- pretty funny!

One comment from former St. Cloud mayor (and Scholars lover) John Ellenbecker:
Thousands of non-citizens in Minnesota have Minnesota Drivers Licenses - do they get to vote if they show up at the polls and show their DL?
If it has their current address, and if they do not truthfully reveal their citizenship, either someone has to challenge them or the electoral judge has to somehow determine citizenship. If they do so after the vote is taken, there is no provisional balloting provision that allows the electoral judges to remove that vote. Now most temporary legal immigrants have a mark of "Status Check" on their licenses, which may trigger someone to question whether someone can vote, but that can be an ugly scene. Suppressing voter challenges is as much a part of the electoral process as challenging voter eligibility.

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Thursday, December 06, 2007

A good start 

It will be interesting to hear what objections the education establishment have to school choice this time. Rep. Michele Bachmann has introduced a bill for school choice for foster children.

Currently, when foster children change homes, many must transfer schools if their new home is located in a different school district. The bipartisan School Choice for Foster Kids Act would give states the flexibility to make younger foster children eligible for education vouchers � currently designated for students 16 to 23 years old � through the Chafee Foster Care Independence Program. It would allow foster parents to send a child to his or her original school or to choose a school that can undertake the unique challenges their foster child may face.

�Instead of separating foster children from trusted friends and teachers, we should give them the opportunity to stay at a school if it is fulfilling their needs,� said Bachmann. �We should also allow families to choose the school that is best equipped to serve their foster child.�

That last sentence begs the question: Why just for foster children?

The Chafee program mentioned provides federal dollars to assist teens transitioning out of foster care. In the enabling legislation (P.L. 106-169 -- it's Appendix B in this FAQ about the program) there was a Congressional finding in 1999 that money should go "several years before high school graduation and continuing ... until the young adults emancipated from foster care establish independence or reach 21 years of age." But the Chafee program, as I understand it, only sends money to states and has the states create the vouchers. I have not seen the text of the School Choice for Foster Kids bill yet, and it's not on the House website. I've written to ask for that information.


There's only one car 

See if you can spot the flaw in Senator Tarryl Clark's latest press release?
Our state is like a car stalled on a cold winter morning. We have the jumper cables out, but the governor is choosing to just drive by and wave.
How is it that there are two cars? What car is the governor driving?

Any government spending must be paid for by taxes. Any additional employment created by the government is offset by the loss of income to those workers who used to receive the money now collected by the government in taxes.

There's only one car, and Clark, Pawlenty, and you and I are all in it. To use her metaphor you would have to connect your cable from your own to battery to your own battery. I'm dumb enough to have tried that once. The car did not start.

h/t: Larry Schumacher

UPDATE: My further thoughts on the DFL plan to "create" jobs at the Minnesota Free Market Institute. Craig Westover notes as well,

�Clark�s government job creation proposal is interesting in that just two paragraphs earlier, she writes � �Small business and a strong middle class are the real engines that drive and sustain job creation and retention. It�s the aspiration (emphasis hers) to acquire wealth to pay for college, vacations or retirement by building a business or working hard at a job that spins the economic engine.�

�Well, okay � What better argument for a progressive tax scheme that takes more of the marginal dollar as a person acquires wealth and moves into higher tax brackets, not to mention the benefits to our aspiring, wealthy wannabe of state government raising taxes and taking investment money he or she could use to expand a business and using it to compete in the labor pool with our guy or gal by building tourist centers and hockey arenas when he or she could be using the investment capital and labor to build a factory and �spin the economic engine.�

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But of course Minnesotans NEVER move due to higher taxes! 

Y'know, those Danes, they are such rugged individualists, like greedy banker dudes.
Young Danes, often schooled abroad and inevitably fluent in English, are primed to quit Denmark for greener pastures. One reason is the income tax rate, which can reach 63 percent...a level that hits anyone making more than 360,000 Danish kroner, or about $70,000. That same tax rate underpins such effective income redistribution that Denmark is the most nearly equal society in the world, in that wealth is more evenly spread than anywhere else...

But today young Danes can easily choose not to pay for the system's upkeep, once they have siphoned off what they need. For starters, as citizens of the European Union they are entitled to work in any of the 27 EU countries.

Sorensen, who graduated from business school in Copenhagen, found himself earning the equivalent of more than $100,000 before he was 30 - and paying 63 percent of it in taxes. His work as a computer consultant for Deloitte also took him to Brussels, where he met the Spanish woman he would eventually marry.

But the high taxes, mixed with his wife's discomfort in Denmark, meant that a job offer in Qatar three years ago was all it took to pry him away from Copenhagen. Now, he is ensconced in Frankfurt, setting up a new business on the side and planning to pay no more than 25 percent of his income to the German state.

"When you are at 63 percent tax, you don't look forward to the evaluation with the boss to get a raise," Sorensen said. "You look for more vacation or a training course in the tropics - something that you get the full benefit of."
Source, hat tip George Borjas.

Under revision 

FIRE has announced that its plan to make Metro State's university community conduct code its speech code of the month was dealt a deadly blow, when it was pulled for revision. It contained language that prohibited "manifestations of prejudice regarding race, ethnicity, religion or sexual orientation."

Interestingly, the Metro State policy doesn't seem to conform with the 1B.1 Policy and Procedure of the Minnesota State Colleges and University System, which controls the policies at Metro, SCSU and other of its institutions. From the procedure:
Not every act that may be offensive to an individual or group constitutes discrimination or harassment. Harassment includes action beyond the mere expression of views, words, symbols or thoughts that another individual finds offensive. To constitute a violation of Board Policy 1B.1, conduct must be considered sufficiently serious to deny or limit a student�s or employee�s ability to participate in or benefit from the services, activities, or privileges provided by Minnesota State Colleges and Universities.
I'm no lawyer, so I don't know how elastic that standard is to meet, but at least there's something there.

Be careful how you give thanks 

The University of Minnesota is offering its employees "holiday" tips.
Holiday parties in December--many offices plan them. University offices celebrate the end of fall semester and look toward the start of winter. Then there's the proximity of several religious holidays. But as our workplaces become more diverse, people wonder how to celebrate in ways that respect our different religious and cultural traditions.

Celebrations are important as places where coworkers can socialize and get to know each other in informal settings. Managers need to create opportunities to thank staff for their contributions. Work flows more smoothly when successes are recognized and celebrated. Teams are strengthened and individuals are motivated when they feel their work is appreciated.

But December celebrations can cause problems if events seem to emphasize one religion or cultural tradition. If activities make some people feel excluded, they defeat team-building goals.

"The problem is that any celebration in December tends to be about Christmas," according to Beth Zemsky, formerly the coordinator of leadership and organizational effectiveness in the Office of Human Resources.
Funny thing, that. Perhaps because polls have found over 80% of Americans call themselves Christians and 90% believe in God. So when you get a group of people together and the probability of any two of them being Christian is greater than 2/3, there is a chance they might talk about the birth of Christ.

But of course, some people might be bothered by this, the article says, so you should in a party thanking your workers at the end of the year be more careful. Here are some of their suggestions:
Pick themes that everyone can appreciate, such as the end of fall semester or the beginning of winter.
Yes, nothing makes me festive quite like fighting with the snowblower and grading papers. (Maybe this is why I never did get into the Festivus thing. Which apparently someone is using.) Speaking of the grading papers, however,
Plan a time that makes sense with your workplace schedule. Think about whether December is the best time for your event. If it's a particularly busy time in your office, it may be better to plan activities for January or February. Consider celebrating another holiday, such as Martin Luther King, Jr., Day--it can be a chance to learn together as a group as well as celebrate together.
So move your party to January and make it a diversity workshop too! How marvelous. I can feel my festiveness (Festivusness?) rising now!
Be aware of unintended messages. Celebrations held in December tend to make people think of Christmas, whatever the theme. Decorating public spaces with red and green or playing Christmas songs for telephone clients on hold can enhance the problem. Adding references to Hanukkah and Kwanzaa on an invitation won't change the underlying message and can be seen as insensitive to the true meaning of those events.
"Wait, never mind what we said in #1! You never can do it right, you'll always screw it up, so just don't have any parties in December. Wait for MLK Day instead."
Consider performing a community service project as a work group. Some units volunteer at food shelves or participate in clothing drives. Others participate in the United Way campaign through fund-raiser activities such as bake-offs or talent shows. Find something that is connected to the particular work of your office.
I like the idea, actually, but thinking this is going to substitute for the end of year party (or now,beginning of year Diversity Party) is pretty silly. Besides, how many acts into the talent show do you go until the guy who thinks he's funny gets up in to do a stand-up routine the goes a little beyond the "Airing of Grievances" observation of Festivus?

(h/t: Ken Doyle)


Wednesday, December 05, 2007

What to Do About Iran 

What to do about Iran? Given the NIE report released yesterday and these comments by Middle East expert Michael Ledeen, one answer could be, "Who knows?"

There is someone in the Cities who does have first hand knowledge and experience: A. John Radsan, the Founder and Director of the National Security Forum. He also is a former assistant general counsel at the CIA, a practicing attorney, and a law professor at William Mitchell Law School.

Dr. Radsan understands the culture, religion and politics of Iran. His main points at a luncheon at the Center of the American Experiment can be summarized as follows:
1 - Talk without action is useless - our enemy assumes we are weak.
2 - Perception is Al Qaeda (AQ) is the #1 problem - no, it's Iran's Islamic Republic. AQ has been damaged significantly but Iran actually is stronger than it was 9/11.
3 - Iran cannot be allowed to get nuclear weapons. Problem with destroying them is that they are located in multiple sites and thus, Dr. Radsan does not believe a military strike will work.

What will work?
1 - Dr. Radsan is a proponent of covert action, undermine Iran in a number of ways.
2 - Use media propaganda and blogs. Iranians read a lot of blogs, therefore, the US should use the blogs to discuss Iranian issues.
3 - Go after the Iranian financial assets, neutralize intelligence officers, remove diplomats. In other words, create hassles for their government.
4 - Iran, for all its oil, cannot refine it. Therefore, we should keep pressure on them to prevent refining it.

Why does he believe his suggestions can work?
Iranians blame their government for their problems, not the USA. If we attack overtly, it will cause major problems for their dissidents and they may turn against us. Iranians, 50% of whom are Persian, the others are Arabs, Kurds and other groups, have a very proud history. They understand the long-term and have long-term memories. We do not want to do something that will be to our detriment nor do we want to just sit on the sidelines and assume (ostrich position) that being nice will work. The political bosses of Iran want us gone.


Who you buying from? 

Relating to the post just below, statists also want to be able to tell you who you can buy from and who you can not. A local monthly columnist engages in China-bashing. Prof. Larson (he a professor of history and environmental studies at a nearby college) speaks that "business is good" at places like "The Not Made in China Store". He provides shopping advice:

Here�s a simple metric you can use when selecting toys for kids this holiday season. Make a list of the following three adjectives: cheap, safe and Chinese. When it comes to toys you should be able to find items with any two of those qualities.

If it seems like you�re getting all three in one package, ask yourself if it�s true.

Perhaps those blocks from Vermont might be a better buy after all.

Try substituting the words "Mississippi" or "Africa" for "Chinese" in the adjective list. That sound OK to you still? If enforcement is the problem, as Prof. Larson suggests, then the same set of incentives adhere to the Vermont firm as to the China one.

Prof. Larson suggests that consumers do not "ecognize that safety comes at a cost, as does quality. We can�t have both cheap products and cheap government if we want to avoid future recalls and threats to our children�s safety." So who says we want that? Who says I want someone to protect my safety.

But, our professor of environment goes on, we shouldn't blame the Chinese. We are to blame.
It�s the American companies� desire for ever greater profit, the consumers� demand for ever cheaper products, and the corresponding unwillingness by either to pay for quality or the services needed to ensure product safety regulations are enforced.
You have a right to be unwilling, though, don't you?
China is capable of manufacturing just about anything and at virtually every level of quality. State-of-the-art, high-tech factories in China can engineer and produce goods that are certainly equal to their Western counterparts when asked to do so.
And we do, when high-quality goods matter to us. You seen kids with toys? Or with clothes? They get smashed and torn and broken, often very quickly. Many other times, the toy is played with a few times and discarded. The return on your investment is uncertain. Couldn't cheap be rational?

But a big part of the attraction to Chinese products for retailers is their very low cost, which unfortunately does not come without a price.

That price may simply be lower quality, a reasonable trade-off with certain items. Who doesn�t need a disposable paintbrush or spare screwdriver now and then? But as we�ve seen in recent months, sometimes that cost is less apparent and can take dangerous forms, such as toys contaminated with lead, or as we saw last spring, pet food additives tainted with toxic chemicals.

Of course it comes at a price, AND I PAID FOR IT ANYWAY. Who the hell are you to get in the way of my choice?

We have laws that deal with risky products. The common law has torts that deal with the cost of injurious toys. If a good is cheap but makes no representation of being "100% safe" you have the right to buy that for your child and bear the costs of a lawsuit (which might not be successful.) Sellers of toys who think goods will be more attractive with a "Buy American" or "Made in the U.S.A." sticker on the package can do so. If the goods cost more, you can make the choice to pay or not. You might have a lower accident rate, and if you do, you have an easier time suing. But you might choose to take that chance anyway. Why can't you?

Advocates of toys not made in China are trying to tell people to stop specializing and exchanging, and are decreasing the wealth of the world. Imagine if I had written Prof. Larson's last three sentences this way:

Here�s a simple metric you can use when selecting toys for kids this holiday season. Make a list of the following three adjectives: cheap, safe and made by Chinese workers escaping poverty. When it comes to toys you should be able to find items with any two of those qualities.

If it seems like you�re getting all three in one package, ask yourself if it�s true.

Perhaps those Chinese workers should stay in poverty after all.

You're right, my insert wasn't an adjective. So sue me.


Who you selling to? 

Another cockamamie scheme going around Minnesota is proposed by Minnesota 2020, called the Made in MN program. A column in the local paper explains:

The typical holiday meal travels about 1,200 miles from farm to Minnesota dinner table. A large percentage of holiday gifts go at least that far, with many arriving on a fast boat from China. And all those miles take a lot of increasingly expensive energy to fuel the food chain.

There is a better way: Buy local. Support our own economy this year by giving high-quality Minnesota-made gifts.

Minnesota entrepreneurs offer products that could fill stockings, provide a holiday feast and give far-flung friends and relatives a taste and touch of Minnesota.

With Minnesota�s 2 percent share of the national retail market, an estimated $9.49 billion will fill our state�s retail holiday season cash registers.

That means just a one-tenth share going to local products would add up to almost $1 billion, boosting businesses, adding jobs and creating a statewide economic multiplier effect for manufacturers and retailers.

Those options, of course, are always there. Buy American is a common refrain. So we should also be sure that Minnesota firms only sell to Minnesotans. Why? Because if they sell to consumers in other states, they are letting furrners buy OUR products, competing with Minnesotans, pushing UP the price WE have to pay! That's an outrage, isn't it? But of course they won't do this. They must permit Minnesota firms to sell abroad.

That's probably not the case, but it seems interesting that somehow we should worry about our trade surplus or deficit with Wisconsin as much as we worry about our deficit with China.

MN 2020 has put out a report in which it takes that $9.49 billion figure (just taking 2% of a national forecast) and argues that we should buy local to get fresh goods. Are we to assume people are too stupid to figure out what is fresh? People pay for transportation; if they want to pay for something to travel 1200 miles to their dinner plate, who are these people to stop them? But, MN 2020 answers, buying local saves carbon. I refer you to the post of the week, from Russ Roberts.
Here's a secret. Don't tell anybody. Living uses electricity and water and it's worth it, most of the time. Here's another secret. Civilization uses electricity and water. I guess we need more people living naked in caves.

If you don't like how much electicity and water we use, explain to me why it's the wrong amount. Then change the prices.

As to the question of more money circulating when buying from an independent local business than from WalMart, understand the number calculated. They tell us that 43 cents of a dollar spent at a national chain "stays in the local economy" versus 68 cents "staying" when spent at the local business. I put staying in quotes because I'm not sure what that means. Is it that 68 cents of a dollar of spending at the local store is income to someone living in the town? If so, would that argue that the store should not hire people living outside of town?

Suppose my dollar goes further at Home Depot than at Fred's Ace Hardware. Suppose the prices there were cheaper? Isn't that why people flock to HD and WMT? The size of the discount may not be enough to cover the full difference, but the few dollars left over when I leave the store might get put in the Salvation Army kettle rather than in the independent business owner's hands. Is this what MN 2020 intends?

I'm lead to conclude that Minnesota 2020 has been overrun by mercantilists. In this and another post in a few minutes, I will show you that what liberals want is nothing less than full state control, to tell you who you may exchange values with and who you may not. MN 2020 does not want you to exchange with people living outside the state. Funny enough, that doesn't extend to higher education.


Structure and ideology: Implications for free speech 

Something we have (had?) always prided ourselves on at St. Cloud State has been that our students should be instructed by full-time faculty, all with terminal degrees, all committed to a teacher-scholar model of the professoriate. (The code words are 'Boyer model'; the derision with which those more inclined to traditional research speak these words rivals that I have when I say the words 'New York Yankees'.) Over time, like most every other university, we have a number of non-tenure track faculty here; our latest faculty factbook says 380 of 934 are non-tenure track, including 260 adjunct faculty.

So it is with great interest that I read two posts by Stephen Karlson regarding an alternative explanation for the persistence of indoctrination on American college campuses. In short, it's an incentive problem with more insecure faculty teaching the large freshmen classes.
[A]s long as the senior professors are relatively free to pursue their research, while the armies of adjuncts on term contracts can be mau-maued into going along with the Diversity Boondoggle's gutting of learning in the name of access, and the beneficiaries of access figure out on their own that college is not for them and never darken a professor's door, the senior professors will have scant incentive to defend either free thought or the core of liberal education.

The astonisher is that as many students get through, successfully, as they do, take five to seven years though it may. In the military, the recruit first faces a career non-commissioned officer. In railroading, the student engineman quickly gets to know the crusty road foreman. In the university, eighteen year olds get psychological "treatment" from twenty year old housefellows and introductory calculus from twenty-five year old graduate assistants who have yet to prove a theorem of their own. Experience, literally, is the greatest teacher, and for many students, the teacher with the steepest grading curve, at least until dormies get put on Double Secret Probation for harboring unsustainable thoughts.
I've of course had cause to talk about Residential Life's behavior here with a course called "Respect and Responsibility" required before you take a class, taught (?) by people in the Aggrievement Centers. Then off they go to freshman comp, taught in a department more than a quarter of which are adjuncts. Those who want to be teachers may find half the teacher development faculty are adjuncts. Those instructors, Stephen argues, have no incentive to be advocates for free speech or intellectual diversity. They need next semester's contract. (And meanwhile their students are checking them out on Rate My Professor in search of the grading scale and stars for entertainment value provided.)

Stephen interacts with an essay by Donald Downs, in which he argues "Senior faculty indifference to campus citizenship leaves a vacuum into which questionable and damaging agendas by those who do care can flow." Downs seems a little more hopeful that the right incentive structure can provide for change to create a movement for intellectual freedom that spans any ideological divide. Perhaps, but our Department of the 3.7 GPA has plenty of tenured advocates for the Diversity Boondoggle. They protect their booty through a faculty union that has run roughshod over governance. Perhaps structural changes can solve it but the structures are now so deeply embedded that contemplating their destruction seems like nuclear winter. Most despair, crawl back to their offices and vacate the battleground to the groups that stifle intellectual freedom. If on top of that, as Downs indicates, there may also be ideological bias in campus hirings, all the worse.


Tuesday, December 04, 2007

The Only Color that Matters is the Gray Stuff Between Your Ears 

My several careers as a teacher have covered every level, from primary grades through undergraduates, graduate school, and specialized seminars for adults in the business world, at locations from coast to coast. My current classes tend to have a substantial proportion of foreign-born immigrants from all over the planet, Asia, Africa, Europe and South America. They have included just about every shade of skin and sexual preference there is, along with a huge sampling of the world�s tribes, clans, nationalities, religions and ideologies. They come from an enormous range of socioeconomic backgrounds, with varying personalities, styles of thinking, and methods for interacting with others. They all bring their various biases from past experiences into the classroom. Of course I do, too.

One statement I make to my students in the very first class of each semester is that "The only color that matters is the gray stuff between your ears." This simple line negates so many prejudices it is unreal.

I treat this statement very seriously, and apply it in a variety of ways throughout the semester. For example, I assign group mini-projects for work to be completed in class, while scrambling the composition of every group for each new assignment. The students have to adapt to each new small-group dynamic. They learn to focus on getting the best possible contribution from every member of the group. Some use their gray matter better than others, which affects the results for which they are all responsible.

Because my expectations and standards are clearly set out in the detailed syllabus I present in the first class meeting, my students learn very quickly that outward appearances have little to do with the value of the contributions they get from their fellow students.

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Satiation points 

In one of my early lectures in principles we get to the discussion of whether people really always want more. To motivate that story, I tell them of sitting at a ballpark next to a rich friend who offers to buy you hot dogs. All the hot dogs you want are available through your friend's beneficence. Of course, at some point you stop -- economists might say the marginal satisfaction of the Xth hot dog is now negative. That doesn't mean you don't want more, just not more of that. (Bromo comes to mind.)

That thought came to mind when reading Don Boudreaux this morning discuss the health cost arguments for smoking bans, helmet laws and putting too much salt in our restaurant food.
if the proponents of greater collectivization of health-care provision not only recognize this fact but cite it as a justification for restricting personal freedoms that would otherwise be no one else's business, it seems to follow that these proponents of collectivization of health-care provision would recognize also that the problem is so general that it indicts the very idea of collectivization of health-care provision.

Because such collectivization creates a giant tragedy of the commons � because such collectivization enables each of us at each moment of making health-care choices to impose most of the costs of our choices on others � such collectivization will require not only that government restrict our access to fun but unhealthy life choices (such as eating lots of Cajun food), but also restrict our access to medical-care.

So the idea that a young mother whose child has a runny nose will be able to skip off to the pediatrician pronto for a diagnosis and treatment is chimerical. Just as collectivization of health-care provision will encourage people to eat too much sodium and too much bacon, it will also encourage people to seek medical treatment too frequently and too frivolously.
We can also observe that on campuses: If we say everyone has a right not to be offended by someone else's speech (or that only "protected classes" have this right), we encourage overconsumption of speech restrictions. You consume speech restrictions up to the point where you are satiated in it. Is this really wise? One example: the new chapter of the "pink locker room" debate at the University of Iowa.

It really would not take much money to convince the athletic department at Iowa to change the color of the locker room. Rather than contribute, though, people claim a right under some law and sue. When people to do not have to bear the costs of their actions -- because "I have a RIGHT!!!" -- there is overconsumption of the activity.

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One-hoss microwave 

I first bought a microwave when Mrs. and I were married. I remember driving to several stores, speaking to salespeople, weighing characteristics carefully, then buying it. It was a substantial purchase for us (I'm quite sure it cost more than $200, and this was around 1988.) It traveled with us for about eight years.

About the time it failed, we bought our house. In the cabinetry of the kitchen is a space for a microwave, and one was there similar to ours. We wanted that one because it fit the space. The house was about ten years old, and it turns out so was the microwave. The seller was incredulous that we wanted the microwave but relented.

A year later, the microwave stopped working. We went to one store (the one with two words beginning with 'B') and talked with two salespeople. Fretted over it for about an hour, paid about $150 for a decent model, and took it home.

I then never thought about it again.

Last night I came home and both Mrs. and Littlest had sad looks on their face. The microwave did not work. I examined it and sure enough it did not work. "Do we get it fixed?" Simple cost-benefit analysis question, I replied. Ate a relatively cold late dinner and then went to the store and bought same. Opened laptop, looked at the same store's website. Saw nice one for $100. Took Littlest, bought same, came home and plugged it in.

Conclusions: Microwaves are an example of one-hoss shay depreciation. When my long-life lightbulb croaks, I am out some money, and then I have light. I get the same service from the microwave each time until it stops working, then I have zero service. On a rather difficult day, the $100 is a loss, but the decision is pretty simple: You no longer own a microwave; they cost $100; want one?

Amazing what a bag of microwave popcorn will get you thinking about. I had the same popcorn Sunday and Monday night. Was the cost of Monday's popcorn $101 ($1 bag + $100 oven)?

Question: Is a bridge a one-hoss shay? We don't create sinking funds for replacements of lightbulbs or microwaves because you typically have enough money to replace them in a ready reserve. Poop happens. But we do for larger expenses like bridges. It has to be tempting to raid that fund. But when a bridge falls it's the same choice. You don't own a bridge; they cost $250 million; want one?

I think about this in terms of considering what the value of public capital is. What does it mean to depreciate a bridge or a public building? Do they generate less value as inputs to production as they age?

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Monday, December 03, 2007

Do We Want J. Edgar Hoover's Ghost in the White House? 

J. Edgar Hoover was notorious for using the FBI to compile dossiers on people from all walks of life. Is his ghost on the campaign trail now? Lots of jabber about Mrs. Clinton's latest attack on Mr. Obama's writing about a wish to be president in kindergarten and third grade: here, here and here.

One point overlooked: President Bush has been criticized for his efforts to try to protect Americans from future terrorist attacks. There's been way too much hand-wringing over the possibility that the government might possibly in some remote case ask about what books you have read.

If you are honestly concerned about civil liberties, the last thing you ought to want or even consider is someone (Mrs. Clinton) in the White House who already displays a personal interest in the minute details across the entire span of another person's life.

This is really scary.


You know the world is screwed up 

...when the Veterans Committee votes Bowie Kuhn into the Baseball Hall of Fame and leaves Marvin Miller out. Sure, Kuhn was commissioner for fifteen years, but anyone wanting to tell me that baseball was better off after he left than when he arrived may post this in comments after they explain how baseball went from America's sport to no better than third during his tenure. Add to that the Kuhn rule on selling players, and the disastrous handling of the collective bargaining agreement, and you begin to wonder if the kind of fame Kuhn earned belongs enshrined anywhere besides Madame Tussaud's? Of course, Kuhn's death earlier this year contributes to the vote.

The best you can say is that he gave us night baseball in the World Series. So those of us who were tired all of October following the Red Sox have yet one more reason to think Mr. Kuhn was not someone to be honored.

Late 2005 interview with Kuhn here.


Good to work next to you 

Captain Capitalism copies for us an intriguing graphic of the density of New York City by day and by night. He wonders what would happen to commercial building prices if telecommuting became more common.

The reason commercial space is high-priced is because of positive externalities that occur when people work together. You get what urban economists call "agglomeration economies" from clustering businesses together. The question is whether the same types of economies can be generated in an online environment.

In a comment from Mark Perry's reference to this post, Spencer asks whether this happens in all cities. If the diseconomies of agglomeration happen at night more than in the day -- a function of transportation and communication costs, in part -- then I'd say yes.


The StarTribune with a classic Keynesian wheeze 

It is of course unsurprising that a StarTribue editorial would promote higher taxes as a cure for the state budget shortfall, even while admitting the reserves would be sufficient to cover the deficit. But its last paragraph belies some oversimplified economic thinking.
Pawlenty rejected any state tax increase yesterday, saying he considers the best economic stimulus "more money in Minnesotans' pockets." While money in private pockets can produce economic good, if it stays there, it won't buy the roads, transit, schools and other public assets that a robust economy requires. Strategic use of resources for economic betterment must be state government's guiding principle now.
The state cannot spend money it does not first withdraw from the economy through taxes, so there is a question of whether the government can spend the money more "strategically" than private citizens do. And if people save, says the STrib, that's bad.

This is of course the old Keynesian wheeze of the "paradox of thrift". It hypothesizes that any dollar received by a Minnesotan that is not spent on other goods and services produced by Minnesotans (or at least sold by them) is a leakage from the economic system. To offset that leakage, government spending should be injected into the economy. But of course the dollar the state injects is just a dollar leaked out in higher taxes. The usual story is that state government spending is subject to a "balanced budget multiplier". (Here's AmosWeb with a review of multiplier analysis for those of you who remember it vaguely from a principles class in the past. See also the one for tax multipliers.)

With states there's the additional complication of spending on goods from other states and countries. The simple balanced budget multiplier is equal to 1 if there is no leakage to purchases of goods and services from other jurisdictions, otherwise it is quite likely less than one. For example, the St. Cloud area employs about 14% of its workforce in retail sales, but retail produces only 8% of its area GDP because much of the goods sold come from outside St. Cloud.

How is it that the STrib knows that dollars spent by the state government will be more sticky in the state economy than dollars spent by private individuals? Even if we assume the tax dollars taken in come from those "idle balances" in people's savings accounts, it may very well be that the dollars expended must use resources from outside the state. Furthermore, expectations of higher taxes later to pay for bonding requests may lead individuals to save more now (a story economists call Ricardian equivalence.) In fact, there is no reason to believe a priori that state governments can be at all stimulative to their economies -- though particular programs might be found to do so after the fact.

Add to this the efficiency arguments, that private citizens will better know what to buy to improve their welfare than governments will, and a solid case can be made for not increasing taxes to stimulate a soft state economy.

There may be a case made that Pawlenty's plan -- offer individual property tax relief across the board, paid for by closing the foreign operating corporation tax loophole -- could be more stimulative. I don't know that this is true, but it is something to be determined by an efficiency argument that I can see one making. There is a commission working on these very issues right now with representatives from the Governor's office and the Legislature. I'd wait to see what they find before making any recommendations.

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Sunday, December 02, 2007

HUGE Breakthrough in Iraq 

More good news from Iraq. The the leading Shiite cleric in Iraq, the Ayatollah Ali Sistani, has just issued a Fatwa (ruling) banning the killing of Sunni Muslims. The announcement was made at a conference between Sunni and Shiite clerics in Najaf, Iraq, a religious city for Shi'a Muslims. In addition, Sheikh Khaled Al-Mulla, a conference leader, quoted Sistani saying, "I am a servant of all Iraqis, there is no difference between a Sunni, a Shiite or a Kurd or a Christian,"

We Americans rarely comprehend the impact these kind of religious edicts can have. For a leading Muslim cleric to issue a Fatwa banning the murder of other Muslims is simply huge. In addition, it appears the Ayatollah Sistani is being watched very closely in Shi'a Iran where another Ayatollah, the radical Khameini, is claiming the top position in Shi'a Islam. As a result of all the positive events and leadership seen in Iraq, many Iranians are sending their religious donations (not insurgents, thugs, murderers, etc.) to Sistani, the Iraqi cleric. A final point, Ayatollah Sistani believes in the separation of mosque and state, again, a huge breakthrough in thought.

These events follow an earlier breakthrough between the Iraqi government and the USA. In summary, Iraq is asking the UN to leave and the US to stay. They have concluded that the lies they heard over the years are just that - lies and that Americans are decent people. It would be nice if our mainstream media and Democrat Party could reach the same conclusion.

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