Sadly, the average economist is no Milton Friedman.
It beggars belief when economists at Princeton, Harvard and Berkeley claim that they are lone voices in the wilderness boldly striking heterodox positions against the hegemony of “free market economics.”
David Card, for example, says “You lose your ticket as a certified economist if you don’t say any kind of price regulation is bad and free trade is good.” Really? Card and Krueger’s famous paper on the minimum wage was a 1993 NBER working paper published in the AER in 1994. What happened then in 1995? Was Card decertified, drummed out of the profession, vilified by his peers? Hardly, in 1995 David Card was honored (deservedly imho) by the American Economic Association with the John Bates Clark medal.
Dani Rodrik says “I fall into the methods of the mainstream, but not the faith,” which he defines as the belief that more markets and free trade are always good and government regulation is always bad. Give me a break. Let’s go to the data.
Klein and Stern surveyed members of the AEA on a host of policy questions bearing on markets and government regulation. The result, “Only a small percentage of AEA members ought to be called supporters of free-market principles.”
Even on the minimum wage, support for which Card says gets you decertified, the mean economist position is in between “support mildly” and “have mixed feelings.” Indeed, even Card has mixed feelings about the minimum wage! (See his book with Krueger in which he points out that the minimum wage is not a very effective way to help the poor). On a host of other issues concerning government regulation, like support for OSHA, the FDA, and the EPA, the mean economist is somewhere between strongly and mildly support.
Only on free trade is there strong opposition to government regulation in the form of tariffs. Thank goodness for small mercies.
Markets in Everything: Replacement Drivers
The NYTimes reports on Korean replacement drivers – they drive drunks home in the drunk’s own car.
Their work has become such an essential part of life in Seoul and other
major cities of South Korea that the national statistical office last
year began monitoring the price of replacement driver services as an
element in calculating the benchmark consumer price index. An estimated
100,000 replacement drivers handle 700,000 customers a day across the
country, the number increasing by 30 percent on Fridays, according to
the Korea Service Driver Society, a lobby for replacement drivers.
This seems like a great idea and it’s obviously a huge success in Korea. Why not in the United States?
Tyler on UFOs
Discover Your Inner Economist has lots of great insights. But this one Tyler gets all wrong.
Small changes in incentives can make a big difference in our beliefs. For instance, UFO sightings are down dramatically in the last decade…I think [one factor is] cell phones and cell phone cameras.
"The spaceship was in a no-call dead zone. And you didn’t snap a picture?"
…The story is suddenly a little harder to swallow. Most of all, it is harder to fool oneself, not just one’s spouse and friends.
I mean really. Why jump to conclusions? OBVIOUSLY the aliens know we have cell phone cameras now.
Worse than Viruses
Public computer surfaces are reservoirs for methicillin-resistant staphylococci.
The role of computer keyboards used by students of a metropolitan
university as reservoirs of antibiotic-resistant staphylococci was
determined. Putative methicillin (oxacillin)-resistant staphylococci
isolates were identified from keyboard swabs following a combination of
biochemical and genetic analyses. Of 24 keyboards surveyed, 17 were
contaminated with staphylococci that grew in the presence of oxacillin
(2 mg l-1). Methicillin (oxacillin)-resistant Staphylococcus aureus (MRSA), –S. epidermidis (MRSE) and –S. hominis
(MRSH) were present on two, five and two keyboards, respectively, while
all three staphylococci co-contaminated one keyboard. Furthermore,
these were found to be part of a greater community of
oxacillin-resistant bacteria. Combined with the broad user base common
to public computers, the presence of antibiotic-resistant staphylococci
on keyboard surfaces might impact the transmission and prevalence of
pathogens throughout the community.
Thanks to Monique van Hoek for the pointer.
Creative Destruction?
I met a friend recently that I hadn’t seen since high school. I told her I was an economist. "Oh," she said in the nicest possible way, "I’m surprised, you were so creative in high school." Sigh.
Money can’t buy you love but in Illinois it can compensate
Arthur Friedman asked his wife to have sex with other men. She said yes and fell in love with the third wheel. Art then sued the invitee and won $4,802 under Illinois’s alienation of affection doctrine.
Aside from voyeurism the case raises some interesting issues. Friedman surely does not have a right to his wife’s affection – he can’t sue her if she doesn’t love him – so if another man steals what Friedman does not own how can Friedman have a claim against the other man? It’s cases like this that push me towards Murray Rothbard’s position that you don’t have a right to other people’s thoughts. As a result, there can be no just laws against alienation of affection but also since you do not have a right to your reputation (it is in other people’s heads) there can be no just laws against libel.
Thanks to Monique van Hoek for the pointer.
Jefferson’s Last Letter
In his last letter Thomas Jefferson declined for reasons of ill health to attend a celebration in Washington on the fiftieth anniversary of the Declaration of Independence.
I should, indeed, with peculiar delight, have met and
exchanged there congratulations personally with the small band, the
remnant of that host of worthies, who joined with us on that day, in
the bold and doubtful election we were to make for our country,
between submission or the sword; and to have enjoyed with them the
consolatory fact, that our fellow citizens, after half a century of
experience and prosperity, continue to approve the choice we made.
May it be to the world, what I believe it will be, (to some parts
sooner, to others later, but finally to all,) the signal of arousing
men to burst the chains under which monkish ignorance and
superstition had persuaded them to bind themselves, and to assume the
blessings and security of self-government. That form which we have
substituted, restores the free right to the unbounded exercise of
reason and freedom of opinion. All eyes are opened, or opening, to
the rights of man. The general spread of the light of science has
already laid open to every view the palpable truth, that the mass of
mankind has not been born with saddles on their backs, nor a favored
few booted and spurred, ready to ride them legitimately, by the grace
of God. These are grounds of hope for others. For ourselves, let
the annual return of this day forever refresh our recollections of
these rights, and an undiminished devotion to them.
Compensating Variations
The British Parliament was debating how much slave owners should be compensated for their losses, 20 million pounds as it turned out, when a furious John Stuart Mill rose to his feet thundering, "I should have thought it was the slaves who should be compensated."
I am reminded of this story, which is probably apocryphal, whenever I hear about how we must compensate "the losers" from globalization. Really? Why should they get any compensation at all?
Imagine that transportation costs fall so that Joe buys his shoes from China. Why do lower transportation costs impose an obligation on Joe to compensate Mary, a U.S. shoe maker? If transportation costs rise (say because the price of oil increases) does Mary have an obligation to compensate Joe?
Or imagine that tariffs have long protected the shoe industry and now the tariffs are lifted allowing Joe to save some money. Why does this impose an obligation on Joe to compensate Mary? Indeed, shouldn’t Mary have to compensate Joe? After all because of the tariffs for many years Joe had to labor extra hours to buy shoes – shouldn’t Joe be compensated for this injustice?
Think about it this way: Suppose the mafia threatens to do you harm if you don’t buy at over-inflated prices from Guido’s Supplies. For many years you buy but one day the mafia is forced out of business. Now you are free to buy from any supplier. Must you compensate Guido for his losses?
Of course, I understand that we might have to compensate the losers from globalization because without compensation they won’t allow us to trade. My question is different. It might be expedient to compensate slave owners but is this justice?
Addendum: It was Benjamin Pearson not Mill (see my comment below for citations).
Virtual Economy Hires Real Economist
The massively multiplayer online game, EVE Online, has hired a PhD economist. Dr. Eyolfur Guomundsson writes:
In the real world, economic information is the cornerstone for our
daily business; everyone takes note when news on inflation, production
and interest rates are announced and traders try to predict beforehand
what the news will be. There is a constant game between the market and
authorities on predicting each other’s move and for that everyone needs
information. Though EVE is a virtual world, the basic needs are the
same. Players, designers and the company leaders at CCP will all
benefit from having a central figure to monitor inflation and trends
and provide a focused insight into what is happening within that
virtual world so that everyone can make better decisions.As the lead economist for EVE, my duties will include
publishing economic information to the EVE-Online community. My duties
will also be to coordinate research cooperation with academic
institutions as the academic world has expressed quite an interest in
doing research on this phenomenon (which shows how important MMOGs
might become in future research into economic and human behavior).
Thanks to Derek Guder for the link.
Meet Bryan Caplan in Person!
Bryan Caplan will be talking about free trade and The Myth of the Rational Voter at the Heritage Institute on Monday July 2 at 11 am, RSVP here.
He will also be speaking at a Cato luncheon for his book on Tuesday July 17 at noon. More information here.
Bryan would be happy to sign your copy of the The Myth of the Rational Voter. I know he would be even more delighted to sign your copy of Amore Infernale.
Eating Strategies
Do you eat the best thing first or save the best for last? Most people fall into one of these two categories and according to Brian Wansink’s Mindless Eating there is a simple economic explanation. The people who eat the best thing first tend to have grown up as younger children from large families. The people who save the best for last are more often first borns. Need I say more?
Mindless Eating, by the way, masquerades as a diet book but it’s really about research design! Highly recommended.
Gas Shortages in Iran
Iran, one of the largest producers of oil in the world, has shortages of gasoline and has just introduced a rationing scheme causing riots in the streets.
Need I explain why the shortage exists?
Under the rationing plan, owners of private cars can buy 26 gallons of
fuel per month at the subsidized price of 38 cents per gallon.
and this tidbit is interesting.
Conservatives in Iran’s parliament, especially those aligned with
the country’s national oil company, have long pushed for higher
gasoline prices to curtail demand and free up government funds for
investment in more oil and gas production.Ahmadinejad had resisted allowing increases because of his campaign promises to share Iran’s oil wealth with the nation’s poor.
The Spirit of Radio
The Lott-Levitt dispute is a distraction but John Lott’s Freedomnomics has plenty of interesting economics. I liked this bit regarding free-riding and the early history of radio:
…free-riding problems initially seemed almost insurmountable in providing radio service….some peope doubted there was any way to make listeners pay. In 1922, Herbert Hoover, then Secretary of Commerce, declared: "Nor do I believe there is any practical method of payment from the listeners." Others assumed that radio transmissions would eventually be funded by paying subscribers, but no one could devise a method for limiting broadcasts to subscribers’ receivers. Consequently, some believed that government would have to provide the service…
So what happened? Did private businessmen throw up their hands and invite the government to run the industry? Was society denied the benefits of radio because no one could solve the free-riding problem? Of course not. The problem was eventually resolved in 1922 when AT&T discovered that it could make money by selling radio advertising airtime….With enough at stake, companies find amazingly creative ways to solve free-riding problems.
Sophisticated, Unintelligent-Non Design
The buds or leaves of many plants are arranged not randomly but in sophisticated spiral structures that exhibit many mathematical properties involving Fibonacci sequences and golden angles.
A theist might see evidence of intelligent design in these structures. An evolutionary biologist (or economist) might see evidence of unintelligent design i.e. they will assume that since the patterns are far from random there must be some functional advantage to spiral patterns and that natural selection operating over many generations results in a convergence to or near the optimum.
There is, however, a third – often overlooked – possibility. Sophisticated structures may be the result of unintelligent, non-design. Here’s an interesting article, for example, arguing that the spiral patterns in flowers are the result of physical processes of attraction and repulsion. In particular, check out this cool movie which shows magnetized drops of ferrofluid being dropped into a dish that is magnetized at its
edge and filled with silicone oil. The droplets are attracted to the edge of the dish and repelled from one another. What’s interesting is that when the droplets are dropped slowly they float directly away from one another in a simple pattern but when they are dropped quickly they form intricate spirals with different properties depending on how quickly they are dropped. (Note that the movie is a bit long – just grab the slider and you will see what is going on). The physical model is only suggestive of what is going on in flowers, of course, but the idea is generating new testable predictions about the kinds of patterns we should see in real flowers.
My suspicion is that quite a few of the sophisticated patterns that we see in nature and elsewhere is neither intelligent nor unintelligent design, i.e. not functional in any direct sense, but rather the result of unintelligent, non-design.
Hell Money
I’ve always liked this joke.
Paddy O’Brien died and as is the Irish custom the mourners were throwing money into his coffin. The town miser, whom everyone despised, cried out "I loved Paddy O’Brien. Whatever anyone else puts into the coffin, I will double!" Thinking the miser a little bit drunk the townspeople took this as an opportunity to teach him a lesson. Gathering all their money they showered the coffin with $3012 in bills and coins, more than had ever before been given at a funeral. The miser then gathered the money, wrote a cheque for $6024 and threw that in.
The Chinese have a similar custom of burying the dead with money but like the miser they understand monetary economics (if not perhaps signalling theory). Big white guy explains in his interesting post on Chinese hell money.
Hat tip to Marcus at the Mises Economics Blog.