Markets in Everything
Or is this item another reason for vouchers? I think it is sad, but then again I sell the contents of my brain so who am I to object?
Thanks to Chris Rasch for the heads up.
Guest Bloggers
Tyler is off on a travel adventure starting in Las Vegas but then on to a number of different countries and continents. He will keep us informed about his favorite things ____ as he travels. In the meantime, we will have several guest bloggers beginning, as you can see below, with the ever-interesting Fabio Rojas.
Liberty Belles
Liberty Belles is a new blog from five young libertarian women ready to take on the world. I like their Statement of Principles:
What We Want
For too
long, the word on the street has been that the movement for freedom and
limited government lacks its Lady Liberty. Women’s voices are largely
absent from the conversation, despite the calls and catcalls of our
fellow men.In March 2004, Comedian Drew Carey wrote a letter to Reason Magazine Editor-in-Chief Nick Gillespie suggesting some strategies for improving circulation:
“To start with, how about some near-naked starlets? ‘The Girls of Reason‘
or something like that. To justify them editorially, you could have
them holding pencils between their pouty lips while reading books on
privatization. You could also note how much perkier their breasts are
without government interference.”While we may not be naked
and pouting, our ideas are on display for all to see. We stand for free
minds, free markets, free… Well, let’s say we don’t mind you holding
the door for us, we just don’t want the government doing it.With Liberty Belles, we blast ourselves into the canon of ideas.
And
because we simply can’t disappoint, here’s a sneak peek at how ladies
of liberty lead the people. Drew Carey: eat your heart out.
Go get em grrls! And don’t forget to check out one of the uber-texts of libertarian feminism, Liberty For Women (I am a contributor).
Freakonomics Too
The latest Wall Street Journal Econoblog features yours truly and Bryan Caplan. Instead of debating, Bryan and I talk about our favorite freakonomics from people other than Levitt and Dubner. We hit on some themes familiar to this audience and some new material.
Unocal and China
Michael Higgins who blogs at Chocolate and Gold Coins but is writing in the comments section of Crooked Timber asks a good question about the CNOOC bid.
If Unocal went out of business, would we have cared? If China had spent $10
billion on new tanks, would we be quaking in our boots? (I’m glad they are not
doing this). But if neither happens but instead one Chinese company buys Unocal
and keeps their employees employed, we should be concerned?
Although I didn’t get into this in my original post, it’s also not clear to me what we gain by "owning" Unocal. If the assets of Unocal are in America or an ally then CNOOCs bid gives us greater power over China not less. If the assets are in Asia then in the event of a major conflict we would have to use the military to control the assets whether we own them or not. Steve Carr, also writing in the comments section of Crooked Timber, expresses this point well.
The United States doesn’t own, in any sense, Unocal’s reserves–the vast majority
of which are, by the way, in Asia. So it’s not losing anything, because it
doesn’t have anything. If, in this imaginary future that Krugman is conjuring,
the US wants those reserves, it will have to take them by force–first
nationalizing Unocal (or whatever American company comes along to pick up Unocal
if the CNOOC bid is dropped) and then seizing and
defending the reserves militarily against the Chinese (who, in Krugman’s model,
will presumably be trying to take them). If Unocal is bought by CNOOC, and we want the reserves, we’ll again have to take them
by force from a public company. The second seems mildly more difficult than the
first, but in both cases you’re talking about a massive use of military force to
secure energy resources. If we do end up in that future, I have a hard time
believing that who owns the deed to the natural-gas fields in Indonesia is going
to make much of a difference to anyone.There is, then, no real downside (in strategic terms) to letting the deal go
through. But there’s a real downside to blocking it: alienating China, making it
clear to them that we perceive them as an enemy, looking like hypocrites in the
eyes of the world, interfering with rights of Unocal shareholders, etc.
Other good comments from Tino at Truck and Barter.
An Eminent Domain Case that I Favor
If rich, powerful people were subject to eminent domain I think the Kelo decision would have been decided differently. Logan Clements has a good idea for a new hotel project.
Monday, June 27, 2005
Mr. Chip Meany
Code Enforcement Officer
Town
of Weare, New Hampshire
Fax 603-529-4554Dear Mr. Meany,
I
am proposing to build a hotel at 34 Cilley Hill Road in the Town of Weare. I
would like to know the process your town has for allowing such a
development.Although this property is owned by an individual, David H. Souter, a recent
Supreme Court decision, "Kelo vs. City of New London" clears the way for this
land to be taken by the Government of Weare through eminent domain and given to
my LLC for the purposes of building a hotel. The justification for such an
eminent domain action is that our hotel will better serve the public interest as
it will bring in economic development and higher tax revenue to Weare.As
I understand it your town has five people serving on the Board of Selectmen.
Therefore, since it will require only three people to vote in favor of the use
of eminent domain I am quite confident that this hotel development is a viable
project. I am currently seeking investors and hotel plans from an architect.
Please let me know the proper steps to follow to proceed in accordance with the
law in your town.Thank you.
Sincerely,
Logan Darrow
Clements
Freestar Media, LLC
Addendum: The hotel is to be called the Lost Liberty Hotel. You can pledge to stay at the hotel if it is built, thereby demonstrating its public value, at Pledge Bank which uses assurance contracts to overcome prisoner’s dilemma problems. Thanks to Travis Corcoran for the link and starting the pledge.
Krugman: Illiberal Demagogue
Paul Krugman used to be a liberal economist; no longer. His abandonment of economics has long been plain, Krugman’s abandonment of liberalism was announced in yesterday’s commentary on China.
What really upset me about Krugman’s column is not the bizarre economics but the illiberal politics. In the last twenty years China’s economic growth has lifted hundreds of millions of people out of poverty and nearly unspeakable deprivation. China’s abandonment of communism is one of the great humanitarian events of all time. And what does Krugman have to say about this improvement in well being? (I paraphrase).
‘Watch out. Now is the time to panic. Their gain is your loss.’
It’s hard to over-estimate how awful Krugman’s column is. Consider this:
China, unlike Japan, really does seem to be emerging as America’s strategic rival and a competitor for scarce resources…
‘Strategic rival’ is the kind of term that would-be Metternichs throw about to impress their girlfriends but what does it mean? Everyone is a competitor for scarce resources. Even those nice Canadians compete with Americans for scarce resources. Are Canadians a strategic rival to be feared?
The real question is how do rivals compete? Do they compete with war or by trade? China is moving from the former to the latter but shockingly Krugman prefers the former. Exaggeration? Consider this statement:
…the Chinese government might want to control [Unocal] if it envisions a sort of
"great game" in which major economic powers scramble for access to
far-flung oil and natural gas reserves. (Buying a company is a lot
cheaper, in lives and money, than invading an oil-producing country.
So what does Krugman recommend? Blocking the bid for Unocal. In other words, support China’s fear that they may be cut off from oil and encourage the invasion of an oil-producing country.
Nothing can harm the prospects for world peace more than the vicious
idea that we do better when they do worse. The Chinese and Americans people already have enough mercantilists,
imperialists and “national greatness” warriors pushing them towards conflict, what we need on this issue are liberal economists like the wise Brad DeLong who writes:
It is very important for the late-twenty first century national
security of the United States that, fifty years from now,
schoolchildren in India and China be taught that America is their
friend, that it did all it could to help them become rich. It is very
important that they not be taught that America wishes that they were
still barefoot and powerless, and has done all it can to keep them so.
How is it that Brad DeLong and I should agree so completely? It is because neither of us has forgotten our heritage as economists. Here then is the enlightened humanity and wisdom of the first liberal economist.
Each nation foresees, or imagines it
foresees, its own subjugation in the increasing power and
aggrandisement of any of its neighbours; and the mean principle of
national prejudice is often founded upon the noble one of the love of
our own country. The sentence with which the elder Cato is said to have
concluded every speech which he made in the senate, whatever might be
the subject, ‘It is my opinion likewise that Carthage ought to be destroyed,’
was the natural expression of the savage patriotism of a strong but
coarse mind, enraged almost to madness against a foreign nation from
which his own had suffered so much. The more humane sentence with which
Scipio Nasica is said to have concluded all his speeches, ‘It is my opinion likewise that Carthage ought not to be destroyed,’
was the liberal expression of a more enlarged and enlightened mind, who
felt no aversion to the prosperity even of an old enemy, when reduced
to a state which could no longer be formidable to Rome. France and
England may each of them have some reason to dread the increase of the
naval and military power of the other; but for either of them to envy
the internal happiness and prosperity of the other, the cultivation of
its lands, the advancement of its manufactures, the increase of its
commerce, the security and number of its ports and harbours, its
proficiency in all the liberal arts and sciences, is surely beneath the
dignity of two such great nations. These are all real improvements of
the world we live in. Mankind are benefited, human nature is ennobled
by them.
Voltaire: Game Theorist
Voltaire didn’t just champion markets he used them to his advantage. In one scheme he successfully cornered the market on a poorly-designed government lottery buying all the tickets to score a sure profit. Jerry Muller writing in his excellent The Mind and the Market: Capitalism in Western Thought speculates that Voltaire’s legendary hypochondria also had an economic basis.
Voltaire loaned large sums of money to members of the royalty, in return for a lifelong annual payment…He lived for eight-four years, and throughout the last four decades of his life, he spoke of illness and his imminent demise. Since his debtors had to make the full annual payments only as long as the original lender was alive, those to whom Voltaire loaned funds were more likely to agree to a higher annual rate if they had reason to think that his life would be short.
Hi, I’m a rogue economist too
My kind of girl. Almost as good as meeting a cutie at an Ayn Rand club.
Hat tip to the Freakonomics blog of course.
Subsidy Suckers
Depressing article from the Washington Post on the rise of lobbyists.
The number of registered lobbyists in Washington has more than doubled
since 2000 to more than 34,750 while the amount that lobbyists charge
their new clients has increased by as much as 100 percent…The lobbying boom has been caused by three factors, experts say: rapid
growth in government, Republican control of both the White House and
Congress, and wide acceptance among corporations that they need to hire
professional lobbyists to secure their share of federal benefits…Lobbying firms can’t hire people fast enough. Starting salaries have
risen to about $300,000 a year for the best-connected aides eager to
"move downtown" from Capitol Hill or the Bush administration. Once
considered a distasteful post-government vocation, big-bucks lobbying
is luring nearly half of all lawmakers who return to the private sector
when they leave Congress, according to a forthcoming study by Public
Citizen’s Congress Watch.
No doubt this will create more calls for reform but the truth is we will never get the money out of politics until we get the politics out of money.
Mathematics and Sex
Mathematics and Sex caught my eye at the bookstore yesterday. My review? Not enough math.
Bubble Schmubble
Is there a housing bubble? Some say yes, some say no. I say who cares? The real question is not whether there is a bubble the question is, What are the chances that housing prices will fall dramatically? Contrary to popular belief, knowledge of whether prices are following fundamentals or a bubble tells us very little about this question.
An efficient market is not necessarily a stable market. Indeed, an efficient market can be as or even more volatile than a market plagued by bubbles.
Consider the stock market – the price to earnings ratio can be written (using the Gordon Growth Model) as P/E=D/E*(1+g)/(r-g) where g is the growth rate of dividends and r is the discount rate. Since r and g are small a small change in g can have a large effect on the P/E ratio – so much in fact that it is very difficult to reject a model of stock prices based solely on fundamentals (see my paper with Gary Santoni or the Barsky and DeLong classic Why Does the Stock Market Fluctuate (JSTOR).)
The principles are similar with respect to the housing market. Do note that only a small fraction of the housing stock is available for sale at any one point in time. When we hear about the high price of housing prices we think that the stock of housing must have gone up a lot in value. But in fact all that has occured for certain is that the price for the marginal house has increased. When the supply is inelastic (as it is on the coasts) and demand is fairly inelastic (as it is for most people who like to live where they work) small changes in either demand or supply can change the marginal price dramatically. Thus, even if house prices are at fundamental values today and will be at fundamental values tomorrow a small change in say interest rates or the economy could make tomorrow’s price considerably lower than today’s.
Theism vs Evolution II
Rather than answer all the objections put forward to my theism and evolution post let me state the argument in another way which should make it clear that I am (obviously) correct.
Suppose that God came down from the heavens tomorrow in all his glory, throwing thunderbolts, raising the dead, turning water into wine, whatever it takes to convince everyone of his existence. If this were to occur I have no doubt that even Richard Dawkins, precisely because he is a rational scientist, would say ‘hmmm, perhaps I wasn’t quite right about all this evolution stuff.’ My point in the post is that many religious people don’t need the demonstration – they already believe and in so doing they logically question evolution just as Dawkins would if he came to believe as they do.
Theism versus Evolution
I say that evolution is an improbable theory in light of Holmes’s dictum that "when you have excluded the impossible, whatever remains, however improbable, must be the truth." Excluding god as impossible leaves us with the improbable but true theory of evolution. Fail to exclude god and evolution is nothing but an improbable theory.
Theism implies some form of creationism but not necessarily the ‘on the 7th day he rested’ version. One could of course so weaken theism as to make it consistent with anything (e.g. deism) but in practice this is amounts to atheism or agnosticism. Any theism worth its name, i.e. postulating a god that works his or her ways in the world today is bound to be inconsistent with evolution. It makes no sense to assume a god that intervenes to answer prayer but who never has done any genetic engineering.
Is Grade Inflation All Bad?
Grade inflation has not been constant through time. Mark Thoma at Economist’s View offers some hypotheses.
There are two episodes that account for most grade inflation. The first
is from the 1960s through the early 1970s. This is usually explained by
the draft rules for the Vietnam War. The second episode begins around
1990 and is harder to explain….My
study finds an interesting correlation in the data. During the time
grades were increasing, budgets were also tightening inducing a
substitution towards younger and less permanent faculty. I broke down
grade inflation by instructor rank and found it is much higher among
assistant professors, adjuncts, TAs, instructors, etc. than for
associate or full professors. These are instructors who are usually
hired year-to-year or need to demonstrate teaching effectiveness for
the job market, so they have an incentive to inflate evaluations as
much as possible, and high grades are one means of manipulating student
course evaluations.
But what are the consequences of grade inflation? A new study takes advantage of a tres bon experiment. In May of 1968 French students rioted, were suppressed by the police, but then joined by 10 million striking workers leading to a near revolutionary situation. To quiet things down many students that year were accepted to universities which in former and later years they would not have qualified for. What happened to those students?
Eric Maurin and Sandra McNally write:
We show that the lowering of thresholds at an early (and highly selective stage) of the higher education system enabled a significant proportion of students born between 1947 and 1950 (particularly in 1948 and 1949) to pursue more years of higher education that would otherwise have been possible. This was followed by a significant increase in their subsequent wages and occupational attainment, which was particularly evident for persons coming from a middle-class family background. Finally, returns were transmitted to the next generation on account of the relationship between parental education and that of their children.
The results are surprising but consistent with Bowen and Bok who argue that affirmative action did not harm minority students who were accepted at universities at which they would not have qualified based on grades alone.
I’m puzzled but not yet ready to retire my reputation as a tough grader – my best students deserve no less.
Comments are open.