Month: April 2004

The Federal government has for a long time prohibited the use of federal funds in toll road projects. Amid the pork in the approx. $300 billion highway bill, however, are provisions that would lift this ban. Gasoline taxes are not raising enough revenue to support road construction and maintenance at desired levels but no one wants to propose an increase in the gas tax today! In addition, policy makers are finally beginning to understand that there’s no such thing as a free lunch or a free highway. Mary Peters, the administrator of the Federal Highway Administration said recently:

Our Interstate system left the public with the perception that roads are free and price shouldn’t vary according to the demand you place on roads, but that’s a fallacy. If you use the road at a peak time when many other people want to use it, then you should pay a higher price.

I don’t expect to see “free” roads converted to toll roads anytime soon but new roads financed by electronic tolls will become increasingly common and this move will encourage the creation of HOT lanes (high occupancy/toll lanes) in the median or alongside currently congested highways. Northern Virginia, the San Francisco Bay area, Chicago and other centers of heavy congestion for example, could all benefit from HOT lanes. Fairfax endorsed such a road not long ago.

Addendum: Here is a good report on road pricing around the world. And here is my debate with Tyler on this subject.
Tyler I, Alex 1, Tyler I, Alex II.

Glen Whitman, Cal State Northridge economist, presents an elegant idea: The Two Things.

A few years ago, I was chatting with a stranger in a bar. When I told him I was an economist, he said, “Ah. So . . . what are the Two Things about economics?”

“Huh?” I cleverly replied.

“You know, the Two Things. For every subject, there are really only two things you really need to know. Everything else is the application of those two things, or just not important.”

“Oh,” I said. “Okay, here are the Two Things about economics. One: Incentives matter. Two: There’s no such thing as a free lunch.”

It would be hard to do better than that! And Glen has gathered an terrific group of Two Things statements from readers. A sample:

The Two Things about Marketing:
1. Find out who is buying your product.
2. Find more buyers like them.
-Racehorse

The Two Things about Software Engineering:
1. Pick two, and only two: stable, feature-complete, on-time.
2. One great coder is better than two good coders, except when not.
-Matt

The Two Things about Teaching History:
1. A good story is all they’ll remember, not the half hour of analysis on either side of it.
2. They think it’s about answers, but it’s really about questions.
-Jonathan Dresner

The Two Things about Art Criticism:
1. If it isn’t novel, critics aren’t interested.
2. If it is novel, no one else is interested.
-TheLetterM

The Two Things about Writing:
1. Include what’s necessary.
2. Leave everything else out.
-Nicholas Kronos

The Two Things about World Conquest:
1. Divide and Conquer.
2. Never invade Russia in the winter.
-Tim Lee

The Two Things about Star Trek:
1. Don’t beam down in a red shirt.
2. You can always talk evil computers into destroying themselves.
-Tim Lee

My modest attempt to match these is

The Two Things about Life:
1. Be brave, work hard, save: live for the long run.
2. In the long run, we’re all dead.

Professor Joanna Shepherd (Clemson) presented “Racial Diversity, Residential Segregation, and Crime: An Industrial Organization Analysis of Racial Competition” at N. C. State. She finds that, other things equal, more racially diverse areas have more crime. From her conclusion:

My econometric analysis of counties from 1990-1999 and metropolitan areas in 1980,
1990, and 2000 finds that both diversity and segregation increase crime. Moreover, tests of the
combined effect of diversity and segregation reveal that segregation worsens diversity’s effect on
crime. My results are robust to many alternative specifications. Moreover, tests confirm that my
diversity measures are not proxying for racial groups that disproportionately commit crime. Nor
are the results caused by any potential endogeneity between crime and diversity. Finally, my
estimations are designed so that my racial diversity measure is not picking up other types of
diversity, such as income diversity or religious diversity, which could increase crime.

The results from my econometric analysis confirm the predictions of my industrial organization theory of racial competition. The theory suggests that diversity increases both inter and intra-racial crime as racial groups compete. Segregation sharpens the competition.

My results in no way establish that diversity is bad; diversity provides countless benefits such as awareness of other racial groups and an intermingling of cultures. However, this paper, for the first time, focuses on one of diversity’s costs: increased crime. To determine the optimal amount of diversity in a region, one must weigh diversity’s numerous benefits against the costs.

She hypothesizes that a primary means by which diversity affects crime is provision of local goods. Areas that are more diverse tend, other things equal, to provide less public goods.

Here is Nicholas Kristof on the terrible consequences of so-called international labor standards.

It’s appalling that Abakr, like tens of millions of other children abroad, is working instead of attending school. But prohibiting child labor wouldn’t do him any good, for there’s no school in the area for him to attend. If child labor hawks manage to keep Abakr from working, without giving him a school to attend, he and his family will simply be poorer than ever.

And that’s the problem when Americans get on their high horses about child labor, without understanding the cruel third world economics that cause it. The push by Democrats like John Kerry for international labor standards is well intentioned, but it is also oblivious to third world realities.

Look, I feel like Scrooge when I speak out against bans on sweatshops or on child labor. In the West, it’s hard to find anyone outside a university economics department who agrees with me. But the basic Western attitude – particularly among Democrats and warm-and-fuzzy humanitarians – sometimes ends up making things worse.

Kristof goes beyond attacking soft-headed thinking, he also suggests a soft-hearted alternative.

It’s bribery. The U.N. World Food Program runs a model foreign aid effort called the school feeding program. It offers free meals to children in poor schools…. “If there were meals here, parents would send their kids,” said Muhammad Adam, a teacher in Toukoultoukouli.

School feeding costs just 19 cents per day per child.

So here’s my challenge to university students: Instead of spending your energy boycotting Nike or pressing for barriers against child labor, why not sponsor school meals in places like Toukoultoukouli?

I spoke with officials at the World Food Program [you can donate at this link, Alex], and they’d be thrilled to have private groups or individuals help sponsor school feedings. Children in Africa will be much better off with a hot meal and an education than with your self-righteous indignation.

Aside: The only thing Kristof misses is that the soft-hearted demand for international labor standards often masks labor union protectionism. Another case of bootleggers and Baptists. And here is Tyler with more on the economics of child labor.

The average full professor of economics has a salary of $135,000, the median is $138,000.

The sample is the top seventeen public universities in the United States. Here are the raw data.

On the other hand, Bill Gates has been earning an estimated $300 a second.

Nonetheless here are some other reasons to become a professional economist.

Thanks to Dan Houser for the pointer on the salaries.

In spite of the recent downturn, never-married mothers continue to stay off the welfare rolls. Kausfiles offers some cogent commentary, along with links to the data. Here is his bottom line:

What happened in the 2001-2002 recession, and the subsequent sluggish job recovery? Burtless says reliable figures for 2003 aren’t yet available, but he has the numbers for 2001 and 2002. “Astonishingly,” he says, “divorced, separated and never married mothers seem to have maintained [labor market] participation rates all through the recession” and the follow up. For “never married” mothers, the percent working dipped to 64.4 in 2001 but was back up to 65.8 in 2002. Essentially, it stabilized near its all-time peak, at a level about 20 percentage points higher than before 1996. Burtless thinks this happened at least partly because the recent recession was relatively easy on those at the bottom of the labor market (and relatively hard on those with college degrees). Maybe a different kind of recession–one that hit unskilled jobs the hardest–would produce a big increase in welfare rolls. Maybe not.

Either way, Burtless’ statistics suggest that welfare rolls didn’t fail to rise in 2001-2 because jobless single mothers were heartlessly denied their benefits and left with nothing. The rolls didn’t rise in the recession because single mothers kept on working. That’s a good thing. Advantage: Reformers!

The bottom lines: First, welfare reform has proved resilient and was a good idea. Second, the figures also illustrate why Bush isn’t a shoo-in for reelection. Many of the people spared by the current recession wouldn’t have voted for him anyway.

Believe it or not, the private British firm, Global Risk International, “a more bespoke approach to the security industry,” operates the 6th largest military force in Iraq. Overall there are some 15,000 private military contractors in Iraq. In addition to more mundane tasks like feeding the troops they protect convoys and train the Iraqi police, paramilitary and army. The four Americans brutally killed earlier this week were employees of Blackwater Security Consulting who also serve as bodyguards for Paul Bremer.

In the United States, private military firms (PMFs) are similarly pervasive. Over the past 10 years the US has spent more than 300 billion on private forces including a contract for the operation of the computer and communications systems at NORAD’s Cheyenne Mountain base, where the U.S. nuclear response is coordinated. Brookings’s Peter Singer notes:

PMFs now provide the logistics for every major U.S. military deployment, and have even taken over the Reserve Officer Training Corps (“ROTC”) programs at over two hundred U.S. universities; that is, private company employees now train the U.S. military leaders of tomorrow.

I have drawn from Peter Singer’s book Corporate Warriors: The Rise of the Privatized Military Industry as well as several of his papers at the Brookings Institution. If you are in need of a small island nation, here is list of private military firms.