Month: April 2005

Will Wilkinson on Thomas Jefferson

The more I read about the guy, the more I dislike him. He was without doubt a man of incandescent brilliance. But he also seems to have been sly, creepy, and an insufferable snob, in addition to having been a racist, slaveholding, anti-cosmopolitan, anti-commercial, Jacobin utopian. When his visage appears on Cato promotional material, as it so often does, I try to stay positive.

I like that Jefferson cared so much about food, but I’ve never found his political writings very illuminating.  Read the whole post, Will serves up some other controversial opinions.

Is NAFTA good for rural Mexico?

On net, yes, but it is not simple:

…institutions such as NAFTA are problematic for many of the indigenous groups in Mexico.  While the economic case for free trade is a strong one, politics matters as well.  The long-run benefits of NAFTA, most of all for Mexico, are likely to dramatically outweigh the costs, but trade can worsen some political problems in the shorter run.

…greater wealth sometimes brings greater confiscation in response.  NAFTA, and economic development more generally, has attracted much foreign investment to Mexico.  The land in Guerrero is suddenly more valuable than before, or at least potentially so.  If better roads were in place, Oapan [the village] would be no more than two and a quarter hours from Mexico City.  The Mexican government therefore would like to get the villagers off the land, whether by legitimate means or not. 

The Mexican state and federal governments also favor foreign investment when the villagers do not.  Any foreign investment that came into Guerrero would likely involve significant payoffs, of one form or another, to the various levels of government involved.  The villagers would not expect to see any of this money.  NAFTA therefore has increased the conflict of interest between the villagers and higher levels of Mexican government. 

Here is my previous post on my new book, Markets and Cultural Voices: Liberty vs. Power in the Lives of Mexican Amate Painters.  You can (and should) buy it here.

In the Green Room

In the green room before my appearance on Kudlow and Co. I was with an older gentleman who looked vaguely familiar but I couldn’t place him.  I introduced myself, he was pleasant and we talked a little but he didn’t give his name.  Oh hell, I thought, he expects me to know it.

Do I insult his vanity by asking or do I remain quiet?   My instincts were to remain quiet but by failing to introduce himself he was clearly intending to signal his superiority and that annoyed me – thus at the price of revealing my ignorance I pricked his vanity and subtly indicated that I didn’t know who he was.  He responded, "Well, I was President twice…briefly".

Of course!  I still didn’t recognize him but I immediately knew.  After all, he is famous for claiming he was President, Al Haig!

To be fair, Haig is a major figure in twentieth century U.S. politics and he is still sharp.  We had a very interesting conversation about Truman’s firing of Douglas MacArthur and about Donald Rumsfeld’s mistakes in Iraq.

Funny thing is, however, he never did tell me his name.

Alex on TV

It is likely that Alex will be on the Larry Kudlow show today (CNBC), on the blogger’s segment, at roughly the 5:40-6 time range, EST.  I hope you catch him…

Addendum: The discussion focused on social security, and Alex was great!  (I am told a transcript will appear on  We thank Larry for plugging our blog….and here is the video.  And here is the transcript.

Sophistical arguments, a continuing series

Are you worried about a housing bubble?  Go buy that house anyway.

Let’s say you buy and the price of housing then goes up.  Surely you are happy.

Let’s say the price of housing, including your house, falls.  Well, in absolute terms that is not so bad either.  You can simply stay put.  Even better, you might buy another house.  Consider the polar case where houses fall to a nickel a piece.  Yes you wasted 600K on an overpriced big box.  But now you can buy your favorite mansion for a dime.

In technical terms, consider the changing price as a budget constraint rotating around a fixed status quo point (you can always stay in the house you bought).  The rotating budget constraint will put you on a higher indifference curve.

So go ahead and buy that house.  Yes, you might be better off by waiting for the price to fall.  But don’t worry about bursting bubbles, you won’t end up worse off.

And let’s assume you won’t have to move anytime soon.

So buy, buy, buy.  And don’t stop at homes.

I’ve opened up the comments section, and don’t forget the title of this post.

Demand does not create its own supply

Captain Capitalism is a "frustrated economist" living in Minneapolis.  He thinks he’s found the perfect woman:

…it seemed the prophecy of the Holy and Sacred Elder Economists of Yore were to come true. For in that brief minute of conversation it was established that;

1. She reads The Economist
2. She was a financial manager at a money management firm
3. She had her undergraduate in finance
4. She was getting her masters in economics

next hour of conversation was tantilizing and insanely intelligent. We
talked about econometric modeling. We talked about efficient frontier
theory. We talked about Miller-Modigliani. And then she talked about
her specialty, behavioral economics.

I love it when chicks talk dirty to me.

But he makes one crucial mistake in the dating game and, inevitably, is frustrated.

Jacqueline Mackie Paisley Passey is not (yet?) a professional economist but she understands this market far better than CC in Minneapolis.  Kindly, she lays it all out for him in the comments section.  But will he learn the error of his ways?  Are his expectations rational?  Can the Captain find a first-mate? Tune in next week as the frustrated economist finds that doing it with models ain’t as easy as it looks.

John Bates Clark Award goes to Daron Acemoglu

In a written statement, the [American Economic] association praised Mr. Acemoglu, 37, as a "broad and productive economist" who has made "valuable contributions" in the fields of labor economics, macroeconomics, institutional economics, and political economy. "Especially innovative," the statement says, is his recent work on the role of institutions in development and in political economy.

Mr. Acemoglu was one of the authors of a paper, "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," that appeared in the Quarterly Journal of Economics in 2002. The authors argue that among countries colonized by European powers, those that were relatively rich in 1500 are now relatively poor because of colonial policies — an argument against the notion that geography is destiny.

In a working paper published in March by the National Bureau of Economic Research, Mr. Acemoglu and other authors argue that there is no evidence that countries that increase their levels of education are likely to become more democratic.

That is from the Chronicle of Higher Education, through the Division of Labor blog

This is a very good choice.  Acemoglu is an economist who starts with, and sticks with, the critical questions about development and institutions.  He does not let himself get distracted by a model he knows he can solve or a technique he knows he can use.  Here is his home page, with links to research.  Here is an earlier MR post on his work.  Here is David Warsh on Acemoglu.

My new book on Mexico and globalization

Randall Kroszner writes a very nice blurb for my new Markets and Cultural Voices: Liberty vs. Power in the Lives of Mexican Amate Painters:

Cowen is a cross between Vasari and de Soto, using the lives of artists in rural Mexico to challenge the development orthodoxy to illustrate how global markets and liberty are the friends, not the enemies, of the rural poor and their cultural expression.  A stimulating interdisciplinary tour de force and a must-read for anyone who cares about development policy.

You can order the paperback here.  Please do consider buying this book, noting that any royalties will go to the artists.  I regard it as the most personal book I have written — recording the story of these artists, and integrating it with economic understanding — has been a personal quest of mine for almost a decade.

Yes I would prefer that this book is free like MR, but the publisher will not cooperate. 

Click here to see one of my favorite images by these painters.  Here is an earlier MR post on one of the Mexican painters, Marcial Camilo.  Here are yet more images.

Airport Security

In Changing the Guard I wrote:

After the Sept. 11 attacks, many people immediately assumed that more government was necessary and thus the Aviation Security Act, passed just two months after the attacks, federalized airport security.   But on 9/11 airport security did not fail at its assigned task, which was to keep bombs and illegal weapons off the plane.  It’s difficult to see, therefore, how federal workers would have performed better.

No country has more experience with terrorism than Israel, yet Tel Aviv’s Ben Gurion Airport uses private security firms to do major portions of its security work.  In Europe, entire airports are increasingly run by private corporations.  The main airports at Athens, Copenhagen, Frankfurt, London, Rome, Vienna and Zurich, for example, are run by private for-profit firms.  Government is not absent in these airports but, as with private prisons, it remains content with defining acceptable levels of ouput and creating procedures to measure and test the performance of the private companies.

What has Federalization bought us?  Despite spending billions of dollars security at airports has not improved since 9/11 and waste appears rampant.

As a test, 5 airports were allowed to keep private screeners.  The results?

The Government Accountability Office found statistically significant
evidence that passenger screeners, who work under a pilot program at
five airports, including San Francisco International Airport, perform
better than their federal counterparts at some 450 airports, Rep. John
Mica, R-Fla. and chairman of the House aviation subcommittee, said

Must my TV snobbery come to an end?

I’ve long been a TV snob, and I can recall going twenty years without watching a program.  But now I like — and sometimes love — several contemporary shows: Seinfeld, Curb Your Enthusiasm, The Sopranos, and Ali G.   (The Simpsons I appreciate but do not love viscerally; my favorite few South Parks are excellent but the median SP bores me.)  After viewing but a single episode, I believe Firefly must be added to my list.

Outsourcing for everything

Why not grade exam papers in India?  Brad DeLong offers the link.  The obvious question is what we really need professors for anyway  — are we simply magnets of personality to keep students interested?

Speaking of Brad, he and Jacqueline Passey have unknowingly combined forces to make me mighty curious about Firefly.  The Amazon ratings are in the stratosphere.  My TV education continues.  But if I ever felt obliged to watch the medium, my already overbooked life would simply fall apart…