Month: January 2013

The impact of biofuel policy on Guatemala

It is bad:

In the tiny tortillerias of this city, people complain ceaselessly about the high price of corn. Just three years ago, one quetzal — about 15 cents — bought eight tortillas; today it buys only four. And eggs have tripled in price because chickens eat corn feed.

…In a country where most families must spend about two thirds of their income on food, “the average Guatemalan is now hungrier because of biofuel development,” said Katja Winkler, a researcher at Idear, a Guatemalan nonprofit organization that studies rural issues. Roughly 50 percent of the nation’s children are chronically malnourished, the fourth-highest rate in the world, according to the United Nations.

James Buchanan (1919-2013), Appreciations

James M. Buchanan Jr.Here a number of appreciations and memories of Jim Buchanan. Steve Horwitz has a good, concise summary of some of his intellectual contributions:

Buchanan’s work changed political economy in fundamental ways.  Thanks to him and his colleagues, three things are true:  No one who wishes to talk responsibly about politics can be ignorant of public choice theory. No one should ever invoke the language of market failure (including externalities) without having digested his work on government failure. And people who run around talking about the constitution better be able to understand something of his contributions to constitutional political economy.

I agree entirely with Robert Higg’s portrait:

I first encountered Jim when he came to Johns Hopkins to present a seminar paper while I was a graduate student there, in 1967, as I recall. He did not make a good impression on me then. His presentation, like all his work, was nontechnical, and Hopkins specialized in a much more formal, mathematical style of economic analysis. When Professor Bela Belassa asked him a technical question, Jim shrugged it off as if its answer didn’t matter much one way or the other. In the grad students’ minds, this attitude toward the very sorts of things we were agonizingly trying to master suggested that he was a lightweight. In this respect, we could scarcely have been more wrong.

Indeed, the hallmark of Buchanan’s work from beginning to end was a deep seriousness of purpose and procedure that not many economists have matched in the past century. Unlike the typical mainstream economist, Jim was never just fooling around, toying with a tweaked model or a trivial, throw-away idea. To a rare degree, he kept his eyes focused on the prize of true economic understanding.

…. He gave me a deeper understanding of the market process than anyone else had given me. He raised many worthwhile questions that I continue to ponder. He offered me a shining example of the economist as a serious thinker, not simply an idiot savant fooling with models.

The NYTimes quotes Tyler:

Over the years since Dr. Buchanan won the Nobel, much of what he predicted has played out. Government is bigger than ever. Tax revenue has fallen far short of public programs’ needs. Public and private borrowing has become a way of life. Politicians still act in their own interests while espousing the public good, and national deficits have soared into the trillions.

In a commentary in The New York Times in March 2011, Tyler Cowen, an economics professor at George Mason, said his colleague Dr. Buchanan had accurately forecast that deficit spending for short-term gains would evolve into “a permanent disconnect” between government outlays and revenue.

“We end up institutionalizing irresponsibility in the federal government, the largest and most central institution in our society,” Dr. Cowen wrote. “As we fail to make progress on entitlement reform with each passing year, Professor Buchanan’s essentially moral critique of deficit spending looks more prophetic.”

Writing in the Wall Street Journal our colleague Don Boudreaux also points to Jim’s work on the true burden of the debt–stop the we owe it to ourselves madness!  Lars Christensen looks at one of Buchanan’s many interesting ideas, the brick standard for monetary policy. Randall Holcombe remembers his teacherThe Washington Post and Bloomberg offer useful commentaries as does political scientist Tim Groseclose.

Of course you should not ignore Buchanan’s own writings which spans more than 20 volumes, 10 of which are available online. Buchanan’s classic Politics without Romance offers a short introduction as does his Nobel lecture.

Buchanan’s Nobel lecture illustrates why, even today, many other economists don’t get Buchanan. While other economists are looking for “efficiency” and “optimality” in models Buchanan had a very different concept of welfare economics.

[Buchanan]…sought to bring all available scientific analysis to bear in helping to resolve the continuing question of social order: How can we live together in peace, prosperity, and harmony, while retaining our liberties as autonomous individuals who can, and must, create our own values?

On a personal note, I was fortunate to have Buchanan both as a teacher and as a colleague. He founded the Center for Study of Public Choice that today I direct.

Buchanan wrote not for the hour or the day but for the age and his influence will continue far into the long run.

My favorite things Guatemala

I am headed there this morning for a Liberty Fund conference.  In terms of the list, I came up with a bunch rather quickly:

1. Writer: Miguel Ángel Asturias.  I don’t see why he isn’t a bigger deal with U.S. readers, given that he won a Nobel Prize for literature.  His Hombres de maíz is a beautiful book.  There is also Francisco Goldman.

2. Blogger, tweeter, and economist: Andres Marroquin.

3. Painter: Julian Chex, from the naive school of Comalapa, and some of his relatives too.  Carlos Mérida is also Guatemalan and not Mexican as many believe.

4. Movie, set in: You’ve got Predator and El Norte, for a start.  As for filming, the Star Wars medal ceremony was shot in part in Tikal National Park, scroll all the way down here.

The country has some of the best textiles in the world and in great profusion.  It has an important university with a superb museum.  A hotel run by Frances Coppola.  And much more.

Sentences about dead mouse prices (markets in everything)

At this time last year, the price of a frozen, euthanized mouse was 45 cents.

But now, that price has nearly doubled, said Diane Johnson, executive director of Operation WildLife Inc. And the 25-year-old animal rehabilitation clinic known as OWL is “struggling” as a result.

Here is more, and for the pointer I thank Matt F.

What is the critical view on the lead-crime correlation?

Here is a report from Scott Firestone.  He does admit that much of the evidence carries some weight, but he is less persuaded when it comes to cohort studies:

It turns out there was in fact a prospective study done—but its implications for Drum’s argument are mixed. The study was a cohort study done by researchers at the University of Cincinnati. Between 1979 and 1984, 376 infants were recruited. Their parents consented to have lead levels in their blood tested over time; this was matched with records over subsequent decades of the individuals’ arrest records, and specifically arrest for violent crime. Ultimately, some of these individuals were dropped from the study; by the end, 250 were selected for the results.

The researchers found that for each increase of 5 micrograms of lead per deciliter of blood, there was a higher risk for being arrested for a violent crime, but a further look at the numbers shows a more mixed picture than they let on. In prenatal blood lead, this effect was not significant. If these infants were to have no additional risk over the median exposure level among all prenatal infants, the ratio would be 1.0. They found that for their cohort, the risk ratio was 1.34. However, the sample size was small enough that the confidence interval dipped as low as 0.88 (paradoxically indicating that additional 5 µg/dl during this period of development would actually be protective), and rose as high as 2.03. This is not very convincing data for the hypothesis.

For early childhood exposure, the risk is 1.30, but the sample size was higher, leading to a tighter confidence interval of 1.03-1.64. This range indicates it’s possible that the effect is as little as a 3% increase in violent crime arrests, but this is still statistically significant.

I don’t have any particular view on this matter, but if you wish can you read Drum’s response here.

Addendum: Andrew Gelman comments.

Law and Literature reading list for 2013

The New English Bible, Oxford Study Edition

Billy Budd and Other Tales, by Hermann Melville.

The Metamorphosis, In the Penal Colony, and Other Stories, by Franz Kafka.

In the Belly of the Beast, by Jack Henry Abbott.

Conrad Black, A Matter of Principle.

Kate Summerscale, Mrs. Robinson’s Disgrace: The Private Diary of a Victorian Lady.

Glaspell’s Trifles, available on-line.

Sherlock Holmes, The Complete Novels and Stories, Sir Arthur Conan Doyle, volume 1.

I, Robot, by Isaac Asimov.

Moby Dick, by Hermann Melville, excerpts, chapters 89 and 90, available on-line.

Year’s Best SF 9, edited by David G. Hartwell and Kathryn Cramer.

Running the Books, by Avi Steinberg.

Death and the Maiden, Ariel Dorfman.

The Pledge, Friedrich Durrenmatt.

The Crime of Sheila McGough, Janet Malcolm

Errol Morris, A Wilderness of Error.

Leslie Katz, “John Keats’s Attitudes to Lawyers,”

Some additions to this list will be made as we proceed, mostly a few short articles.

We also will view a small number of movies on legal themes. You will be responsible for obtaining these or for viewing them in the theater.  These include:

Capturing the Friedmans

Anatomy of a Murder

A Separation

Memories of Murder

MRU videos live

That last two sections of MRU’s Economic Development course (“Migration” and “Population and environment”) are now live, you will find them at the site here.  Michael Clemens has been one big influence, as you can see in our video on whether there is a brain drain problem.  Here is our video on remittances.  Here is our video on the evidence for and against the Malthusian argument.  There is more at the site.

Our final exam will be posting soon.

p.s. We will be starting new courses later this month!  More on that soon…

The Illusion of Central Bank Independence

In 2009 a number of prominent economists signed a petition arguing for central bank independence. I was less enthusiastic writing:

There is nothing magical about independence that makes for low-inflation.

…The primary reason that independent central banks are better at controlling inflation is that absent direct political control the default selection mechanism favors bankers, i.e. lenders, people whose interests make them more favorable towards lower inflation.

Thus, independence is a political decision that favors lenders in the decisions of monetary policy. Now, depending on the alternatives, there may be good reasons for making this choice but we should not fool ourselves into thinking that we have depoliticized money. We should not be surprised, for example, that “independent” central banks tend to make lender of last resort decisions that protect banks and bankers.

Joseph Stiglitz recently made similar remarks

“[The crisis] has shown that one of the central principles advocated by Western central bankers- the desirability of central bank independence-was questionable at best…In the crisis, countries with less independent central banks-China, India, and Brazil-did far, far better than countries with more independent central banks, Europe and the United States. There is no such thing as truly independent institutions. All public institutions are accountable, and the only question is to whom.”

From Business Insider, which adds:

[Stiglitz] believes that in the run-up to the financial crisis, the Federal Reserve was accountable only to Wall Street, and singles out New York Fed President William Dudley for some especially harsh criticism. He claims Dudley was “a model of bad governance” because of his inherent conflict of interest: he bailed out the very banks he was supposed to regulate – the very same banks that enabled him to gain his position.

*Bleeding Talent*, the Tim Kane critique of the U.S. military

Here is a review from The New York Times:

In “Bleeding Talent” (Palgrave Macmillan, $30), Mr. Kane gives us a veteran’s proud, though acutely critical, perspective on the American military. He offers an illuminating view of the other “1 percent” — not the privileged upper crust, but the sliver of Americans who have accepted the burden of waging two of the longest wars in our history.

The military is perhaps as selfless an institution as our society has produced. But in its current form, Mr. Kane says, it stifles the aspirations of the best who seek to serve it and pushes them out. “In terms of attracting and training innovative leaders, the U.S. military is unparalleled,” he writes. “In terms of managing talent, the U.S. military is doing everything wrong.”

The core problem, he argues, is that while the military may be “all volunteer” on the first day, it is thoroughly coercive every day thereafter…

ACCORDING to Mr. Kane, “the root of all evil in this ecosystem” is the Defense Officer Personnel Management Act, enacted by Congress in 1980 to standardize military personnel policies. But the system has defied efforts by successive defense secretaries to bring about change.

That act binds the military into a system that honors seniority over individual merit. It judges officers, hundreds at a time, in an up-or-out promotion process that relies on evaluations that have been almost laughably eroded by grade inflation. A zero-defect mentality punishes errors severely. The system discourages specialization — you can’t expect to stay a fighter jock or a cybersecurity expert — and pushes the career-minded up a tried-and-true ladder that, not surprisingly, produces lookalikes.

Tim is a frequent (unofficial) member of the GMU lunch crew, and you can buy his book here.  Here is Tim’s Wikipedia page.