Category: Current Affairs

The Eric Rasmusen controversy

Eric Rasmusen of Indiana University has long been well-known as an excellent microeconomist. I taught from his Games and Information for many years, I still have his article “Stock Banks and Mutual Banks” on my Industrial Organization reading list.

Lately Rasmusen has been the center of much controversy. Usually I like to summarize the links I use, however briefly. But in this case I am not sure how to explain events without offending anybody, I know Rasmusen a bit plus I have numerous gay friends. So just read here on the episode. Here is Rasmusen’s frequently interesting blog. Here are Rasmusen’s views on religion. Thanks to Eugene Volokh for the Chicago Tribune link.

Tragedy of the tragedy of the commons

Garrett Hardin and his wife recently passed away, it is rumored to have been a double suicide. Hardin was a well-known environmentalist, most prominently he coined the phrase “tragedy of the commons”. He spent the latter part of his career opposing immigration and favoring population control, he was even embraced by some eugenecists.

Addendum: The Hardins were survived by their four children, thanks to Nicky Tynan for the pointer.

Will those annoying calls go away?

Perhaps you have put your name on the “do not call” list. Don’t think that your troubles are over. One estimate suggests that unsolicited calls will go down by no more than 25 percent. The wording is ambiguous but from the context the figure seems to be for people who have put their name on the list, obviously it will be worse for the population as a whole. One loophole is that anyone with a “previously existing commercial relationship” can call you, so can non-profits, pollers, and radio and TV providers, not to mention politicians. The group Private Citizen is leading the fight against such cold calls, and is the original source of the estimate. Thanks to TechiePundit for the original pointers to the links.

Where do people marry close relatives?

Check out this map, which is dominated by the Muslim world.

Stanley Kurtz of the Hoover Institution has argued that such intermarriage patterns make liberal democracy harder:

In the modern Middle East, networks of kin are still the foundation of wealth, security, and personal happiness. That, in a sense, is the problem. As we’ve seen in Afghanistan, loyalty to kin and tribe cuts against the authority of the state. And the corrupt dictatorships that rule much of the Muslim Middle East often function themselves more like self-interested kin groups than as rulers who take the interests of the nation as a whole as their own. That, in turn, gives the populace little reason to turn from the proven support of kin and tribe, and trust instead in the state.

An intriguing idea, but I find it very hard to establish the appropriate causal connections. Still, better that we ponder the question than stick our heads in the sand. Parapundit offers a very useful overview of the debate, sympathetic to Kurtz’s point of view. Please note, as always, that use of a link does not constitute endorsement of all of that link’s contents or subsequent links.

Will Bush back away from steel tariffs?

President Bush has received two mid-term reports, critical of his decision to implement steel tariffs, here is a relevant International Trade Commission link. The tariffs are not only bad economics, but it seems, bad politics as well. Steel price increases appear to have cut out some jobs in the potential swing states of Pennsylvania, Ohio, and Michigan. And most of Bush’s economic advisors opposed the tariffs from the beginning. The Washington Post account (see the above link) suggests that the Bush Administration is likely to nix the tariffs:

“The only reason they won’t do it is if they’re unwilling to admit they made a mistake,” said a Republican strategist who works closely with the White House.

An alternative account from The New York Times (registration required) implies that the matter is less settled. Even the Post notes that giving up on the tariffs would be a significant loss of face for Karl Rove, their initial backer. Either way, this issue is likely to prove an embarrassment to the Bush reelection campaign.

NY Times Wrong on Iraqi Gun Ownership

In March, Neil MacFarquhar of the New York Times asserted that guns were easy and legal to obtain in Saddam Hussein’s Iraq. The NRA has long argued that guns are a bulwark against the police state so Slate’s Timothy Noah challenged the NRA to explain “how Iraq got to be, and remains, one of the world’s most repressive police states when just about everyone is packing heat.” Noah later rejected reader explanations of this apparent paradox, including the possibility that MacFarquhar was wrong, and “reluctantly” concluded that private gun ownership is not a bulwark against a police state.

Today, however, John Tierney of the New York Times reports that “Mr. Hussein, never one to tolerate competition, forbade private citizens to carry weapons, effectively outlawing the security industry.”

Clearly, the New York Times is wrong. But where does the truth lie?

You can always resell it

Why not just give gifts of money? Prudence of Slate tells us that norms are changing, and that more people are finding cash gifts for weddings acceptable. The couple that posed the initial question put it as follows:

So they think it’s “tacky” to ask for money? Well, we think it’s worse to make people spend precious time getting gifts we don’t need or want.

Amen, says this economist, whose best wedding presents from this last May often were the gift certificates. I might add that co-blogger Alex and his wife gave us a very useful gift certificate for a framing shop.

One economic estimate suggested that Christmas gifts alone involve a “deadweight loss” of $4 billion. I’ve never been convinced by this number, gifts help people sort out how well their friends and loved ones understand them, and create new lines of communication, surely this is an offsetting benefit. And sometimes a surprise or show of affection, as embodied in a gift, is simply more fun. Nonetheless gifts are a form of signalling, and very often people invest too much effort in the signal, just to be higher in the pecking order. I hope Prudence is right about the change in norms.

Addendum: I read the following in the Weekend Financial Times: “In 1979, Karen Davis started a hickory-baked ham company in Marieta, Georgia, and on opening day her parents gave her a porcelain pig for good luck. Over the next two decades, she estimates that she got 400-500 pig gifts. “Pigs aren’t my thing,” she says, though she did warm to the piggy banks.” See the article for other examples of dubious gifts.

Storming the MarginalRevolution

We at MarginalRevolution are committed to providing regular fresh content on a daily basis. That being said, we live in Northern Virginia, a big storm is coming, and Governor Mark Warner says we might lose electrical power for a while. I don’t expect blogging problems, but on the off-chance that you don’t hear from us for a short while, keep faith, we will be back as soon as conditions permit.

Why does the middle class feel so poor?

I’ve just read The Two-Income Trap: Why Middle Class Mothers & Fathers are Going Broke, by Elizabeth Warren and Amelia Warren Tyagi. This book has received a good deal of popular press.

Having children is a big part of the financial burden, Americans have been spending less on appliances, food, and clothing. Housing prices are the real killer, especially if the family has children. Good schools and safety are becoming increasingly hard to buy. In real terms, families with children paid 79 percent more for housing, comparing 1983 to 1998.

Having just overpaid for a house, to put my stepdaughter into a good school district, I can sympathize with this argument. But I don’t understand the core logic as a more general claim. The authors claim that this financial predicament is affecting very large numbers of middle class Americans. At the same time we are told that good schools are increasingly hard to come by. Which is it? If there are a small number of homes with good schools, not too many people can be overpaying. If there are a large number of such homes, good schools cannot be that scarce, and the bidding war should not be so fierce.

I nonetheless recommend the book to stimulate your thoughts. It also argues for anti-usury laws, claiming that debt-ridden families will make rash decisions and overborrow at excess rates. You might recall Adam Smith made a similar claim over two centuries ago.

Iraq and the Marshall Plan

According to some estimates, we will spend $20 billion on Iraqi infrastructure over the next year, half of Iraqi gdp (don’t take Iraqi gdp statistics too seriously!). Andrew Sullivan has been asking how our assistance to Iraq compares to the Marshall Plan of postwar Europe. Here are some answers, drawn from a 1985 piece I wrote “The Marshall Plan: Myths and Realities,” click here for an on-line summary, the piece appeared in Doug Bandow’s U.S. Aid to the Developing World.

The Marshall Plan did not ever exceed 5 percent of the gross national product of the recipient nations. In the case of Germany, note that we were taking more out of Germany, in the forms of reparations and occupation cost reimbursements (11 to 15 percent of West German gnp), than we were ever putting in. Then throughout the mid-1950s, Bonn repaid half of the aid it had received. Note that German economic recovery followed from liberalization and reforms, which predated Marshall Plan aid.

In 1949-50, our Marshall Plan aid to France was roughly equivalent to French military expenditures abroad in Indochina and North Africa.

Of the European nations, arguably Belgium recovered from World War II most rapidly, and this happened before Marshall Plan aid kicked in.

At the end of World War II, the Austrian economy was one of the most desperate in Europe. Austria received high per capita aid sums, but the economy stagnated. Austria later recovered, when it improved its monetary and fiscal policies. Marshall Plan supporter Franz Nemschak wrote: “The radical cuts in foreign aid in the last year of the Marshall Plan and the stabilization tendencies in the world economy forced Austria to make a basic change in economic policy.” Greece received high per capita aid as well, but had a poor recovery.

The lesson for Iraq?: Simply spending money won’t get us there. See these Rand Corporation figures, showing that per capita aid does not correlate obviously with the eventual success of a reconstruction. The key question is whether the Iraqis can build healthy institutions. Walking away is not the answer, but don’t feel good just because you see more money being spent.

Addendum: I have scanned the whole essay and put it on-line.

Why the EU won’t become a federal government

I was struck by Larry’s Siedentop’s words from today’s Financial Times (subscription required):

…the new member states will be very assertive once the formalities of enlargement are over. We can expect an unapologetic defence of national interests, a suspicion of encroachments from Brussels and an intense dislike of what might be called lurking double standards in the EU…It will be a pluralist vision rather than a unitary one, a preference for something more like a confederation than a federation. For behind the quasi-federalist form projected for Europe that is promoted, at least intermittently, by France, such countries detect a wish to give the EU some of the attributes of a unitary state. Their contribution could decisively shift the balance of the debate away from that particular vision.

The beast isn’t starving

I caught a lot of flak from conservatives when I wrote in an op-ed that the so-called Bush tax-cuts were a fraud. If spending isn’t cut then in the long run taxes can’t be cut either. Since spending has gone up under Bush, all he has done, I argued, is to raise our future taxes (at precisely the wrong time too given the coming fiscal problems created by demography) . Conservatives complained that I missed the strategic beauty of the Bush plan. A tax cut, they said, will keep spending down, it will “starve the beast.” Well Bush is now asking for another $87 billion to fight the war in Iraq, employment is down everywhere but in the federal government where it is higher than under Clinton, and Bush is already touting how his administration is responsible for the largest increase in Medicare in its 38 year history. Apparently, on the Bush diet you can eat all you want and still lose weight.