Month: May 2012

*Progressive Consumption Taxation*

The authors are Robert Carroll and Alan D. Viard and the subtitle is The X Tax Revisited, published by AEI.  Here is a summary excerpt:

…we propose an X tax, consisting of a flat-rate firm-level tax on business cash flow and a graduated-rate household tax on wages.  The tax would completely replace the individual and corporate income tax, the estate and gift taxes, and the Unearned Income Medicare Contribution tax slated to take effect in 2013.

Those interested in tax policy should read this book, which covers some of the tricky issues — such as the transition, or international income — more carefully than do most sources.


Tyler’s twitter account was hacked yesterday for the most pedestrian of motives:

An amazing new weight loss product! It worked for me and I didnt even change my diet! [link redacted]
— tylercowen (@tylercowen) May 31, 2012

Justin Wolfers tweeted that this was rather unimaginative and following a challenge from Eric Crampton at Offsetting Behaviour a new meme was born, #tylertweets. First the honorable mentions:

Although gas station tacos are generally excellent you should never get carnitas at a gas station that has clean squeegee water #tylertweets
—  Gabriel Rossman ‏@GabrielRossman

#tylertweets New in my pile: “50 Shades of Grey”. Self-recommending.
—  Robert Guico ‏@lpangelrob

@ModeledBehavior truly rose to the challenge:

Its hard to imagine spoons will exist in their current form in 30 years. What does this tell us about the social discount rate? #tylertweets
— Modeled Behavior (@ModeledBehavior)

Given what we know about the money illusion, should the moon be destroyed or doubled? The answer is not clear to me. #tylertweets
— Modeled Behavior (@ModeledBehavior)

#tylertweets cannibalism is wrong, but not for the reasons it’s critics say. We ignore the wisdom of cannibals at our peril.
— Modeled Behavior (@ModeledBehavior)

#tylertweets careful viewers will note Big Momma’s House 3 is biting satire of modern central banking. Most underappreciated drama of 2011?
— Modeled Behavior (@ModeledBehavior)

CSI: Independent

Fingerprints, DNA testing, blood samples and other crime evidence are much more open to interpretation and judgment than is suggested by television or by the police. As a result, I agree with Roger Koppl and E. James Cowan that there needs to be a Wall of Separation between forensic science and law enforcement:

If you work for the police, you tend to see things from that point of view. Same goes for the prosecution. Usually, it is not a conscious thing. You want to be fair and unbiased, and you think you are. But when the boss hopes you’ll find evidence to support her point of view, your mistakes may lean in that direction.

…Crime labs should produce unbiased scientific evidence. In order to be as unbiased as possible, they should report to independent boards. The boards should represent a diverse group of stakeholders, including a local prosecutor, a prominent defense attorney, a representative from the public defender’s office, a traditional scientist working, perhaps, at a university, and a forensic scientist from another jurisdiction.

The growing concentration of education

Dayton sits on one side of a growing divide among American cities, in which a small number of metro areas vacuum up a large number of college graduates and the rest struggle to keep those they have.

The winners are cities like Bridgeport, Conn., San Francisco and Raleigh, N.C., where more than 40 percent of the population has a college degree. Cities like Youngstown, Ohio, Bakersfield, Calif., and Lakeland, Fla., where less than a fifth of the population has a college degree, are being left behind. The divide shows signs of widening as college graduates gravitate to places with a lot of other college graduates and the atmosphere that creates.

“This is one of the most important developments in recent economic history of this country,” said Enrico Moretti, an economist at the University of California, Berkeley, who just published a book on the topic, “The New Geography of Jobs.”

Here is more.

*The Knockoff Economy*

The authors are Kal Raustiala and Christopher Sprigman, and the subtitle is How Imitation Spurs Innovation.  Here is one excerpt:

During the postwar heyday of the one-liner, there was no strong norm against imitating another comedian.  In fact, comedians copied one another shamelessly, joking about it as they did so.  And the type of comedy prevalent then permitted and even encouraged this practice.  Comedians were telling largely interchangeable generic jokes that a wide audience could appreciate.  Comics differentiated themselves by their performance style: who delivered the joke better, timed the audience better, was able to compile and assemble from a repository of jokes a subset that fitted the particular audience.  Many comedians based their acts on a blend of stock jokes, purchased jokes, and copied jokes.  There was not much investment in the kind of personalized material that dominates today.  Given the system at the time, this made sense.  One-liners were easy to copy; delivery, however, was relatively more difficult to steal.  Post-vaudeville comedians were incentivized to invest in their delivery, not in writing new jokes.

Now compare those comedians with their modern counterparts.  Contemporary comics invest far more in original and personal content.  The medium is no longer focused on reworking preexisting genres like mother-in-law jokes.  Nor is it just about slinging in one funny joke after another.  Comedy today is more personal, more story-telling in orientation, and more consistent with a real or assumed stage persona.  In short, comedians in the post Lenny-Bruce era invest in a personality, and their comedy reflects that personality.  They create a comedic brand of sorts.  And to protect that investment and that brand, they have developed a system of social norms that punishes copying.  At the same time, comedians invest less in some of the performative aspects of their work: many today stand at a microphone, dress simply, and move around very little, with none of the more elaborate costuming, mimicry, musicianship, and play-acting that characterized the post-vaudeville comics.

The book is due out in September.

Using iPads to crack down on market-clearing prices

The local government in the popular coastal resort of Sanya in southern China’s Hainan province has decided to introduce a centralized digital food ordering system to prevent the city’s seafood restaurants from overpricing.

Seafood restaurants with 15 or more tables will be required to use iPads to process their orders, Southern Metropolis Daily reported on Monday, citing a government policy.

Smaller restaurants will be asked to use Personal Digital Assistant devices, which are cheaper than iPads, according to the policy.

The iPads and PDAs, with a specially installed program, will be connected to cashier computers at the restaurants. If the price of seafood ordered by customers is higher than the government ceiling, an alarm will sound on the cashier computers and it will not print out the check.

The full article is here, and for the pointer I thank Michael Giberson.

Low interest rates vs. high risk premium

It is often claimed that the governments of the United States, the UK, and Germany should spend more money because they can borrow at low rates, thus raising the present expected return on the investment considered as a whole.

Maybe, but keep in mind that the interest rates on quality government debt are down, in part, because the risk premium is up.  Non-governmental investments are perceived as riskier.  It is also possible that governmental outputs are perceived as riskier, as those outputs will be evaluated by consumers.  Note that Kenneth Arrow’s “the government can spread around the financial risk” point does not eliminate this more fundamental risk, namely the risk associated with the quality of government output, just as there is a risk associated with the quality of private sector output.  Michael Jensen made this point in 1972.

You might think the government investments are “low hanging fruit” in terms of quality.  Maybe yes, maybe no, but the low real interest rate doesn’t signal that, rather it signals merely that people expect to be repaid.

In this argument for more government investment, the notion of government investments as low hanging fruit is doing a lot of the work.

Did the debt ceiling dispute hurt the economy?

Matt offers a summary with links:

I was hoping to do a followup piece on that point, but Betsey Stevenson and Justin Wolfers did a great one for Bloomberg yesterday. The basic point is that we had three of the worst months for job growth of the entire recovery while the debate played out and consumer confidence took a sharp but temporary tumble. This was, in other words, just about the only time from the stress tests until the present when you seemed to see a real sense of panic and uncertainty afflicting the economy. The whole rest of the period has been pretty bad anyway, but the debt ceiling debate really dealt us a blow.

One measure of deflationary pressure

Three days before Ireland’s crucial referendum on the eurozone’s fiscal pact – a vote that could complicate further the debate over austerity in Europe– the citizens of Clones are already taking matters into their own hands. Butchers, bar owners, shopkeepers, barbers and ordinary citizens of the County Monaghan town have in effect resurrected the old Irish currency bearing the faces of past Irish heroes such as Catholic emancipator Daniel O’Connell as the punt exchanges hands and is tucked into the tills.

They are all taking part in an experiment to boost a town ravaged by the economic downturn. It exploits a financial loophole which deems that up to 285m punts stuffed under Irish mattresses, inside piggy banks, salted away as souvenirs in shoeboxes or in latent bank accounts, are still legal currency.

Holders of the old currency are invited to visit Clones and hand over their punts in exchange for blue and yellow laminated vouchers which are then usable at any of the 45 businesses that have signed up for the scheme.

This is one inefficient way of individuals trying to manufacture their own nominal gdp, attached to a possible efficient method of price discrimination.  The plastic coupons, by the way, were printed in China.

The article is here, and for the pointer I thank Tracy Wilkinson.

“Childhood and child labour in the British industrial revolution”

Here is a new and important paper by Jane Humphries (pdf):

Quantitative and qualitative analysis of a large number of autobiographies by working men who lived through the industrial revolution has demonstrated that there was an upsurge in child labour in the late eighteenth and early nineteenth centuries with children’s work entrenched in traditional sectors as well as spreading in newly mechanized factories and workshops. I have interpreted this rise in terms of the appearance of a new equilibrium in the early industrial economy with more and younger children at work. The new equilibrium, in turn, was related to a number of co-incidental developments including: an increase in the relative productivity of children as a result of mechanization, new divisions of labour, and changes in the organization of work; the dynamics of competitive dependence linking labour market and families; high dependency ratios within families; stumbling male wages and pockets of poverty; family instability; and breadwinner frailty. The establishment of these links forges a new synchronization between revised views of the industrial revolution and a revisionist history of child labour.

The original pointer comes from the now back-up-and-running New Economist blog.

*The Oil Curse*

The author is Michael L. Ross and the subtitle is How Petroleum Wealth Shapes the Development of Nations.  It is an excellent book, here is the bottom line:

Most social scientists trace the oil curse to the governments of petroleum-producing states…This book, though, shows that the events of the 1970s, especially nationalization, made the problems of the oil states a lot worse.

Recommended, here is the book’s home page.