As economics predicts, substitutes are, and soon will be, available. Short answer: farm-raised Scottish salmon, wild Atlantic salmon, and arctic char. (The latter, though, isn't as rich in omega-3 fats.)
The fine report by David Glenn is here. Note the ad hominem attack on Liebowitz:
In an e-mail message to The Chronicle, Mr. Strumpf defends his work and suggests that Mr. Liebowitz's zeal stems from the fact that an academic center he directs, the Center for the Analysis of Property Rights and Innovation, receives grants from the Recording Industry Association of America and other commercial interests. "One might ask why Professor Liebowitz has remained so engrossed with our study," he writes.
Or, maybe he's just upset that a 40+-page lead article in one of the profression's top journals has serious errors.
. . . but the Economist blog says (June 25) it's not true.
Certain people--I won't name them, because some of them would come here like bees to honey and leave dopey comments--think "speculation" is terrible. Some of them even want to regulate, even tax it.
USC Professor Peter Gordon has a different view, and since it's a short post and I recommend you read it all, I'll borrow just two sentences:
Price adjustments are essential and the key to market magic. . . .
All humans with a pulse plan beyond today and are, therefore, speculators. [Italics added.]
Folks are just beginning to realize some of the costs that will follow the government's freshly-minted requirement that we use CFLs. For one thing, they contain mercury, and mercury, in certain circumstances, is really toxic. Disposing of them properly is not trivial.
But Home Depot, and probably soon Wal-Mart, is providing an answer.
The LA Weekly reports that Los Angeles's Metropolitan Transit Authority plans to ask voters for "$40 billion for mass transit over the next 30 years". The Weekly then raises some interesting points:
Voters might question the scope when they learn that cities with extensive light-rail systems have been unable to take more than 1 to 2 percent of the cars off the road.
In fact, a recent study by Seattle’s Washington Policy Center, of the six West Coast cities that have invested in light rail since 1995 — L.A., Sacramento, San Francisco, San Jose, Portland and Seattle — found it costs a princely $82,000 to $240,000 for each transit rider they have wooed on to their systems. . . .
In 1980, politicians similarly promised that a half-cent tax would build a modern transit system. In 1991, L.A. leaders again claimed that an additional half-cent was needed. Those dual transit taxes, Proposition C and Proposition A, provide MTA with an annual $1.4 billion windfall, but the agency has delivered only a fraction of what was promised.
Even the darling of mass-transit advocates, the city of Portland — which has embraced “transit-oriented development” and so-called “smart growth” — is in the throes of massive congestion, and local critics say the dense urban-development projects that were supposed to reduce Portland’s traffic have had the opposite effect. A nonscientific 2005 survey of more than 400 Portland residents showed that they wanted tax dollars to be spent on better roads. “Transit” came in a distant fourth in Portland.
I posted linked earlier to a story about how the Bureau of Land Management had imposed a two-year moratorium on new solar energy projects on public land so that it could study their "environmental impact".
Guess what? The Bureau has reversed itself.
Since 2005, the bureau has received more than 130 applications from private companies to build plants in those states, where large amounts of sun-scorched land make for prime solar real estate. Those proposals cover more than a million acres and have the potential to power 20 million homes.
The bureau will process all of the applications it received before the freeze, and now, as a result of Wednesday’s decision, will continue to accept new ones, studying the environmental effects of each proposed plant individually, Ms. Boddington said.
If only other less-than-intelligent government decisions could be reversed as quickly.
Divided into the following categories: art, economics, education, English, history, math, media/technology, music, philosophy, psychology, political science, sociology, and theology.
The economics section would be particularly strong even if it didn't include The Door. I thank Ms. Fiona Lewis for including me.
Noted labor economist Daniel Hamermesh has recently made two posts I especially like.
His July 8 post--his posts don't have individual links---argues, with an interesting example, that "allowing older workers greater flexibility in hours of work will become crucial as baby-boomer retirements begin to remove a lot of skill from the American workforce."
And his June 25 post explains why feeling busy is related to income.
The average human being will be substantially richer in 50 years, just as the average American today has a real income three times what it was in 1955. But the average human being will not have much more time in 50 years than today; and life expectancy has increased by only 10 percent in the U.S. since 1955, so for most people time has become relatively scarce compared to money. Not surprisingly, we feel more stressed for time than ever before—the opportunity cost of time has risen compared to the opportunity cost of goods. People with higher incomes usually express more time stress than those with lower incomes.
Concerning the last sentence, see this brief summary of research by Nobel Prize-winner, Daniel Kahneman, that finds wealth is positively correlated with "stress". Kahneman might not explain it the same way, but the finding seems consistent with Hamermesh's argument.
(I have been arguing the same point for several years in my MBA economics course and I also made it in this post.)
From "In Defense of Excessive Government" by Dwight R. Lee, Southern Economc Journal, 65(4) (April 1999), pp. 658-59.
I remember sitting around a table at a Liberty Fund conference a number of years ago with Jim Buchanan during a decidedly pessimistic discussion about the possibility of political reform. Suddenly, Jim cleared his throat, and everyone went silent in anticipation. Jim said something to the effect of "If its all hopeless, then just why in the hell are we here?" Good question.
I believe the reason we were there, and the reason for much of the work economists do, is that improvement is possible, and increasing and communicating our understanding of how the political economy works can lead to that improvement. Just communicating some basics of public choice to a wider audience can reduce the influence of politically organized interest groups. For example, being well organized in pursuit of a highly concentrated benefit whose cost will be thinly spread over the unorganized public is seldom sufficient for political success. To be effective, special-interest political activity must masquerade behind some plausible claim of public concern. Consider that Gordon Tullock has long favored a policy of imposing a tax of $1 on every American with the resulting $260 million going directly to him. He actually favors a higher tax, but not being greedy, is willing to settle for $1. His proposal has all the characteristics of a successful special-interest program. Gordon is a small group and has always been well organized. The benefits would be extremely concentrated and the costs so diffused and insignificantly burdensome to any one person that no one would be motivated to oppose the proposal. Despite these advantages, the Tullock proposal has never achieved political liftoff because it lacks any plausible pretense that it would advance some noble public purpose. Gordon is still working on a public-interest rationale, but so far without success.
The point is that if you strip away the public-interest facade cloaking a special-interest proposal, political support for the proposal quickly collapses. Public choice, by creating a coherent framework for understanding the political process in terms of private interests, is helping to penetrate the public-interest rhetoric and to expose the private-interest reality.
Dwight Lee, again. He reviews Richard Layard's book, Happiness: Lessons From a New Science (Journal of Bioeconomics, volume 10, pp. 97-99, 2008). He eviscerates Layard's primary policy proposal:
The crux of Layard’s policy argument is that by earning more income you are generating a negative externality—in his words, polluting—because your higher income makes others unhappy. . . .
If the public, and then politicians, take seriously the argument that earning money (being productive) is equivalent to pollution, there is no end to the destructive policies they could enact. An entrepreneur who puts existing firms out of business by providing consumers with better products at lower prices is, according to this argument, polluting those who own and work for the bankrupt firms, and there should be a stiff entrepreneurial tax to correct this externality. Maybe Layard would approve of such a tax, but would he approve of a special tax on academics when they have articles or books accepted by prestigious journals or university presses? Consistency certainly requires that he support such a tax, since those academics who are successful publishers impose externalities (unhappiness pollution) on their colleagues whose relative publishing success is diminished.
Not to mention that the proposal has a disconcerting "Harrison Bergeron" vibe.
Mike Moffatt links to a paper--co-authored by a Door fave, J. Scott Armstrong--that reports terrible citing practices, at least in the marketing literature.
But that's not the best part. Mike then goes on a mini-rant about referee reports. You should read the whole thing. But here's a part that made me laugh:
My all-time favorite was a [referee] report that blasted me for not reporting the findings of some "key" paper in my field. I was worried that I might have missed an important work on my topic (that may have made my paper redundant). Until I discovered that the "key" paper:
Even the Washington Post(!) has to write about it. (June 9 story, with some nice quotes from Clifford Winston).
"Any extremely successful company, any company that creates enormous, almost incalculable, social surplus, will be bitterly opposed by some people, and those people's opposition will end up with governmental action."
Case in point: Google. Here's the Boston Globe, reporting on people who are
. . . developing strategies to push back against Google, dilute its growing dominance of the information sphere, and make it more publicly accountable.
"Publicly accountable": as Jerry Seinfeld might snap, "Oh yeah, I like that idea."
In case you missed it, Peter Boettke responds to a question about economic inequality:
So what should we economists be insisting on during the current political discussions:
1. Intentions do not equal results
2. Innovations that are economically viable cannot be orchestrated by government, but must come through the free market
3. Policies to eliminate inequality distort incentives and often harm the very individuals they intend to help
4. Politicians possess a shortsightedness bias and policies are adopted in order to concentrate benefits on well-organized and well-informed interest groups and disburse the costs on the ill-organized and ill-informed mass of voters/citizens. What is good politics in other words may very well be bad economics, and what would be good economics might be bad politics. . . .
Read his whole post.
This is my fourth post on Stan Liebowitz versus Felix Oberholzer-Gee and Koleman Strumpf , but the dispute is quite important and deserves wide examination. Stan's new paper is available at SSRN. Here's the abstract:
Through a stroke of luck, a referee report in the review process at the JPE has been positively identified as the Oberholzer-Gee/Strumpf (O/S) response to my earlier comment. Regardless of the response's provenance, what counts is whether it solidly refuted my comment. This 'sequel' analyzes the O/S response. The O/S response only deals with four of the nine points discussed in my comment, leaving the five remaining critiques unchallenged. The conclusion of my review is that the O/S response fails as a defense of these four points and contains many of the same types of errors that marred their original paper. This sequel also discusses the history of this dispute including O/S' various reasons for not making their data available. Finally, this sequel provides full documentation on the JPE's decision not to publish the comment.
Part 1--send to certain Congressmen--"What Onions Teach Us About Oil Prices". They teach us that 1) even in a market in which futures trading is prohibited by statute, price can rise (and fall) astonishingly fast, and 2) "The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place."
Part 2--send to certain candidates for Congress--"Middle-Income Tax Burden: Lowest Level in Decades". Mark J. Perry at Carpe Diem links to a press release from the ranking Republican member of the Joint Economic Committee which states, "Recently released Congressional Budget Office (CBO) data show that the total effective federal tax rate of the middle fifth of households declined after 2001 to its lowest levels since at least 1979."
This article has received plenty of Web-buzz, and I should have commented on it already, but . . .
Its thesis is as follows:
The advantages of having immediate access to such an incredibly rich store of information are many, and they’ve been widely described and duly applauded. “The perfect recall of silicon memory,” Wired’s Clive Thompson has written, “can be an enormous boon to thinking.” But that boon comes at a price. As the media theorist Marshall McLuhan pointed out in the 1960s, media are not just passive channels of information. They supply the stuff of thought, but they also shape the process of thought. And what the Net seems to be doing is chipping away my capacity for concentration and contemplation. My mind now expects to take in information the way the Net distributes it: in a swiftly moving stream of particles. Once I was a scuba diver in the sea of words. Now I zip along the surface like a guy on a Jet Ski.
The thesis is supported by a handful of anecdotes--it used to be easy for him to immerse himself in a book or lengthy article, now it's not--one academic study, and some airy theorizing.
The culprit, as the title indicates, is the Net generally, and Google specifically.
Fortunately for the author, we here at the Door's Center for Study of Half-Baked Highbrow Theories for Why Life Stinks Now have examined his story, and we are pleased to offer two alternate hypotheses (below the fold).
The central domestic policy issue in the national elections this year--I omit education because it should be primarily the responsibility of the states and localities--should be this (Peter Orszag, June 17):
Under any plausible scenario, the federal budget is on an unsustainable path—that is, federal debt will grow much faster than the economy over the long run. In particular, in the absence of significant changes in policy, rising costs for health care and the aging of the U.S. population will cause federal spending to grow rapidly. If federal revenues as a share of gross domestic product (GDP) remain at their current level, that rise in spending will eventually cause future budget deficits to become unsustainable.
One: "The Motion Picture Association of America said Friday intellectual-property holders should have the right to collect damages, perhaps as much as $150,000 per copyright violation, without having to prove infringement."
Two: "Recording Industry Decries AM-FM Broadcasting as 'A Form of Piracy'".
Three:
Chuck, Yeager is a man of many accomplishments, including becoming an “ace in a day” in WWII by downing five enemy fighters in one mission. He then became a test pilot, and flew the first plane to break the speed of sound (Mach 1). He’s made commercial use of his identity.
In 2006, defendants issued a press release (or, as the court said, an “advertising/promotional article (the ‘publication’) styled as a ‘Press Release’”) highlighting the reliability, durability and security of their cellular network. It focused on a new service for responding to disasters or emergencies and continuing to provide cell service. The press release states:
“Nearly 60 years ago, the legendary test pilot Chuck Yeager broke the sound barrier and achieved Mach 1. Today, Cingular is breaking another kind of barrier with our MACH 1 and MACH 2 mobile command centers, which will enable us to respond rapidly to hurricanes and minimize their impact on our customers.”
Yeager alleged that this reference harmed his ability to get sponsorship agreements with other phone providers. He sued for violations of the Lanham Act, California common law and statutory rights of publicity, unjust enrichment, and state-law false advertising.
Cingular argued that the First Amendment barred the claim, because the press release was news and addressed a matter of public interest. Yeager argued that the release was commercial speech and sought to capitalize on Yeager’s identity. Under California precedent, the First Amendment doesn’t protect commercial speech that uses a plaintiff’s identity without his or her consent to promote an unrelated product. Using identity as “illustrative” or “window-dressing” for a commercial theme isn’t protected by the First Amendment.
(Last link via The Volokh Conspiracy.)
Starting salaries in finance are high. Harvard Magazine reports that Harvard undergraduates are responding.
The L.A. Times writes about the financial difficulties of five celebrities, focusing on Ed McMahon. Their problems are sad, but the article advances two entertaining excuses for them:
When the work is coming, so are the perks, which may be part of the reason many celebrities have a hard time understanding the actual costs of their high standard of living. While they are employed, most top stars can go for weeks without having to pay for much more than breath mints. Movie studios cover their hotel, food and transportation bills; designers shower them with free clothes; and gift baskets come jammed with complimentary cellphones, jewelry and other goodies.
That swanky lifestyle soon becomes addictive -- even after some third party has stopped underwriting it. And Hollywood can be as cruel as it is kind with compensation, and the once-hot actress who was making $10 million a few years ago might be forced to scrape by with just $5 million now. If her cost of living has grown to match those better-off days, she might suddenly find herself millions in the hole.. . .
Almost every performer retains a talent agent, whose fees average 10% of the gross returns, and many also use a personal manager, who typically takes 15% more. A business manager will charge an additional 5% and attorneys can add the same fee. Then there's the publicist, who can cost as much as $5,000 a month. So a hypothetical $100,000 acting job would net about $60,000, and state and federal taxes would trim that amount even more.
(Question: why do the talent agent, personal manager, business manager, and attorney all get a piece of the gross, but the publicist doesn't?)
From an actual document I recently received, not one word made up.
Why did I get this notice package?
You may have been a Time Warner Cable subscriber at some time between January 1, 1994 and December 31, 1998 and may have been on a list of subscribers whose personal information may have been made available for sale by Time Warner Cable to other companies for marketing purposes. . . .
What is this lawsuit about?
The lawsuit claimed that Time Warner Cable sold personal information about its subscribers to other companies that wanted the information to advertise and try to sell you products and services. The lawsuit claimed that Time Warner Cable is required to tell subscribers how it collects and uses their personal information, and that Time Warner Cable failed to do so in compliance with applicable law. Time Warner Cable denies that it did anything wrong or that it violated any law, and believes that it would have ultimately prevailed at trial. . . .
What benefits does the settlement provide?
If you qualify, you may receive $5 or free services. If you choose to receive free services, here are the free Time Warner Cable services you can get. . . .
(1) One free month of any Time Warner Cable service that is available on a monthly basis and that you don't already have.
OR
(2) Two (2) free Movies on Demand. . . .
Are there other settlement benefits in addition to the $5 of free services?
Yes. As part of the settlement, Time Warner Cable has agreed: (1) to change its disclosure to subscribers about how it collects and uses their personal information; (2) to employ a Chief Privacy Officer in charge of making sure the company complies with privacy laws; (3) to give money to two public interest groups that care about and work on privacy issues; (4) to pay the costs of sending and publishing this notice and giving out the free services and $5 checks; (5) to give money to the two Class Representatives who participated in this case for all the subscribers; and (6) to pay for the lawyers who represented the subscribers throughout this case.
Now, for some questions--and a prize offer--please read the continuation.
UPDATE: For a different view on the merits of this settlement, see the comments of Daniel L. Anderson, the attorney who represented objectors to the original settlement agreement.
Continue reading "Our legal system at work (with an economics test after)" »
As I've written before, Google's success, size, and visibility mean that it's just a matter of time before it attracts antitrust interest. Here's another indication that I will be right.
. . . the youngest of the Raleigh Newmarks, on her recent publication (a letter to the editor of the Raleigh News & Observer).
While I think the economy faces, both short-term and long-term, some serious problems, James Pethokoukis makes some good points in "Why the Economy Is Better Than You Think".
If you could swap the American economy for someone else's long term—China's, India's, the EU's—would you? . . . China, for instance, has far worse demographic problems, has far worse environmental problems, will probably never catch America in terms of per capita GDP, and, by the way, still needs to fully transition to democratic capitalism. America? It's in far better shape that you think.
On the other hand, there's this: "The Train Wreck Ahead: Medicare is rolling toward disaster, and there is no easy way to fix it".
Thom Brooks's "Publishing Advice for Graduate Students".
"Top 30 Failed Technology Predictions".
Including the well-known:
“There is no reason anyone would want a computer in their home.” — Ken Olson, president, chairman and founder of Digital Equipment Corp. (DEC), maker of big business mainframe computers, arguing against the PC in 1977.
And at least two that I hadn't seen before:
“The cinema is little more than a fad. It’s canned drama. What audiences really want to see is flesh and blood on the stage.” -– Charlie Chaplin, actor, producer, director, and studio founder, 1916
“[Television] won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.” — Darryl Zanuck, movie producer, 20th Century Fox, 1946.
I've posted about the famous Oberholzer-Gee and Strumpf JPE paper on file-sharing--and Stan Liebowitz's questioning of it--before (here and here).
There's now a third round in the controversy. The German newspaper Handelsblatt has a story today titled "No Comment, Please" accompanied by the following blurb:
Steven Levitt, Editor of the Journal of Political Economy, uses a questionable tactic to block an undesired comment. The subject of the criticised article was a hot topic. On closer look, everything about the case was unusual.
Read the whole thing.
It's sad that it falls to a German newspaper to cover this, but then I've come to expect very little of the U.S. mass media.
For those of you keeping score at home, it's N.C. State's EC305. There will be ongoing, irregular posts about my preparation.
I plan to gather an eclectic set of the most seemingly powerful arguments against capitalism. (The quality of a defense should only be measured against the best offense.) One such piece I've run across and will probably assign the students to read is "The Parable of the Shoe Salesman".
What John's story reveals is that capitalism does not reward people who create wealth. It rewards people who own wealth. It does not reward initiative and hard work and productivity - unless by the ownership class. It rewards owners as much as possible, and employees as little as possible.
Leaving aside at least three basic questions--1) Was John really fired because he was making too much money?, 2) If he was as productive as described, why didn't some other greedy, money-grubbing firm hire him?, and 3) "Owners" usually bear more risk: why shouldn't their rewards be higher (and lower, though we don't typically hear as much about those instances)?--I will present some evidence that contradicts the claim that employees are rewarded "as little as possible". Consider, for example, the estimated 10,000 "Microsoft millionaires".
I plan to assign a number of eloquent defenses of capitalism. I've got a bunch, but one really fine piece--fine both because it focuses on four really relevant points and because it is concise--is George Leef's "The Four Mistakes of Nonlibertarians".
(Googling it, I see that E. Frank Stephenson at Division of Labour linked to it about a year ago. To folks who read both blogs, I apologize for the repetition. But if you don't read Division of Labour--I suggest that you do--or FEE's publications--I suggest that you do--Leef's piece may be new to you.)
In New York City, city plus state cigarette taxes now sum to $4.25 per pack. Guess what happens. Go ahead, guess.
The underground trade in cigarettes is thriving across New York, and it’s about to get worse. . . . The number of [state cigarette tax] inspectors in the city will soon nearly double to 64.
According to eigenfactor.org, molecular & cell biology is Where It's At in the hard sciences. In the social sciences, economics. (Psychology a close second.)
Naturally.
I posted briefly about how Harvard president's refused the economic department's recommendation to appoint Christina Romer. David Warsh, at the end of a column on the split between the "New Keynesians" and the "New Classicals" speculates on the reason for the decision.
Interesting column from the New York Times's John Tierney about failed Malthusian predictions and how current Doomsday predictons may well fail, too, because of the new technologies that are coming.
It reminds me of a fine Arnold Kling column, "The Great Race". Over the next few decades we will see a race between our fiscal problems--and I would add, our (potential) environmental, political, social, and foreign relations problems--and our technology's ability to greatly diminish, or solve, those problems.
(And more on old man Malthus taking it on the chin: "The Coming Population Bust".)
"[UCLA] Economists predict more pain ahead but no recession".
The Journal of Wine Economics has recently debuted.
Just saw this via Lucianne.com:
"Naming U. of C. research center after Nobel Prize winner has faculty split".
In a letter to U. of C. President Robert Zimmer, 101 professors—about 8 percent of the university's full-time faculty—said they feared that having a center named after the conservative, free-market economist [Milton Friedman] could "reinforce among the public a perception that the university's faculty lacks intellectual and ideological diversity."
I wholeheartedly agree with Columbia economics professor Jagdish Bhagwati:
"It is nonsensical to object. . . . Chicago should be proud it has someone like Milton on its rolls," he said. "Anybody who can claim that Milton was not one of the major thinkers of his time is crazy."
John Lott critically reviews the estimate by Joseph Stiglitz and Linda Bilmes that the Iraq war has cost $3 trillion. Among the economists who question the estimate, or who compute the cost at considerably less, John cites Richard Zerbe, Matthew Goldberg, Edgar Browning, Al Harberger, Kevin Murphy, and Robert Topel.
UPDATE: commenter William asks that I link to Stiglitz and Bilmes's blog. Fair enough: their blog.
Making an honest buck in business is tough. Making that buck for 37 years is tougher. Making that buck for 37 years while retaining a huge amount of affection from your employees is tougher still. The Door seconds this salute to Herb Kelleher, retiring chairman of Southwest Airlines.
And yes, being able to operate out of Love Field helped, but there are a number of stories that testify to Southwest's smart business decisions. One of my favorites, useful in an economics course because it illustrates a weakness of the standard "predatory pricing" claim, is as follows:
In its early days Southwest Airlines competed primarily with Braniff. Southwest undercut Braniff's prices a little and provided better service and more convenience. But Southwest was making money on only one route, the Dallas-Houston route--it accounted for 72% of Southwest’s revenue--and Braniff slashed its price in half on that route.
Southwest took out full-page ads accusing Braniff of predatory pricing and it asked, “Remember What It Was Like Before Southwest Airlines?” The ad then offered to match Braniff's price, but it also asked customers to voluntarily buy the full-price ticket (with a small bottle of Scotch thrown in). Supposedly, more than 75% of Southwest's customers chose to pay full price.
Braniff reversed the price cut after two months, and about two years later exited the route completely. (This account is in a famous B-school case; I got the details second-hand from Peter Robinson's fine book, Snapshots from Hell: The Making of an MBA.)
Washington, D.C. limits the height of buildings.
Benefits: " . . . a day to appreciate the building-height limits that allow unobstructed views of the fireworks on the Mall from roof decks miles away. Washington's height restriction has preserved the city's modest scale, preventing the Manhattanization of the downtown business district."
Costs: ". . . the D.C. height restriction has also promoted suburban sprawl, boxified the city's architecture and deadened Washington's downtown. It has inflated office rents, deflated the municipal tax base, limited affordable housing, contributed to the region's hideous traffic jams and generally helped keep Washington a second-tier city despite the unrelenting growth of its major industry -- the government."
(Link via commenter "Davod" on my wife's blog.)
A Washington, D.C.-area couple is selling concierge services for $65/hour.
[They] cater to households with incomes over $200,000. That might sound expensive, Ken says, but many of their customers are busy CEOs with no time for daily chores.
"They pay us to do something for $65 while they work on making $65 million," Ken says.
I was going to criticize "The Audacity of Growth" by Sebastian Mallaby of the Washington Post, but James Pethokoukis has already done a fine job.
But I'll add some comments on Mallaby's next-to-last paragraph:
The one certainty about education is that holding schools accountable is only part of the solution. This is where Obama has the lead. He wants a big push on early-childhood education, which researchers believe can have an excellent payoff in terms of later achievement; he wants to address key gaps in teacher quality with higher pay; he wants a new tax credit to make college more affordable. A hundred years ago, the United States set the stage for the American century by investing more public money in education than other advanced economies. It needs to up its game again if it wants to retain its preeminence.
1. The stage was set for "the American century" by more than public education. Relatively low marginal tax rates and political and legal systems that supported entrepreneurs were important, too. Worth remembering this election year.
2. Government policies to "make college more affordable" have been in place for nearly two generations. Exactly how well have they worked out? (I refer to research that greater government tuition aid seems mostly to foster higher tuition.)
3. Formal evidence that teacher quality matters a lot is mixed, perhaps because our significantly flawed K-12 educational system dilutes whatever effect better teachers have. Greater educational choice through vouchers and charter schools could well be necessary before the usual program of "more money for teachers" becomes worthwhile.
4. Greater help for kids before they begin school is certainly a promising approach. I have new papers by James J. Heckman and Amy L. Wax to read on this subject. But given the current system, this approach, too, could well be limited in its effectiveness. Here in North Carolina, it seems every one of the last several governors has made pre-school education a priority and has asked for ever-increasing amounts of money to fund new programs: "More at Four", "Whee at Three", "Do at Two"--O.K., I made the last two up, but they indicate the way we've been heading--without, so far as I know, a lot of measurable results. We probably need to address difficult problems of families and communities, problems that simply throwing money at won't solve.
. . . a well-intentioned government subsidy seems to be having unexpected distributional effects.
When [Massachusetts] Governor Deval Patrick signed legislation a year ago to expand state tax subsidies for the film industry, he predicted it would help lure new movies to Massachusetts and pump millions of dollars into the economy.
"Economics, like math, is something most people rationalized they would never need to know after graduation. But with gas prices soaring, home values sinking, consumer debt rising and jobs vanishing, it is hard to deny that economics affects our daily lives and livelihoods."
Yes, it sure is "hard to deny".
"More than a year after Congress pledged to curb pork barrel funding known as earmarks, lawmakers are gearing up for another spending binge, directing billions toward organizations and companies in their home districts.
"Earmark spending in the House's defense authorization bill alone soared 29 percent last month, from $7.7 billion last year to $9.9 billion now, according to data compiled by Taxpayers for Common Sense, a nonpartisan watchdog group in the District."
Ironman, at the valuable Political Calculations, lists "2008 Starting Salaries for Recent College Graduates" (National Association of Colleges and Employers data). Economics majors rank near the top of the majors he's able to list, at $52,926/year.
This is not a surprise; economics majors have been near the top, usually below engineering, computer science, and not much else, for at least the eight years or so I've been following the NACE surveys.
But there are two surprises. One, economics used to be combined with "finance" and I'd always assumed the high value for economics was due in significant part to the finance folks. But for this survey, finance is broken out separately and the survey shows an average starting salary for finance majors below economics.
Second, and related, there are ample indicators that accounting majors are much in demand. But accounting--which used be ranked slightly above economics/finance--is now shown as about $5500/year less than economics.
Note: I don't trust any of these figures much. But as my wife once proclaimed, tongue-in-cheek, when talking about teaching history to high-schoolers: "It doesn't matter whether it's true or not, so long as it's interesting."
UPDATE: Thanks to economist, blogger, and Door reader, John B. Chilton, for a pointer to these comments by noted labor economist Daniel Hamermesh. Aside from any inaccuracy in the the NACE data, Hamermesh finds (using other data) that over half the differences in earnings across majors can be explained by differences in personal characteristics--such as SAT scores--and hours worked. This doesn't surprise me. I have long told my economics students that their prospective higher salaries are, of course, not entirely because of their economics training. But I do implore them to learn enough economics to be worth those salaries.
I've previously praised the remarkable speech Danny DeVito's character gives defending capitalism in Other People's Money.
Here, courtesy of Mark A. Steckbeck, is a speech almost as good. It's from the 1951 movie Home Town Story.
Notes.
1. The "customer profit" Donald Crisp's character emphasizes is, of course, "consumer surplus" and I would make that point to students viewing the clip.
2. There are by now a number of resources listing and discussing movies that have economics- and/or business-related content. See this well-known list ("Movie Scenes for Economics") and associated references; Larry Ribstein's blog and paper; and Laura Jean Bhadra's course syllabus. But in a quick scan of these resources I didn't see a mention of Home Town Story. I again thank Professor Steckbeck for the reference (and for uploading the clip to YouTube).
3. IMDB states the movie is "apparently" in the public domain.
4. The gentleman standing in the background of the clip is a young Alan Hale, Jr., better known to many as The Skipper on Gilligan's Island.
5. If economics doesn't interest you, the movie--though not the clip--has an appearance by a 24-year-old Marilyn Monroe.
One--among other--objections I have to most Liberal economic policies is the lack of evidence that they work well. Some Liberals will argue that excellent examples of good Liberal economic policies are to be found in Scandanavia, particularly Sweden.
I've noted some problems with the Swedish example before (here and here). Michael C. Moynihan, writing for Reason Hit & Run, adds some useful observations.
In other words, Swedish social democracy, and its concomitant hostility to entrepreneurship and overly generous network of financial benefits for immigrants and asylum seekers, is a significant contributor to high unemployment rates. . . .
Amazingly, Geier revels that "the Swedish economy is competitive, the school system offers choice, and pensions are partially privatized" but fails to note—or is simply unaware—that almost all of these policies were either implemented or introduced by the conservative government of Carl Bildt, against the strenuous objections of the Swedish left, after the economy sunk into a deep recession in the 1990s.
(Link via Megan McArdle.)
I'm posting this especially for two recent NCSU economics majors--and at least occasional readers of the Door--who will be starting graduate work in economics at George Mason University this fall. (But it has good advice for other beginning economcs graduate students as well.) Peter Boetkke, economics professor at Mason, gives tips and some suggestions for summer reading.
One tip: "Don't think courses substitute for knowledge acquisition. Read, talk, live and breathe economcs constantly."
(My first semester of graduate school, the distinguished economist Armen Alchian told us that we didn't have to be thinking about economics 24 hours a day, just "every moment you're awake".)
And, bonus courtesy of all of us at Newmark's Door, here's J. Michael Steele's (Univ. of Pennsylvania, statistics, specialist in financial time series) "Advice for Graduate Students in Statistics". It includes advice for finding thesis topics useful to Ph.D. students in almost any field. (Also see his favorite quotes.)
Arnold Kling concisely explains the differences between "conservatives", "progressives", and "Masonomists".
Perhaps needless to say, Masonomists rule.
Via Marginal Revolution, here's an interesting post: "Why Athletes Go Broke". It reviews the financial troubles of a half-dozen athletes from several sports and cites a "ballpark" estimate by the NBA Players' Association that 60% of NBA players "go broke" within five years after leaving the NBA.
The post goes on to quote from a principal in a sports marketing/management firm:
I think there are several reasons why so many athletes “go broke”. First, whether it is a lottery winner, an athlete or a star entertainer, if they are not equipped with the knowledge on how to make and save money they are in trouble. When they didn’t earn it through disciplined business practices and they don’t have those skills they usually go through it quickly. Most lottery winners or athletes make a great deal of money in a short period of time. They start spending it on things that only go down in value (cars, jewelry, partying, entourage, etc) and start to evaporate the money they do have. They can carry this off until they stop earning big money. This is when the trouble starts. . . .
Most athletes play for four to ten years if they are lucky. After they pay taxes (can be 40 to 50%) and agent fees and buy their first homes, cars, outfits, jewelry (plus, cars, clothes and jewelry for friends and family), they are left with very little.
If this is a general problem, not just a few atypical anecdotes, I certainly don't have a good explanation. I'll add just two notes.
Continue reading "Maybe there's some truth to "Easy come, easy go"" »
You certainly couldn't prove it by last week's skyrocketing spot oil price, but Fortune editor Shawn Tully argues--and I agree--that oil prices are headed for a big fall.
High-flying tech stocks crashed. The roaring housing market crumbled. And oil, rest assured, will follow the same path down.
Not everyone agrees. In an echo of our most recent market frenzies, some experts pronounce that the "world has changed," and that the demand spikes, supply disruptions, and government bungling we face now will saddle us with a future of $4, $5 or even $10 a gallon gasoline.
But if you stick to basic economics, it's clear that the only question is when - not if - prices will succumb.
Link via one of my ECG507 students, Patrick L.
The author concludes that for 2007-08, the 9th pick was the sweet spot.
This news is two weeks old, but in case you missed it: the almost brand-new president of Harvard vetoed the economics department's recommendation to appoint Christina D. Romer. Additional detail and a couple of quotes from unnamed Harvard sources--"they screwed up very badly"; "it truly was a disaster"--here.
Harvard professor Jeffrey Miron notes that economics is Harvard's most popular major--"more than 15 percent of the senior class"--and offers five possible reasons why.
At least as of a couple of weeks ago the TIPS--Treasury Inflation Protected Securities--market was signaling that inflation will be moderate.
. . . the Powell Center for Economic Literacy offers potentially useful resources. Includes LifeSmarts, a competition that "develops the consumer and marketplace knowledge and skills of teenagers in a fun way and rewards them for this knowledge."
People of my generation will almost certainly remember a clever ad for Chiffon margarine featuring the line "It's not nice to fool Mother Nature".
The same could be said about the gods of a competitive marketplace. For many years the United Auto Workers tricked them.
I don't intend to offend any of my female readers--as noted recently, I've been married for 30 years, and I have two daughters--but as a group, women in the U.S. bear a significant part of the responsibilty for our (too) Big Government.
(By the way, Rush Limbaugh will supposedly be discussing John's research on this topic today.)
